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Riverstone Energy’s Hammerhead to list via SPAC

Riverstone Energy says that two of its portfolio companies, Hammerhead Resources Inc., a Calgary-based energy company, and Decarbonization Plus Acquisition Corporation IV (Nasdaq: DCRD, DCRDW, DCRDU), a special purpose acquisition company, have announced a business combination that values Hammerhead at an enterprise value of C$1.39bn, which is approximately 2.2x DCRD’s projected 2024 EBITDA for Hammerhead.

Riverstone Energy holds a 17% stake in Hammerhead, investing alongside Riverstone Global Energy and Power Fund V, L.P. (“Fund V”). As of 30 June 2022, this was valued at $156m against total invested capital of $295m. At the agreed pre-money transaction value and at an assumed $10.00/share trading price, that might rise to $177m, or 0.60x Gross MOIC. Hammerhead is Riverstone’s largest investment and represents 18% of its NAV.

Riverstone Energy’s interest in DCRD comes through a 5% position in its sponsor, which is controlled by Riverstone. Riverstone Energy has invested a total of $639,497 in the sponsor and that investment is currently marked at cost. The balance of the interests in the sponsor are held by Riverstone professionals and other persons associated with Riverstone.

Assuming the approval by each of the Hammerhead shareholders and the DCRD shareholders, the transaction will result in the formation of a publicly traded upstream oil and gas company with an identified investment program to decarbonise its oil and gas operations through the development of a carbon capture and sequestration programme (which would need investment of about C$240m of capital between 2023 and 2029). The company’s assets will include a large, consolidated block of acreage in the prolific Montney trend in Western Canada, spanning over 100,000 net acres in Alberta. Planned production and EBITDA growth is expected by DCRD to be in excess of 40% and 50%, respectively, from an expected 31,500-32,500 boe/d and C$375-425m in 2022 to over an expected 46,000-48,000 boe/d and C$625-675m in 2024.

Closing of the transaction is likely to occur in Q1 2023, subject to approval of the shareholders of each of Hammerhead and DCRD and other customary closing conditions. At closing, Riverstone Energy is expected to receive 15m shares of the new stock (ticker HHRS), giving it about 12% pro forma ownership of HHRS assuming no redemptions by existing DCRD shareholders.

RSE : Riverstone Energy’s Hammerhead to list via SPAC

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