Riverstone Energy’s NAV per Share as at 30 June 2016 totalled $16.24/GBP12.25 per share, representing an increase of 29 cents or GBP1.42 compared to NAV per Share at 31 December 2015.
They say the increase in NAV over the six months ended 30 June 2016 was primarily due to the increase in the fair market value of CIOC, Meritage III, Three Rivers III, Carrier II, Fieldwood and RCO, which offset a decline by Castex 2005. The depreciation of the British Pound Sterling has contributed to the NAV per share increasing by GBP1.42, or 13.1 per cent., when compared with the previous six months in Pounds Sterling terms. The $/GBP exchange rate declined from 1.473 at 31 December 2015 to 1.326 at 30 June 2016.
During the first half of the year, the Company made additional commitments of $100 million to Carrier II and $42 million to Liberty II to support these businesses as they continue to execute their strategies. As of 30 June 2016, Riverstone Energy, through the Partnership, had committed $1,722 million, or 127 per cent. of total capital available to 16 investments. The Company’s commitments are now split approximately evenly across four geographic areas: Western Canada, the Permian & Eagle Ford, Gulf of Mexico and niche strategies comprising credit, international opportunities and select US onshore basins.
The Carrier team, which has extensive experience operating in West Texas, opportunistically acquired interests in the prolific Sugarloaf Project in the Eagle Ford. The commitment to Liberty II, which is Riverstone Energy’s earliest investment and focused on the Bakken and Powder River Basin, was increased to support investment in gas gathering and processing infrastructure, well completions and balance sheet strengthening.
The company points out that, although Riverstone Energy’s commitments exceed capital raised, the portfolio remains relatively young due to its strategy of gradually deploying capital across the cycle. Because of this “build-up” approach, where Riverstone controls the pace and deployment of capital, the Board is comfortable with current commitment levels. The history of Riverstone investments has shown that not all of the commitments made to portfolio companies are ultimately funded and in some cases are cancelled altogether. For example, as of 30 June 2016, Funds I through IV have only invested 87 per cent. of the total commitments to its portfolio companies. Also, Riverstone Energy’s arrangements with Riverstone allow excess commitments to be amended by the Investment Manager with consideration from the Board.
They say Riverstone Energy’s portfolio companies’ management teams continued to make solid operational progress in the first half of the year. Meritage III’s gathering and processing infrastructure became operational at the end of April, which will support CIOC as it continues to increase production from its extensive land position in Canada’s Montney and Duvernay plays. Eagle II’s initial well in the SCOOP produced strong results and the company is now pursuing a multi-well delineation drilling programme. While Origo and ILX III remain relatively early in their exploration programmes, they have already made five discoveries which are now being progressed toward development. Rock Oil and Three Rivers III continue to develop drilling programmes for their recently acquired properties. Elsewhere in the portfolio, Liberty II and Fieldwood took measures to optimise their capital structures, with Fieldwood agreeing a solution whereby it no longer faces borrowing base redeterminations until May 2018.
Valuations for some of the earlier investments made by REL continue to face challenges due to weak energy prices. However, the Company’s build-up strategy, where capital is deployed gradually over time, has allowed several of its portfolio companies to benefit from industry distress, resulting in value accretion for Shareholders as evidenced by three of Riverstone Energy’s four largest investments (CIOC, Rock Oil and Carrier II), being valued above cost. Throughout the portfolio, Riverstone continues to work with its portfolio companies’ management teams to reduce operating expenses, hedge commodity price exposure where appropriate and maintain maximum capital flexibility to thrive in a variety of commodity price environments.
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