Moody's: Noble Group could be broke in a year

Commodity trader Noble Group said Tuesday it was selling off more assets to its counterpart, Vitol.
By Daniel J. Graeber  |  Nov. 14, 2017 at 7:04 AM
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Nov. 14 (UPI) -- Weak quarterly results suggest commodity trader Noble Group may go broke within the next year even as it sells off its assets, Moody's Investors Service said.

Noble last week reported a loss for the third quarter of $1.17 billion. Moody's said Tuesday that had no impact on its credit rating, which was already deep in negative territory.

"Noble's continued to report a large net loss and its cash holdings further decreased in the third quarter," Gloria Tsuen, a senior analyst at Moody's, said in a statement. "That said, these developments are within expectations and the current Caa3 rating already reflects a significant probability of default within the next 12 months."

Noble has been on a divestment streak since at least last year when it sold off more than 33,000 undeveloped acres in the Denver-Julesburg shale basin in Colorado to Synergy Resources for $505 million.

Early last year, when the price for crude oil hovered around $30 per barrel, the company set a 2016 spending target of about $1.5 billion, which was 50 percent lower than outlined for 2015. In October, even as markets improved, it sold its oil trading business focused on the Americas to its counterpart, Vitol for $576 million.

Noble Group on Tuesday said it agreed to a deeper sale of its Noble Petro Inc. to Vitol for another $217 million.

The announcement came one day after Noble Group Executive Director Jeffrey Frase resigned "to pursue other opportunities."

In its quarterly statement, the company said the current operating environment was "challenging," adding access to finance lines was restrictive. Trade volumes as a result were down 26 percent from last year and the company said it expected to report further losses going forward despite efforts to improve shareholder value.

Moody's noted that cash flow turned positive for Noble during the third quarter, but that may be difficult to sustain given its problems in turning a profit. The company is shedding assets and plans further disposals through the end of the decade.

"However, it is highly uncertain whether these sales will raise sufficient proceeds to meet its debt maturities and cash outflow over the next 12 months," Moody's said. "In addition, the proposed disposals would substantially reduce Noble's scale and global reach, challenging its ability to generate profit and cash flow to service the remaining debt."

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