REG - Riverstone Energy Ld - Final results for the year ended 31 December 2021

Riverstone EnergyAnnouncement

24/02/2022 07:00

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RNS Number : 6456C  Riverstone Energy Limited  24 February 2022

Riverstone Energy Limited

LEI: 213800HAZOW1AWRSZR47

 

Final results for the year ended 31 December 2021

London, UK (24 February 2022) - Riverstone Energy Limited ("REL" or the
"Company") announces its Year End Results from 1 January 2021 to 31 December
2021 (the "Period").

Summary Performance

 

31 December 2021

 NAV                                             $682 million (£506 million) 1 
 NAV per share                                   $12.41 / £9.19(1)
 Profit/(loss) for Period ended                  $341.94 million
 Basic profit/(loss) per share for Period ended  561.73 cents
 Market capitalization                           $345 million (£255 million)(1)
 Share price                                     $6.28 / £4.65(1)

Highlights

§ As of 31 December 2021, REL had a NAV per share of $12.41 (£9.19), an
increase in USD and GBP of 100 & 102 per cent., respectively, compared to
31 December 2020.  The quarter end closing share price was $6.28 (£4.65), an
increase of 55 & 57 per cent., respectively, compared to 31 December 2020.

§ Hammerhead, Centennial, GoodLeap, Onyx and Carrier II were the largest
drivers of REL's NAV improvement over the Period.

§ During the Period, under the Company's modified investment programme, REL
invested an aggregate amount of $97 million in eight new energy transition and
decarbonisation investments, bringing the total invested in this area to $115
million across nine investments, which in aggregate were valued at $206
million, or 1.8x Gross MOIC, at 31 December 2021.

§ Total invested capital during the Period of $108 million: Samsung Ventures
($30 million), GoodLeap ($25 million), Solid Power ($20 million), Hyzon Motors
($10 million), FreeWire Technologies ($10 million), Onyx ($7 million), ILX III
($4 million) and other investments ($2 million).

§ Total net realisations and distributions during the Period of $176 million:
ILX III ($166.9 million), Castex 2014 ($6.1 million), Meritage III ($2.3
million), GoodLeap ($1.3 million), and other investments ($1.2 million),
offset by negative earn-out payment for Sierra Oil & Gas ($1.6 million).

§ REL finished the Period with a cash balance of $106 million and remaining
potential unfunded commitments of $49 million 2 .

§ Since the initial announcement of the Share Buyback Programme on 1 May
2020, the Company has bought back a total of 24,959,132 ordinary shares at an
average price of approximately £3.45 per ordinary share, which has
contributed to the share price increase of ~111 per cent. from £2.20 to
£4.65 over the period to 31 December 2021.

 

 

 

Share Buyback Programme

§ With today's publication of the Company's Annual Report and Audited
Financial Statements for the year ended 31 December 2021, the Board will
recommence its £40.0 million open market share buyback programme with Numis
Securities Limited and J.P. Morgan Securities plc. Since the Company's
announcement on 11 May 2021, 7,744,935 ordinary shares have been bought back
at a total cost of approximately £36 million ($50 million) at an average
share price of approximately £4.65 ($6.40), such that there is £4 million
remaining of the total authorised amount.

 

§ In addition, pursuant to changes to the Investment Management Agreement
announced on 3 January 2020, the Investment Manager agreed for the Company to
be required to repurchase shares or pay dividends equal to 20 per cent. of net
gains on dispositions.  No further carried interest will be payable until the
$208 million of realised and unrealised losses to date at 31 December
2021 are made whole with future gains. REL continues to seek opportunities to
purchase shares in the market at prices at or below the prevailing NAV per
share at intrinsic value. Accordingly, an EGM was announced on 14 February
2022 seeking shareholder approval to renew the Company's share buyback
authority.  REL will continue to build value by monetising its conventional
assets and applying the proceeds to the decarbonisation of its portfolio.

 

 

Post-Year End Updates

§ Subsequent to quarter-end, REL, through the Partnership, fully funded a
$17.5 million commitment to the T-REX Group and a $15 million commitment to
Tritium, and also committed up to $20.0 million to Anuvia and funded $17.0
million of a $17.5 million commitment to the first closing of an electric
motor company's latest financing round. Each of these investments provide an
opportunity to create shareholder value while supporting REL's long-term focus
on ESG and energy transition investments.

 

§ Additionally, on 4 February 2022, REL sold its entire position in
Pipestone Energy Corp. for CAD 4.55 per share or CAD 53.0 million ($41.7
million) in net proceeds. The 11.72 million block sale resulted in an
aggregate Gross MOIC of 0.64x, inclusive of previously realised proceeds,
which is slightly higher than its fourth-quarter 2021 mark of 0.58x.

 

§ Lastly, on 8 February 2022, the Company announced that the Board and
Investment Manager agreed to allocate an additional £46.0 million to the
share buyback programme. As the Company currently has the authority to
repurchase 1,799,944 shares pursuant to the authority granted at its 2021
annual general meeting, the Board is convening an EGM on 4 March 2022 to seek
shareholder approval to renew the Company's authority to repurchase up to
14.99 per cent. of the shares outstanding as at the date of the meeting.

 

Manager Outlook

§ The Investment Manager continues to work with its portfolio companies to
navigate rising energy price tailwinds, monetizing legacy investments
opportunistically and redeploying proceeds to decarbonisation investments

§ Our work over the last year, reducing exposure to commodity risk and
increasing exposure to emergent green technologies, has positioned the
portfolio well to benefit from increasing and accelerating capital flows into
the energy transition. The eight new decarbonisation investments in 2021 and
the three new commitments in the beginning of the year demonstrate our
privileged access to leading growth-stage companies and top management teams.

§ We expect legacy portfolio companies to continue to pay down debt and
renegotiate covenants, to manage existing liquidity with discipline, and to
increase strategic capital expenditure where appropriate.

§ With $88.5 million in cash on the balance sheet as of 22 February 2022,
exclusive of the $20.0 million commitment to Anuvia, as well as $180 million
of unrestricted marketable securities and $42 million of restricted marketable
securities, the Investment Manager will continue to execute on the modified
investment programme, identifying new decarbonisation investments that present
attractive risk-reward profiles supporting value creation for shareholders.

 

Richard Hayden, Chairman of Riverstone Energy Limited, commented:

 

"It has been enormously encouraging to witness economies around the world
return to growth during 2021 thanks to the remarkable pace of vaccine
rollouts. Momentum on climate action has also accelerated and I am pleased
with the real progress that REL has made in reorientating our portfolio
further towards decarbonisation opportunities. We have nine active investments
in decarbonisation as of 31 December 2021, including eight added in 2021.
Looking forward, the opportunities offered by the scale of the investment
required to support the energy transition continue to be attractive and our
focus remains on identifying value accretive investments for our portfolio and
on executing our strategy."

 

David M. Leuschen and Pierre F. Lapeyre Jr., Co-Founders of Riverstone, added:

 

"Careful cost control and an emphasis on enhancing portfolio resilience and
efficiency has allowed REL to reposition our investments and improve
performance. We were also aided by rising commodity prices in the past year
contributing to an improved performance in REL's legacy commodity-linked
portfolio. Our commitment to delivering Shareholder value remains a core
priority, as demonstrated by our share buyback programme which we increased to
£90 million in 2021 and further increased by an additional £46 million in
February 2022, subject to shareholder approval at the upcoming EGM on 4 March
2022."

 

- Ends -

 

Riverstone Energy Limited's 2021 Annual Report is available to view at:
www.RiverstoneREL.com (http://www.RiverstoneREL.com) .

 

 

 

4Q21 Quarterly Portfolio Valuation

 

Previously, on 1 February 2022, REL announced its quarterly portfolio summary
as of 31 December 2021, inclusive of updated quarterly unaudited fair market
valuations:

 

Current Portfolio - Conventional

 

 Investment   (Public/Private)                                         Gross Committed Capital ($mm)  Invested        Gross Realised     Gross Unrealised Value  Gross Realised Capital & Unrealised Value ($mm)      30 Sep 2021 Gross MOIC 4   31 Dec 2021

                                                                                                      Capital ($mm)   Capital ($mm) 3    ($mm)(4)                                                                                                Gross MOIC(4)
 Centennial(6)        (Public)                                         268                            268             172                91                      263                                                  1.02x                      0.98x
 Hammerhead Resources        (Private)                                 307                            295             23                 93                      116                                                  0.41x                      0.39x
 Onyx                (Private)                                         66                             60              -                  102                     102                                                  1.00x                      1.70x
 Carrier II        (Private)                                           133                            110             29                 48                      77                                                   0.70x                      0.70x
 Pipestone Energy (formerly CNOR)(6)             (Public)              90                             90              16                 36                      52                                                   0.45x                      0.58x
 Total Current Portfolio - Conventional - Public 5 (,  6 )             $358                           $358            $188               $126                    $314                                                 0.88x                      0.88x
 Total Current Portfolio - Conventional - Private(5)                   $507                           $465            $52                $243                    $295                                                 0.55x                      0.63x

 

 

 

 

 

 

 

Current Portfolio - Decarbonisation

 Investment   (Public/Private)                              Gross Committed Capital ($mm)  Invested           Gross Realised     Gross Unrealised Value  Gross Realised Capital & Unrealised Value ($mm)      30 Sep 2021 Gross MOIC(4)  31 Dec 2021 Gross MOIC(4)

                                                                                           Capital ($mm)      Capital ($mm)(3)   ($mm)(4)
 GoodLeap (formerly Loanpal)           (Private)            25                             25                 1                  67                      68                                                   2.50x                      2.75x
 Solid Power(6)             (Public)                        48                             48                 -                  59                      59                                                   1.00x                      1.24x
 Enviva(6)                  (Public)                        25                             18                 -                  44                      44                                                   1.70x                      2.45x
 FreeWire              (Private)                            10                             10                 -                  20                      20                                                   2.00x                      2.00x
 Hyzon Motors(6)      (Public)                              10                             10                 -                  6                       6                                                    0.69x                      0.65x
 DCRN(6,  7 )                  (Public)                     1                              1                  -                  4                       4                                                    7.11x                      6.46x
 Ionic I & II (Samsung Ventures)      (Private)             3                              3                  -                  3                       3                                                    1.00x                      1.00x
 DCRD(6, 7)                  (Public)                       1                              1                  -                  1                       1                                                    1.00x                      1.00x
 Total Current Portfolio - Decarbonisation - Public(5, 6)   $84                            $77                -                  $115                    $115                                                 1.22x                      1.49x
 Total Current Portfolio - Decarbonisation - Private(5)     $38                            $38                $1                 $90                     $91                                                  1.73x                      2.42x
 Cash and Cash Equivalents                                                                                                       $106
 Total Liquidity (Cash and Cash Equivalents & Public Portfolio)                                                                  $347
 Total Market Capitalisation                                                                                                     $345

 

Realisations

 Investment   (Initial Investment Date)                                Gross Committed Capital ($mm)  Invested        Gross Realised     Gross Unrealised Value  Gross Realised Capital & Unrealised Value ($mm)( )      30 Sep 2021 Gross MOIC(4)  31 Dec 2021

                                                                                                      Capital ($mm)   Capital ($mm)(3)   ($mm)(4)                                                                                                   Gross MOIC(4)
 Rock Oil 8            (12 Mar 2014)                                   114                            114             232                3                       235                                                     2.05x                      2.06x
 Three Rivers III (7 Apr 2015)                                          94                             94             204                -                       204                                                     2.17x                      2.17x
 ILX III 9              (8 Oct 2015)                                   179                            179             171                1                       172                                                     0.97x                      0.96x
 Meritage III 10      (17 Apr 2015)                                    40                             40              86                 -                       86                                                      2.16x                      2.16x
 RCO 11                          (2 Feb 2015)                          80                             80              80                 -                       80                                                      0.99x                      0.99x
 Sierra              (24 Sept 2014)                                    18                             18              38                 -                       38                                                      2.06x                      2.06x
 Aleph                 (9 Jul 2019)                                    23                             23              23                 -                       23                                                      1.00x                      1.00x
 Ridgebury                                                             18                             18              22                 -                       22                                                      1.22x                      1.22x

 (19 Feb 2019)
 Castex 2014                                                           52                             52              14                 -                       14                                                      0.27x                      0.27x

 (3 Sep 2014)
 Total Realisations(5)                                                 $619                           $619            $871               $4                      $875                                                    1.41x                      1.41x
 Withdrawn Commitments and Impairments 12                              350                            350             9                  -                       9                                                       0.02x                      0.02x
 Total Investments(5)                                                  $1,955                         $1,906          $1,121             $578                    $1,699                                                  0.86x                      0.89x
 Total Investments & Cash and Cash Equivalents(5)                                                                                        $684
 Draft Unaudited Net Asset Value                                                                                                         $682

 Total Shares Repurchased to-date                                                                                                        24,959,132              at average price per share of £3.45 ($4.52)
 Current Shares Outstanding                                                                                                              54,937,599

 

 

Note:

The Investment Manager is charged with proposing the valuation of the assets
held by REL through the Partnership. The Partnership has directed that
securities and instruments be valued at their fair value. REL's valuation
policy follows IFRS and IPEV Valuation Guidelines. The Investment Manager
values each underlying investment in accordance with the Riverstone valuation
policy, the IFRS accounting standards and IPEV Valuation Guidelines. The
Investment Manager has applied Riverstone's valuation policy consistently
quarter to quarter since inception. The value of REL's portion of that
investment is derived by multiplying its ownership percentage by the value of
the underlying investment. If there is any divergence between the Riverstone
valuation policy and REL's valuation policy, the Partnership's proportion of
the total holding will follow REL's valuation policy. There were no valuation
adjustments recorded by REL as a result of differences in IFRS and U.S.
Generally Accepted Accounting Policies for the period ended 31 December 2021
or in any period to date. Valuations of REL's investments through the
Partnership are determined by the Investment Manager and disclosed quarterly
to investors, subject to Board approval.

Riverstone values its investments using common industry valuation techniques,
including comparable public market valuation, comparable merger and
acquisition transaction valuation, and discounted cash flow valuation.

For development-type investments, Riverstone also considers the recognition of
appreciation or depreciation of subsequent financing rounds, if any. For those
early stage privately held companies where there are other indicators of a
decline in the value of the investment, Riverstone will value the investment
accordingly even in the absence of a subsequent financing round.

Riverstone reviews the valuations on a quarterly basis with the assistance of
the Riverstone Performance Review Team ("PRT") as part of the valuation
process. The PRT was formed to serve as a single structure overseeing the
existing Riverstone portfolio with the goal of improving operational and
financial performance.

The Board reviews and considers the valuations of the Company's investments
held through the Partnership.

 

 

 1  GBP:USD FX rate of 1.350 as of 31 December 2021

 2  Excludes the remaining unfunded commitments for Carrier II and Hammerhead
$36 million, in aggregate, which are not expected to be funded. The expected
funding of the remaining unfunded commitments at 31 December 2021 are $nil in
2022, 2023 and 2024. The residual amounts are to be funded as needed in 2025
and later years.

 3  Gross realised capital is total gross proceeds realised on invested
capital. Of the $1,121 million of capital realised to date, $823 million is
the return of the cost basis, and the remainder is profit.

 4  Gross Unrealised Value and Gross MOIC (Gross Multiple of Invested
Capital) are before transaction costs, taxes (approximately 21 to 27.5 per
cent. of U.S. sourced taxable income) and 20 per cent. carried interest on
applicable gross profits in accordance with the revised terms announced on 3
January 2020, but effective 30 June 2019. Since there was no netting of losses
against gains before the aforementioned revised terms, the effective carried
interest rate on the portfolio as a whole will be greater than 20 per cent. No
further carried interest will be payable until the $208 million of realised
and unrealised losses to date at 31 December 2021 are made whole with future
gains, so the earned carried interest of $0.8 million at 31 December 2021 has
been deferred and will expire in October 2023 if the aforementioned losses are
not made whole. Since REL has not yet met the appropriate Cost Benchmark at 31
December 2021, $28.7 million in Performance Allocation fees that would have
been due under the prior agreement were not accrued. In addition, there is a
management fee of 1.5 per cent. of net assets (including cash) per annum and
other expenses. Given these costs, fees and expenses are in aggregate expected
to be considerable, Total Net Value and Net MOIC will be materially less than
Gross Unrealised Value and Gross MOIC. 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 US tax
purposes. The C Corporations serve to protect REL's public investors from
incurring U.S. effectively connected income. The C Corporations file U.S.
corporate tax returns with the U.S. Internal Revenue Service and pay U.S.
corporate taxes on its taxable income.

 5  Amounts may vary due to rounding.

 6 . Represents closing price per share in USD for publicly traded shares of
Centennial Resource Development, Inc. (NASDAQ:CDEV - 31-12-2021: $5.98 price
per share / 30-09-2021: $6.70 price per share); USD-equivalent closing price
per share for Pipestone Energy Corp. (TSX-V:PIPE - 31-12-2021: $3.08 price per
share / 30-09-2021: $2.09 price per share); Enviva, Inc. (NYSE:EVA -
31-12-2021: $70.42 price per share / 30-09-2021: $53.41 price per share);
Solid Power, Inc. (NASDAQ:SLDP - 31-12-2021: $8.74 price per share /
30-09-2021: $10.05 price per share); Hyzon Motors, Inc. (NASDAQ:HYZN -
31-12-2021: $6.49 price per share / 30-09-2021: $6.94 price per share); and
Decarbonization Plus Acquisition Corporation II (NASDAQ:DCRN - 31-12-2021:
$9.97 price per share / 30-09-2021: $9.87 price per share).

 7  SPAC Sponsor investment for Decarbonization Plus Acquisition Corporation
II (NASDAQ:DCRN) and Decarbonization Plus Acquisition Corporation IV
(NASDAQ:DCRD).

 8  The unrealised value of the Rock Oil investment consists of rights to
mineral acres.

 9  The unrealised value of the ILX III investment consists of 43,333 shares
of Talos Energy Inc stock (NYSE:TALO) in connection with its former investment
in ILX III.

 10  Midstream investment.

 11  Credit investment.

 12  Withdrawn commitments consist of Origo ($9 million) and CanEra III ($1
million), and impairments consist of Liberty II ($142 million), Fieldwood ($80
million), Eagle II ($62 million) and Castex 2005 ($48 million).

 

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