Riverstone Energy (RSE) has announced its annual results for the year ended 31 December 2016. During the period, RSE saws its NAV increase by 26.1% to $20.11 per share and that the impact of Brexit, through the devaluation of sterling, contributed to the sterling NAV per share increasing by 50.5% to £5.47. RSE says that strong NAV growth was driven primarily by the sale of Rock Oil and valuation uplifts by several large investments, including CIOC, Three Rivers III and Centennial. RSE says that, altogether, these three investments now account for close to two-thirds of its portfolio’s gross unrealised value. RSE’s share price performed well in 2016, with a 70% increase during the calendar year. The Company says that its share price has increased by 34% from IPO through the end of 2016, significantly outperforming benchmarks such as the S&P Oil & Gas E&P Index.
In addition to the new investment in Centennial, REL increased commitments to existing portfolio companies CIOC, Carrier II, Liberty II, Meritage III and Eagle II by $267 million in total. RSE says that these commitments are focussed on North American energy production and midstream services, and will support these businesses as they continue to execute their strategies. In addition, REL released $188 million of commitments throughout the year. As of 31 December 2016, REL has commitments of $1,928 million to 16 current investments, equating to 126% of net capital available. RSE says that it believes that it is appropriate for the Company to maintain a level of over-commitment, in order to optimise the level of invested capital. Commitments are structured to maximise flexibility, and portfolio companies are often fully or partially monetised prior to drawing the full committed amounts. At year end, REL, including the Partnership, had a cash balance of over $270 million.
RSE says that, in total, it has net invested $1,172 million, equating to 76% of the net capital available at the end of 2016. This was an increase of $536 million over the course of the year as RSE continued to take advantage of opportunities presented by market distress. RSE says that over 80% of capital invested in 2016 was deployed to the onshore U.S. to support acquisitions by companies such as Centennial, Three Rivers III and Carrier II, and provide funding for initial drilling and delineation programmes.
RSE says that the portfolio continued to make strong operational progress in 2016. The completion of Meritage III’s initial midstream infrastructure in Western Canada has allowed CIOC to continue to grow production. In addition, Meritage III has signed an agreement with a third party which will support volumes as the company invests in additional infrastructure. Eagle II and Three Rivers III have commenced their initial drilling programmes in the SCOOP and Delaware Basin, respectively, with encouraging initial results. According to RSE In the Gulf of Mexico, ILX III made two additional discoveries in the fourth quarter, helping drive a 75% success rate for the eight wells drilled since inception. Fieldwood completed a comprehensive debt restructuring in the first half of the year and, according to RSE, made strong progress with recompletions and workover activity to maintain production at approximately 85,000 boepd.
In terms of outlook, the company’s manager says that while they are confident that the outlook for the sector remains favourable, following successive years of under-investment, they expect the energy market to continue to be volatile in the short term given uncertainties over global economic growth and the velocity at which North American oil production returns to the market. As such, they say that they continue to manage risk through diversifying across geographies and energy segments, while consistently focusing on build-up strategies, partnering with experienced, operationally-focussed management teams, hedging cash flows from producing assets, using moderate levels of debt with flexible covenant structures, and maintaining sufficiently high levels of liquidity to take advantage of attractive acquisition opportunities.
Riverstone Energy strong NAV growth, of 26.1%, driven by the sale of Rock Oil and valuation uplifts : RSE