Riverstone Energy Share Price (RSE)

I tendered all my holding for the buyback at £10.50, got scaled back to 54% which is better than the initial offer of around 36%. Pretty happy to get out with > half my holding at this price, having bought in under £5. Letting the others revalue towards £10 and then run this to see if the green energy recovery boosts the unlisted holdings over the next couple of years..

Many thanks PekingDuck! Much appreciated!

December, Crescent Point Energy finalised its acquisition of

Hammerhead, which resulted in a $175m distribution to REL and the receipt of 8m shares

of Crescent Point Energy (CPG). In addition, Onyx's valuation also increased from 3.00x

to 3.20x Gross MOIC. However, the decarbonisation portfolio dropped 22.9% in value,

driven primarily by its position in Enviva, which lost 85.4% of its market value due to

missed earnings targets, plant-level operational disruption, and ongoing restructuring. In

addition, FreeWire lost 75% of its value due to reduced growth projections as the

company works to preserve cash in a challenging fundraising and growth environment

for EV-related businesses. With the exception of Infinitum, the remainder of the

decarbonisation portfolio continued to suffer from fundraising headwinds caused by the

impact of rates and lower risk appetite from investors. RSE says that these businesses will

remain susceptible to market volatility until they reach profitability.

Having updated our model, our live NAVe falls by 1.2% from $15.76ps/1248pps to

$15.57ps/1233pps, down 2.5% since 31/12/23, reflecting overall weakness in the listed

holdings, with a notable 57% fall in Tritium, 48% in Enviva and 10% in Crescent Point.

RSE continues to show its commitment to capital returns, with its announcement today

to return $200m via a tender at a 16% discount to the 31/12/23 NAV. The tender price is

fixed at 1050pps, a 31% premium to last night’s close and a 16.4% premium to the current

price. If approved by shareholders, this would lead to an estimated uplift of around 8.7%

to our live NAV. The potential impact of the remaining buyback capacity would be to add

around 1.7% to NAV in the absence of the tender. But it becomes more powerful if

deployed post tender as the £22m would buy back a larger proportion of the remaining

shares at potentially a bigger discount to NAV (we argue that post returns of capital the

headline discount should widen to reflect the smaller amount of cash on the balance sheet,

with the price constant, and the NAV enhanced). At current prices the combined impact

would ab an estimated overall 12% NAV per share increase. The price has responded well

to the tender news, and is up 13.5% to 908pps (@9.30). This implies a headline discount

of 26.3% to our live NAVe. But stripping out cash and listed this is a 106% discount to

the remaining unlisted holdings (this is the metric to focus on in our view, and should

remain constant before and after any capital returns). This remains very good value in our

view and thus overall we remain Overweight

Exert from recent JPM note on results/tender offer:

RSE is proposing to return $200m (£158m) of its excess capital to shareholders via a tender offer at a fixed price of 1050pp,

a premium of 31% to the closing market price of 800pps on 7/2/24, and a 16% discount

to the 31/12/23 NAV announced today of 1253pps (see below). RSE expects to launch

the tender before the end of this month, closing during March. The number of shares

purchased is expected to represent ~36% of RSE’s existing ordinary shares then in issue

(excluding any shares held in treasury). The tender requires shareholder approval at an

EGM, which is anticipated will be held in March, and will be subject to other legal,

regulatory and customary conditions. Since the announcement on 23/5/23 of the

authorised increase of £30m for the share buyback programme through to

31/12/23,126,023 ordinary shares have been bought back at a total cost of £18m ($22m)

at an average share price of 567p/$7.13. As of 31/12/23, £22m was available for

repurchase. In addition, pursuant to changes to the IMA announced on 3 January 2020,

the manager agreed for RSE to be required to repurchase shares or pay dividends equal

to 20% of net gains on dispositions. No further carried interest will be payable until the

$85m of realised and unrealised losses to date at 31/12/23 are made whole with future

gains.

Portfolio performance for the last quarter of 2023 remained essentially flat with positive

performance from the conventional energy portfolio offset by lagging results from the

decarbonisation investments. Growth stage (pre-profitability) energy transition and

decarbonisation investments continue to lag broader markets, and still face adversity as

the viability of their business plans remain in question due to a dampening of investor

appetite in the face of higher interest rates. RSE points out that a lower risk appetite

presents a substantial risk for these businesses as they are at a stage in their growth that

relies disproportionately on funding from private equity, corporate balance sheets and

institutional investors, and that RSE’s decarbonisation investments are not immune from

these headwinds. On the energy commodity front, WTI crude prices were down 6.5% in

2023 and 20.8% in 4Q, with Brent Crude down 6.2% in 2023 and 19.2% in 4Q. Henry

Hub natural gas spot prices were down 29.1% in 2023 and 3.7% in 4Q. Consolidation in

the US oil and gas sector has reached levels not seen in a long time with over $250bn in

acquisitions announced in 2023. The Permian basin featured prominently in this deal

activity and reflects the acquirers' strong balance sheets due to the sector's commitment

to cash-flow-generation.

Against this backdrop, RSE's conventional energy portfolio gained 7.6% in value over

4Q, driven largely by Crescent Point Energy's (previously Hammerhead Energy) 21.1 %

improvement in share price, countering slight weakness in Permian

Many thanks, tichtich.

Still questions remain on the mechanism here, but I guess that'll become clear in the near future.

Best wishes!