Shrinking Noble Group needs to pay debt with mostly Asian assets

Noble said it agreed to sell most of its global oil liquids business to Vitol Group. PHOTO: REUTERS

SINGAPORE (BLOOMBERG) - Another chapter's being written in the drawn-out saga of Singapore-listed Noble Group. Some three decades after its founding, and from a perch among the world's top commodity traders, the company has abandoned its global ambitions and retreated back to its Asian roots in a last-ditch effort to survive.

Noble said Monday (Oct 23) it agreed to sell most of its global oil liquids business to Vitol Group, in a race against time to repay lenders, having already hived off its North American gas-and-power unit to Mercuria Energy Group in recent months. That leaves the Hong Kong-based firm - once a rival to trading behemoths like Glencore in its global reach across multiple commodities - as effectively an Asian trader of coal, iron ore, freight and liquefied natural gas, with a market value of less than US$400 million.

As Noble warns of yet another quarterly loss of more than US$1 billion, banks and investors will be scrutinizing the trader's ability to service debt obligations with its remaining businesses. It's been a torrid few years for the company, which has seen it offload prized assets to shore up its finances, including a North American power trading unit and its agriculture arm. Noble will also lose its gasoline blending facilities on the US Gulf Coast, petroleum storage in Panama, and fuel transport via American pipelines.

With the exception of an alumina refinery in Jamaica and some assets in Mexico, Noble's left with a largely Asian portfolio including marketing rights to Indonesian coal, LNG trading capabilities as well as some stakes in Australian and Mongolian coal mines. The information below is taken from company reports, earnings statements and Noble's website and is subject to change.

Following a revamp in 2016, which included the sale of its US energy solutions unit, an exit from European gas and power as well as a reduction in its global metals business, the trader changed the way it differentiates its segments. It's expected to give an update when it reports quarterly results in November to reflect the sale of its gas-and-power and oil businesses.

Energy: Under the structure at the end of the first half, Noble's energy segment comprised the oil liquids, gas & power and energy coal units. It had an operating loss from supply chains of US$226 million in the first six months of 2017, compared with the group's operating loss of US$269 million. In revenue terms, it accounted for about 90 per cent of total sales in the January-to-June period.

Energy Coal: Noble has a portfolio of off-take and marketing agreements with several mines worldwide from Australia to Indonesia and South Africa, and supply contracts with customers such as power producers and trading houses in key markets including China, India and Japan.

Oil Liquids: Noble has reached an agreement to sell this business to Vitol. The unit trades crude and refined products via ship, barge, pipeline, truck and rail. In the US, it transports fuels via pipelines including Colonial, Magellan and Explorer, and produces ethanol in South Bend, Indiana. It has blending and wholesale facilities in North America and the Caribbean. In 2014, Noble reached a deal to loan US$1 billion to Ecuador's state oil company and signed a five-year contract to supply the South American nation with refined fuels.

Gas & Power: The unit is focused on its North American and global LNG businesses after the trader sold Noble Americas Energy Solutions - an asset it once considered core - last year to raise about US$1 billion. Noble supplies gas in the Pacific North West from Canada into the West Coast of the U.S. The North American gas & power business was sold to Mercuria for less than what Noble had previously indicated.

Metals, Minerals and Ores: As part of the new structure, this business segment combines Noble's metals, carbon steel materials and logistics units. It posted an operating loss from supply chains of US$43 million in the first half.

Metals: Noble's metals unit comprises its Asian base metals arm, trading copper, zinc, lead, nickel and other raw materials and its global aluminum business. Noble has a 55 per cent stake in a joint venture with the government of Jamaica, which mines bauxite and refines it into alumina before it's exported. The facility has a production capacity of 1.425 million metric tons a year, according to information on Jamalco's website. It's among the few hard assets Noble has left, according to Alex Turnbull, managing partner of hedge fund Keshik Capital Pte, who said "any creditor would love to take that."

Carbon Steel Materials: This unit focuses on providing raw materials such as iron ore, chrome, manganese and metallurgical coal and coke to mainly Asian steel mills. Noble doesn't own any production assets.

Logistics: With offices in Hong Kong, Singapore, Mumbai, Beijing and London, Noble's logistics business services external customers as well as its internal freight requirements, shipping commodities in Capesize, Panamax and Supramax bulk carriers. At any given time, Noble has more than 100 vessels on charter, either owned, bareboat, time charter period or single trips, the company said in its latest annual report.

Joint Ventures & Associates: Some of Noble's assets are held by the joint ventures and associated companies in which it has shares. These include Yancoal Australia Ltd, the miner majority-owned by China's Yanzhou Coal Mining Co, as well as mines in Mongolia and South Africa. Noble's stake in Yancoal has been diluted following the latter's capital raising exercise, and is expected to result in substantial non-cash losses in Noble's third-quarter results.

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