Noble Group is close to offloading its Americas-focused oil business to rival Vitol, in a deal that will end the Singapore-listed company’s pretension to be a global commodity trader.
Executives from Vitol and Noble were hammering out the final terms of the sale in Houston late into the night on Thursday, said people familiar with the discussions. However, no agreement had been reached and the deal could still fall apart or be delayed.
The unit, which traded up to 2.5m barrels a day of oil and products, has the potential to boost Vitol’s trading volumes to more than 9m b/d and reinforce its position as the world’s biggest independent oil trader.
Trading in Noble’s shares was suspended on Friday in Singapore, “pending the announcement of a major transaction”. The crisis-hit company, which is scrambling to pay down debts, is believed to be seeking up to $1bn for the business, including working capital.
Noble and Vitol declined to comment.
Ian Taylor, chief executive of Vitol, who has built the energy trader into a company that analysts calculate is worth as much as $20bn, said this week that negotiations were “very complicated”, in an interview with Bloomberg TV. It was not clear on Friday how many staff would join Vitol from Noble or the precise structure of the deal.
Noble put its oil business up for sale in July as part of a radical shrink-to-survive strategy after posting a second-quarter loss of $1.8bn. The company said it would sell assets to help pay down debt and return to its roots in Asia selling coal and other hard commodities.
Once a $12bn company — at its peak in 2011 — with operations around the world, Noble is now worth just $370m and has been fighting for its survival because of a crisis of confidence triggered by long-running concerns about its accounting.
Its shares have sunk 95 per cent since early 2015 when a former employee published a series of scathing reports under the name of Iceberg Research, which highlighted Noble’s repeated inability to fully convert profits booked on long-term deals into cash, and service its borrowings.
Noble has always stood by its accounts.
Investors and trading counterparties have become nervous about the company’s ability to manage its debt load and turn round the business.
Noble must repay $1.5bn of bonds and banks loans by May 2018. It is seeking a covenant waiver on a $2bn credit facility that is due to expire this week.
The Americas oil liquids unit owns a number of assets, including an ethanol plant in Indiana, as well as a business called Noble Petro, which distributes gasoline and diesel in Texas and along the US Gulf Coast. It also has capacity on the Colonial pipeline — the main conduit for fuel produced by Gulf Coast refineries to markets in the east — and a contract to sell refined fuel to Ecuador. It also has leases on storage facilities in North and South America.
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