**Standard’s & Poors downgrades Noble Group Ltd. further into junk, saying the capital structure “is not sustainable”
**Sinochem no longer pursuing stake buying in Noble Group.
(Noble Group is at the twilight of an agonising death spiral).
Largest Houston Marketer says
“Nothing good out of Noble camp, that’s for sure
Worse and worse by the day
All I’m saying is two years ago only one person was talking about their eventual collapse: simon jacques”…
From Energy Market Price Reporting Sources
” -Visibly you have excellent source on Noble too, Jacques I’ve read all your articles. We had an argument with the head trading desk of Mercuria in London (an ex U.S Marine) because we took in consideration a deal of Noble on North Sea Crude oil. He first set fire to us and questioning the reasons on why we had taken into account a deal with a “very suspicious” and non recommendable trader such Noble… “default is a real possibility”..
“and guess what ? One or two hours later, the same gentleman of Mercuria concluded a deal with Noble in the Window”.
“A bit cynical, all those traders aren’t they”
(This tragedy has become a routine).
Noble has pushed back against the exchange disclosure standards in Singapore for the compensation of its executives.
Thanks to a lawsuit, the market has been revealed that Noble owed $58M to its ex-CEO, Yusuf Alireza.
Isn’t it quite ironic that the Noble camp jumped over Alireza- referring to the nearly $500,000 dollars in personal placement commissions on executive’s placement at Noble Americas Corporation, a New-York Energy products Associate at a Wall St. Bulge-bracket Bank said:
“What other kind of corporate affiliates you’d expect ? -One has put both hands in the jar”
“When you look at it, Head of HR at the company shrouded with egregious dealings, what does the rest of the corp can look like ?”
(Case was dismissed, indeed only because the U.S court couldn’t establish its jurisdiction over Noble).
The compensation liability of some Noble Traders [est. 100-150M$ of phantom shares, cash or a combination of both] raises the delicate question: How the 2 or 3 traders concerned can still expect monetizing their bonus along with the execs ? This is Noble, the cancer patient on a forward-curve.
Accounting is a lot like a bathing suit, what it reveals is interesting but what it conceals is vital.On Dec 31th 2016, the coal and gas PnL is up by about $500M with no reason, simultaneously the MTM on Commodity Contracts was also up by the tune of $500M ?!
Accounting can be a way to obfuscate the truth but every business at the end must generate positive cash-flows.
Negative CFO of -900M for Q4 told a different story than their positive P\L that we can only tell.
In the past we have expressed reservations about the uncertainty surrounding the outcome of Noble’s Financials as well as the risk that financial losses would continue.
To us there should be no excuse for non-performance.
Its toleration shows the kind of risk management that Noble had.
In commodity trading, the unfolding of the Trade-to-cash is plainly and simply the bread and butter.
When the firm is questioned, and it’s unclear from the answers they give how they make the bread plus this firm doesn‘t show the butter : there is a problem and it should be stopped.
From A 1st class Operator in Conmodity Trading.
“-At Astra Oil Trading N.V, “ASTRA” we had to least produce enough steam (to cover our 8 salaries, office overheads and misc expenses…) before making any profit in our pockets. $1.8M exactly. It was the low-hanging food set by the line manager”.
“On day one, I was told my raison d’être: we hire and pay you specifically for one reason, protect the cheese”.
“Until December 31th, at 15 to Midnight it was like skating on the thin ice over a lake“.
These trading houses can’t hire a 2nd or a 3rd because it won‘t work.
There is margin for error in the trade operations on physical commodities like there is room for the cardiologist to cut the wrong artery on the surgery table.
As we reckon, the positions of a commodity trader are too precious and entrenched, they can become very quickly unmanageable.
When Enron declared bankruptcy in December of 2001, defaut losses were born not only by Enron’ s many lenders who had made loans or bought Enron’ s commercial paper, bonds and other financial instruments.
Hundred of millions of dollars were lost due to the default by companies who bought from, or sold to Enron power, oil, gas, coal, steel, generation and pipeline access and/or derivatives referenced to those and other commodities.
Anyone who had bought a commodity forward from Enron and subsequently experienced a rise in prices saw an unrealized gain that, because of Enron’ s liquidation, would be lost, as it couldn’t be realized.
Anyone who had sold a commodity forward to Enron and subsequently experienced a decline in prices saw also an unrealized gain that would be lost, as it couldn’t be realized.
A risk manager in Gas & Power:
“Simon Jacques, your articles have opened my eyes to the many manipulations that can occur in the hard commodities, I appreciated the complexity of your skillset”.
“Too many people in our industry dance the issues of major losses and dress up them as exotic derivatives going bad when in reality it’s generally corruption or rank stupidity”.
It’s on this last sentence that can close our round-up on what the Trade had to say about Noble for the readers of Navigating the Commodity Markets with Freight and Spreads.
It gives us no deals but nevertheless teaches us an important lesson for the future: a trader without effective risk management is like playing roulette, he quits or double.