REG - Riverstone Energy Ld - REL 2Q22 Quarterly Portfolio Valuations & NAV
29/07/2022 07:00
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RNS Number : 1704U Riverstone Energy Limited 29 July 2022
- THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION -
Riverstone Energy Limited Announces 2Q22 Quarterly Portfolio Valuations &
NAV
London, UK (29 July 2022) - Riverstone Energy Limited ("REL" or the "Company")
announces its quarterly portfolio summary as of 30 June 2022, 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) 31 Mar 2022 30 June 2022
Capital ($mm) Capital ($mm)( 1 (#_edn1) ) ($mm)( 2 (#_edn2) ) Gross MOIC(2) Gross MOIC(2)
Centennial( 3 (#_edn3) ) (Public) 268 268 194 75 269 1.10x 1.00x
Hammerhead Resources (Private) 307 295 23 133 156 0.50x 0.53x
Onyx (Private) 66 60 - 149 149 2.50x 2.50x
Carrier II (Private) 133 110 29 48 77 0.70x 0.70x
Total Current Portfolio - Conventional - Public( 4 (#_edn4) ) $268 $268 $194 $75 $269 1.10x 1.00x
Total Current Portfolio - Conventional - Private(4) $507 $465 $52 $330 $382 0.80x 0.82x
Current Portfolio - Decarbonisation
Investment (Public/Private) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 31 Mar 2022 Gross MOIC(2) 30 Jun 2022 Gross MOIC(2)
Capital ($mm) Capital ($mm)(1) ($mm)(2)
GoodLeap (formerly Loanpal) (Private) 25 25 2 67 69 2.75x 2.75x
Solid Power(3) (Public) 48 48 - 39 39 1.29x 0.82x
Enviva(3) (Public) 22 18 - 37 37 2.79x 2.03x
FreeWire (Private) 10 10 - 20 20 2.17x 2.00x
Anuvia Plant Nutrients 20 20 - 20 20 1.00x 1.00x
(Private)
T-REX Group (Private) 18 18 - 18 18 1.00x 1.00x
Infinitum 18 18 - 18 18 1.00x 1.00x
(Private)
Tritium DCFC(3) 16 16 - 17 17 1.78x 1.07x
(Public)
Group14 (Private) 4 4 - 4 4 n/a 1.00x
Hyzon Motors(3) (Public) 10 10 - 3 3 0.64x 0.29x
Ionic I & II (Samsung Ventures) (Private) 3 3 - 3 3 1.00x 1.00x
DCRD(3, (#_edn5) ) (#_edn5) ( 5 (#_edn5) ) (#_edn5) ( (#_edn5) ) 1 1 - 1 1 1.00x 1.00x
(Public)
Total Current Portfolio - Decarbonisation - Public(4) $96 $92 - $96 $96 1.59x 1.04x
Total Current Portfolio - Decarbonisation - Private(4) $97 $97 $2 $149 $151 1.60x 1.56x
Cash and Cash Equivalents $72
Total Liquidity (Cash and Cash Equivalents & Public Portfolio) $243
Total Market Capitalisation $425
Realisations
Investment (Initial Investment Date) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 31 Mar 2022 Gross MOIC(2) 30 Jun 2022
Capital ($mm) Capital ($mm)(1) ($mm)(2) Gross MOIC(2)
Rock Oil( 6 (#_edn6) ) (12 Mar 2014) 114 114 233 4 237 2.06x 2.07x
Three Rivers III (7 Apr 2015) 94 94 204 - 204 2.17x 2.17x
ILX III (8 Oct 2015) 179 179 172 - 172 0.96x 0.96x
Meritage III( 7 (#_edn7) ) (17 Apr 2015) 40 40 87 - 87 2.20x 2.20x
RCO( 8 (#_edn8) ) (2 Feb 2015) 80 80 80 - 80 0.99x 0.99x
Pipestone Energy (formerly CNOR) (29 Aug 2014) 90 90 58 - 58 0.64x 0.64x
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(4) $709 $709 $932 $4 $936 1.32x 1.32x
Withdrawn Commitments and Impairments( 9 (#_edn9) ) 350 350 9 - 9 0.02x 0.02x
Total Investments(4) $2,026 $1,980 $1,188 $654 $1,842 0.97x 0.93x
Total Investments & Cash and Cash Equivalents $726
Draft Unaudited Net Asset Value( 10 (#_edn10) ) $719
Total Shares Repurchased to-date 27,182,444 at average price per share of £3.70 ($4.82)
Current Shares Outstanding 52,714,287
Geopolitical Dynamics and Commodity Market Volatility
Global commodity price volatility and pervasive tightness has created distinct
winners and losers in the market. We would be remiss not to acknowledge that
the benefit dispersed over the last six months arrives alongside incredible
human toll, whether Ukrainian lives and socioeconomic progress lost to war and
the effects thereof. One small, but not insignificant silver lining is an
increase in momentum toward long-term decarbonisation. For example, the influx
of capital available to the beneficiaries of market volatility-namely oil and
gas producers-may for the first time facilitate major consolidation among
traditional and renewable power producers. The major oil producers, including
Shell, Equinor, and TotalEnergies have recently completed cost-benefit
analyses of prospective renewable utility buy-out acquisitions to facilitate
decarbonisation. This would be a divergence and acceleration from thus-far
incremental build-out of renewable generation to satisfy net-zero pledges, and
opportunistic capital expenditure for hydrocarbon E&P.
In the meantime, Europe will be reliant on legacy coal-fired generation to
balance intermittency on the grid in the context of repudiation of Russian
gas. We continue to feel the effects of the bullwhip, as energy commodity
price volatility persists into the second half of the year. Whilst WTI and
Brent prices are up 42 per cent. and 45 per cent. since the beginning of the
year, they increased by only 7.2 per cent. and 6.4 per cent. over the quarter.
While some deceleration in price increases in oil may signify an absorption of
war-driven energy supply adjustments, oil prices have reached heights not seen
since 2008. Gasoline prices have risen commensurately, but market conditions
for natural gas are worse than when systematic market failure threw the globe
into recession.
While current geopolitical tensions persist and the global economy continues
to recover from pandemic conditions, we expect our energy trilemma: security,
affordability, and the need to decarbonise to mitigate the worst effects of
climate change and drive global market dynamics.
Quarterly Performance Commentary
REL's legacy portfolio investments have maintained their valuations quarter
over quarter due to volatility in global energy prices. The market dynamics of
particular benefit to the portfolio include the increase in liquefied natural
gas exports powering the UK's net-exporter role in the European power
landscape. They also include European mandates to maintain or increase
generation from coal-fired assets in efforts to arrest runaway power prices on
the continent. Macroeconomic tailwinds driving the constructive commodity
environment have dovetailed with strong operational results from several of
REL's legacy investments. Centennial Resource Development generated record
free cash flows in the second quarter of the year and now represents half of
the largest pure-play E&P company in the Delaware Basin post its business
combination with Colgate. Legacy production and generation assets still
predominate REL's gross unrealised investment value (62 per cent. at 30 June
2022). Continued debt paydown and prudent hedging programs by our upstream oil
and gas companies have created a resilient and substantially de-risked
portfolio of high-quality assets.
In the second quarter of the year, each of REL's privately held, conventional
investments maintained or improved their marks. Investments with exposure to
public markets were predominately marked down. This included REL's investments
in Hyzon, Tritium, Enviva, and Solid Power, and is consistent with the
market's overall performance-the S&P 500 is down 21 per cent.
year-to-date, and 16 per cent. over the quarter. REL's investments in private
decarbonisation companies largely maintained their value.
Over the quarter, REL invested $4 million in Group14, which is described
below. Continued liquidity management at the legacy portfolio coupled with
persistent, incremental efforts to decarbonise has continued to position REL's
portfolio to benefit from the energy transition and decarbonisation movements.
Further information on REL's five largest positions, which account for 72 per
cent. of the portfolio's gross unrealised value is set forth below:
Onyx
The Gross MOIC for Onyx remained flat from the first quarter at 2.50x. Power
markets in Europe, while highly volatile, remain elevated due to the Russian
invasion of Ukraine and associated concerns over gas supply. In addition to
prioritising plant availability, the management team continues to work on
several organic growth initiatives, including the implementation of
operational performance improvements and the development of potential capital
projects related to the energy transition.
Hammerhead
The Gross MOIC for Hammerhead increased from 0.50x to 0.53x during the second
quarter. Given the strong macro environment, Hammerhead plans to continue
ramping development in the second half of 2022. Hammerhead has hedged
approximately 52 per cent. of forecasted 2022 crude oil production at a
weighted average price of $76.55 per barrel, 12 per cent. of forecasted 2023
crude oil production at a weighted average price of $71.84 per barrel, 59 per
cent. of forecasted 2022 natural gas production at a weighted average price of
$3.41 per MMBtu, and 10 per cent. of forecasted 2023 natural gas production at
a weighted average price of $3.04 per MMBtu. As of 2Q 2022, Hammerhead was
producing approximately 34,400 Boepd.
Centennial Resource Development
The Gross MOIC for Centennial was 1.00x at the end of the second quarter. In
Q2, Centennial announced that they had entered into an agreement to combine
with Colgate Energy for a total consideration of 269.3 million shares of
Centennial stock, $525 million of cash and the assumption of $1.4 billion of
Colgate's outstanding net debt. The company expects leverage at closing to be
1.0x. The combined company will be the largest pure-play E&P company in
the Delaware Basin with approximately 180,000 net leasehold acres, 40,000 net
royalty acres and total current production of 135,000 Boe/d.
From an operational standpoint, Centennial continues to see strong results on
the back of a highly constructive commodity environment and strong capital
efficiency. In Q1 2022, Centennial generated record free cash flow of $89
million and reduced Net Debt/LTM EBITDAX to 1.1x compared to 1.4x at YE 2021.
The Company expects leverage to fall to <1.0x by Q2 2022.
GoodLeap (formerly Loanpal)
The Gross MOIC for GoodLeap remained flat at 2.75x during the second quarter.
During the quarter, the company closed on its 13th securitisation which was
oversubscribed despite volatile markets. Management continues to execute on
its growth plans.
On 13 October 2021, GoodLeap announced a new investment round of over $800
million, which will support the company's operational improvements, technology
innovation efforts, and expansion. This funding round gives the company an
implied post-money valuation of $12 billion and informs our implied 2.75x
valuation.
Carrier II
The Gross MOIC for Carrier II remained flat at 0.70x during the second
quarter. The company continues to operate prudently and remains focused on
using free cash flow for high commodity prices to fund development and reduce
outstanding indebtedness on the company's term loan. Carrier II has hedged
approximately 50 per cent. of forecasted oil production during the remainder
of 2022 at a weighted average price of $57.40 per barrel WTI. As of 30 June
2022, the company was producing approximately 2,713 Boepd.
Other Investments
Anuvia
On 8 March 2022, REL invested $20 million into Anuvia Plant Nutrients' $65.5
million Series D funding round. Anuvia, a bio-based crop nutrition technology
company, produces a sustainable, organic fertiliser product that provides
delayed-release nutrient delivery better aligned with crop needs, allowing for
more efficient nutrient absorption in agriculture. Anuvia's products improve
soil health, reduce nutrient runoff, and reduce reliance on carbon-intensive
synthetic fertilisers. During Q2 2022, the Company engaged McKinsey plant
operations specialists for on-site consulting to help the Company establish
best practices and identify root causes of production bottlenecks and
potential solutions to further enhance Anuvia's ability to ramp production
volumes.
Group14
In April 2022, REL invested $4 million into Group14 Technologies, Inc.'s $400
million Series C funding round. The Series C round was led by Porsche AG, with
participation from OMERS Capital Markets, Decarbonization Partners, Vsquared
Ventures, and others. Group14 is a battery materials technology company
founded in 2015. The Company has developed a proprietary silicon-based anode
battery material to replace graphite in conventional lithium-ion batteries.
LEI: 213800HAZOW1AWRSZR47
About Riverstone Energy Limited:
REL is a closed-ended investment company that has since 2020 been exclusively
focussed on pursuing and has committed $171 million to a global strategy
across decarbonisation sectors presented by Riverstone's investment platform.
REL's ordinary shares are listed on the London Stock Exchange, trading under
the symbol RSE. REL has 19 active investments spanning decarbonisation, oil
and gas, renewable energy and power in the Continental U.S., Western Canada,
Gulf of Mexico and Europe.
For further details, see www.RiverstoneREL.com (http://www.RiverstoneREL.com)
Neither the contents of Riverstone Energy Limited's website nor the contents
of any website accessible from hyperlinks on the websites (or any other
website) is incorporated into, or forms part of, this announcement.
Media Contacts
For Riverstone Energy Limited:
Josh Prentice
+44 20 3206 6300
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 30 June 2022 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 (#_ednref1) Gross realised capital is total gross proceeds realised on
invested capital. Of the $1,188 million of capital realised to date, $888
million is the return of the cost basis, and the remainder is profit.
2 (#_ednref2) 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 $138.4
million of realised and unrealised losses to date at 30 June 2022 are made
whole with future gains, so the earned carried interest of $0.8 million at 30
June 2022 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 30 June 2022, $34.1 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.
3 (#_ednref3) Represents closing price per share in USD for publicly traded
shares of Centennial Resource Development, Inc. (NASDAQ:CDEV - 30-06-2022:
$5.98 per share / 31-03-2022: $8.07 price per share); Enviva, Inc. (NYSE:EVA -
30-06-2022: $57.22 per share / 31-03-2022: $79.15 price per share); Solid
Power, Inc. (NASDAQ:SLDP - 30-06-2022: $5.38 per share / 31-03-2022: $8.67
price per share); Hyzon Motors, Inc. (NASDAQ:HYZN - 30-06-2022: $2.94 per
share / 31-03-2022: $6.39 price per share); and Tritium DCFC Limited
(NASDAQ:DCFC - 30-06-2022: $6.09 price per share / 31-03-2022 $10.04 price per
share.)
4 (#_ednref4) Amounts vary due to rounding
5 (#_ednref5) SPAC Sponsor investment for Decarbonization Plus Acquisition
Corporation IV (NASDAQ:DCRD)
6 (#_ednref6) The unrealised value of Rock Oil investment consists of rights
to mineral acres.
7 (#_ednref7) Midstream investment
8 (#_ednref8) Credit investment
9 (#_ednref9) 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)
10 (#_ednref10) Since REL has not yet met the appropriate Cost Benchmark at
30 June 2022, $34.1 million in Performance Allocation fees that would have
been due under the prior agreement were not accrued and thereby reduced the
NAV on a pro forma basis to $685 million or $12.99 per share
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