Investment trust insider on Riverstone Energy – James Carthew: Riverstone Energy’s unreasonable tender
Riverstone Energy (RSE) made headlines this week when it announced a tender offer for up to 30.4% of its issued share capital.
The fund is almost 10 years old, having launched in October 2013. The initial issue was a phenomenal success, raising over £760m from investors at £10 per share. Its focus was oil and gas exploration, production and ‘midstream’ transportation and storage.
The fund manager Riverstone had $26bn under management when RSE launched and a great track record. The shale boom in North America was underway, helped by a buoyant oil price that was around $100 a barrel.
However, at the end of 2014, the oil price fell sharply and hit a sub-$30 low in February 2016. That didn’t seem to have much of an impact on RSE’s net asset value (NAV) but it did hit the shares which fell a discount to NAV. In October 2018, the company held a tender offer to buy back £55m worth of shares at a price between £12 and £13.75 – shareholders had to bid the level that they were prepared to sell at and the tender cleared at the lowest price that absorbed the available cash, which turned out to be £12.
At the end of 2018, as the rally in oil price… read more here