TIDMRSE
RNS Number : 3559B
Riverstone Energy Limited
30 January 2020
- THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION -
Riverstone Energy Limited Announces 4Q19 Quarterly Portfolio
Valuations
London, UK (30 January 2020) - Riverstone Energy Limited ("REL")
announces its quarterly portfolio summary as of 31 December 2019,
inclusive of updated quarterly unaudited fair market
valuations:
Current Portfolio
Gross
Realised
Gross Gross Gross Capital 30 Sep 31 Dec
Investment Committed Invested Realised Unrealised & 2019 2019
(Initial Investment Capital Capital Capital Value Unrealised Gross Gross
Date) Target Basin ($mm) ($mm) ($mm)[1] ($mm) Value ($mm) MOIC2 MOIC(2)
Centennial Permian
(6 Jul 2016) (U.S.) $268 $268 $172 $70 $242 0.9x 0.9x
Deepwater
ILX III (8 GoM
Oct 2015) (U.S.) 200 155 5 181 186 1.2x 1.2x
Hammerhead
Resources Deep Basin
(27 Mar 2014) (Canada) 307 295 23 81 104 0.4x 0.4x
RCO3 (2 Feb North
2015) America 80 80 79 2 81 1.0x 1.0x
Permian &
Carrier II Eagle Ford
(22 May 2015) (U.S.) 133 110 29 48 77 0.7x 0.7x
Liberty II Bakken, PRB
(30 Jan 2014) (U.S.) 142 142 - 57 57 0.5x 0.4x
Fieldwood GoM Shelf
(17 Mar 2014) (U.S.) 89 88 8 39 47 0.6x 0.5x
Onyx (30 Nov
2019) Europe 66 31 - 31 31 n/a 1.0x
CNOR (29 Aug Western
2014) Canada 90 90 16 15 31 0.3x 0.3x
Vaca Muerta
Aleph (9 Jul (Argentina
2019) ) 100 23 - 23 23 1.0x 1.0x
Ridgebury
(19 Feb 2019) Global 22 18 2 20 22 1.2x 1.2x
Gulf Coast
Castex 2014 Region
(3 Sept 2014) (U.S.) 67 52 - 19 19 0.3x 0.4x
Total Current Portfolio(4) $1,564 $1,352 $332 $587 $919 0.7x 0.7x
------------------------------------- ---------- --------- ---------- ---------- ----------- ------- --------
Realisations
Gross
Realised
Capital
Gross Gross Gross & 30 Sep 31 Dec
Investment Committed Invested Realised Unrealised Unrealised 2019 2019
(Initial Investment Capital Capital Capital Value Value Gross Gross
Date) Target Basin ($mm) ($mm) ($mm)(1) ($mm) ($mm) MOIC(2) MOIC(2)
Rock Oil5 (12
Mar 2014) Permian (U.S.) 114 114 231 6 237 2.1x 2.1x
Three Rivers
III (7 Apr
2015) Permian (U.S.) 94 94 204 - 204 2.2x 2.2x
Meritage III6 Western
(17 Apr 2015) Canada 40 40 83 - 83 2.1x 2.1x
Sierra (24
Sept 2014) Mexico 18 18 39 - 39 2.1x 2.1x
Total Realisations(4) $267 $267 $558 $6 $565 2.1x 2.1x
------------------------------------------ ---------- --------- ---------- ---------- ---------- --------- --------
Withdrawn Commitments
and Impairments7 121 121 1 - 1 0.0x 0.0x
------------------------------------------ ---------- --------- ---------- ---------- ---------- --------- --------
Total Investments(4) $1,952 $1,739 $892 $593 $1,485 0.9x 0.9x
------------------------------------------ ---------- --------- ---------- ---------- ---------- --------- --------
Cash and Cash Equivalents $183
------------------------------------------ ---------- --------- ---------- ---------- ---------- --------- --------
Total Investments & Cash
and Cash Equivalents(4) $776
------------------------------------------ ---------- --------- ---------- ---------- ---------- --------- --------
Quarterly Performance Commentary
During the fourth quarter, the West Texas Intermediate ("WTI")
spot prices and S&P Oil & Gas Exploration & Production
Index increased by approximately 14 per cent. and 10 per cent.,
respectively, largely due to geopolitical instability related to
tensions between the U.S. and Iran. However, energy valuations
especially within E&P, continued to face macro headwinds as the
forward curve as well as capital markets and M&A activity
remained at muted levels. Further detail on REL's five largest
positions, which account for 74per cent. of the portfolio's gross
unrealised value, is set forth below:
ILX III
The Gross MOIC for ILX III remained unchanged during the fourth
quarter and was marked at a 1.2x. To date, the company has
participated in nine commercial discoveries, of which four are
currently producing oil, and expects to bring an additional 3
assets online during 2020.
During the fourth quarter, ILX III announced the sale of its
working interest in 18 exploration prospects to Talos Energy
("Talos"; NYSE: TALO) in 4Q 2019 and finalised the sale of its
remaining 20 per cent. working interest in Mt. Ouray to Murphy Oil
Corporation. These transactions did not have a material impact on
the valuation of ILX III.
Hammerhead
The Gross MOIC for Hammerhead remained unchanged during the
fourth quarter and was marked at a 0.4x. While capital markets and
macro conditions continue to remain challenging for Canadian oil
producers, Hammerhead continues to focus on the development of its
core Upper/Middle Montney acreage. During 2019, the company
significantly improved drilling and completion cost efficiencies as
it executed on pad development. Hammerhead is currently producing
29,000 boepd, in line with its 2019 targeted production levels.
During the year, Hammerhead tabled discussions regarding a
midstream financing transaction. However, the Company's borrowing
base did not change during 2019, and the Company signed a farm-out
agreement on a portion of its acreage to accelerate development
without impacting near-term liquidity.
Centennial
The Gross MOIC for Centennial remained unchanged during the
fourth quarter and was marked at a 0.9x, reflecting the ending
share price for the period. Even though the share price continues
to trade at low levels, the company continues to operationally
outperform with capital efficiency being a top focus to maintain a
strong balance sheet and financial flexibility in the current
commodity price environment. Operational efficiencies have resulted
in Centennial accomplishing its drilling program with 5.5 rigs
compared to the budgeted 6 rigs. The company is targeting crude oil
production growth of 22 per cent. based on FY 2019 guidance, with
the ability to ramp down rig pace to generate additional
free-cash-flow if macro-environment conditions decline.
Liberty II
The Gross MOIC for Liberty II was reduced from 0.5x to 0.4x
during the fourth quarter due to difficult capital markets
conditions and higher discount rates applied to its NAV valuation
methodology. The company has adjusted its development plan to
improve production efficiencies while proving the quality of its
East Nesson position. Liberty II continues to evaluate external
financing options in order to grow production volumes and cash
flows. In the interim, the company will commence a four-well
drilling contract using existing sources of capital.
Carrier II
The Gross MOIC for Carrier II remained unchanged during the
fourth quarter and was marked at a 0.7x. During the quarter, the
company successfully completed the sale of its Southern Midland
Basin assets and had six additional Eagle Ford wells brought
online, resulting in a total of 34 new wells in 2019. Carrier II
continues to generate free cash flow from its Eagle Ford assets,
which were producing approximately 6,180 boepd at the end of 2019.
The company has distributed $29 million, representing approximately
26 per cent. of REL's invested capital.
Other Investments
During the fourth quarter, the Gross MOIC for Fieldwood was
reduced from 0.6x to 0.5x due to existing shelf production
underperformance, an increase in capital expenditures due to a
shift in focus towards higher impact deepwater prospects, and
increased regulatory scrutiny. This reduction was partially offset
by the increase in valuation for Castex 2014 from a Gross MOIC of
0.3x to 0.4x. In early December, Talos announced the acquisition of
Castex 2014 in exchange for cash proceeds and shares of Talos
stock. Since the announcement of the transaction through to 30
December 2019, Talos' share price increased by approximately 17 per
cent., resulting in an increase in Castex 2014's valuation.
Onyx Power
On 30 November 2019, REL invested an initial $31 million of its
$66 million commitment to Onyx Power. The capital was used to fund
the acquisition of 2,350MW of gross installed capacity (1,941MW of
net installed capacity) across five coal- and biomass-fired power
plants in Germany and the Netherlands from Engie SA. Two of the
facilities in the acquired portfolio are among Europe's most
recently constructed thermal plants, which benefit from high
efficiencies, substantial environmental controls, very low
emissions profiles and the potential use of sustainable
biomass.
About Riverstone Energy Limited:
REL is a closed-ended investment company that invests
exclusively in the global energy industry across all sectors. REL
aims to capitalise on the opportunities presented by Riverstone's
energy investment platform. REL's ordinary shares are listed on the
London Stock Exchange, trading under the symbol RSE. REL has 12
active investments spanning oil and gas, midstream, and energy
services in the Continental U.S., Western Canada, Gulf of Mexico,
Latin America, Europe 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
Brian Potskowski
+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 2019 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] Gross realised capital is total gross proceeds realised on
invested capital. Of the $892 million of capital realised to date,
$600 million is the return of the cost basis, and the remainder is
profit.
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 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. 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 Credit investment.
4 Amounts may vary due to rounding.
5 The unrealised value of the Rock Oil investment consists of
rights to mineral acres.
6 Midstream investment.
7 Withdrawn commitments consist of Origo ($9 million) and CanEra
III ($1 million), and impairments consist of Eagle II ($62 million)
and 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 rns@lseg.com or visit www.rns.com.
END
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