REG - Riverstone Energy Ld - Annual Report and Financial Statements <Origin Href="QuoteRef">RSER.L</Origin> - Part 5
28/02/2018 07:05
- Part 5: For the preceding part double click ID:nRSb1636Gd
of the fair value of its assets and
liabilities, adjusted if necessary, to reflect liquidity, future commitments,
and other specific factors of the Partnership and Investment Manager. This is
based on the components within the Partnership, principally the value of the
Partnership's investments in addition to cash and short-term money market
fixed deposits. Any fluctuation in the value of the Partnership's investments
in addition to cash and short-term money market fixed deposits held will
directly impact on the value of the Company's investment in the Partnership.
The Partnership's investments are valued using the techniques described in the
Company's valuation policy. The Investment Manager's assessment of fair value
of investments held by the Partnership, through Investment Undertakings, is
determined in accordance with IPEV Valuation Guidelines. When valuing the
Partnership's investments, the Investment Manager reviews information provided
by the underlying investee companies and other business partners and applies
IPEV methodologies, to estimate a fair value as at the date of the Statement
of Financial Position, subject to Board approval. It is the opinion of the
Directors, that the IPEV valuation methodology used in deriving a fair value
is generally not different from the fair value requirements of IFRS 13. In the
event that there is a difference, the requirements of IFRS 13 override the
IPEV requirements.
Initially, acquisitions are valued at the price of recent investment.
Subsequently, and as appropriate, the Investment Manager values the
investments on a quarterly basis using common industry valuation techniques,
including comparable public market valuation, comparable merger and
acquisition transaction valuation and discounted cash flow valuation. For
early stage private investments, Riverstone's investment due diligence process
includes assumptions about short-term financial results in determining the
appropriate purchase price for the investment. The techniques used in
determining the fair value of the Company's investments through the
Partnership are selected on an investment by investment basis so as to
maximise the use of market based observable inputs.
REL's valuation policy is compliant with both IFRS and IPEV Valuation
Guidelines and is applied consistently from period to period. As the Company's
investments are generally not publicly quoted, valuations require meaningful
judgment to establish a range of values, and the ultimate value at which an
investment is realised may differ from its most recent valuation and the
difference may be significant.
For the year ended 31 December 2017, the valuations of the Company's
investments, through the Partnership, are detailed in the Investment Manager's
Report.
Quantitative information about Level 3 fair value measurements as at 31
December 2017
Industry: Energy
Fair value of Level 3 Sensitivity of the Fair value of Level 3
investments Valuation Unobservable Range Weighted Average (1) input to fair value of investments (2)
(in thousands) technique(s) input(s) Low (1) High (1) Level 3 investments (in thousands)
$1,260,861 Public comparables 1P Reserve multiple ($/Boe) $12 $17 $16 10% weighted average change in the input would result in 1% change in the total fair value of Level 3 investments $234,453
2P Reserve multiple ($/Boe)(3) $7 $13 $10 10% weighted average change in the input would result in 1% change in the total fair value of Level 3 investments $760,781
EV / 2018E EBITDA multiple(3) 3.9x 10.1x 6.9x 10% weighted average change in the input would result in 1% change in the total fair value of Level 3 investments $921,913
EV / 2018E Production multiple ($/Boepd)(3) $37,300 $66,400 $48,500 10% weighted average change in the input would result in 1% change in the total fair value of Level 3 investments $854,062
Transaction comparables Acreage Multiple ($/Boepd per Acre) $2,600 $12,100 $5,900 10% weighted average change in the input would result in 1% change in the total fair value of Level 3 investments $854,062
Discounted cash flow Oil Price Curve ($/bbl) $48 $57 $55 10% weighted average change in the input would result in 5% change in the total fair value of Level 3 investments $801,465
Gas Price Curve ($/mcfe) $2 $3 $3 10% weighted average change in the input would result in 3% change in the total fair value of Level 3 investments $801,465
Discount Rate(3) 16% 25% 19% 10% weighted average change in the input would result in 0.4% change in the total fair value of Level 3 investments $217,937
$233,308 Other
$1,494,169 Total
Quantitative information about Level 3 fair value measurements as at 31
December 2016
Industry: Energy
Fair value of Level 3 Sensitivity of the Fair value of Level 3
investments Valuation Unobservable Range Weighted Average (1) input to fair value of investments (2)
(in thousands) technique(s) input(s) Low (1) High (1) Level 3 investments (in thousands)
$1,241,851 Public comparables 1P Reserve multiple ($/Boe) $3 $13 $12 10% weighted average change in the input would result in 1% change in the total fair value of Level 3 investments $310,557
EV / 2017E EBITDA multiple 6.6x 11.2x 7.7x 10% weighted average change in the input would result in 1% change in the total fair value of Level 3 investments $656,742
Transaction comparables Acreage Multiple ($/Boepd per Acre) $2,200 $16,800 $6,300 10% weighted average change in the input would result in 2% change in the total fair value of Level 3 investments $813,751
Discounted cash flow(4) Oil Price Curve ($/bbl) $43 $54 $51 20% weighted average change in the input would result in 10% change in the total fair value of Level 3 investments $883,424
Gas Price Curve ($/mcfe) $3 $3 $3 20% weighted average change in the input would result in 4% change in the total fair value of Level 3 investments $620,161
$1,389 Last round of financing
$65,494 Other
$1,308,734 Total
(1) Calculated based on fair values of the Partnership's Level 3 investments
(2) Each of the Partnership's Level 3 investments are valued using one or more
of the techniques which utilise one or more of the unobservable inputs, so the
amounts in the "Fair value of Level 3 investments" column will not aggregate
to the total fair value of the Partnership's Level 3 investments
(3) As at 31 December 2017, the sensitivity of these unobservable inputs to
the total fair value of Level 3 investments was determined to be significant
by applying the same methodology that determined it not to be significant as
at 31 December 2016
(4) Discounted cash flow technique which involves the use of a discount factor
of 10 per cent.
The Board reviews and considers the fair value of each of the Partnership's
investments arrived at by the Investment Manager before incorporating such
values into the fair value of the Partnership. The variety of valuation bases
adopted, quality of management information provided by the underlying investee
companies and the lack of liquid markets for the investments mean that there
are inherent difficulties in determining the fair value of these investments
and such difficulties cannot be eliminated. Therefore the amounts realised on
the sale of investments may differ from the fair values reflected in these
Financial Statements and the differences may be significant.
The Board approves the valuations performed by the Investment Manager and
monitors the range of reasonably possible changes in significant observable
inputs on a regular basis.
The Directors have considered whether a discount or premium should be applied
to the net asset value of the Partnership. In view of the investment in the
Partnership and the nature of the Partnership's assets, no adjustment to the
net asset value of the Partnership has been deemed to be necessary (see Note
3).
6. Investment at fair value through profit or loss
The movement in fair value is derived from the fair value movements in the
underlying investments held by the Partnership, net of income and expenses of
the Partnership and its related Investment Undertakings, including any
Performance Allocation and applicable taxes.
REL US Centennial Holdings, LLC, a wholly-owned subsidiary of the Partnership,
has borrowed $100 million under the terms of the Margin Loan Agreement to
finance the Company's additional investment in Centennial, through the
Partnership. The Margin Loan Agreement, dated 27 December 2016, is for a term
of 18 months to 27 June 2018 and has an annual interest rate cost of 3 month
LIBOR plus 3.25 per cent.. A security interest has been granted by REL US
Centennial Holdings, LLC over the shares in Centennial, as collateral for any
amounts which may become due under the Margin Loan Agreement. As at 31
December 2017, there is no going concern issue regarding the Partnership's
ability to repay the Margin Loan by utilising cash on hand and / or proceeds
from a partial sale of the shares in Centennial.
31 December2017$'000 31 December2016$'000
Cost
Brought forward 1,303,435 1,308,935
Distribution from the Partnership (1,100) (5,500)
Carried forward 1,302,335 1,303,435
Fair value adjustment through profit or loss
Brought forward 391,971 36,215
Fair value movement during the year - see Summary Income Statement below 48,151 355,756
Carried forward 440,122 391,971
Fair value at year end 1,742,457 1,695,406
Summary financial information for the Partnership
Summary Balance Sheet 31 December2017$'000 31 December2016$'000
Investments at fair value (net) 1,683,127 1,461,145
Cash and cash equivalents 28,166 147,882
Money market deposits 37,501 91,786
Management fee payable - see Note 10 (6,537) (6,370)
Other net assets 200 963
Fair value of REL's investment in the Partnership 1,742,457 1,695,406
Reconciliation of Partnership's investments at fair value 31 December2017$'000 31 December2016$'000
Investments at fair value - Level 1 (gross) 392,504 476,591
Investments at fair value - Level 3 (gross) - see Note 5 1,494,169 1,308,734
Investments at fair value (gross) 1,886,673 1,785,325
Margin Loan Agreement - see above (100,000) (100,047)
Accrued General Partner performance allocation - see Note 10 (138,151) (132,164)
Provision for taxation - see Note 4 (46,433) (120,785)
Cash and cash equivalents 81,038 28,816
Partnership's investments at fair value (net) 1,683,127 1,461,145
Summary Income Statement 1 January2017 to31 December2017$'000 1 January2016 to31 December2016$'000
Unrealised and realised gain on Partnership's investments (net) 79,280 377,481
Interest and other income 1,339 1,833
Management fee expense - see Note 10 (25,729) (22,370)
Other operating expenses (6,739) (1,188)
Portion of the operating profit for the year attributable to REL's investment in the Partnership 48,151 355,756
Reconciliation of unrealised and realised gain on Partnership's investments 1 January2017 to31 December2017$'000 1 January2016 to31 December2016$'000
Unrealised (loss)/gain on Partnership's investments (gross) (16,690) 530,833
Realised gain on Partnership's investments (gross) 32,317 87,220
Income from Partnership's investments (gross) 5,864 6,520
General Partner's performance allocation - see Note 10 (16,288) (126,307)
Provision for taxation - see Note 4 74,077 (120,785)
Unrealised and realised gain on Partnership's investments (net) 79,280 377,481
7. Cash and cash equivalents
These comprise cash and short-term bank deposits available on demand. The
carrying amounts of these assets approximate to their fair value.
8. Share capital
31 December2017$'000 31 December2016$'000
Authorised:
Ordinary Shares of no par value Unlimited Unlimited
TotalNo. TotalNo.
Issued and fully paid:
Unlimited Shares of no par value
Shares as at inception - -
Issued on 23 May 2013 1 1
Issued on 29 October 2013 71,032,057 71,032,057
Issued on 10 October 2014 5,000,000 5,000,000
Issued on 11 December 2015 8,448,006 8,448,006
Shares as at year end 84,480,064 84,480,064
Share capital $'000 $'000
Share capital brought forward 1,317,496 1,317,537
Movements for the period:
Share issue costs - (41)
Share capital as at year end 1,317,496 1,317,496
The Company has one class of Ordinary Shares. The issued nominal value of the
Ordinary Shares represents 100 per cent. of the total issued nominal value of
all share capital. Under the Company's Articles of Incorporation, on a show of
hands, each Shareholder present in person or by proxy has the right to one
vote at general meetings. On a poll, each Shareholder is entitled to one vote
for every Share held.
Shareholders are entitled to all dividends paid by the Company and, on a
winding up, providing the Company has satisfied all of its liabilities, the
Shareholders are entitled to all of the surplus assets of the Company. The
Ordinary Shares have no right to fixed income.
KFI, one of the Cornerstone Investors in the Company, paid for and acquired
its Ordinary Shares in two equal tranches of £50 million. The first tranche
was paid on Admission at which time 5 million Ordinary Shares were issued to
KFI. The second tranche was paid on 26 September 2014 and issued on 10 October
2014 upon the Company being 50 per cent. committed of the aggregate net
proceeds of the Issue, calculated using KFI's total subscription monies.
On 11 December 2015, the Company raised £67.6 million ($102.3 million) (based
on an exchange rate of 1.5144 $/£ and gross of share issuance costs of $3.6
million) through the issuance of 8,448,006 new Ordinary Shares at £8.00 per
Ordinary Share.
Following admission of the new Ordinary Shares, the share capital of the
Company is 84,480,064 Ordinary Shares in aggregate.
9. Contingent liabilities
Contingent liabilities are potential future cash outflows where the likelihood
of payment is considered more than remote but is not considered probable or
cannot be measured reliably.
Formation and initial expenses
The formation and initial expenses of the Company totalling $22.5 million have
been paid in full by the Investment Manager. However, if the Investment
Management Agreement is terminated by the Company on or before the seventh
anniversary of Admission (other than for a material breach by the Investment
Manager attributable to its fraud) the Company will be required to reimburse
the Investment Manager in respect of the formation and initial expenses of the
Company and the costs and the expenses of the Issue to the full extent that
such costs and expenses were borne by the Investment Manager. At this time,
the Directors consider the likelihood of the Investment Management Agreement
being terminated by the Company to be remote.
10. Related party transactions
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over the party in making
financial or operational decisions.
Directors
The Company has eight Non-executive Directors (31 December 2016: eight). The
Chairman is entitled to annual remuneration of £132,000 (31 December 2016:
£120,000). The Chairman of the Audit Committee is entitled to annual
remuneration of £82,500 (31 December 2016: £75,000) and the Chairman of the
Management Engagement Committee is entitled to annual remuneration of £71,500
(31 December 2016: £65,000). The other independent Directors are entitled to
annual remuneration of £66,000 (31 December 2016: £60,000). The three
non-independent Directors (31 December 2016: three) have chosen not to be
remunerated by the Company for their services.
Directors' fees and expenses for the year ended 31 December 2017 amounted to
$944,878 (31 December 2016: $922,379), $409 of Directors' expenses were
outstanding at year end (31 December 2016: none).
Messrs Lapeyre and Leuschen are senior executives of Riverstone and have
direct or indirect economic interests in affiliates and/or related parties of
the Investment Manager, which holds the founder Ordinary Share of the Company,
the General Partner, the general partner of Fund V, Riverstone Equity
Partners, Riverstone Investment Group LLC, REL Coinvestment, LP and Other
Riverstone Funds. REL Coinvestment, LP was subject to lock-up restrictions for
two years from admission.
Messrs Barker and Hayden have direct or indirect economic interests in Other
Riverstone Funds as investors.
Investment Manager
The Investment Manager, an affiliate of Riverstone, provides advice to the
Company and the Partnership on the origination and completion of new
investments, on the management of the portfolio and on realisations, as well
as on funding requirements, subject to Board approval. For the provision of
services under the Investment Management Agreement, the Investment Manager is
paid in cash out of the assets of the Partnership an annual Management Fee
equal to 1.5 per cent. per annum of the Company's Net Asset Value. The fee is
payable quarterly in arrears and each payment is calculated using the
quarterly Net Asset Value as at the relevant quarter end. Notwithstanding the
foregoing, no Management Fee is paid on the cash proceeds of the Issue to the
extent that they have not yet been invested or committed to an investment.
Amounts not forming part of a commitment to an investment that are invested in
cash deposits, interest-bearing accounts or sovereign securities directly or
indirectly, are not considered to have been invested or committed for these
purposes.
The Investment Manager has agreed to deduct from its annual Management Fee all
fees, travel costs and related expenses of the Directors exceeding the
following annual limits:
Portion of NAV Limit (as a percentage of the then last published NAV)
Up to and including £500 million 0.084 per cent.
From £500 million to and including £600 million 0.084 per cent. at £500 million and thereafter adjusted downwards proportionately to NAV to 0.07 per cent. at £600 million
From £600 million to and including £700 million 0.07 per cent. at £600 million and thereafter adjusted downwards proportionately to NAV to 0.06 per cent. at £700 million
Above £700 million 0.06 per cent.
The above limits are subject to adjustment by agreement between the Investment
Manager and the Company acting by its independent Directors. Based on the last
published NAV as of 31 December 2017, the maximum amount of annual fees,
travel and related expenses of the Directors is $1,212,307 (31 December 2016:
$1,093,763). During the year ended 31 December 2017, fees and expenses of the
Directors amounted to $944,878 (31 December 2016: $922,379), therefore no
reduction in the 31 December 2017 quarter-end management fee (31 December
2016: no reduction of the quarter-end management fee).
During the year ended 31 December 2017, the Partnership incurred Management
Fees of $25,728,585 (31 December 2016: $22,370,296) of which $6,536,923
remained outstanding as at the year end (31 December 2016: $6,369,594).
The Investment Manager's appointment cannot be terminated by the Company with
less than 12 months' notice. The Company may terminate the Investment
Management Agreement with immediate effect if the Investment Manager has
committed an act of fraud or wilful misconduct in relation to the Company
which has resulted in material harm to the Company's business. The Investment
Manager may terminate their appointment immediately if either the Company or
the Partnership is in material breach of any of its material obligations under
the Investment Management Agreement. The Investment Management Agreement
continues into perpetuity post the seventh year anniversary.
General Partner
The General Partner makes all management decisions, other than investment
management decisions, in relation to the Partnership and controls all other
actions by the Partnership and is entitled to receive a Performance
Allocation, calculated and payable at the underlying investment holding
subsidiary level, equal to 20 per cent. of the gross realised profits (if any)
in respect of a disposal, in whole or in part, of any underlying asset of the
Company.
The General Partner is entitled to receive its Performance Allocation in cash,
all of which, after tax, Riverstone, through its affiliate RELCP, reinvests in
Ordinary Shares of the Company on the terms summarised in Part I and Part VIII
of the IPO Prospectus.
Cornerstone Investors
Each of the Cornerstone Investors has acquired an indirect economic interest
in each of the General Partner and the Investment Manager depending on the
size of their commitment and the total issue size, up to an aggregate maximum
indirect economic interest of 20 per cent. in each, for nominal consideration.
These interests entitle the Cornerstone Investors to participate in the
economic returns generated by the General Partner, including from the
Performance Allocation, and the Investment Manager, which receives the
Management Fee.
11. Financial risk management
Financial risk management objectives
The Company's investing activities, through its investment in the Partnership,
intentionally expose it to various types of risks that are associated with the
underlying investee companies of the Partnership. The Company makes the
investment in order to generate returns in accordance with its investment
policy and objectives.
The most important types of financial risks to which the Company is exposed
are market risk (including price, interest rate and foreign currency risk),
liquidity risk and credit risk. The Board of Directors has overall
responsibility for the determination of the Company's risk management and sets
policy to manage that risk at an acceptable level to achieve those objectives.
The policy and process for measuring and mitigating each of the main risks are
described below.
The Investment Manager and the Administrator provide advice to the Company
which allows it to monitor and manage financial risks relating to its
operations through internal risk reports which analyse exposures by degree and
magnitude of risks. The Investment Manager and the Administrator report to the
Board on a quarterly basis.
Categories of financial instruments
31 December2017$'000 31 December2016$'000
Financial assets
Investment at fair value through profit or loss:
Investment in the Partnership 1,742,457 1,695,406
Loans and receivables:
Cash and cash equivalents 789 3,230
Trade and other receivables 545 545
Financial liabilities
Financial liabilities:
Trade and other payables (612) (623)
Capital risk management
The Company manages its capital to ensure that the Company will be able to
continue as a going concern while maximising the capital return to
Shareholders. The capital structure of the Company consists of issued share
capital and retained earnings, as stated in the Statement of Financial
Position.
In order to maintain or adjust the capital structure, the Company may buy back
shares or issue new shares. There are no external capital requirements imposed
on the Company.
During the year ended 31 December 2017 and 2016, the Company itself had no
borrowings. However, as disclosed in Note 6, REL US Centennial Holdings, LLC
has borrowed $100 million under the terms of the Margin Loan Agreement.
The Company's investment policy is set out in the Investment Policy section of
the Annual Report.
Market risk
Market risk includes price risk, foreign currency risk and interest rate
risk.
(a) Price risk
The underlying investments held by the Partnership present a potential risk of
loss of capital to the Partnership and hence to the Company. The Company
invests through the Partnership. Price risk arises from uncertainty about
future prices of underlying financial investments held by the Partnership,
which at year end was $1,886,673 (31 December 2016: $1,785,325).
The Partnership is exposed to a variety of risks which may have an impact on
the carrying value of the Company's investment in the Partnership. The
Partnership's risk factors are set out in (a)(i) to (a)(iii) below.
(i) Not actively traded
The Partnership's investments are not generally traded in an active market but
are indirectly exposed to market price risk arising from uncertainties about
future values of the investments held. The underlying investments of the
Partnership vary as to industry sub-sector, geographic distribution of
operations and size, all of which may impact the susceptibility of their
valuation to uncertainty.
Although the investments are in the same industry, this risk is managed
through careful selection of investments within the specified limits of the
investment policy. The investments are monitored on a regular basis by the
Investment Manager.
(ii) Concentration
The Company, through the Partnership, invests in the global energy sector,
with a particular focus on businesses that engage in oil and gas exploration
and production and midstream investments in that sector. This means that the
Company is exposed to the concentration risk of only making investments in the
global energy sector, which concentration risk may further relate to
sub-sector, geography, and the relative size of an investment or other
factors. Whilst the Company is subject to the investment and diversification
restrictions in its investment policy, within those limits, material
concentrations of investments have arisen.
The Board and the Investment Manager monitor the concentration of the
investment in the Partnership on a quarterly basis to ensure compliance with
the investment policy.
(iii) Liquidity
The Company's underlying investments through the Partnership are dynamic in
nature. The Partnership will maintain flexibility in funding by keeping
sufficient liquidity in cash and cash equivalents which may be invested on a
temporary basis in line with the cash management policy as agreed by the Board
from time to time.
As at 31 December 2017, $147 million or 8.4 per cent. (31 December 2016: $268
million or 15.8 per cent. of the Partnership's financial assets, including
those held by its wholly-owned subsidiaries, REL US Corp and REL US Centennial
Holdings, LLC, were money market fixed deposits and cash balances held on
deposit with several, A or higher rated, banks. All of these assets have
maturities of less than one year.
(b) Foreign currency risk
The Company has exposure to foreign currency risk due to the payment of some
expenses in Pounds Sterling. Consequently, the Company is exposed to risks
that the exchange rate of its currency relative to other foreign currencies
may change in a manner that has an adverse effect on the value of that portion
of the Company's assets or liabilities denominated in currencies other than
the U.S. Dollar.
The following tables sets out, in U.S. Dollars, the Company's total exposure
to foreign currency risk and the net exposure to foreign currencies of the
monetary assets and liabilities:
As at 31 December 2017 $$'000 £$'000 E$'000 Total$'000
Assets
Non-current assets
Investment in the Partnership(1) 1,742,457 - - 1,742,457
Total non-current assets 1,742,457 - - 1,742,457
Current assets
Trade and other receivables 545 - - 545
Cash and cash equivalents 667 122 - 789
Total current assets 1,212 122 - 1,334
Current liabilities
Trade and other payables 128 454 30 612
Total current liabilities 128 454 30 612
Total net assets 1,743,541 (332) (30) 1,743,179
As at 31 December 2016 $$'000 £$'000 E$'000 Total$'000
Assets
Non-current assets
Investment in the Partnership(1) 1,695,406 - - 1,695,406
Total non-current assets 1,695,406 - - 1,695,406
Current assets
Trade and other receivables 545 - - 545
Cash and cash equivalents 1,801 1,429 - 3,230
Total current assets 2,346 1,429 - 3,775
Current liabilities
Trade and other payables 215 408 - 623
Total current liabilities 215 408 - 623
Total net assets 1,697,537 1,021 - 1,698,558
The Directors do not consider that the foreign currency exchange risk at the
balance sheet date is significant or material and therefore sensitivity
analysis for the foreign currency risk has not been provided.
(1) Includes the fair value of two investments, Hammerhead and CNOR,
denominated in CAD and therefore subject to foreign currency risk. These two
investments had an aggregate fair value of $621.5 million as at 31 December
2017 (31 December 2016: $520.8 million).
(c) Interest Rate Risk
The Company's exposure to interest rate risk relates to the Company's cash and
cash equivalents held through the Partnership and the Margin Loan held through
REL US Centennial Holdings, LLC, a wholly-owned subsidiary of the Partnership
(see Note 6). The Company is subject to risk due to fluctuations in the
prevailing levels of market interest rates. Any excess cash and cash
equivalents are invested at short-term market interest rates. As at the date
of the Statement of Financial Position, the majority of the Company's cash and
cash equivalents were held on interest bearing fixed deposit accounts at the
Partnership.
The Company has no other interest-bearing assets or liabilities as at the
reporting date. As a consequence, the Company is only exposed to variable
market interest rate risk. Management does not expect any significant change
in interest rates that would have a material impact on the financial
performance of the Company in the near future, therefore sensitivity analysis
for the interest rate risk has not been provided.
31 December2017$'000 31 December2016$'000
Non-interest bearing
Cash and cash equivalents 789 3,230
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of
Directors.
Liquidity risk is defined as the risk that the Company may not be able to
settle or meet its obligations on time or at a reasonable price.
The Company adopts a prudent approach to liquidity management and through the
preparation of budgets and cash flow forecasts maintains sufficient cash
reserves to meet its obligations. The Company received distributions of $5.5
million and $1.1 million from the Partnership in Q1 2016 and Q1 2017,
respectively, to meet its forecasted liabilities. In accordance with section
4.1(a) of the Partnership Agreement, in the event of the Company requiring
additional funds for working capital, it is entitled to receive another
distribution from the Partnership.
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Company.
The carrying value of the investment in the Partnership as at 31 December 2017
was $1,742 million (31 December 2016: $1,695 million).
Financial assets mainly consist of cash and cash equivalents and investments
at fair value through profit or loss. The Company's risk on liquid funds is
reduced because it can only deposit monies with institutions with a minimum
credit rating of "single A". The Company mitigates its credit risk exposure on
its investment at fair value through profit or loss by the exercise of due
diligence on the counterparties of the Partnership, its General Partner and
the Investment Manager.
The table below shows the material cash balances and the credit rating for the
counterparties used at the year end date:
31 December 31 December
2017 2016
Counterparty Location Rating $'000 $'000
ABN Amro (Guernsey) Limited Guernsey A 789 3,230
The Company's maximum exposure to loss of capital at the year end is shown
below:
31 December 2017 Carrying Value and Maximum exposure$'000
Investment at fair value through profit or loss:
Investment in the Partnership 1,742,457
Loans and receivables (including cash and cash equivalents but excluding prepayments) 789
31 December 2016 Carrying Value and Maximum exposure$'000
Investment at fair value through profit or loss:
Investment in the Partnership 1,695,406
Loans and receivables (including cash and cash equivalents but excluding prepayments) 3,230
Gearing
As at the date of these Financial Statements the Company itself has no
gearing; however, the Partnership had approximately $11 million of letter of
credit outstanding as part of a $200 million line of credit agreement and REL
US Centennial Holdings, LLC has borrowed $100 million under the terms of the
Margin Loan Agreement. The Company may have additional indirect gearing
through the operations of the underlying investee companies.
12. Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of
Directors, as a whole. The key measure of performance used by the Board to
assess the Company's performance and to allocate resources is the Total Return
on the Company's Net Asset Value and therefore no reconciliation is required
between the measure of profit or loss used by the Board and that contained in
the Financial Statements.
For management purposes, the Company is organised into one main operating
segment, which invests in one limited partnership.
All of the Company's income is derived from within Guernsey and the Cayman
Islands.
All of the Company's non-current assets are located in the Cayman Islands.
Due to the Company's nature, it has no customers.
13. Earnings per Share and Net Asset Value per Share
Earnings per Share
31 December 2017 31 December 2016
Basic Diluted Basic Diluted
Profit for the year ($'000) 44,621 44,621 351,410 351,410
Weighted average numbers of Shares in issue 84,480,064 84,480,064 84,480,064 84,480,064
EPS (cents) 52.82 52.82 415.97 415.97
The Earnings per Share is based on the profit or loss of the Company for the
year and on the weighted average number of Shares the Company had in issue for
the year ended 31 December 2017.
There are no dilutive Shares in issue as at 31 December 2017.
Net Asset Value per Share
31 December2017 31 December2016
NAV ($'000) 1,743,179 1,698,558
Number of Shares in issue 84,480,064 84,480,064
Net Asset Value per Share ($) 20.63 20.11
Net Asset Value per Share (£) 15.27 16.29
Discount to NAV (per cent.) 19.15 17.48
The Net Asset Value per Share is arrived at by dividing the net assets as at
the date of the Statement of Financial Position by the number of Ordinary
Shares in issue at that date. The Discount to NAV is arrived at by calculating
the percentage discount of the Company's Net Asset Value per Share to the
Company's closing Share price as at the date of the Statement of Financial
Position.
14. Auditors' Remuneration
Other operating expenses include all fees payable to the auditors, which can
be analysed as follows:
2017$'000 2016$'000
Ernst & Young LLP Audit fees 434 335
2017$'000 2016$'000
Ernst & Young LLP (United Kingdom) Interim Review fees 136 108
Ernst & Young Business Services S.a.r.l Non-Assurance services 30 -
Ernst & Young LLP (United States) Tax Compliance fees - 25
Ernst & Young LLP Non-Audit fees 166 133
15. Subsequent Events
In February 2018, REL announced the sale of Three Rivers III. Under the terms
of the transaction, the Company's investment, through the Partnership, will
realise gross cash proceeds of approximately $205 million, representing a
Gross MOIC(1) of 2.2x (Net MOIC of 1.9x) on the $94 million investment and a
Gross IRR(1) of 49 per cent. (Net IRR of 41 per cent.). This represents a
gross profit of $111 million, which will be subject to a performance fee upon
closing of the sale, which is expected to occur in April 2018 and is subject
to customary closing conditions. The realised gain from this transaction was
fully offset by net operating losses from prior years, with the tax effect of
the transaction fully reflected in the tax component of the valuation of the
Company's investment in the Partnership, resulting in no tax due.
In February 2018, Fieldwood filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code. The Chapter 11 plan of
reorganisation encompasses a comprehensive restructuring of the company's
balance sheet through reducing current debt by approximately $1.6 billion and
raising capital of approximately $525 million through an equity rights
offering. In addition, Fieldwood is expected to acquire the deepwater Gulf of
Mexico oil and gas assets of Noble Energy, Inc., which complement and enhance
the company's existing asset base and operations. The transaction is expected
to close in the second quarter of 2018, subject to court approval. The effects
of both transactions are fully reflected in the valuation of the Company's
investment in the Partnership at the year end.
(1) Gross MOIC is Gross Multiple of Invested Capital before transaction costs,
taxes (approximately 21 to 27.5 per cent. of U.S. sourced taxable income) and
20 per cent. carried interest on gross profits (without a hurdle rate). Since
there is no netting of losses against gains, the effective carried interest
rate on the portfolio as a whole will be greater than 20 per cent.. In
addition, there is a management fee of 1.5 per cent. of net assets per annum
and other expenses. Given these costs, fees and expenses are in aggregate
expected to be considerable, Net MOIC and Net IRR will be materially less than
the Gross MOIC and Gross IRR. Local taxes, primarily on U.S. assets, may apply
at the jurisdictional level on profits arising in operating entity
investments. Further withholding taxes may apply on distributions from such
operating entity investments. In the normal course of business, REL may form
wholly-owned subsidiaries, to be treated as C Corporations for U.S. tax
purposes. The C Corporations serve to protect REL's public investors from
incurring U.S. ECI. The C Corporations file U.S. corporate tax returns with
the U.S. IRS and pay U.S. corporate taxes on its taxable income
Glossary of Capitalised Defined Terms
"1P reserve" means proven reserves;
"2P reserve" means proven and probable reserves;
"Administrator" means Estera International Fund Managers (Guernsey) Limited
(formerly Heritage International Fund Managers Limited);
"Admission" means admission, on 29 October 2013, to the Official List and/or
admission to trading on the London Stock Exchange, as the context may require,
of the Ordinary Shares becoming effective in accordance with the Listing Rules
and/or the LSE Admission Standards as the context may require;
"AEOI Rules" means Automatic Exchange of Information;
"AIC" means the Association of Investment Companies;
"AIC Code" means the AIC Code of Corporate Governance;
"AIC Guide" means the AIC Corporate Governance Guide for Investment
Companies;
"AIF" means Alternative Investment Funds;
"AIFM" means AIF Manager;
"AIFMD" means EU Alternative Investment Fund Managers Directive (No.
2011/61EU);
"Annual General Meeting" or "AGM" means the general meeting of the Company;
"Annual Report and Financial Statements" means the annual publication of the
Company provided to the Shareholders to describe their operations and
financial conditions, together with their Financial Statements;
"Articles of Incorporation" or "Articles" means the articles of incorporation
of the Company;
"Audit Committee" means a formal committee of the Board with defined terms of
reference;
"bbl" means barrel of crude oil;
"Board" or "Directors" means the directors of the Company;
"boepd" means barrels of equivalent oil per day;
"bopd" means barrels of oil per day;
"CAD" or "C$" means Canadian dollar;
"CanEra III" means CanEra Inc.;
"CAR" means Capital Adequacy Ratio;
"Carrier II" means Carrier Energy Partners II LLC;
"Castex 2005" means Castex Energy 2005 LLC;
"Castex 2014" means Castex Energy 2014 LLC;
"Centennial" means Centennial Resource Development, Inc.;
"CNOR" means the Canadian Non-Operated Resources LP;
"Companies Law" means the Companies (Guernsey) Law, 2008, (as amended);
"Company" or "REL" means Riverstone Energy Limited;
"Company Secretary" means Estera International Fund Managers (Guernsey)
Limited (formerly Heritage International Fund Managers Limited);
"Cornerstone Investors" means those investors who have acquired Ordinary
Shares and acquired a minority economic interest in the General Partner and in
the Investment Manager, being AKRC Investments LLC, Casita, L.P., KFI, Hunt
and McNair;
"Corporate Brokers" means Goldman Sachs International and JP Morgan Cazenove;
"Corporate Governance Code" means The UK Corporate Governance Code 2016 as
published by the Financial Reporting Council;
"C Corporations" means a C Corporation, under U.S. federal income tax law,
being a corporation that is taxed separately from its owners;
"CRAR" means Capital to Risk (Weighted) Assets Ratio;
"CRS" means Common Reporting Standard;
"Depositary" means Estera Depositary Company (UK) Limited (formerly Heritage
Depositary Company (UK) Limited);
"Discount to NAV" means the situation where the Ordinary shares of the Company
are trading at a price lower than the Company's Net Asset Value;
"E&P" means exploration and production;
"Eagle II" means Eagle Energy Exploration, LLC;
"Earnings per Share" or "EPS" means the Earnings per Ordinary Share and is
expressed in U.S. dollars;
"EBITDA" means earnings before interest, taxes, depreciation and
amortisation;
"EBITDAX" means earnings before interest, taxes, depreciation, amortisation
and exploration expenses;
"ECI" means effectively connected income, which refers to all income from
sources within the United States connected with the conduct of a trade or
business;
"EEA" means European Economic Area;
"EGM" means an Extraordinary General Meeting of the Company;
"EU" means the European Union;
"EV" means enterprise value;
"FATCA" means Foreign Account Tax Compliance Act;
"FCA" means the UK Financial Conduct Authority (or its successor bodies);
"Fieldwood" means Fieldwood Energy LLC;
"Financial Statements" means the audited financial statements of the Company,
including the Statement of Financial Position, the Statement of Comprehensive
Income, the Statement of Cash Flows, the Statement of Changes in Equity and
associated notes;
"FRC" means Financial Reporting Council
"FTSE 350" means Financial Times Stock Exchange 350 Index;
"Fund V" means Riverstone Global Energy & Power Fund V, L.P.;
"Fund VI" means Riverstone Global Energy & Power Fund VI, L.P.;
"General Partner" means REL IP General Partner LP (acting through its general
partner, REL IP General Partner Limited), the general partner of the
Partnership and a member of the Riverstone group;
"GFSC" or "Commission" means the Guernsey Financial Services Commission;
"GFSC Code" means the GFSC Finance Sector Code of Corporate Governance;
"GoM" means the Gulf of Mexico;
"Gross IRR" means an aggregate, annual, compound, gross internal rate of
return on investments. Gross IRR does not reflect expenses to be borne by the
relevant investment vehicle or its investors including, without limitation,
carried interest, management fees, taxes and organisational, partnership or
transaction expenses;
"Gross MOIC" means gross multiple of invested capital;
"Hammerhead" means Hammerhead Resources Inc. (formerly Canadian International
Oil Corp.);
"Hunt" means Hunt REL Holdings LLC together with various members of Ray L.
Hunt's family and their
related entities;
"IAS" means international accounting standards as issued by the Board of the
International Accounting Standards Committee;
"IFRS" means the International Financial Reporting Standards, being the
principles-based accounting standards, interpretations and the framework by
that name issued by the International Accounting Standards Board, as adopted
by the EU;
"ILX III" means ILX Holdings III LLC;
"Interim Financial Report" means the Company's half yearly report and
unaudited interim condensed financial statements for the period ended 30
June;
"Investment Manager" or "RIL" means Riverstone International Limited which is
majority-owned and controlled by Riverstone;
"Investment Management Agreement" means the investment management agreement
dated 24 September 2013 between RIL, the Company and the Partnership (acting
through its General Partner) under which RIL is appointed as the Investment
Manager of both the Company and the Partnership;
"Investment Undertaking" means the Partnership, any intermediate holding or
investing entities that the Company or the Partnership may establish from time
to time for the purposes of efficient portfolio management and to assist with
tax planning generally and any subsidiary undertaking of the Company or the
Partnership from time to time;
"IPEV Valuation Guidelines" means the International Private Equity and Venture
Capital Valuation Guidelines;
"IPO" means the initial public offering of shares by a private company to the
public;
"IRS" means the Internal Revenue Service, the revenue service of the U.S.
federal government;
"ISAE 3402" means International Standard on Assurance Engagements 3402,
"Assurance Reports on Controls at a Service Organisation";
"ISA" means International Standards on Auditing (UK and Ireland);
"ISIN" means an International Securities Identification Number;
"KFI" means Kendall Family Investments, LLC, a cornerstone investor in the
Company;
"Liberty II" means Liberty Resources II LLC;
"Listing Rules" means the listing
- More to follow, for following part double click ID:nRSb1636Gf - Part 5: For the preceding part double click ID:nRSb1636Gd
Board
from time to time.
As at 31 December 2017, $147 million or 8.4 per cent. (31 December 2016: $268
million or 15.8 per cent. of the Partnership's financial assets, including
those held by its wholly-owned subsidiaries, REL US Corp and REL US Centennial
Holdings, LLC, were money market fixed deposits and cash balances held on
deposit with several, A or higher rated, banks. All of these assets have
maturities of less than one year.
(b) Foreign currency risk
The Company has exposure to foreign currency risk due to the payment of some
expenses in Pounds Sterling. Consequently, the Company is exposed to risks
that the exchange rate of its currency relative to other foreign currencies
may change in a manner that has an adverse effect on the value of that portion
of the Company's assets or liabilities denominated in currencies other than
the U.S. Dollar.
The following tables sets out, in U.S. Dollars, the Company's total exposure
to foreign currency risk and the net exposure to foreign currencies of the
monetary assets and liabilities:
As at 31 December 2017 $ £ Total
$'000 $'000 € $'000
$'000
Assets
Non-current assets
Investment in the Partnership((1)) 1,742,457 - - 1,742,457
Total non-current assets 1,742,457 - - 1,742,457
Current assets
Trade and other receivables 545 - - 545
Cash and cash equivalents 667 122 - 789
Total current assets 1,212 122 - 1,334
Current liabilities
Trade and other payables 128 454 30 612
Total current liabilities 128 454 30 612
Total net assets 1,743,541 (332) (30) 1,743,179
As at 31 December 2016 $ £ Total
$'000 $'000 € $'000
$'000
Assets
Non-current assets
Investment in the Partnership((1)) 1,695,406 - - 1,695,406
Total non-current assets 1,695,406 - - 1,695,406
Current assets
Trade and other receivables 545 - - 545
Cash and cash equivalents 1,801 1,429 - 3,230
Total current assets 2,346 1,429 - 3,775
Current liabilities
Trade and other payables 215 408 - 623
Total current liabilities 215 408 - 623
Total net assets 1,697,537 1,021 - 1,698,558
The Directors do not consider that the foreign currency exchange risk at the
balance sheet date is significant or material and therefore sensitivity
analysis for the foreign currency risk has not been provided.
((1)) Includes the fair value of two investments, Hammerhead and CNOR,
denominated in CAD and therefore subject to foreign currency risk. These two
investments had an aggregate fair value of $621.5 million as at 31 December
2017 (31 December 2016: $520.8 million).
(c) Interest Rate Risk
The Company's exposure to interest rate risk relates to the Company's cash and
cash equivalents held through the Partnership and the Margin Loan held through
REL US Centennial Holdings, LLC, a wholly-owned subsidiary of the Partnership
(see Note 6). The Company is subject to risk due to fluctuations in the
prevailing levels of market interest rates. Any excess cash and cash
equivalents are invested at short-term market interest rates. As at the date
of the Statement of Financial Position, the majority of the Company's cash and
cash equivalents were held on interest bearing fixed deposit accounts at the
Partnership.
The Company has no other interest-bearing assets or liabilities as at the
reporting date. As a consequence, the Company is only exposed to variable
market interest rate risk. Management does not expect any significant change
in interest rates that would have a material impact on the financial
performance of the Company in the near future, therefore sensitivity analysis
for the interest rate risk has not been provided.
31 December 31 December
2017 2016
$'000 $'000
Non-interest bearing
Cash and cash equivalents 789 3,230
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of
Directors.
Liquidity risk is defined as the risk that the Company may not be able to
settle or meet its obligations on time or at a reasonable price.
The Company adopts a prudent approach to liquidity management and through the
preparation of budgets and cash flow forecasts maintains sufficient cash
reserves to meet its obligations. The Company received distributions of $5.5
million and $1.1 million from the Partnership in Q1 2016 and Q1 2017,
respectively, to meet its forecasted liabilities. In accordance with section
4.1(a) of the Partnership Agreement, in the event of the Company requiring
additional funds for working capital, it is entitled to receive another
distribution from the Partnership.
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Company.
The carrying value of the investment in the Partnership as at 31 December 2017
was $1,742 million (31 December 2016: $1,695 million).
Financial assets mainly consist of cash and cash equivalents and investments
at fair value through profit or loss. The Company's risk on liquid funds is
reduced because it can only deposit monies with institutions with a minimum
credit rating of "single A". The Company mitigates its credit risk exposure on
its investment at fair value through profit or loss by the exercise of due
diligence on the counterparties of the Partnership, its General Partner and
the Investment Manager.
The table below shows the material cash balances and the credit rating for the
counterparties used at the year end date:
31 December 31 December
2017 2016
Counterparty Location Rating $'000 $'000
ABN Amro (Guernsey) Limited Guernsey A 789 3,230
The Company's maximum exposure to loss of capital at the year end is shown
below:
31 December 2017 Carrying Value and Maximum exposure
$'000
Investment at fair value through profit or loss:
Investment in the Partnership 1,742,457
Loans and receivables (including cash and cash equivalents but excluding 789
prepayments)
31 December 2016 Carrying Value and Maximum exposure
$'000
Investment at fair value through profit or loss:
Investment in the Partnership 1,695,406
Loans and receivables (including cash and cash equivalents but excluding 3,230
prepayments)
Gearing
As at the date of these Financial Statements the Company itself has no
gearing; however, the Partnership had approximately $11 million of letter of
credit outstanding as part of a $200 million line of credit agreement and REL
US Centennial Holdings, LLC has borrowed $100 million under the terms of the
Margin Loan Agreement. The Company may have additional indirect gearing
through the operations of the underlying investee companies.
12. Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of
Directors, as a whole. The key measure of performance used by the Board to
assess the Company's performance and to allocate resources is the Total Return
on the Company's Net Asset Value and therefore no reconciliation is required
between the measure of profit or loss used by the Board and that contained in
the Financial Statements.
For management purposes, the Company is organised into one main operating
segment, which invests in one limited partnership.
All of the Company's income is derived from within Guernsey and the Cayman
Islands.
All of the Company's non-current assets are located in the Cayman Islands.
Due to the Company's nature, it has no customers.
13. Earnings per Share and Net Asset Value per Share
Earnings per Share
31 December 2017 31 December 2016
Basic Diluted Basic Diluted
Profit for the year ($'000) 44,621 44,621 351,410 351,410
Weighted average numbers of Shares in issue 84,480,064 84,480,064 84,480,064 84,480,064
EPS (cents) 52.82 52.82 415.97 415.97
The Earnings per Share is based on the profit or loss of the Company for the
year and on the weighted average number of Shares the Company had in issue for
the year ended 31 December 2017.
There are no dilutive Shares in issue as at 31 December 2017.
Net Asset Value per Share
31 December 31 December
2017 2016
NAV ($'000) 1,743,179 1,698,558
Number of Shares in issue 84,480,064 84,480,064
Net Asset Value per Share ($) 20.63 20.11
Net Asset Value per Share (£) 15.27 16.29
Discount to NAV (per cent.) 19.15 17.48
The Net Asset Value per Share is arrived at by dividing the net assets as at
the date of the Statement of Financial Position by the number of Ordinary
Shares in issue at that date. The Discount to NAV is arrived at by calculating
the percentage discount of the Company's Net Asset Value per Share to the
Company's closing Share price as at the date of the Statement of Financial
Position.
14. Auditors' Remuneration
Other operating expenses include all fees payable to the auditors, which can
be analysed as follows:
2017 2016
$'000 $'000
Ernst & Young LLP Audit fees 434 335
2017 2016
$'000 $'000
Ernst & Young LLP (United Kingdom) Interim Review fees 136 108
Ernst & Young Business Services S.a.r.l Non-Assurance services 30 -
Ernst & Young LLP (United States) Tax Compliance fees - 25
Ernst & Young LLP Non-Audit fees 166 133
15. Subsequent Events
In February 2018, REL announced the sale of Three Rivers III. Under the terms
of the transaction, the Company's investment, through the Partnership, will
realise gross cash proceeds of approximately $205 million, representing a
Gross MOIC((1)) of 2.2x (Net MOIC of 1.9x) on the $94 million investment and a
Gross IRR((1)) of 49 per cent. (Net IRR of 41 per cent.). This represents a
gross profit of $111 million, which will be subject to a performance fee upon
closing of the sale, which is expected to occur in April 2018 and is subject
to customary closing conditions. The realised gain from this transaction was
fully offset by net operating losses from prior years, with the tax effect of
the transaction fully reflected in the tax component of the valuation of the
Company's investment in the Partnership, resulting in no tax due.
In February 2018, Fieldwood filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code. The Chapter 11 plan of
reorganisation encompasses a comprehensive restructuring of the company's
balance sheet through reducing current debt by approximately $1.6 billion and
raising capital of approximately $525 million through an equity rights
offering. In addition, Fieldwood is expected to acquire the deepwater Gulf of
Mexico oil and gas assets of Noble Energy, Inc., which complement and enhance
the company's existing asset base and operations. The transaction is expected
to close in the second quarter of 2018, subject to court approval. The effects
of both transactions are fully reflected in the valuation of the Company's
investment in the Partnership at the year end.
((1)) Gross MOIC is Gross Multiple of Invested Capital before transaction
costs, taxes (approximately 21 to 27.5 per cent. of U.S. sourced taxable
income) and 20 per cent. carried interest on gross profits (without a hurdle
rate). Since there is no netting of losses against gains, the effective
carried interest rate on the portfolio as a whole will be greater than 20 per
cent.. In addition, there is a management fee of 1.5 per cent. of net assets
per annum and other expenses. Given these costs, fees and expenses are in
aggregate expected to be considerable, Net MOIC and Net IRR will be materially
less than the Gross MOIC and Gross IRR. Local taxes, primarily on U.S. assets,
may apply at the jurisdictional level on profits arising in operating entity
investments. Further withholding taxes may apply on distributions from such
operating entity investments. In the normal course of business, REL may form
wholly-owned subsidiaries, to be treated as C Corporations for U.S. tax
purposes. The C Corporations serve to protect REL's public investors from
incurring U.S. ECI. The C Corporations file U.S. corporate tax returns with
the U.S. IRS and pay U.S. corporate taxes on its taxable income
Glossary of Capitalised Defined Terms
"1P reserve" means proven reserves;
"2P reserve" means proven and probable reserves;
"Administrator" means Estera International Fund Managers (Guernsey) Limited
(formerly Heritage International Fund Managers Limited);
"Admission" means admission, on 29 October 2013, to the Official List and/or
admission to trading on the London Stock Exchange, as the context may require,
of the Ordinary Shares becoming effective in accordance with the Listing Rules
and/or the LSE Admission Standards as the context may require;
"AEOI Rules" means Automatic Exchange of Information;
"AIC" means the Association of Investment Companies;
"AIC Code" means the AIC Code of Corporate Governance;
"AIC Guide" means the AIC Corporate Governance Guide for Investment Companies;
"AIF" means Alternative Investment Funds;
"AIFM" means AIF Manager;
"AIFMD" means EU Alternative Investment Fund Managers Directive (No.
2011/61EU);
"Annual General Meeting" or "AGM" means the general meeting of the Company;
"Annual Report and Financial Statements" means the annual publication of the
Company provided to the Shareholders to describe their operations and
financial conditions, together with their Financial Statements;
"Articles of Incorporation" or "Articles" means the articles of incorporation
of the Company;
"Audit Committee" means a formal committee of the Board with defined terms of
reference;
"bbl" means barrel of crude oil;
"Board" or "Directors" means the directors of the Company;
"boepd" means barrels of equivalent oil per day;
"bopd" means barrels of oil per day;
"CAD" or "C$" means Canadian dollar;
"CanEra III" means CanEra Inc.;
"CAR" means Capital Adequacy Ratio;
"Carrier II" means Carrier Energy Partners II LLC;
"Castex 2005" means Castex Energy 2005 LLC;
"Castex 2014" means Castex Energy 2014 LLC;
"Centennial" means Centennial Resource Development, Inc.;
"CNOR" means the Canadian Non-Operated Resources LP;
"Companies Law" means the Companies (Guernsey) Law, 2008, (as amended);
"Company" or "REL" means Riverstone Energy Limited;
"Company Secretary" means Estera International Fund Managers (Guernsey)
Limited (formerly Heritage International Fund Managers Limited);
"Cornerstone Investors" means those investors who have acquired Ordinary
Shares and acquired a minority economic interest in the General Partner and in
the Investment Manager, being AKRC Investments LLC, Casita, L.P., KFI, Hunt
and McNair;
"Corporate Brokers" means Goldman Sachs International and JP Morgan Cazenove;
"Corporate Governance Code" means The UK Corporate Governance Code 2016 as
published by the Financial Reporting Council;
"C Corporations" means a C Corporation, under U.S. federal income tax law,
being a corporation that is taxed separately from its owners;
"CRAR" means Capital to Risk (Weighted) Assets Ratio;
"CRS" means Common Reporting Standard;
"Depositary" means Estera Depositary Company (UK) Limited (formerly Heritage
Depositary Company (UK) Limited);
"Discount to NAV" means the situation where the Ordinary shares of the Company
are trading at a price lower than the Company's Net Asset Value;
"E&P" means exploration and production;
"Eagle II" means Eagle Energy Exploration, LLC;
"Earnings per Share" or "EPS" means the Earnings per Ordinary Share and is
expressed in U.S. dollars;
"EBITDA" means earnings before interest, taxes, depreciation and amortisation;
"EBITDAX" means earnings before interest, taxes, depreciation, amortisation
and exploration expenses;
"ECI" means effectively connected income, which refers to all income from
sources within the United States connected with the conduct of a trade or
business;
"EEA" means European Economic Area;
"EGM" means an Extraordinary General Meeting of the Company;
"EU" means the European Union;
"EV" means enterprise value;
"FATCA" means Foreign Account Tax Compliance Act;
"FCA" means the UK Financial Conduct Authority (or its successor bodies);
"Fieldwood" means Fieldwood Energy LLC;
"Financial Statements" means the audited financial statements of the Company,
including the Statement of Financial Position, the Statement of Comprehensive
Income, the Statement of Cash Flows, the Statement of Changes in Equity and
associated notes;
"FRC" means Financial Reporting Council
"FTSE 350" means Financial Times Stock Exchange 350 Index;
"Fund V" means Riverstone Global Energy & Power Fund V, L.P.;
"Fund VI" means Riverstone Global Energy & Power Fund VI, L.P.;
"General Partner" means REL IP General Partner LP (acting through its general
partner, REL IP General Partner Limited), the general partner of the
Partnership and a member of the Riverstone group;
"GFSC" or "Commission" means the Guernsey Financial Services Commission;
"GFSC Code" means the GFSC Finance Sector Code of Corporate Governance;
"GoM" means the Gulf of Mexico;
"Gross IRR" means an aggregate, annual, compound, gross internal rate of
return on investments. Gross IRR does not reflect expenses to be borne by the
relevant investment vehicle or its investors including, without limitation,
carried interest, management fees, taxes and organisational, partnership or
transaction expenses;
"Gross MOIC" means gross multiple of invested capital;
"Hammerhead" means Hammerhead Resources Inc. (formerly Canadian International
Oil Corp.);
"Hunt" means Hunt REL Holdings LLC together with various members of Ray L.
Hunt's family and their
related entities;
"IAS" means international accounting standards as issued by the Board of the
International Accounting Standards Committee;
"IFRS" means the International Financial Reporting Standards, being the
principles-based accounting standards, interpretations and the framework by
that name issued by the International Accounting Standards Board, as adopted
by the EU;
"ILX III" means ILX Holdings III LLC;
"Interim Financial Report" means the Company's half yearly report and
unaudited interim condensed financial statements for the period ended 30 June;
"Investment Manager" or "RIL" means Riverstone International Limited which is
majority-owned and controlled by Riverstone;
"Investment Management Agreement" means the investment management agreement
dated 24 September 2013 between RIL, the Company and the Partnership (acting
through its General Partner) under which RIL is appointed as the Investment
Manager of both the Company and the Partnership;
"Investment Undertaking" means the Partnership, any intermediate holding or
investing entities that the Company or the Partnership may establish from time
to time for the purposes of efficient portfolio management and to assist with
tax planning generally and any subsidiary undertaking of the Company or the
Partnership from time to time;
"IPEV Valuation Guidelines" means the International Private Equity and Venture
Capital Valuation Guidelines;
"IPO" means the initial public offering of shares by a private company to the
public;
"IRS" means the Internal Revenue Service, the revenue service of the U.S.
federal government;
"ISAE 3402" means International Standard on Assurance Engagements 3402,
"Assurance Reports on Controls at a Service Organisation";
"ISA" means International Standards on Auditing (UK and Ireland);
"ISIN" means an International Securities Identification Number;
"KFI" means Kendall Family Investments, LLC, a cornerstone investor in the
Company;
"Liberty II" means Liberty Resources II LLC;
"Listing Rules" means the listing rules made by the UK Listing Authority under
section 73A Financial Services and Markets Act 2000;
"London Stock Exchange" or "LSE" means London Stock Exchange plc;
"LSE Admission Standards" means the rules issued by the London Stock Exchange
in relation to the admission to trading of, and continuing requirements for,
securities admitted to the Official List;
"M&A" means mergers and acquisitions;
"Management Engagement Committee" means a formal committee of the Board with
defined terms of reference;
"Management Fee" means the management fee to which RIL is entitled;
"Margin Loan Agreement" means the margin loan agreement dated 27 December 2016
entered into by REL US Centennial Holdings, LLC;
"McNair" means RCM Financial Services, L.P. for the purposes of acquiring
Ordinary Shares and Palmetto for the purposes of acquiring a minority economic
interest in the General Partner and the Investment Manager;
"Meritage III" means Meritage Midstream Services III, L.P.;
"mmboe" means million barrels of oil equivalent;
"mcfe" means thousand cubic feet equivalent (natural gas);
"mmcfepd" means million cubic feet equivalent (natural gas) per day;
"NASDAQ" means National Association of Securities Dealers Automated Quotations
Stock Market;
"NAV per Share" means the Net Asset Value per Ordinary Share;
"Net Asset Value" or "NAV" means the value of the assets of the Company less
its liabilities as calculated in accordance with the Company's valuation
policy and expressed in U.S. dollars;
"Net IRR" means an aggregate, annual, compound, gross internal rate of return
on investments, net of taxes and carried interest on gross profit;
"Net MOIC" means gross multiple of invested capital net of taxes and carried
interest on gross profit;
"Nomination Committee" means a formal committee of the Board with defined
terms of reference;
"NURS" means non-UCITS retail schemes;
"NYSE" means The New York Stock Exchange;
"Official List" is the list maintained by the Financial Conduct Authority
(acting in its capacity as the UK Listing Authority) in accordance with
Section 74(1) of the Financial Services and Markets Act 2000;
"OPEC" means Organisation of the Petroleum Exporting Countries;
"Ordinary Shares" means redeemable ordinary shares of no par value in the
capital of the Company issued and designated as "Ordinary Shares" and having
the rights, restrictions and entitlements set out in the Articles;
"Origo" means Origo Exploration Holding AS;
"OSE" means Oslo Stock Exchange;
"Other Riverstone Funds" means other Riverstone-sponsored, controlled or
managed entities, including Fund V/VI, which are or may in the future be
managed or advised by the Investment Manager or one or more of its affiliates,
excluding the Partnership;
"Partnership" or "RELIP" means Riverstone Energy Investment Partnership, LP,
the Investment Undertaking in which the Company is the sole limited partner;
"Partnership Agreement" means the partnership agreement in respect of the
Partnership between inter alios the Company as the sole limited partner and
the General Partner as the sole general partner dated 23 September 2013;
"Performance Allocation" means the Performance Allocation to which the General
Partner is entitled;
"Placing and Open Offer" means the issuance of 8,448,006 new Ordinary Shares
at £8.00 per Ordinary Share on 11 December 2015;
"POI Law" means the Protection of Investors (Bailiwick of Guernsey) Law, 1987;
"Private Riverstone Funds" means Fund V and all other private multi-investor,
multi-investment funds that are launched after Admission and are managed or
advised by the Investment Manager (or one or more of its affiliates) and
excludes Riverstone employee co-investment vehicles and any Riverstone managed
or advised private co-investment vehicles that invest alongside either Fund V
or any multi-investor multi-investment funds that the Investment Manager (or
one or more of its affiliates) launches after Admission;
"prompt" means the front end of the price curve;
"Prospectuses" means the prospectus published on 24 September 2013 by the
Company in connection with the IPO of Ordinary Shares and further prospectus
published on 23 November 2015;
"Qualifying Investments" means all investments in which Private Riverstone
Funds participate which are consistent with the Company's investment objective
where the aggregate equity investment in each such investment (including
equity committed for future investment) available to the relevant Private
Riverstone Fund and the Company (and other co-investees, if any, procured by
the Investment Manager or its affiliates) is $100 million or greater, but
excluding any investments made by Private Riverstone Funds where both (a) a
majority of the Company's independent directors and (b) the Investment Manager
have agreed that the Company should not participate;
"RCO" means Riverstone Credit Opportunities, L.P.;
"RELCP" means Riverstone Energy Limited Capital Partners, LP (acting by its
general partner Riverstone Holdings II (Cayman) Ltd.) a Cayman exempted
limited partnership controlled by affiliates of Riverstone;
"RIL" or "Investment Manager" means Riverstone International Limited;
"Riverstone" means Riverstone Holdings LLC and its affiliated entities (other
than the Investment Manager and the General Partner), as the context may
require;
"Rock Oil" means Rock Oil Holdings, LLC;
"S&P Index" means the Standard & Poor's 500 Index;
"S&P Oil & Gas E&P Index" means the Standard & Poor's Oil
& Gas Exploration & Production Select Industry Index;
"SCOOP" means South Central Oklahoma Oil Province;
"SEC" means the U.S. Securities and Exchange Commission;
"Sierra" means Sierra Oil and Gas Holdings, L.P.;
"SIFI" means Systemically Important Financial Institutions;
"Shareholder" means the holder of one or more Ordinary Shares;
"Stewardship Code" means the UK Stewardship Code;
"Tax Cuts and Jobs Act" means U.S. public law no. 115-97, An Act to provide
reconciliation pursuant to titles II and V of the concurrent resolution on the
budget for fiscal year 2018;
"Three Rivers III" means Three Rivers Natural Resources Holdings III LLC;
"Total Return of the Company's Net Asset Value" means the capital appreciation
of the Company's Net Asset Value plus the income received from the Company in
the form of dividends;
"UCITS" means undertakings for collective investment in transferable
securities;
"UK" or "United Kingdom" means the United Kingdom of Great Britain and
Northern Ireland;
"UK Listing Authority" or "UKLA" means the Financial Conduct Authority;
"U.S." or "United States" means the United States of America, its territories
and possessions, any state of the United States and the District of Columbia;
"WTI" means West Texas Intermediate which is a grade of crude oil used as a
benchmark in oil pricing;
"£" or "Pounds Sterling" or "Sterling" means British pound sterling and
"pence" means British pence; and
"$" means United States dollars and "cents" means United States cents.
Directors and General Information
Directors Administrator and Company Secretary Guernsey advocates to the Company
Richard Hayden (Chairman) Estera International Fund Managers (Guernsey) Limited (formerly Heritage Carey Olsen
International Fund Managers Limited)
Peter Barker
Carey House
Heritage Hall
Patrick Firth
PO Box 98
PO Box 225
Pierre Lapeyre
Les Banques
Le Marchant Street
David Leuschen
St Peter Port
St Peter Port
Ken Ryan
Guernsey
Guernsey
Jeremy Thompson
GY1 4BZ
GY1 4HY
Claire Whittet
Channel Islands
Channel Islands
U.S. legal advisors to the Company
Registered office
Audit Committee
Vinson & Elkins LLP
Heritage Hall
Patrick Firth (Chairman)
1001 Fannin Street
PO Box 225
Peter Barker
Suite 2500
Le Marchant Street
Richard Hayden
Houston, Texas
St Peter Port
Jeremy Thompson
TX 77002
Guernsey
Claire Whittet
United States of America
GY1 4HY
Channel Islands
Management Engagement Committee
Independent auditor
Claire Whittet (Chairman)
Ernst & Young LLP
Registrar
Peter Barker
PO Box 9, Royal Chambers
Link Asset Services (formerly Capita Registrars (Guernsey) Limited)
Patrick Firth
St Julian's Avenue
65 Gresham Street
Richard Hayden
St Peter Port
London
Jeremy Thompson
Guernsey
EC2V 7NQ
GY1 4AF
United Kingdom
Nomination Committee
Channel Islands
Richard Hayden (Chairman)
Principal banker
Peter Barker
Public relations advisers
ABN AMRO (Guernsey) Limited
Patrick Firth
Scott Harris UK Limited
PO Box 253
Jeremy Thompson
Victoria House
Martello Court
Claire Whittet
1-3 College Hill
Admiral Park
London
St. Peter Port
Investment Manager
EC4R 2RA
Guernsey
Riverstone International Limited
United Kingdom
GY1 3QJ
190 Elgin Avenue
Channel Islands
George Town
Corporate Brokers
Grand Cayman
Goldman Sachs International
English solicitors to the Company
KY1-9005
Peterborough Court
Freshfields Bruckhaus Deringer LLP
Cayman Islands
133 Fleet Street
65 Fleet Street
London
London
Website: www.RiverstoneREL.com
EC4A 2BB
EC4Y 1HS
ISIN: GG00BBHXCL35
United Kingdom
United Kingdom (effective until 21 September 2017)
Ticker: RSE
JP Morgan Cazenove
Hogan Lovells International LLP Atlantic House Holborn Viaduct London
25 Bank Street
EC1A 2FG
Canary Wharf
United Kingdom (effective from 21 September 2017)
London
E15 5JP
United Kingdom
Cautionary Statement
The Chairman's Statement and Investment Manager's Report have been prepared
solely to provide additional information for Shareholders to assess the
Company's strategies and the potential for those strategies to succeed. These
should not be relied on by any other party or for any other purpose.
The Chairman's Statement and Investment Manager's Report may include
statements that are, or may be deemed to be, "forward-looking statements".
These forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes", "estimates",
"anticipates", "expects", "intends", "may", "will" or "should" or, in each
case, their negative or other variations or comparable terminology.
These forward-looking statements include all matters that are not historical
facts. They appear in a number of places throughout this document and include
statements regarding the intentions, beliefs or current expectations of the
Directors and the Investment Manager, concerning, amongst other things, the
investment objectives and investment policy, financing strategies, investment
performance, results of operations, financial condition, liquidity, prospects,
and distribution policy of the Company and the markets in which it invests.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future. Forward-looking statements are not guarantees of future
performance.
The Company's actual investment performance, results of operations, financial
condition, liquidity, distribution policy and the development of its financing
strategies may differ materially from the impression created by the
forward-looking statements contained in this document.
Subject to their legal and regulatory obligations, the Directors and the
Investment Manager expressly disclaim any obligations to update or revise any
forward-looking statement contained herein to reflect any change in
expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
Riverstone Energy Limited
Heritage Hall, PO Box 225,
Le Marchant Street, St Peter Port, Guernsey, GY1 4HY, Channel Islands.
T 44 (0) 1481 742742
F 44 (0) 1481 730617
Further information available online:
www.RiverstoneREL.com
This information is provided by RNS
The company news service from the London Stock Exchange
Recent news on Riverstone Energy
See all newsREG - Riverstone Energy Ld - Variation of Corporate Broker Services
AnnouncementREG - Riverstone Energy Ld - Notice of Annual General Meeting
AnnouncementREG - Riverstone Energy Ld Barclays PLC - Holding(s) in Company
AnnouncementREG - Riverstone Energy Ld - Holding(s) in Company
AnnouncementREG - Riverstone Energy Ld - Holding(s) in Company
Announcement