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Riverstone Energy Limited

Riverstone Energy Limited Final results for the half year ended 30 June 2019

Riverstone Energy Limited (LON: RSE) has today announced its Half Year Results for the 6-month period from 1 January 2019 to 30 June 2019.

Summary Performance

30 June 2019

NAV $1,058 million (£833 million)[1]

NAV per share $13.24 / £10.431

Profit/(loss) during Period $(373.12) million

Basic profit/(loss) per share during Period (467.01) cents

Market capitalization $874 million (£688 million)1

Share price $10.93 / £8.611

Highlights

  • As of 30 June 2019, REL had a NAV per share of $13.24 (£10.43)1, representing a decrease in USD and GBP of 26 per cent. compared to the 31 December 2018 NAV.
  • Hammerhead, Centennial and CNOR were the largest drivers of REL’s NAV decline over the Period.
  • During the Period, REL, through the Partnership, received $133 million in gross proceeds from the realization of its investments in Meritage III ($83 million), Sierra ($39 million), and Three Rivers III ($3 million), as well as distributions from Carrier II ($6 million) and ILX III ($2 million).
  • The Company, through the Partnership, invested a total of $24 million during the period, bringing net capital invested as of 30 June 2019 to $991 million, or 82 per cent of net capital available[2].
  • During the first half of 2019, REL committed up to $22 million to Ridgebury and withdrew commitments totaling $28 million to Sierra, Meritage III, and Eagle II, bringing net committed capital as of 30 June 2019 to $1,116 million, or 92 per cent of net capital available2.
  • REL finished the Period with a cash balance of $219 million and remaining unfunded commitments of $125 million.
  • On 26 April 2019, Riverstone Holdings LLC (“Riverstone”) announced the formation of Onyx Strategic Investment Management I BV (“Onyx”), a European independent power producer. The investment in Onyx will be funded with an initial equity commitment from REL, Riverstone Global Energy and Power Fund VI, L.P., and other Riverstone managed vehicles. Further details on REL’s commitment of up to $66 million will be provided upon close of the transaction, which is expected to occur later this year following the receipt of regulatory and other approvals.
  • On 28 June 2019, Riverstone announced the signing of an agreement for REL to invest in Aleph Midstream S.A. (“Aleph”), an independent Argentine oil and gas gathering and processing-focused midstream company, in line with REL’s previously-stated modified investment approach. Aleph has received a $103 million commitment from funds affiliated to Riverstone (comprising $100 million from REL and $3 million from other investors) alongside commitments of $54 million from Southern Cross Group, $45 million from Vista Oil & Gas (“Vista”), and approximately $3 million from the Aleph and Vista management teams, for a total commitment of approximately $205 million, expected to be deployed over the next 24 months. Upon closing of the transaction, which occurred in July 2019, Aleph began funding the construction of infrastructure necessary to provide gathering, processing, and evacuation midstream services to oil and gas producers in the Vaca Muerta.

Portfolio Update

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

Meritage Midstream Services III, L.P. (“Meritage III”)

REL, through the Partnership, received sale proceeds of $83 million from Meritage III.

Sierra Oil and Gas Holdings, L.P. (“Sierra”)

REL, through the Partnership, received sale proceeds of $39 million from Sierra.

Carrier Energy Partners II, LLC (“Carrier II”)

REL, through the Partnership, received income distributions of $6 million from Carrier II.

Three Rivers Natural Resources Holdings III, LLC (“Three Rivers III”)

REL, through the Partnership, received escrow proceeds of $3 million from Three Rivers III.

ILX Holdings III, LLC (“ILX III”)

REL, through the Partnership, received income distributions of $2 million from ILX III.

Ridgebury H3 LLC (“Ridgebury”)

REL, through the Partnership, invested $18 million in Ridgebury.

ILX Holdings III, LLC (“ILX III”)

REL, through the Partnership, invested $4 million in ILX III.

Castex Energy 2014, LLC (“Castex 2014”)

REL, through the Partnership, invested $3 million in Castex 2014.

Manager Outlook

  • REL’s $219 million cash balance makes the Company well placed to make its new investments in Onyx and Aleph, as well as grow its existing Portfolio. Pro forma for these new commitments, the Company has remaining unfunded commitments of up to $291 million; however, the Board, in consultation with the Investment Manager, does not expect to fully fund all commitments in the normal course of business.
  • The Investment Manager believes the current market environment is generating attractive opportunities in midstream, energy services and power, and will continue to seek to invest in opportunities that span the entire energy value chain to diversify its portfolio.
  • 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.
  • The Company’s Management Engagement Committee has been holding discussions with the Investment Manager regarding potential changes to the terms of the Investment Management Agreement.

Richard Hayden, Chairman of Riverstone Energy Limited, commented:

“Since the end of last year, REL has announced three new transactions that reflect its focus on diversifying the portfolio and implementing its modified investment approach. The most recent commitment to Aleph Midstream, which is representative of the modified investment approach, provides an opportunity for REL to capitalise on the need for infrastructure in one of the most prolific shale basins outside of North America. We look forward to continuing to evaluate new opportunities and deploying capital in a tactical manner across subsectors to actively manage our portfolio construction.”

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

“While spot prices for oil have improved modestly, the volatile nature of the geopolitical landscape has continued to negatively impact energy equities and valuations as investor sentiment remains weak. Despite the macro environment, we remain focussed on driving operational performance in order to maximise returns over the long-term as market conditions stabilise.”

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