27 July 2017

Noble to Sell Global Oil Liquids and N.A. Gas & Power Biz Lines

In an effort to raise capital and pay down debt, beleaguered Singapore-based commodity trading house Noble Group said last night that it would be selling two of its most valuable chips as part of a two-year debt reduction plan, the company announced last night.

As part of the chairman's review, the Global Oil Liquids and North American Gas & Power business were mentioned as Noble's most working capital intensive operations, but also the board believes that sales of the two business lines will generate significant sales that could retire revolving credit lines.

Noble Group has started the formal sales process of the Global Oil Liquids business and has a short list of potential buyers. Final bids are expected to be received sometime in the third quarter 2017 and expected to close quickly. The group also announced that it has entered a binding stock purchase agreement with Mercuria Energy America for its Noble Americas Gas & Power Corp.

Total considerations for the sale come out to US$248 million and is subject to shareholder approval as well as other regulatory approvals. The sale of the Gas and Power group along with the Global Oil Liquids group allows Noble to retire some $3 billion in credit facilities, and proceeds can be used to pay down debt.

As part of the strategic view, Noble Group has also announced an asset disposal program that it believes could net them somewhere between US$800 million and US$1 billion. Additional cost reductions in the form of administrative and operations expenses were identified and will bring its employee count from roughly 900 to around 400.

Noble Group's board notes that the commodity trading business will continue to face challenging conditions and realignment during times of low margins. The announcement also cites a changing banking and regulatory landscape as well as the chance of a "digital disruption." Ultimately, the group's board expects more industry consolidation.

Sales of the two key groups will allow Noble Group to focus on its Hard Commodities, freight and LNG business lines. The Group will also continue to focus on its strong presence in the Asian markets. The release notes the resilience of the Hard Commodities business and its contribution to cash flow.

"Cash flows from the Hard Commodities businesses, together with net proceeds from the monetization of the Global Oil Liquids and North American Gas & Power businesses and the new Asset Disposal Programme form the core of the Group's debt repayment capability," it said.

Second-Quarter Loss

Noble Group also announced a second-quarter loss last night and expects to report a total net loss in the US$1.7-1.8 billion range.

In addition to the complicated commodities trading environment, the conservative use of liquidity, its scale-back of risk and access to finance lines prevented Noble Group from taking trading opportunities that it saw as profitable.

Noble Group stock prices were hammered on the news, trading as low as 29.5 Singapore cents and were off by almost 50%. The price did bounce back to 39.5 Singapore cents, still a loss of more than 31%.


20 June 2017

Petredec Orders Up To Four VLGCs

Global LPG trading company Petredec has ordered two 84,000-cbm Very Large Gas Carriers (VLGC) with options to build a further two units with Chinese shipyard Jiangnan, the Singapore arm of the group announced Monday. The first two vessels are expected to be delivered during Q2 and Q3 2019 and the optional vessels, if taken, would deliver later the same year, Petredec stated.

The additions would bring Petredec's VLGC fleet to 21.

Petredec said that the vessels will comply with all the latest environmental legislation, including NOx Tier III, the new IGC code and with the USCG-approved Ballast Water Treatment System, to make them some of the most economical VLGCs in the global fleet.

Petredec Chief Executive Giles Fearn stated that the market expects to see accelerated scrapping of older vessels, which are less efficient and don't comply with the latest environmental regulations and face expensive dry docks.

"Petredec must continue to provide the best service to our customers and therefore cannot be too dependent on third party tonnage providers," Fearn commented.

The group delivers over 12 million tons of LPG annually with a controlled fleet of over 70 gas carriers.


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