REG - Riverstone Energy Ld - REL Announces 4Q23 Valuations & $200M Tender Offer
08/02/2024 07:15
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RNS Number : 4084C Riverstone Energy Limited 08 February 2024
- THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION -
Riverstone Energy Limited Announces 4Q23 Quarterly Portfolio Valuations &
NAV, and $200M Tender Offer
London, UK (8 February 2024) - Riverstone Energy Limited ("REL" or the
"Company") announces its quarterly unaudited fair market valuations as of 31
December 2023, and a proposed $200 million Tender Offer.
The Company announces that it proposes to return $200 million (equivalent to
approximately £158 million on the basis of the prevailing USD:GBP exchange
rate) of its excess capital to shareholders by means of a tender offer (the
"Tender Offer") at a price of £10.50 per ordinary share. The Tender Price
represents a premium of approximately 31 per cent. to the closing market price
per ordinary share of £8.00 on 7 February 2024 and represents a 16 per cent.
discount to the unaudited net asset value per ordinary share of £12.53 as
at 31 December 2023 (on the basis of the prevailing USD:GBP exchange rate at
31 December 2023 of 1.2736). The Company expects to launch the Tender Offer
before the end of this month and that the Tender Offer will close during
March. The precise number of ordinary shares that may be acquired in the
Tender Offer will be determined on launch (on the basis of the then prevailing
USD:GBP exchange rate), but is expected will represent approximately 36 per
cent. of the Company's existing ordinary shares then in issue (excluding any
ordinary shares held in treasury). The Tender Offer will require shareholder
approval at an extraordinary general meeting of the Company's shareholders,
which is anticipated will be held in March, and will be subject to other
legal, regulatory and customary conditions.
Current Portfolio - Conventional
Investment (Public/Private) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 30 Sep 2023 31 Dec 2023
Capital ($mm) Capital ($mm) 1 (#_edn1) ($mm) 2 (#_edn2) Gross MOIC(2) Gross MOIC(2)
Permian Resources 3 (#_edn3) (Public) 268 268 225 137 362 1.36x 1.35x
Onyx (Private) 66 60 121 70 191 3.00x 3.20x
Crescent Point Energy (fka Hammerhead Resources)(3) (Public) 308 296 198 58 256 0.71x 0.87x
Total Current Portfolio - Conventional - Public 4 (#_edn4) $576 $564 $423 $195 $618 1.02x 1.10x
Total Current Portfolio - Conventional - Private(4) $66 $60 $121 $70 $191 3.00x 3.20x
Total Current Portfolio - Conventional - Public & Private(4) $642 $624 $544 $265 $809 1.21x 1.30x
Current Portfolio - Decarbonisation
Investment (Public/Private) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 30 Sep 2023 Gross MOIC(2) 31 Dec 2023 Gross MOIC(2)
Capital ($mm) Capital ($mm)(1) ($mm)(2)
Infinitum Electric 27 27 - 30 30 1.05x 1.10x
(Private)
GoodLeap (formerly Loanpal) (Private) 25 25 2 29 31 1.50x 1.25x
T-REX Group (Private) 21 21 - 17 17 1.00x 0.82x
Tritium DCFC(3) 25 25 1 11 12 0.47x 0.46x
(Public)
Solid Power(3) (Public) 48 48 - 11 11 0.31x 0.22x
Group14 (Private) 4 4 - 4 4 1.00x 1.00x
FreeWire (Private) 14 14 - 3 3 1.00x 0.25x
Our Next Energy (Private) 13 13 - 3 3 1.00x 0.25x
Ionic I & II (Samsung Ventures) (Private) 3 3 - 3 3 1.00x 1.00x
Enviva(3) (Public) 22 22 0 1 1 0.29x 0.05x
Hyzon Motors(3) (Public) 10 10 - 1 1 0.13x 0.09x
Anuvia Plant Nurients (Private) 20 20 - - - 0.00x 0.00x
Total Current Portfolio - Decarbonisation - Public(4) $105 $105 $1 $23 $24 0.32x 0.23x
Total Current Portfolio - Decarbonisation - Private(4) $127 $127 $2 $90 $92 0.95x 0.73x
Total Current Portfolio - Decarbonisation - Public & Private(4) $232 $232 $3 $113 $116 0.66x 0.50x
Total Current Portfolio - Conventional & Decarbonisation - Public & $874 $855 $548 $378 $926 1.06x 1.08x
Private(4)
Cash and Cash Equivalents $291
Total Liquidity (Cash and Cash Equivalents & Public Portfolio) $509
Total Market Capitalisation $430
Realisations
Investment (Initial Investment Date) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 30 Sep 2023 Gross MOIC(2) 31 Dec 2023
Capital ($mm) Capital ($mm)(1) ($mm)(2) Gross MOIC(2)
Rock Oil 5 (#_edn5) (12 Mar 2014) 114 114 234 4 238 2.08x 2.08x
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 6 (#_edn6) (17 Apr 2015) 40 40 88 - 88 2.20x 2.20x
RCO 7 (#_edn7) (2 Feb 2015) 80 80 80 - 80 0.99x 0.99x
Carrier II (22 May 2015) 110 110 67 - 67 0.60x 0.61x
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) $819 $819 $1,000 $4 $1,004 1.23x 1.23x
Withdrawn Commitments and Impairments 8 (#_edn8) 350 350 9 - 9 0.02x 0.02x
Total Investments(4) $2,042 $2,024 $1,557 $382 $1,939 0.95x 0.96x
Total Investments & Cash and Cash Equivalents $674
Draft Unaudited Net Asset Value 9 (#_edn9) $674
Total Shares Repurchased to-date 34,518,746 at average price per share of £4.19 ($5.35)
Current Shares Outstanding 42,195,789
Macroeconomic Improvements on the Horizon
US public equity markets ended 2023 on a strong note with the S&P 500
Index and the Russell 1000 Index each up over 11 per cent. in the fourth
quarter and over 24 per cent. on the year. While we had positive returns in
European markets, these were much more subdued. Corporate earnings results
aside, the single most important driver of stock market performance (after a
dismal 2022) was investors' beliefs that the rate hiking cycle in the US has
reached its zenith. Markets continued to show strength in the first weeks of
the new year as investors' expectation have grown from "no more rate hikes" to
"rate cuts" in the back half of 2024. On 19(th) January, the S&P 500
Index set a record close of 4839.81 surpassing its previous record set in
January 2022.
While this market strength is a harbinger of better times for both the
portfolio's conventional and decarbonisation investments, portfolio
performance for the last quarter of 2023 remained essentially flat with
positive performance from the conventional energy portfolio offset by lagging
results from the decarbonisation investments. Growth stage
(pre-profitability) energy transition and decarbonisation investments continue
to lag broader markets, and still face adversity as the viability of their
business plans remain in question due to a dampening of investor appetite in
the face of higher interest rates. Lower risk appetite presents a
substantial risk for these businesses as they are at a stage in their growth
that relies disproportionately on funding from private equity, corporate
balance sheets and institutional investors. The Company's decarbonisation
investments are not immune from these headwinds.
On the energy commodity front, West Texas Intermediate (WTI) crude prices were
down 6.5 per cent. in 2023 and 20.8 per cent. in the fourth quarter, Brent
Crude was down 6.2 per cent. in 2023 and 19.2 per cent. in the fourth quarter,
and Henry Hub natural gas spot prices were down 29.1 per cent. in 2023 and 3.7
per cent. in the fourth quarter. Consolidation in the US oil and gas sector
has reached levels not seen in a long time with over $250 billion in
acquisitions announced in 2023. The Permian basin featured prominently in
this deal activity and reflects the acquirers' strong balance sheets due to
the sector's commitment to cash-flow-generation. The most notable transactions
in the "oil patch" included Exxon Mobil's $60 billion deal for Pioneer Natural
Resources, Chevron's $53 billion acquisition of Hess and Permian Resources'
$4.5 billion bid for Earthstone Energy.
Quarterly Performance Commentary
REL's conventional energy portfolio performed well, gaining 7.6 per cent. in
value over the quarter. This improvement was driven largely by Crescent Point
Energy's (fka Hammerhead Energy) 21.1 per cent. improvement in share price,
countering slight weakness in Permian Resources' share price in the fourth
quarter. Permian Resources was up 44.7 per cent. year-over-year in 2023. At
the end of December, Crescent Point Energy finalised its acquisition of REL
portfolio company, Hammerhead Energy, which resulted in a $175 million
distribution to REL and the receipt of 8 million shares of Crescent Point
Energy (NYSE: CPG). In addition, Onyx's valuation also increased from 3.00x to
3.20x Gross MOIC as detailed below.
The decarbonisation portfolio dropped 22.9 per cent. in value during the
quarter, driven primarily by its position in Enviva, which lost 85.4 per cent.
of its market value due to missed earnings targets, plant-level operational
disruption, and ongoing restructuring. In addition, FreeWire lost 75 per cent.
of its value due to reduced growth projections as the company works to
preserve cash in a challenging fundraising and growth environment for
EV-related businesses. With the exception of Infinitum, the remainder of the
decarbonisation portfolio continued to suffer from fundraising headwinds
caused by the impact of rates and lower risk appetite from investors. These
businesses will remain susceptible to market volatility until they reach
profitability.
Further information on REL's five largest positions, which account for ~85 per
cent. of the portfolio's gross unrealised value is set forth below:
Permian Resources
The valuation for Permian Resources (NYSE: PR) decreased from 1.36x to 1.35x
Gross MOIC in the fourth quarter of 2023. Permian Resources completed the
~$4.5 billion acquisition of Earthstone Energy, Inc. (NYSE: ESTE) in November
2023. The transaction bolsters PR's leading position in the Delaware Basin and
increases operating size and scale. The transaction further enhances free cash
flow generation and is expected to generate ~$175 million of annual synergies.
The pro-forma company remains committed to achieving an investment grade
rating. The pro-forma company has hedged approximately 20 per cent. of
forecasted 2024 crude oil production at a weighted average price of $74.21 per
barrel and 22 per cent. of forecasted 2024 natural gas production at a
weighted average price of $3.89 per mcf.
Onyx
The valuation multiple for Onyx increased in the fourth quarter of 2023 from
3.00x to 3.20x Gross MOIC. While CDS margins have reduced materially since the
peaks of late 2022 due to low European power prices, which have adjusted to
high gas storage levels, warm winter weather, and high wind generation, lower
profitability margins have been offset by hedging activities at Onyx. During
Q4 2023, Onyx distributed €100mm of cash to investors (€300mm year-to-date
2023) of which REL received €20mm in the fourth quarter and $60mm throughout
the year. The management team continues to work on organic growth initiatives,
including the implementation of operational performance improvements and the
development of projects related to the energy transition.
Crescent Point Energy (fka Hammerhead Resources)
Crescent Point Energy's valuation increased from 0.71x to 0.87x Gross MOIC
during the fourth quarter of 2023 reflecting solid share price performance. On
6 November 2023, Crescent Point Energy announced its plan to acquire
Hammerhead for C$21.00 per share (C$15.50 cash, C$5.50 stock). The transaction
closed on 21 December 2023 resulting in REL owning approximately 1.3 per cent.
of Crescent Point Energy. REL received approximately $175 million in cash from
the transaction and 8 million shares which are subject to lock-up. These
shares will be disposed of in time, subject to energy market conditions,
operating performance, and liquidity.
GoodLeap (formerly Loanpal)
The valuation multiple for GoodLeap fell during the fourth quarter of 2023
from 1.50x Gross MOIC to 1.25x Gross MOIC, largely driven by the impact of
interest rates on the profitability of the business. The company continues to
enforce strategic changes to better navigate market dynamics such as expanding
product partnerships and tightening contractor payment guidelines. The
macroeconomic environment headwinds are beginning to stabilise, and the
industry outlook is improving.
Infinitum
The valuation multiple for Infinitum increased from 1.05x Gross MOIC to 1.10x
Gross MOIC during the fourth quarter of 2023 as a result of the increase in
their Series E round led by Just Climate from $160 million to $185 million.
Additionally, the company hired Mike DiNucci (formerly senior Vice President
of Sales at ChargePoint) as Chief Revenue Officer. The company also appointed
Paulo Guedes-Pinto as Chief Technology Officer and Bhavnesh Patel as Chief
Strategy Officer. Overall, in 2023, Infinitum increased revenue and unit
volumes sold by nearly 5 times versus the prior year. In 2024, Infinitum plans
to continue investing in its business to fund product innovation, increase
manufacturing, and grow the company to meet demand.
Other Investments
Tritium DCFC
The valuation multiple for Tritium remained essentially flat from 0.47x Gross
MOIC to 0.46x Gross MOIC during the fourth quarter of 2023. In November 2023,
Tritium implemented a strategic plan to achieve a path to profitability in
2024. The plan improves operational efficiency and margins by consolidating
Tritium's global manufacturing operations into its plant in Tennessee and
reduces SG&A expenses via decreased headcount and professional fees. The
company maintains expectations on becoming EBITDA positive during the first
half of the 2024 calendar year.
In September 2023, Tritium secured a financing commitment of up to $75
million, with an initial funding of $25 million. The company plans to use
proceeds to continue its investment in working capital to meet expected
continued strong customer demand in the 2024 calendar year.
In October 2023, Tritium secured a major order for more than 200 fast chargers
from Driveco, a leading French charging network operator.
Enviva
The valuation multiple for Enviva fell from 0.29x Gross MOIC to 0.05x Gross
MOIC during the fourth quarter of 2023. Subsequent to the close of the third
quarter, on 9 November 2023, Enviva's management released its third quarter
2023 earnings results, initiated a comprehensive review of its capital
structure to improve the company's financial position, and announced a
realignment of leadership, including the appointment of Glenn Nunziata, Chief
Financial Officer, as Enviva's Chief Executive Officer as the company focuses
on executing a multi-faceted restructuring. The company reported lower
adjusted EBITDA for third-quarter 2023 of $36.6 million as compared to $60.6
million for third-quarter 2022, primarily due to lower revenue from commercial
activities.
T-REX
The valuation multiple for T-REX fell from 1.00x Gross MOIC to 0.82x Gross
MOIC during the fourth quarter of 2023. In November 2023, T-REX successfully
executed its contract with Blackstone's Private Credit group, which is
currently in a "Pilot" phase.
FreeWire
The valuation multiple for FreeWire fell from 1.00x Gross MOIC to 0.25x Gross
MOIC during the fourth quarter of 2023. The company has curbed its growth
outlook in order to extend cash runway. Despite the Inflation Reduction Act,
Bipartisan Infrastructure Bill, and growing EV market tailwinds, 2023 was a
very challenging environment for the electrification of transportation and
associated charging infrastructure. Public peer share price performance and
trading multiples steadily declined, amidst broader automotive OEM EV strategy
setbacks affecting charging infrastructure demand.
Our Next Energy ("ONE")
The valuation multiple for ONE fell from 1.00x Gross MOIC to 0.25x Gross MOIC
during the fourth quarter of 2023. Since Q4 2023, the company is in the
process of raising an insider-led round and adjusted its business plan to
better align commercial offtake with factory scale-up and future financing.
ONE continues to demonstrate its compelling technology through qualification
programs with automotive customers. The company plans to use the proceeds from
the insider led financing to continue operations while achieving further
milestones in order to raise a larger Series C round.
Share Buyback Programme and 2023 Tender Offer
Since the Company's announcement on 23 May 2023 of the authorised increase of
£30 million for the share buyback programme through 31 December 2023,
3,126,023 ordinary shares have been bought back at a total cost of
approximately £18 million ($22 million) at an average share price of
approximately £5.67 ($7.13). As of 31 December 2023, £22 million was
available for repurchases.
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 $85 million of realised
and unrealised losses to date at 31 December 2023 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.
On 17 August 2023, REL announced a tender offer to repurchase up to 13,840,830
shares at £5.78 per share. On 27 September 2023, the Company repurchased
3,182,196 shares representing 7 per cent. of outstanding shares at that date,
and 23 per cent. of the tender offer.
LEI: 213800HAZOW1AWRSZR47
About Riverstone Energy Limited:
REL is a closed-ended investment company which invests in the energy industry
that has since 2020 been exclusively focussed on pursuing and has
committed $211 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
14 active investments spanning decarbonisation, oil and gas, renewable energy
and power in the Continental U.S., Western Canada, Europe and Australia.
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 31 December 2023
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 $1,557 million of capital realised to date, $1,194
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 $84.7
million of realised and unrealised losses to date at 31 December 2023 are made
whole with future gains. Therefore, the earned carried interest of $0.8
million that had been deferred, has now expired as of October 2023 since the
aforementioned losses were not made whole. Since REL has not yet met the
appropriate Cost Benchmark at 31 December 2023, $32.2 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 Permian Resources Corporation (formerly Centennial Resource
Development, Inc.) (NASDAQ:PR - 31-12-2023: $13.60 per share / 30-09-2023:
$13.96 per share); Enviva, Inc. (NYSE:EVA - 31-12-2023: $0.9958 per share /
30-09-2023: $7.47 per share); Solid Power, Inc. (NASDAQ:SLDP - 31-12-2023:
$1.45 per share / 30-09-2023: $2.02 per share); Hyzon Motors, Inc.
(NASDAQ:HYZN - 31-12-2023: $0.90 per share / 30-09-2023: $1.25 per share);
Tritium DCFC Limited (NASDAQ:DCFC - 31-12-2023: $0.22 per share / 30-09-2023
$0.30 per share); and Crescent Point (NASDAQ: CPG - 31-12-2023: $6.93 per
share / 30-09-2023: n/a).
4 (#_ednref4) Amounts vary due to rounding
5 (#_ednref5) The unrealised value of Rock Oil investment consists of rights
to mineral acres.
6 (#_ednref6) Midstream investment
7 (#_ednref7) Credit investment
8 (#_ednref8) 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)
9 (#_ednref9) Since REL has not yet met the appropriate Cost Benchmark at 31
December 2023, $32.2 million in Performance Allocation fees that would have
been due under the prior agreement were not accrued and thereby would have
reduced the NAV on a pro forma basis to $641 million or $15.20 per share
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