Final results for the year ended 31 December 2021

RNS Number : 6456C

Riverstone Energy Limited

24 February 2022

Riverstone Energy Limited

LEI: 213800HAZOW1AWRSZR47

Final results for the year ended 31 December 2021

London, UK (24 February 2022) - Riverstone Energy Limited ("REL" or the "Company") announces its Year End Results from 1 January 2021 to 31 December 2021 (the "Period").

Summary Performance

31 December 2021

NAV	$682 million (£506 million)[1]
NAV per share	$12.41 / £9.19¹
Profit/(loss) for Period ended	$341.94 million
Basic profit/(loss) per share for Period ended	561.73 cents
Market capitalization	$345 million (£255 million)¹
Share price	$6.28 / £4.65¹

Highlights

§ As of 31 December 2021, REL had a NAV per share of $12.41 (£9.19), an increase in USD and GBP of 100 & 102 per cent., respectively, compared to 31 December 2020. The quarter end closing share price was $6.28 (£4.65), an increase of 55 & 57 per cent., respectively, compared to 31 December 2020.

§ Hammerhead, Centennial, GoodLeap, Onyx and Carrier II were the largest drivers of REL's NAV improvement over the Period.

§ During the Period, under the Company's modified investment programme, REL invested an aggregate amount of $97 million in eight new energy transition and decarbonisation investments, bringing the total invested in this area to $115 million across nine investments, which in aggregate were valued at $206 million, or 1.8x Gross MOIC, at 31 December 2021.

§ Total invested capital during the Period of $108 million: Samsung Ventures ($30 million), GoodLeap ($25 million), Solid Power ($20 million), Hyzon Motors ($10 million), FreeWire Technologies ($10 million), Onyx ($7 million), ILX III ($4 million) and other investments ($2 million).

§ Total net realisations and distributions during the Period of $176 million: ILX III ($166.9 million), Castex 2014 ($6.1 million), Meritage III ($2.3 million), GoodLeap ($1.3 million), and other investments ($1.2 million), offset by negative earn-out payment for Sierra Oil & Gas ($1.6 million).

§ REL finished the Period with a cash balance of $106 million and remaining potential unfunded commitments of $49 million[2].

§ Since the initial announcement of the Share Buyback Programme on 1 May 2020, the Company has bought back a total of 24,959,132 ordinary shares at an average price of approximately £3.45 per ordinary share, which has contributed to the share price increase of ~111 per cent. from £2.20 to £4.65 over the period to 31 December 2021.

Share Buyback Programme

§ With today's publication of the Company's Annual Report and Audited Financial Statements for the year ended 31 December 2021, the Board will recommence its £40.0 million open market share buyback programme with Numis Securities Limited and J.P. Morgan Securities plc. Since the Company's announcement on 11 May 2021, 7,744,935 ordinary shares have been bought back at a total cost of approximately £36 million ($50 million) at an average share price of approximately £4.65 ($6.40), such that there is £4 million remaining of the total authorised amount.

§ In addition, pursuant to changes to the Investment Management Agreement announced on 3 January 2020, the Investment Manager agreed for the Company to be required to repurchase shares or pay dividends equal to 20 per cent. of net gains on dispositions. No further carried interest will be payable until the $208 million of realised and unrealised losses to date at 31 December 2021 are made whole with future gains. REL continues to seek opportunities to purchase shares in the market at prices at or below the prevailing NAV per share at intrinsic value. Accordingly, an EGM was announced on 14 February 2022 seeking shareholder approval to renew the Company's share buyback authority. REL will continue to build value by monetising its conventional assets and applying the proceeds to the decarbonisation of its portfolio.

Post-Year End Updates

§ Subsequent to quarter-end, REL, through the Partnership, fully funded a $17.5 million commitment to the T-REX Group and a $15 million commitment to Tritium, and also committed up to $20.0 million to Anuvia and funded $17.0 million of a $17.5 million commitment to the first closing of an electric motor company's latest financing round. Each of these investments provide an opportunity to create shareholder value while supporting REL's long-term focus on ESG and energy transition investments.

§ Additionally, on 4 February 2022, REL sold its entire position in Pipestone Energy Corp. for CAD 4.55 per share or CAD 53.0 million ($41.7 million) in net proceeds. The 11.72 million block sale resulted in an aggregate Gross MOIC of 0.64x, inclusive of previously realised proceeds, which is slightly higher than its fourth-quarter 2021 mark of 0.58x.

§ Lastly, on 8 February 2022, the Company announced that the Board and Investment Manager agreed to allocate an additional £46.0 million to the share buyback programme. As the Company currently has the authority to repurchase 1,799,944 shares pursuant to the authority granted at its 2021 annual general meeting, the Board is convening an EGM on 4 March 2022 to seek shareholder approval to renew the Company's authority to repurchase up to 14.99 per cent. of the shares outstanding as at the date of the meeting.

Manager Outlook

§ The Investment Manager continues to work with its portfolio companies to navigate rising energy price tailwinds, monetizing legacy investments opportunistically and redeploying proceeds to decarbonisation investments

§ Our work over the last year, reducing exposure to commodity risk and increasing exposure to emergent green technologies, has positioned the portfolio well to benefit from increasing and accelerating capital flows into the energy transition. The eight new decarbonisation investments in 2021 and the three new commitments in the beginning of the year demonstrate our privileged access to leading growth-stage companies and top management teams.

§ We expect legacy portfolio companies to continue to pay down debt and renegotiate covenants, to manage existing liquidity with discipline, and to increase strategic capital expenditure where appropriate.

§ With $88.5 million in cash on the balance sheet as of 22 February 2022, exclusive of the $20.0 million commitment to Anuvia, as well as $180 million of unrestricted marketable securities and $42 million of restricted marketable securities, the Investment Manager will continue to execute on the modified investment programme, identifying new decarbonisation investments that present attractive risk-reward profiles supporting value creation for shareholders.

Richard Hayden, Chairman of Riverstone Energy Limited, commented:

"It has been enormously encouraging to witness economies around the world return to growth during 2021 thanks to the remarkable pace of vaccine rollouts. Momentum on climate action has also accelerated and I am pleased with the real progress that REL has made in reorientating our portfolio further towards decarbonisation opportunities. We have nine active investments in decarbonisation as of 31 December 2021, including eight added in 2021. Looking forward, the opportunities offered by the scale of the investment required to support the energy transition continue to be attractive and our focus remains on identifying value accretive investments for our portfolio and on executing our strategy."

David M. Leuschen and Pierre F. Lapeyre Jr., Co-Founders of Riverstone, added:

"Careful cost control and an emphasis on enhancing portfolio resilience and efficiency has allowed REL to reposition our investments and improve performance. We were also aided by rising commodity prices in the past year contributing to an improved performance in REL's legacy commodity-linked portfolio. Our commitment to delivering Shareholder value remains a core priority, as demonstrated by our share buyback programme which we increased to £90 million in 2021 and further increased by an additional £46 million in February 2022, subject to shareholder approval at the upcoming EGM on 4 March 2022."

- Ends -

Riverstone Energy Limited's 2021 Annual Report is available to view at: www.RiverstoneREL.com.

4Q21 Quarterly Portfolio Valuation

Previously, on 1 February 2022, REL announced its quarterly portfolio summary as of 31 December 2021, inclusive of updated quarterly unaudited fair market valuations:

Current Portfolio - Conventional

Investment (Public/Private)	Gross Committed Capital ($mm)	Invested Capital ($mm)	Gross Realised Capital ($mm)[3]	Gross Unrealised Value ($mm)⁴	Gross Realised Capital & Unrealised Value ($mm)	30 Sep 2021 Gross MOIC[4]	31 Dec 2021 Gross MOIC⁴
Centennial⁶ (Public)	268	268	172	91	263	1.02x	0.98x
Hammerhead Resources (Private)	307	295	23	93	116	0.41x	0.39x
Onyx (Private)	66	60	-	102	102	1.00x	1.70x
Carrier II (Private)	133	110	29	48	77	0.70x	0.70x
Pipestone Energy (formerly CNOR)⁶ (Public)	90	90	16	36	52	0.45x	0.58x
Total Current Portfolio - Conventional - Public[5]^{, [6]}	$358	$358	$188	$126	$314	0.88x	0.88x
Total Current Portfolio - Conventional - Private⁵	$507	$465	$52	$243	$295	0.55x	0.63x

Current Portfolio - Decarbonisation


Investment (Public/Private)	Gross Committed Capital ($mm)	Invested Capital ($mm)	Gross Realised Capital ($mm)³	Gross Unrealised Value ($mm)⁴	Gross Realised Capital & Unrealised Value ($mm)	30 Sep 2021 Gross MOIC⁴	31 Dec 2021 Gross MOIC⁴
GoodLeap (formerly Loanpal) (Private)	25	25	1	67	68	2.50x	2.75x
Solid Power⁶ (Public)	48	48	-	59	59	1.00x	1.24x
Enviva⁶ (Public)	25	18	-	44	44	1.70x	2.45x
FreeWire (Private)	10	10	-	20	20	2.00x	2.00x
Hyzon Motors⁶ (Public)	10	10	-	6	6	0.69x	0.65x
DCRN^{6, [7]} (Public)	1	1	-	4	4	7.11x	6.46x
Ionic I & II (Samsung Ventures) (Private)	3	3	-	3	3	1.00x	1.00x
DCRD^{6, 7} (Public)	1	1	-	1	1	1.00x	1.00x
Total Current Portfolio - Decarbonisation - Public^{5, 6}	$84	$77	-	$115	$115	1.22x	1.49x
Total Current Portfolio - Decarbonisation - Private⁵	$38	$38	$1	$90	$91	1.73x	2.42x
Cash and Cash Equivalents				$106
Total Liquidity (Cash and Cash Equivalents & Public Portfolio)				$347
Total Market Capitalisation				$345

Realisations

Investment (Initial Investment Date)	Gross Committed Capital ($mm)	Invested Capital ($mm)	Gross Realised Capital ($mm)³	Gross Unrealised Value ($mm)⁴	Gross Realised Capital & Unrealised Value ($mm)	30 Sep 2021 Gross MOIC⁴	31 Dec 2021 Gross MOIC⁴
Rock Oil[8] (12 Mar 2014)	114	114	232	3	235	2.05x	2.06x
Three Rivers III (7 Apr 2015)	94	94	204	-	204	2.17x	2.17x
ILX III[9] (8 Oct 2015)	179	179	171	1	172	0.97x	0.96x
Meritage III[10] (17 Apr 2015)	40	40	86	-	86	2.16x	2.16x
RCO[11] (2 Feb 2015)	80	80	80	-	80	0.99x	0.99x
Sierra (24 Sept 2014)	18	18	38	-	38	2.06x	2.06x
Aleph (9 Jul 2019)	23	23	23	-	23	1.00x	1.00x
Ridgebury (19 Feb 2019)	18	18	22	-	22	1.22x	1.22x
Castex 2014 (3 Sep 2014)	52	52	14	-	14	0.27x	0.27x
Total Realisations⁵	$619	$619	$871	$4	$875	1.41x	1.41x
Withdrawn Commitments and Impairments[12]	350	350	9	-	9	0.02x	0.02x
Total Investments⁵	$1,955	$1,906	$1,121	$578	$1,699	0.86x	0.89x
Total Investments & Cash and Cash Equivalents⁵				$684
Draft Unaudited Net Asset Value				$682

Total Shares Repurchased to-date				24,959,132	at average price per share of £3.45 ($4.52)
Current Shares Outstanding				54,937,599

Note:

The Investment Manager is charged with proposing the valuation of the assets held by REL through the Partnership. The Partnership has directed that securities and instruments be valued at their fair value. REL's valuation policy follows IFRS and IPEV Valuation Guidelines. The Investment Manager values each underlying investment in accordance with the Riverstone valuation policy, the IFRS accounting standards and IPEV Valuation Guidelines. The Investment Manager has applied Riverstone's valuation policy consistently quarter to quarter since inception. The value of REL's portion of that investment is derived by multiplying its ownership percentage by the value of the underlying investment. If there is any divergence between the Riverstone valuation policy and REL's valuation policy, the Partnership's proportion of the total holding will follow REL's valuation policy. There were no valuation adjustments recorded by REL as a result of differences in IFRS and U.S. Generally Accepted Accounting Policies for the period ended 31 December 2021 or in any period to date. Valuations of REL's investments through the Partnership are determined by the Investment Manager and disclosed quarterly to investors, subject to Board approval.

Riverstone values its investments using common industry valuation techniques, including comparable public market valuation, comparable merger and acquisition transaction valuation, and discounted cash flow valuation.

For development-type investments, Riverstone also considers the recognition of appreciation or depreciation of subsequent financing rounds, if any. For those early stage privately held companies where there are other indicators of a decline in the value of the investment, Riverstone will value the investment accordingly even in the absence of a subsequent financing round.

Riverstone reviews the valuations on a quarterly basis with the assistance of the Riverstone Performance Review Team ("PRT") as part of the valuation process. The PRT was formed to serve as a single structure overseeing the existing Riverstone portfolio with the goal of improving operational and financial performance.

The Board reviews and considers the valuations of the Company's investments held through the Partnership.

[1] GBP:USD FX rate of 1.350 as of 31 December 2021

[2] Excludes the remaining unfunded commitments for Carrier II and Hammerhead $36 million, in aggregate, which are not expected to be funded. The expected funding of the remaining unfunded commitments at 31 December 2021 are $nil in 2022, 2023 and 2024. The residual amounts are to be funded as needed in 2025 and later years.

[3] Gross realised capital is total gross proceeds realised on invested capital. Of the $1,121 million of capital realised to date, $823 million is the return of the cost basis, and the remainder is profit.

[4] Gross Unrealised Value and Gross MOIC (Gross Multiple of Invested Capital) are before transaction costs, taxes (approximately 21 to 27.5 per cent. of U.S. sourced taxable income) and 20 per cent. carried interest on applicable gross profits in accordance with the revised terms announced on 3 January 2020, but effective 30 June 2019. Since there was no netting of losses against gains before the aforementioned revised terms, the effective carried interest rate on the portfolio as a whole will be greater than 20 per cent. No further carried interest will be payable until the $208 million of realised and unrealised losses to date at 31 December 2021 are made whole with future gains, so the earned carried interest of $0.8 million at 31 December 2021 has been deferred and will expire in October 2023 if the aforementioned losses are not made whole. Since REL has not yet met the appropriate Cost Benchmark at 31 December 2021, $28.7 million in Performance Allocation fees that would have been due under the prior agreement were not accrued. In addition, there is a management fee of 1.5 per cent. of net assets (including cash) per annum and other expenses. Given these costs, fees and expenses are in aggregate expected to be considerable, Total Net Value and Net MOIC will be materially less than Gross Unrealised Value and Gross MOIC. Local taxes, primarily on U.S. assets, may apply at the jurisdictional level on profits arising in operating entity investments. Further withholding taxes may apply on distributions from such operating entity investments. In the normal course of business, REL may form wholly-owned subsidiaries, to be treated as C Corporations for US tax purposes. The C Corporations serve to protect REL's public investors from incurring U.S. effectively connected income. The C Corporations file U.S. corporate tax returns with the U.S. Internal Revenue Service and pay U.S. corporate taxes on its taxable income.

[5] Amounts may vary due to rounding.

[6]. Represents closing price per share in USD for publicly traded shares of Centennial Resource Development, Inc. (NASDAQ:CDEV - 31-12-2021: $5.98 price per share / 30-09-2021: $6.70 price per share); USD-equivalent closing price per share for Pipestone Energy Corp. (TSX-V:PIPE - 31-12-2021: $3.08 price per share / 30-09-2021: $2.09 price per share); Enviva, Inc. (NYSE:EVA - 31-12-2021: $70.42 price per share / 30-09-2021: $53.41 price per share); Solid Power, Inc. (NASDAQ:SLDP - 31-12-2021: $8.74 price per share / 30-09-2021: $10.05 price per share); Hyzon Motors, Inc. (NASDAQ:HYZN - 31-12-2021: $6.49 price per share / 30-09-2021: $6.94 price per share); and Decarbonization Plus Acquisition Corporation II (NASDAQ:DCRN - 31-12-2021: $9.97 price per share / 30-09-2021: $9.87 price per share).

[7] SPAC Sponsor investment for Decarbonization Plus Acquisition Corporation II (NASDAQ:DCRN) and Decarbonization Plus Acquisition Corporation IV (NASDAQ:DCRD).

[8] The unrealised value of the Rock Oil investment consists of rights to mineral acres.

[9] The unrealised value of the ILX III investment consists of 43,333 shares of Talos Energy Inc stock (NYSE:TALO) in connection with its former investment in ILX III.

[10] Midstream investment.

[11] Credit investment.

[12] Withdrawn commitments consist of Origo ($9 million) and CanEra III ($1 million), and impairments consist of Liberty II ($142 million), Fieldwood ($80 million), Eagle II ($62 million) and Castex 2005 ($48 million).

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