Riverstone Energy Limited Final Results for the year ended 31 December 2018 (2075R)

TIDMRSE

RNS Number : 2075R

Riverstone Energy Limited

27 February 2019

Riverstone Energy Limited

Final results for the year ended 31 December 2018

London, 27 February 2019: Riverstone Energy Limited ("REL" or the "Company") announces its Year End Results from 1 January 2018 to 31 December 2018.

Summary Performance

31 December 2018

 
 NAV                                 $1,431 million (GBP1,123 million)[1] 
 NAV per share                       $17.91 / GBP14.06(1) 
 Profit/(loss) for year ended        $(241.0) million 
 Basic profit/(loss) per share for   (286.87) cents 
  year ended 
 Market capitalization               $1,095 million (GBP860 million)(1) 
 Share price                         $13.71 / GBP10.76(1) 
 

Highlights

-- REL ended 31 December 2018 with an NAV of $17.91 (GBP14.06)(1) per share, a year-on-year decrease in USD of 13 per cent. (in GBP of 8 per cent.) compared to the 31 December 2017 NAV.

-- Hammerhead and Centennial were the largest drivers of REL's NAV decline over the year, with almost all of the decrease in value having occurred during the fourth quarter; however, these declines were partially offset by increased valuations in Fieldwood, ILX III and Meritage III.

-- During 2018, REL, through the Partnership, received over $304 million in gross proceeds from realisations, taking advantage of the ability to monetise positions in two of its investments in the Permian, Three Rivers III and Centennial, at attractive valuations.

-- REL's realisation of Three Rivers III, through the Partnership, generated nearly $203 million in gross proceeds, of which $200 million has been received to-date, representing a Gross MOIC[2] of 2.2x (Net MOIC(2) of 1.9x) and a Gross IRR(2) of 48 per cent. (Net IRR(2) of 40 per cent.).

-- REL's partial realisation of its investment in Centennial, through the Partnership, from the sale of 4.4 million shares, at a share price of $19.50, resulted in gross proceeds of $85 million.

-- REL's largest exposure, through the Partnership, is to Western Canada where it has invested $425 million or 30 per cent. of its capital, followed by the Permian and Eagle Ford, where it has invested $377 million or 27 per cent. of its capital.

-- The Company, through the Partnership, invested a total of $84 million during the year, bringing net capital invested as of 31 December 2018 to $1,174 million, or 90 per cent. of net capital available[3].

-- REL, through the Partnership, withdrew commitments totaling $112 million to Three Rivers III, RCO and Castex 2005, bringing net committed capital as of 31 December 2018 to $1,330 million, or 101 per cent. of net capital available(3) .

-- In January 2019, REL, through the Partnership, announced the sale of Meritage III for gross cash proceeds consistent with its valuation at 31 December 2018 of $80 million, representing a Gross MOIC(2) of 2.0x (Net MOIC(2) of 1.8x) on the $40 million investment and a Gross IRR(2) of approximately 28 per cent. (Net IRR(2) of 23 per cent.). This represents a gross profit of $40 million, which will be subject to a performance fee upon closing of the sale, which completed in Q1 2019.

-- In February 2019, REL, through the Partnership, approved up to a $22 million commitment to fund the acquisition of three refined product tankers in partnership with the Ridgebury Tankers LLC management team. This transaction represents REL's first investment in the energy services sector and provides diversification for the portfolio.

Portfolio Update

Below is a summary of material activity in the portfolio during the period.

ILX Holdings III, LLC ("ILX III")

During the year, REL, through the Partnership, invested $35 million in ILX III.

Fieldwood Energy, Inc. ("Fieldwood")

During the year, REL, through the Partnership, invested $22 million in Fieldwood ERO.

Sierra Oil and Gas Holdings, L.P. ("Sierra")

During the year, REL, through the Partnership, invested $10 million in Sierra.

Canadian Non-Operated Resources LP ("CNOR")

During the year, REL, through the Partnership, invested $7 million in CNOR.

Meritage Midstream Services III, L.P. ("Meritage III")

During the year, REL, through the Partnership, invested $6 million in Meritage III.

Castex Energy 2014, LLC ("Castex 2014")

During the year, REL, through the Partnership, invested $4 million in Castex 2014.

Three Rivers Natural Resources Holdings III LLC ("Three Rivers III")

REL, through the Partnership, received sale proceeds of $200 million.

Centennial Resource Development, Inc. ("Centennial")

REL, through the Partnership, received proceeds of $85 million from shares sold.

Other Investments

REL, through the Partnership, received proceeds of $3 million from other investments, including Rock Oil, RCO, Fieldwood, and Origo.

Manager Outlook

-- REL's $137 million cash balance makes the Company well placed to make new investments and grow its existing Portfolio.

-- The Investment Manager believes the current market environment is generating attractive opportunities in midstream, oilfield services and power, and will continue to seek to invest in opportunities that span the entire energy value chain to diversify its E&P exposure.

-- To effect this change in portfolio construction, REL expects to make more investments independently of Riverstone's private funds going forward.

-- A continued focus on operational excellence will remain critical to driving value across the commodity price cycle.

Richard Hayden, Chairman of Riverstone Energy Limited, commented:

"REL's modified investment approach provides the flexibility to adapt to the evolving universe of investment opportunities. Our recent commitment to Handy Tankers is representative of our ability to capitalise on an opportunity that we believe has an attractive return profile and provides diversification to the portfolio."

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

"Despite a difficult market environment, REL was able to achieve successful monetisations at attractive valuations. The realisations in Three Rivers III and Centennial, and announced sales of Sierra and Meritage III, demonstrate the advantages of REL's differentiated investment strategy and focus on operational execution."

Appointment of Corporate Broker

The Board of REL is pleased to announce the appointment of Numis Securities Limited to act as the Company's joint broker, alongside J.P. Morgan Cazenove.

- Ends -

Riverstone Energy Limited's 2018 Annual Report is available to view at: www.RiverstoneREL.com.

The Investment Manager will host a conference call with investors at 12:00 GMT today. Dial-in details are as follows:

Dial-in (UK): 0800 028 8438

Dial-in (Intl.): [phone]

Conference ID: 5834899

4Q18 Quarterly Portfolio Valuation

Previously, on 31 January 2018, REL announced its quarterly portfolio summary as of 31 December 2018, inclusive of updated quarterly unaudited fair market valuations:

Current Portfolio

 
                                                                                         Gross 
                                                                                        Realised 
                                                                                        Capital 
     Investment                             Gross                 Gross      Gross         &         31 Dec    30 Sep 
      (Initial                            Committed   Invested   Realised  Unrealised  Unrealised     2018      2018 
     Investment                            Capital     Capital   Capital     Value       Value        Gross     Gross 
        Date)              Target Basin     ($mm)       ($mm)    ($mm)[4]    ($mm)       ($mm)       MOIC(2)   MOIC(2) 
  Hammerhead 
   Resources                Deep Basin 
   (27 Mar 2014)              (Canada)      $307        $295       $23        $416        $439        1.5x      1.8x 
  Centennial                  Permian 
   (6 Jul 2016)                (U.S.)        268        268        172        167         339         1.3x      1.9x 
 ILX III                     Deepwater 
  (8 Oct 2015)               GoM (U.S.)      200        151         -          197         197        1.3x      1.4x 
  Liberty II                Bakken, PRB 
   (30 Jan 2014)               (U.S.)        142        142         -         156         156         1.1x      1.3x 
                             Permian & 
  Carrier II                 Eagle Ford 
   (22 May 2015)               (U.S.)        133        110         16         94         110         1.0x      1.2x 
  RCO[5] (2 
   Feb 2015)               North America     87          87         83         10          93         1.1x      1.1x 
  Meritage III[6]             Western 
   (17 Apr 2015)               Canada        67          40         -          80          80         2.0x      2.0x 
  CNOR                        Western 
   (29 Aug 2014)               Canada        90          90         -          72          72         0.8x      1.0x 
  Fieldwood                  GoM Shelf 
   (17 Mar 2014)               (U.S.)        82          81         3          55          58         0.7x      0.8x 
                            Gulf Coast 
  Castex 2014              Region (U.S.)     67          47         -          47          47         1.0x      1.0x 
    (3 Sept 2014) 
  Sierra 
   (24 Sept 
   2014)                      Mexico         38          18         -          37          37         2.0x      2.2x 
  Eagle II                 Mid-Continent 
   (18 Dec 2013)               (U.S.)        67          62         -          19          19         0.3x      0.5x 
  Total Current Portfolio[7]               $1,547      $1,391      $297      $1,349      $1,646       1.2x      1.4x 
----------------------------------------  ---------  ---------  ---------  ----------  ----------  ---------  -------- 
 

Realisations

 
                                                                                       Gross 
                                                                                      Realised 
                                                                                      Capital 
                                        Gross                   Gross      Gross         &         31 Dec    30 Sep 
       Investment                     Committed    Invested    Realised  Unrealised  Unrealised     2018      2018 
   (Initial Investment     Target      Capital      Capital    Capital     Value       Value        Gross     Gross 
          Date)             Basin       ($mm)        ($mm)     ($mm)(4)    ($mm)       ($mm)       MOIC(2)   MOIC(2) 
  Rock Oil[8]              Permian 
   (12 Mar 2014)            (U.S.)       114         114         230         9          239         2.1x      2.1x 
  Three Rivers 
   III (7 Apr              Permian 
   2015)                    (U.S.)        94          94         200         3          203         2.2x      2.1x 
  Total Realisations(5)                  $209        $209       $430        $12         $442        2.1x      2.1x 
------------------------------------  ----------  ---------  ----------  ----------  ----------  ---------  -------- 
  Withdrawn Commitments 
   and Impairments[9]                     59          59          1          -           1          0.0x      0.0x 
------------------------------------  ----------  ---------  ----------  ----------  ----------  ---------  -------- 
  Total Investments(7)                  $1,815      $1,659      $729       $1,360      $2,089       1.3x      1.5x 
------------------------------------  ----------  ---------  ----------  ----------  ----------  ---------  -------- 
  Cash and Cash Equivalents                                                 $137 
------------------------------------  ----------  ---------  ----------  ----------  ----------  ---------  -------- 
  Total Investments & Cash 
   and Cash Equivalents(7)                                                 $1,497 
------------------------------------  ----------  ---------  ----------  ----------  ----------  ---------  -------- 
 

About Riverstone Energy Limited:

REL is a closed-ended investment company that invests exclusively in the global energy industry, with a particular focus on the exploration & production and midstream sectors. REL aims to capitalise on the opportunities presented by Riverstone's energy investment platform. REL is a member of the FTSE 250 and its ordinary shares are listed on the London Stock Exchange, trading under the symbol RSE. REL has 12 active investments spanning conventional and unconventional oil and gas activities in the Continental U.S., Western Canada, Gulf of Mexico, Mexico and credit.

For further details, see 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:

Natasha Fowlie

Fraser Johnston-Donne

[phone]

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 2018 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 Audit Committee reviews the valuations of the Company's investments held through the Partnership, and makes a recommendation to the Board for formal consideration and acceptance.

[1] GBP:USD FX rate of 1.274 as of 31 December 2018.

[2] 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 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 (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] Net capital available of $1,311 million is based on total capital raised of $1,320 million, capital utilised for Tender Offer of $72 million, realised profits and other income net of fees, expenses and performance allocation. The Board, with consultation by the Investment Manager, does not expect to fully fund all commitments in the normal course of business.

[4] Gross realised capital is total gross proceeds realised on invested capital. Of the $729 million of capital realised to date, $427 million is the return of the cost basis, and the remainder is profit.

[5] Credit investment.

[6] Midstream investment.

[7] Amounts may vary due to rounding.

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

[9] Withdrawn commitments consist of Origo ($9 million) and CanEra III ($1 million), and impairments consist of Castex 2005 ($48 million).

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

END

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February 27, 2019 02:01 ET (07:01 GMT)