Noble Group seen picking oil unit buyer in Sept: sources

[LONDON] Trader Noble Group is expected to pick a buyer for its oil and liquefied natural gas (LNG) units by mid-September to cover debts and reduce credit exposure after a first half loss of US$1.9 billion, sources familiar with the matter said.

Once Asia's largest commodities trader, Singapore-listed Noble has slimmed down drastically to its core Asian coal business after a crisis-wracked two years.

Hong Kong-based Noble said in July it was selling its North American gas and power business to Mercuria and also said it would sell its capital-intensive oil liquids business, leaving it focused on hard commodities.

Suitors for the oil business have already signed non-disclosure agreements, one of the sources told Reuters.

"We have the last two weeks of August to view and then compile the bids ... Noble will then take the first two weeks of September to review them," the source said.

Noble's US$2 billion credit facility expires in October, a date set by creditors after a four-month extension.

Noble's LNG business would be included in the sale, the sources said. The firm delivered 2 million tonnes of LNG in 2015 after securing a deal to supply Egypt and contracts in the Asia-Pacific region.

Noble's spokesman in Hong Kong said on Thursday the company had no plans to sell its LNG business. In an update of its strategic review in July, Noble had reiterated its focus on the LNG business, along with hard commodities and freight, he said.

Noble declined to comment on the timeline to pick a buyer for its oil liquids business.

The sources, who did not put a value on the oil and LNG units, said interested parties included rival trading firms Mercuria Group, Vitol Group, US-based Castleton Commodities International and Freepoint Commodities, as well as Litasco, the trading arm of Russia's Lukoil.

A spokesman for Mercuria said the company was "looking broadly at opportunities in the marketplace." Spokesmen for Vitol and Litasco declined to comment. Freepoint and Castleton did not immediately respond to requests for comment.

Noble is a major player in the global physical oil market, trading crude and refined products. But its operations shrank this year due to higher prices and liquidity constraints.

Noble said its traded oil liquids volume fell nearly 20 per cent year-on-year for the first half of 2017. In 2016, it traded 115 million tonnes of oil, helped by low prices.

The firm has blending and wholesale capabilities in North America and the Caribbean, alongside long-term storage leases globally.

Noble's oil business attracted interest even before it was officially put up for sale, particularly for its US presence where Noble focuses on fuel trade via several major pipelines.

The trader's dominant position on the key US Colonial pipeline is a major draw. The pipeline runs from Texas to New Jersey, providing fuel to distributors along the Eastern Seaboard where gasoline commands higher prices. "There's been a fair bit of interest. At the right price, it'll attract bidders," said another of the sources.

Revenues for its energy operations that includes oil and coal were US$39.7 billion in 2016, generating a profit of US$90.6 million.

Noble's market value has plunged by 90 per cent from US$6 billion in February 2015 to just over US$400 million. Its shares are down about 70 per cent so far this year.

Noble was put in the spotlight in February 2015 when Iceberg Research accused it of overstating its assets by billions of dollars, which Noble rejected, and the company was also hit by the downturn in commodities prices. Noble has taken writedowns of more than US$2 billion since the start of 2016.

The firm has scaled back its risk positions. Ratings agencies S&P and Moody's cut their credit ratings on Noble in August, citing high default risks, making it more challenging for Noble to secure trade finance.

REUTERS