Riverstone Energy Limited Announces 4Q22 Quarterly Portfolio Valuations & NAV. This announcement includes updated quarterly unaudited fair market valuations. Company announces quarterly portfolio summary as of 31 December 2022.
* Commodity assets performed best among all asset classes in 2022 returning 16 per cent, while small caps returns performed near the bottom of all asset classes, losing 20 per cent.
* On 14 January, Germany broke the wind generation record it had set just 10 days prior, generating 50,802 MW.
* Permian Resources, REL's sole publicly traded conventional energy investment, saw its stock price rise by 12.5 per cent over the same period.
* Tritium anticipates $200 million in 2023 revenue as of 31 December 2022 while still being down 39 per cent.
* In Q4, PR announced an inaugural quarterly base dividend of $0.05 / share and a robust capital program, returning at least 50 per cent.
Original Press Release:
London, UK, Feb. 1 -- Riverstone Energy Limited issued the following news release:
Riverstone Energy Limited ("REL" or the "Company") announces its quarterly portfolio summary as of 31 December 2022, inclusive of updated quarterly unaudited fair market valuations.
Current Portfolio - Conventional
Disclaimer: Table can be viewed at: https://www.riverstonerel.com/news-media/4q22-quarterly-portfolio-valuations-nav/
Current Portfolio - Decarbonisation
Disclaimer: Table can be viewed at: https://www.riverstonerel.com/news-media/4q22-quarterly-portfolio-valuations-nav/
Equity Market Volatility and Small Cap Performance
At the close of the fourth quarter, energy commodity prices returned to their pre-Ukraine conflict levels, giving investors a reprieve from the year's extreme volatility. Brent was down ~7 per cent over the quarter, but up 5 per cent on the year, and West Texas Intermediate was up 0.3 per cent and 5.5 per cent on the quarter and year, respectively. Despite the conflict raging on, oil prices moderated due to the concern about the length and depth of an expected global recession caused by inflation and quickly rising rates. While commodity prices leveled out at year end, the S&P 500 ended the year down 20 per cent from the beginning of 2022. Commodity assets performed best among all asset classes in 2022 returning 16 per cent., while small caps returns (often associated with growth companies) performed near the bottom of all asset classes, losing 20 per cent. These opposing forces (rising commodities and deflating growth factor) carried implication for REL's portfolio as the majority of investments are characterised as either commodity-linked-nearly 64 per cent. of the portfolio's gross unrealised value-or growth stage companies, which characterise the majority of REL's decarbonisation holdings.
Economic uncertainty and concern over inflation predominated fourth quarter headlines, but European consumers found some respite from crippling energy prices thanks to a warmer than expected winter and record levels of stored natural gas. This has not only provided regional relief from the burden of skyrocketing energy prices but has also undermined Russia's efforts to leverage energy as a tool of war. As the conflict approaches its second year, the EU has better secured its energy system, leaning heavily on conventional power assets to compensate for conflict-era supply deficits. An unseasonably warm winter (and reduced heating demand), and a strong supply outlook drove EU gas prices to a 16-month low. While this may seem like a step backward from the energy transition, energy reliability provided by legacy assets and an unseasonably warm winter across the continent may provide European officials the reprieve they need to thoughtfully address systemic weaknesses in legacy energy supply chain and opportunities to integrate additional renewable generation. On 14 January, Germany broke the wind generation record it had set just 10 days prior, generating 50,802 MW. Investments in grid and intermittency management systems, among other decarbonisation technologies, will allow the continent to take full advantage of existing assets in efforts to advance a just and equitable energy transition.
Quarterly Performance Commentary
REL's conventional investments held or improved their valuations in the fourth quarter of 2022. Despite a considerable reduction in anticipated weather-related natural gas demand, Permian Resources, REL's sole publicly traded conventional energy investment, saw its stock price rise by 12.5 per cent over the same period. Onyx, the second-largest investment in REL's portfolio made 3 distributions to the fund totaling $61 million and has now fully returned its cost basis to REL.
REL's publicly listed decarbonization investments were marked down during the quarter by 28.0 per cent at the hands of market sentiment that indiscriminately punished any growth stage company, both those with large and small market capitalizations. The growth factor sell-off was wide reaching and spared no company from mega caps to smaller caps, on the basis of valuations or on concerns of a global recession caused by higher interest rates and inflation. REL's portfolio of publicly listed growth companies was no exception. While publicly traded value destruction impacted small cap companies (often thinly traded) and growth factors in 2022, it did so regardless of underlying company-level performance. For instance, in the fourth quarter, Tritium continued to execute on its growth plans, announcing a backlog of $159 million, and anticipates $200 million in 2023 revenue as of 31 December 2022 while still being down 39 per cent. over the quarter.
On the other hand, REL's privately held decarbonisation companies were spared the vagaries of the public markets and continue to deliver on their growth plans and execute on their strategies. For example, Group14 was the recipient of a $100 million non-dilutive grant from the U.S. Department of Energy to accelerate the build-out of its domestic supply chain. This grant was made possible by the recently-passed Inflation Reduction Act (August 2022).
Further information on REL's five largest positions, which account for 77 per cent. of the portfolio's gross unrealised value is set forth below:
The valuation for Permian Resources (NASDAQ: PR) increased from 1.04x to 1.17x Gross MOIC in the fourth quarter. In Q4, PR announced an inaugural quarterly base dividend of $0.05 / share and a robust capital program, returning at least 50 per cent. of free cash flow after base dividend starting in 2023. The company also closed on a new $2.5 billion borrowing base RCF with an elected commitment amount of $1.5 billion.
The valuation multiple for Onyx remained flat from the third quarter at 3.00x Gross MOIC. Power prices in Europe remain volatile due to the Russian invasion of Ukraine and associated concerns over gas supply. Management continues to monitor government and regulatory intervention in response to high energy prices, including the recently announced revenue cap in the Netherlands. In addition to prioritising plant availability, the management team continues to work on several organic growth initiatives, including the implementation of operational performance improvements and the development of potential capital projects related to the energy transition.
Hammerhead's valuation remained essentially constant from 0.59x to 0.60x Gross MOIC during the fourth quarter. Given the strong macro environment, Hammerhead plans to continue ramping development in 2023. Hammerhead has hedged approximately 12 per cent. of forecasted 2023 crude oil production at a weighted average price of $71.84 per barrel and 44 per cent. of forecasted 2023 natural gas production at a weighted average price of $3.34 per MMBtu. As of 4Q 2022, Hammerhead was producing approximately 30,164 Boepd.
On 26 September 2022, Hammerhead and Decarbonization Plus Acquisition Corporation IV (Nasdaq:DCRD) announced that they have entered into a definitive agreement for a business combination that values Hammerhead at C$1.39 billion. Upon closing of the transaction, the combined company is expected to be listed on the Nasdaq Capital Market ("Nasdaq") and trade under the ticker symbol "HHRS". Closing of the transaction is expected to occur in Q1 2023.
GoodLeap (formerly Loanpal)
The valuation multiple for GoodLeap decreased from 2.5x to 2.2x Gross MOIC during the fourth quarter, which is largely driven by the impact of rising rates and financing market volatility to the downside of the business.
The valuation multiple for Enviva decreased from 2.16x to 1.92x Gross MOIC during the fourth quarter based on its stock price going from $60.06 to $52.97 at quarter's end. The company capitalised on the industry's growth opportunities, announcing new contracts with terms and conditions reflecting the current strong pricing environment for biomass. Current development efforts support a six-plant development and construction pipeline over the next 5+ years to more than double production capacity.
On 17 January 2023, Tritium announced its largest single customer order from bp (NYSE: BP) for deployment across the U.S., UK, Europe, and Australia. bp will install the chargers for fleets and the general public across three continents as part of a multi-year contract with Tritium to expand its EV charging business, bp pulse. In December 2022, Tritium achieved the largest monthly production output in company history, with 50 per cent. more output than any previous month as its Tennessee factory continues to ramp up.
The company opened the 2023 calendar year with a record order backlog of ~$159 million as of 31 December 2022. The company is projecting 2023 revenue in excess of $200 million, corresponding to a 100+ per cent. YoY increase with expected gross margins of 10 per cent. to 12 per cent. as the company benefits from manufacturing scale up, improved product pricing, and planned produce suite streamlining.
The company also received a primary capital investment of $30 million in December 2022 through a new, $20 million standalone working capital facility with a $10 million accordion from Sunset Power, a trustee of the St. Baker Family Trust, to grow the business through increasing manufacturing capacity, securing long lead-time parts, and bolstering the company's cash balance.
Carrier II was created to invest in non-operating working interests in North American oil and gas properties. Riverstone and Carrier II Management previously formed Carrier Energy Partners, LLC ("Carrier") in August 2013 to pursue the same strategy of assembling, through acquisition and development, an oil and liquids-rich portfolio positioned for production and reserve growth and asset value accretion.
On 27 December 2022, Carrier II was sold to the operator of its wells, Marathon Oil Corporation. REL received proceeds of approximately $34 million. REL is also expected to receive approximately $3 million of residual proceeds to be released from escrow in Q1 2023. In total, REL will have received cumulative proceeds of approximately $66 million, representing a 0.6x Gross MOIC on $110 million of invested capital.
The proceeds from this sale will enable REL to continue its transition to becoming a pure-play decarbonization investment vehicle focused on energy transition, low-carbon industry and the electrification of the global economy. After the sale of Carrier II, REL will only have three conventional energy and power portfolio companies remaining in a portfolio of sixteen investments.
Share Buyback Programme
Since the Company's announcement on 14 February 2022 of the authorised increase of £46 million for the share buyback programme, 4,045,941 ordinary shares have been bought back at a total cost of approximately £27 million ($32 million) at an average share price of approximately £6.63 ($7.95). As of 31 December 2022, £23 million was available for repurchasing and this amount remains unchanged as of the release of this report, which triggers the recommencement of the share buyback programme.
The Investment Manager will continue to be required to apply each Performance Allocation (net of taxes) to acquire ordinary shares of the Company. In accordance with the Performance Allocation terms announced on 3 January 2020, effective from 30 June 2019, no further Performance Allocation will be payable until there is an increase of $95 million (largest deficit of $605.5 million at 30 June 2020) of realised and unrealised value to date at 31 December 2022. As such, the earned carried interest of $0.8 million at 31 December 2022 has been deferred and will expire in October 2023 if the aforementioned losses are not made whole. Further, since REL has not yet met the appropriate Cost Benchmark at 31 December2022, $38.0 million in unearned Performance Allocation fees that would have been due under the prior agreement were not accrued. Based on the aforementioned Performance Allocation, net of estimated applicable taxes, the potential increase arising from the Investment Manager's share purchases would be $19 million as of 31 December 2022.
About Riverstone Energy Limited:
REL is a closed-ended investment company which invests in the energy industry that has since 2020 been exclusively focussed on pursuing and has committed $193 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 16 active investments spanning decarbonisation, oil and gas, renewable energy and power in the Continental U.S., Western Canada, Europe and Australia.
For further details, see www.RiverstoneREL.com
Source: Riverstone Energy Limited
[Category: Energy Equipment & Services, Capital Investment, Financial Results]