It was another year of eye catching returns for Riverstone Energy (RSE) which ended the period to 31 December 2022 with a NAV of $14.52 (£11.99) per share, a 17.0% and 30.5% increase in USD and GBP, respectively, compared to the 31 December 2021 NAV of $12.41 (£9.19) per share. Management does not provide a benchmark in the annual report. The company share price grew 45.8% in sterling terms and according to a recent JPM Euro Equity research report, with the exception of four aircraft leasing companies, RSE had the highest price total return for closed end investment companies. During 2022 and 2021, respectively, the company’s share price traded up 45.8% from £4.65 to £6.78 per share and 56.6% from £2.97 to £4.65 per share. The list included many energy, renewable, infrastructure and commodity funds. Still, the results need to be taken in context of the last few years with the NAV yet to recover its pre-covid peak, while shares still trade at a discount of over 50%.
Commenting on these numbers, chair of the board, Richard Hayden noted:
“Since the lows of June 2020, NAV is up 97.6 per cent. and stock is up 77.7 per cent. Despite continued structural discount to net asset value, the modified investment strategy we put in place in 2020 is working. We are selectively and opportunistically monetising our conventional investments and investing in decarbonisation investments that will play an important role in lowering the carbon footprint of the global economy.
In the past year, energy prices have performed well and been the major contributor to REL’s performance. However, I’d point out also that our growth equity investments in decarbonising companies have also withstood the extreme volatility of 2022, rising interest rates, and the mass, coordinated selloff of tech and growth equities.
This is my last note before I transfer my duties as Chair of the Board to Richard Horlick. As I hand over the reins, I’m glad to say that we are on a fundamentally important and exciting path. The transition is happening, and we are on the arc toward a more sustainable, decarbonised future.
In my nearly seven years as Chair of the Board, I’ve seen boom and bust trends in North American shale to the energy transition. We are executing on our investment programme in a disciplined fashion while delivering consistent, risk-adjusted results. I leave REL well-positioned and in Richard Horlick’s very capable hands. I firmly believe that we are as well-positioned as we’ve ever been to create value for our shareholders and to contribute to a sustainable, resilient energy future.”
He had this to say regarding the recent market disruption:
”2022 was one of the most event and policy driven energy markets I have ever seen. On the face of it, commodity prices ended the year in a similar place to where they started. WTI opened 2022 at US$75.99/bbl and closed it at US$80.16/bbl. In Europe, the Title Transfer Facility (TTF) natural gas price started the year at € 80.43/MWh and ended it at €76.31/MWh.
But this apparent calm year-on-year masked extreme intra-year price movements, driven in a large part by Russia’s invasion of Ukraine and the ensuing European gas and power crisis. The high/low price for WTI during the year was $123.64/$71.05 per barrel. A near decade of under-investment in conventional fossil fuels, combined with continued post-COVID demand recovery, further exacerbated the energy crisis.
Unpredictable commodity prices have been matched by uncertainty in the global stock and bond markets. The highest inflation seen in Europe and North America for forty years, and subsequent shift towards higher interest rate policies by the World’s central banks for the first time in over a decade, contributed to a significant sell off in technology and other growth sectors. It has also been a difficult year for the SPAC market, which has seen demand fall back from the high levels of 2020 and 2021.
Despite this tough backdrop REL has performed well. Our listed companies have remained focused on executing their achievable near-term growth plans. Furthermore, higher commodity prices have lifted the value of our conventional E&P investments, generating additional cashflows that support our share buybacks and the growth of our decarbonisation portfolio as we continue to pivot into the energy transition.”
RSE : Impressive numbers but still work to be done for Riverstone Energy