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Riverstone Energy Limited

Riverstone Energy Limited Achieved successful monetisations at attractive valuations

Riverstone Energy Limited (LON:RSE) announced its Year End Results from 1 January 2018 to 31 December 2018.

Summary Performance

31 December 2018

NAV

$1,431 million (£1,123 million)[1]

NAV per share

$17.91 / £14.061

Profit/(loss) for year ended

$(241.0) million

Basic profit/(loss) per share for year ended

(286.87) cents

Market capitalization

$1,095 million (£860 million)1

Share price

$13.71 / £10.761

Highlights

§ REL ended 31 December 2018 with an NAV of $17.91 (£14.06)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 MOIC2 of 1.9x) and a Gross IRR2 of 48 per cent. (Net IRR2 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 available3.

§ 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 MOIC2 of 2.0x (Net MOIC2 of 1.8x) on the $40 million investment and a Gross IRR2 of approximately 28 per cent. (Net IRR2 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.