REG - Riverstone Energy Ld - Statement re Merger of Portfolio Companies

Riverstone EnergyAnnouncement

26/09/2022 12:15

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RNS Number : 6358A  Riverstone Energy Limited  26 September 2022

Riverstone Energy Limited

REL Portfolio Companies, Hammerhead and DCRD to merge

 

London, UK (26 September 2022).

 

Riverstone Energy Limited ("REL") is pleased to announce that two of its
portfolio companies, Hammerhead Resources Inc., a Calgary-based energy company
("Hammerhead"), and Decarbonization Plus Acquisition Corporation IV (Nasdaq:
DCRD, DCRDW, DCRDU), a special purpose acquisition company ("DCRD"), have
announced today that Hammerhead and DCRD have entered into a definitive
agreement to complete a business combination that values Hammerhead at an
enterprise value of C$1.39 billion, which is approximately 2.2x DCRD's
projected 2024 EBITDA for Hammerhead.

 

REL invests in Hammerhead, alongside Riverstone Global Energy and Power Fund
V, L.P. ("Fund V").  REL holds an approximate 17% interest in Hammerhead
today at a 0.53x Gross MOIC as of 30 June 2022, representing a carrying value
of $156 million against total invested capital of $295 million. At the agreed
pre-money transaction value and at an assumed $10.00/share trading price,
REL's interest in Hammerhead, including prior distributions, is $177 million,
or 0.60x Gross MOIC. Hammerhead is the largest investment of REL, based on
invested capital, and its unrealized value represents 18% of REL's net asset
value as of 30 June 2022. Riverstone Holdings LLC and its affiliates
("Riverstone") acts as investment manager for both REL and Fund V, and
Riverstone also holds a minority interest in Fund V.

 

REL holds an interest in DCRD through a 5% position in the sponsor of DCRD
(the "Sponsor"). The Sponsor is controlled by Riverstone, and the Sponsor
holds Class B ordinary shares of DCRD ("founder shares"), which were acquired
for $25,000 and represent 20% of the equity ownership of DCRD, as well as
warrants to purchase Class A ordinary shares of DCRD for $11.50 per share
("warrants"), which were acquired for $12.7 million. The trading price of DCRD
at close of business on 23 September 2022 is $10.03 per share. REL has
invested a total of $639,497 in the Sponsor. That investment is currently
marked at cost. Through that interest and prior to the arrangements discussed
below, REL indirectly owns 396,456 founder shares and 638,247 warrants. The
balance of the interests in the Sponsor are held by Riverstone professionals
and other persons associated with Riverstone.

 

Assuming the approval by each of the Hammerhead shareholders and the DCRD
shareholders, the transaction will result in the formation of a publicly
traded upstream oil and gas company ("NewCo") with an identified investment
program to decarbonize its oil and gas operations through the development of a
carbon capture and sequestration ("CCS") program. NewCo's CCS program is
estimated to require approximately C$240 million of capital between 2023 and
2029, and, by 2029, is expected to reduce NewCo's Scope 1 and Scope 2
emissions by approximately 79% of 2021 values, even after an anticipated
doubling in production volumes. NewCo's assets will include a large,
consolidated block of acreage in the prolific Montney trend in Western Canada,
spanning over 100,000 net acres in Alberta. NewCo's planned production and
EBITDA growth is expected by DCRD to be in excess of 40% and 50%,
respectively, from an expected 31,500-32,500 boe/d and C$375-425 million in
2022 to over an expected 46,000-48,000 boe/d and C$625-675 million in 2024.

 

Closing of the transaction is likely to occur in Q1 2023, subject to approval
of the shareholders of each of Hammerhead and DCRD and other customary closing
conditions. Closing of the transaction is not subject to a minimum cash
condition and the parties believe that Hammerhead's existing balance sheet
with expected leverage, prior to any proceeds from DCRD's cash in trust, of
0.6x LTM EBITDA at year-end 2022 is expected to provide the liquidity
necessary to execute on Hammerhead's business plan. NewCo is expected to be
listed on the Nasdaq Capital Market ("Nasdaq") and trade under the ticker
symbol "HHRS".

 

At closing, REL is expected to receive 15 million shares of HHRS (representing
12% pro forma ownership of HHRS assuming no redemptions by existing DCRD
shareholders), which will be freely tradeable subject to customary lockup
provisions and applicable blackout periods.  Accordingly, REL's current
privately held interest in Hammerhead will be replaced by a holding of
publicly traded securities in HHRS which will be valued by REL by reference to
HHRS's prevailing share price.

 

In connection with implementing the transaction under the applicable Fund V
governing documents, the Sponsor and the other holders of the founder shares
and warrants (collectively, the "Sponsor Group") agreed to make certain
adjustments to their ownership in the DCRD economics. Pursuant to those
adjustments, the Sponsor Group have agreed that the Sponsor Group will assign
and transfer to Fund V vehicles all of its warrants and 55% of its founder
shares, including the proportionate amount allocable to REL.  Fund V does not
currently have any ownership interest in DCRD.  Following these transfers,
REL will hold an indirect interest, through the Sponsor, in 178,405 founder
shares and no warrants. Following the completion of the business combination,
any proceeds received by Fund V from its investment in HHRS will first be
applied toward the Sponsor Group (including REL) recovering the original cost
of the transferred interests.  Thereafter, proceeds from the founder shares
retained by the Sponsor Group will be applied, alongside all proceeds received
by Fund V, until Fund V has received total proceeds to provide it with a 1.0x
MOIC on its investment in Hammerhead (including its cost for the transferred
warrants and founder shares) (the "MOIC Threshold"). The founder shares
retained by REL via the Sponsor (but not REL's HHRS shares attributable to its
interest in Hammerhead) are "ringfenced" such that they may not be sold other
than in proportion to Fund V's sales. After Fund V achieves the MOIC
Threshold, the founder shares retained by the Sponsor Group (including REL)
will be freely tradeable subject to any unexpired lockup provisions and
applicable blackout periods. To the extent Riverstone receives net after-tax
proceeds from Fund V in its capacity as an investor in Fund V in respect of
the founder shares and warrants transferred to Fund V, Riverstone will remit
to REL a proportionate amount (corresponding to REL's proportionate interest
in the Sponsor).

 

About Riverstone Energy Limited:

 

REL is a closed-ended investment company which invests in the energy industry
that has since 2020 been exclusively focused on pursuing and has committed
$181 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 20 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)

 

About Decarbonization Plus Acquisition Corporation IV

 

Decarbonization Plus Acquisition Corporation IV is a blank check company
formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or similar business
combination with a target whose principal effort is developing and advancing a
platform that decarbonizes the most carbon‐intensive sectors. DCRD is
sponsored by an affiliate of Riverstone Holdings LLC.

 

About Hammerhead Resources

 

Hammerhead Resources is a Calgary, Canada‐based energy company, with assets
and operations in Alberta targeting the Montney formation. The company was
formed in 2009 and has over 85 employees as of 1 September 2022.

 

About Riverstone Holdings LLC:

 

Riverstone is an energy and power‐focused private investment firm founded in
2000 by David M. Leuschen and Pierre F. Lapeyre, Jr. with approximately US$43
billion of capital raised. Riverstone conducts buyout and growth capital
investments in the E&P, midstream, oilfield services, power, and renewable
sectors of the energy industry. With offices in New York, London, Houston,
Mexico City, Amsterdam and Menlo Park, Riverstone has committed nearly US$43
billion to more than 200 investments in North America, Latin America, Europe,
Africa, Asia, and Australia.

 

For further details, see www.RiverstoneLLC.com (http://www.RiverstoneLLC.com)

 

The following information and disclaimers relate to the proposed business
combination between Hammerhead and DCRD.  Shareholders in REL should note
that, as such, they will not be entitled to vote on the proposed business
combination nor will they be sent any of the information or documentation
referred to below.

 

Forward Looking Statements

 

This press release includes certain statements in respect of the proposed
business combination between Hammerhead and DCRD that may constitute
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended.  Forward-looking statements
include, but are not limited to, statements that refer to projections,
forecasts or other characterizations of future events or circumstances,
including any underlying assumptions.  The words "anticipate," "believe,"
"continue," "could," "estimate," "expect," "intends," "may," "might," "plan,"
"possible," "potential," "predict," "project," "should," "would" and similar
expressions may identify forward-looking statements, but the absence of these
words does not mean that a statement is not forward-looking.  Forward-looking
statements may include, for example, statements about Hammerhead's or DCRD's
ability to effectuate the proposed business combination discussed in this
press release; the benefits of the proposed business combination; the future
financial performance of NewCo following the transactions; changes in
Hammerhead's strategy, future operations, financial position, estimated
revenues and losses, projected costs, prospects, plans and objectives of
management; and the anticipated valuation of REL's interest in NewCo.  These
forward-looking statements are based on information available as of the date
of this press release, and current expectations, forecasts and assumptions,
and involve a number of judgments, risks and uncertainties.  Accordingly,
forward-looking statements should not be relied upon as representing REL's,
NewCo's, Hammerhead's or DCRD's views as of any subsequent date, and none of
REL, NewCo, Hammerhead or DCRD undertakes any obligation to update
forward-looking statements to reflect events or circumstances after the date
they were made, whether as a result of new information, future events or
otherwise, except as may be required under applicable securities laws.
Neither REL, NewCo nor DCRD gives any assurance that either NewCo or DCRD will
achieve its expectations.  You should not place undue reliance on these
forward-looking statements.  As a result of a number of known and unknown
risks and uncertainties, NewCo's actual results or performance may be
materially different from those expressed or implied by these forward-looking
statements.  Some factors that could cause actual results to differ include:
(i) the timing to complete the proposed business combination by DCRD's
business combination deadline and the potential failure to obtain an extension
of the business combination deadline if sought by DCRD; (ii) the occurrence of
any event, change or other circumstances that could give rise to the
termination of the definitive agreements relating to the proposed business
combination; (iii) the outcome of any legal, regulatory or governmental
proceedings that may be instituted against NewCo, DCRD, Hammerhead or any
investigation or inquiry following announcement of the proposed business
combination, including in connection with the proposed business combination;
(iv) the inability to complete the proposed business combination due to the
failure to obtain approval of DCRD's shareholders; (v) Hammerhead's and
NewCo's success in retaining or recruiting, or changes required in, its
officers, key employees or directors following the proposed business
combination; (vi) the ability of the parties to obtain the listing of NewCo's
common shares and warrants on Nasdaq upon the closing of the proposed business
combination; (vii) the risk that the proposed business combination disrupts
current plans and operations of Hammerhead; (viii) the ability to recognize
the anticipated benefits of the proposed business combination; (ix) unexpected
costs related to the proposed business combination; (x) the amount of
redemptions by DCRD's public shareholders being greater than expected; (xi)
the management and board composition of NewCo following completion of the
proposed business combination; (xii) limited liquidity and trading of NewCo's
securities; (xiii) geopolitical risk and changes in applicable laws or
regulations; (xiv) the possibility that Hammerhead or DCRD may be adversely
affected by other economic, business, and/or competitive factors; (xv)
operational risks; (xvi) the possibility that the COVID-19 pandemic or another
major disease disrupts Hammerhead's business; (xvii) litigation and regulatory
enforcement risks, including the diversion of management time and attention
and the additional costs and demands on Hammerhead's resources;(xix) the risks
that the consummation of the proposed business combination is substantially
delayed or does not occur; and (xx) other risks and uncertainties indicated
from time to time in the proxy statement/prospectus proposed to be published
relating to the proposed business combination, including those under "Risk
Factors" therein, and in DCRD's other filings with the Securities and Exchange
Commission ("SEC").

 

No Offer or Solicitation

 

This communication includes information that relates to a proposed business
combination between Hammerhead and DCRD.  This document does not constitute a
solicitation of a proxy, consent or authorization with respect to any
securities or in respect of the proposed business combination.  This document
does not constitute an offer to sell or exchange, or the solicitation of an
offer to buy or exchange, any securities, nor shall there be any offer, sale
or exchange of securities in any state or jurisdiction in which such offer,
solicitation, sale or exchange would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.  No
offering of securities will be made except by means of a prospectus meeting
the requirements of section 10 of the United States Securities Act of 1933, as
amended, or an exemption therefrom.

 

Important Information and Where to Find It

 

In connection with the proposed business combination, DCRD and NewCo intend to
file a registration statement in the United States on Form F-4 (as may be
amended from time to time, the "Registration Statement") that includes a
preliminary proxy statement of DCRD and a preliminary prospectus of NewCo, and
after the Registration Statement is declared effective, DCRD will mail the
definitive proxy statement/prospectus relating to the proposed business
combination to DCRD's shareholders as of a record date to be established for
voting on the proposed business combination.  The Registration Statement,
including the proxy statement/prospectus contained therein, will contain
important information about the proposed business combination and the other
matters to be voted upon at a meeting of DCRD's shareholders to be held to
approve the proposed business combination (and related matters).  This
communication does not contain all the information that should be considered
concerning the proposed business combination and other matters and is not
intended to provide the basis for any investment decision or any other
decision in respect of such matters.  DCRD and NewCo may also file other
documents with the SEC regarding the proposed business combination.  DCRD's
shareholders and other interested persons are advised to read, when available,
the Registration Statement, including the preliminary proxy
statement/prospectus contained therein, and the amendments thereto and the
definitive proxy statement/prospectus and other documents filed in connection
with the proposed business combination, as these materials will contain
important information about DCRD, Hammerhead, NewCo and the proposed business
combination.

 

DCRD shareholders and other interested persons will be able to obtain copies
of the Registration Statement, including the preliminary proxy
statement/prospectus contained therein, the definitive proxy
statement/prospectus and other documents filed or that will be filed with the
SEC, free of charge, by DCRD and NewCo through the website maintained by the
SEC at www.sec.gov.

 

Participants in the Solicitation

 

DCRD, Hammerhead, NewCo and their respective directors, officers and related
persons may be deemed participants in the solicitation of proxies of DCRD
shareholders in connection with the proposed business combination.  More
detailed information regarding the directors and officers of DCRD, and a
description of their interests in DCRD, is contained in DCRD's filings with
the SEC, including DCRD's Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, which was filed with the SEC on March 29, 2022, and is
available free of charge at the SEC's web site at www.sec.gov.  Information
regarding the persons who may, under SEC rules, be deemed participants in the
solicitation of proxies of DCRD shareholders in connection with the proposed
business combination and other matters to be voted upon at the DCRD
shareholder meeting will be set forth in the Registration Statement for the
proposed business combination when available.

 

Media Contacts

For Riverstone Energy Limited:

Josh Prentice

Josh@riverstonellc.com

 

Liz Taylor-Kerr

Head of Governance Services

liz.taylor-kerr@ocorian.com

 

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