Riverstone Energy swings to a loss as it seeks to diversify

27th Feb 2019 08:34

(Sharecast News) - Riverstone Energy reported a 13% fall in its dollar-denominated net asset value per share in its final results on Wednesday, to $17.91, which it said was largely driven by the Hammerhead and Centennial parts of its portfolio.The FTSE 250 company said almost all of the decrease in value occurred during the fourth quarter, but noted that the declines were partially offset by increased valuations in Fieldwood, ILX III and Meritage III.Its loss for the year ended 31 December was $241m, swinging from profits of $44.6m a year ago, with its basic loss per share totalling 286.87 US cents, compared to profits of 52.82 cents for the 2017 financial year.The company's market capitalisation at year-end was $1.095bn, down from $1.409bn a year ago.Riverstone's board highlighted that during 2018, the company - through its partnership - received more than $304m 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.It said its realisation of Three Rivers III, through the partnership, generated nearly $203m in gross proceeds, of which $200m had been received to-date, representing a Gross multiple on invested capital of 2.2x, and a gross internal rate of return of 48%.Riverstone'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 $85m.The board said the firm;s largest exposure, through the partnership, was to Western Canada, where it had invested $425m - or 30% - of its capital, followed by the Permian and Eagle Ford, where it had invested $377m - or 27% - of its capital.Through the partnership, Riverstone said it invested a total of $84m during the year, bringing net capital invested as of 31 December to $1.174bn, or 90% of net capital available.The company withdrew commitments totaling $112m to Three Rivers III, RCO and Castex 2005 during the period, bringing net committed capital as of 31 December to $1.33bn, or 101% of net capital available.Post-period end, in January it announced the sale of Meritage III for gross cash proceeds consistent with its valuation at 31 December of $80m , representing a gross multiple on invested capital of 2.0x on the $40m investment, and a gross internal rate of return of approximately 28%.The Riverstone board said that represented a gross profit of $40m, which would be subject to a performance fee upon closing of the sale, which completed in the first quarter of 2019.Also post-period end, in February it approved up to a $22m commitment to fund the acquisition of three refined product tankers in partnership with the Ridgebury Tankers management team.That transaction represented Riverstone's first investment in the energy services sector, which the directors said provided diversification for the portfolio.Looking at portfolio activity during 2018, Riverstone reported that it invested $35m in ILX III, $22m in Fieldwood ERO, and $10m in Sierra during the year.It also invested $7m in CNOR, $6m in Meritage III, and $4m in Castex 2014.From Three Rivers III, it received sale proceeds of $200m, and from Centennial, it received proceeds of $85m from shares sold.Riverstone also said it received proceeds of $3m from other investments, including Rock Oil, RCO, Fieldwood, and Origo.Looking ahead, Riverstone's board said its $137m cash balance made it "well-placed" to make new investments and grow its existing portfolio.It said its investment manager believed the current market environment was generating "attractive opportunities" in midstream, oilfield services and power, and would continue to seek to invest in opportunities that spanned the entire energy value chain to diversify its exploration and production exposure.To effect that change in portfolio construction, the firm said it expected to make more investments independently of Riverstone's private funds going forward.It also said a "continued focus on operational excellence" would remain critical to driving value across the commodity price cycle."REL's modified investment approach provides the flexibility to adapt to the evolving universe of investment opportunities," said Riverstone Energy chairman Richard Hayden."Our recent commitment to Handytankers 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 Leuschen and Pierre Lapeyre Jr, co-founders of Riverstone, added that despite a "difficult" market environment, the company 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," the co-founders said in their joint statement.