Riverstone Energy Ltd. recently agreed to exit its oil and gas venture in the U.S. Gulf of Mexico as part of a push to instead boost low-carbon energy investments.

“We believe that our focus on originating and executing investments that support the portfolio’s focus on decarbonization and low-carbon power generation themes will provide REL shareholders with access to a unique set of opportunities that generate strong financial returns while having a positive impact on climate change,” commented Richard Hayden, chairman and non-executive independent director of Riverstone, in a release from the firm on July 22.

In the release, Riverstone said it sold its one-third ownership interest in ILX Holdings III to an institutional investment fund managed by Ridgewood Energy Corp. for $172 million in cash.

ILX III is a Houston-based joint venture with Ridgewood, focused on the strategy of acquiring nonoperated working interests in oil-focused exploration projects in the Gulf of Mexico. ILX III represented the third partnership that Riverstone’s Global Energy & Power Funds established with Ridgewood since 2010.  

Following the sale of its interest in the venture to Ridgewood, Riverstone said it will no longer own any interest in ILX III.

“The proceeds from REL’s exit of ILX III provide additional funds to accelerate our investments in decarbonization and low-carbon power generation,” Hayden added in the release. “It also provides improved liquidity to support board approved share repurchases.”

Estimated total net proceeds from the sale of $172 million include prior realized distributions. This represents approximately 1.0x gross multiple on invested capital, which is a 23% premium to Riverstone’s 0.8x gross multiple on invested capital valuation at year-end 2020.

As of June 30, pro forma for the ILX III sale, Riverstone holds total cash of $221 million. In addition, as of June 30 June, Riverstone owns $86 million of freely marketable securities and $6 million of securities subject to a lock-up, according to Hayden.

“The board and investment manager are committed to maximizing value from REL’s oil and gas assets to support returns to shareholders and continued investment in low carbon energy assets,” he said. “With a stronger balance sheet, subject to market conditions, capital needs for the current portfolio and the new investment opportunities, the board will continue the Board authorized buyback program on the open market when shares are trading below intrinsic value and may also consider tender offers and dividends in the future.”

The transaction with Ridgewood is all cash and closed upon signing but is subject to certain post-closing purchase price adjustments.

Riverstone has 11 active investments spanning oil and gas, midstream, and energy services in the Continental U.S., Western Canada, Gulf of Mexico, Latin America and credit, according to the release on July 22.

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