Investment Trust Insider on Riverstone Energy

Investment Trust Insider on Riverstone Energy

James Carthew: Riverstone’s history restricts oil boom effect

BP’s announcement on Friday that it is spending $10.5 billion to buy BHP’s US shale oil investments, comprising considerable acreage in the Permian and Eagle Ford basins plus gas-producing fields in the southern states of the US, is a good cue to look at Riverstone Energy (RSE) which offers a credible route into this same sector.

BP reportedly beat several rivals to buy these assets that produce about 190,000 barrels of oil equivalent per day (boepd) and have reserves of about 4.9 billion boe, its biggest transaction in nearly 20 years. Yet despite the significant level of interest from the oil majors, Riverstone’s own shares trade on a big discount to net asset value (NAV). Why the disconnect?

Riverstone Energy is one of the larger funds in the investment companies sector but, I would bet, one of the ones that doesn’t often feature at the forefront of most investors’ minds. By Morningstar’s estimate, its shares at Friday’s closing price of £12.10 languished 21.5% below NAV of £15.39 per share, wider than its average 12-month discount of 17.5%.

That’s an enormous figure for an investment company with net assets of $1.7 billion, equivalent to a $126 million gap between the NAV and the shares’ total market value. This seems especially high when you consider that 15.2% of the fund ($265 million) was in cash at the end of March.

Riverstone Energy is nearly five years’ old having launched at the end of October 2013. Its portfolio comprises oil and gas projects and companies in North America and the North Sea….

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