Shares in Singapore-based commodities trader Noble Group (CGP.SP) are down 26% on Thursday after it warned of a second quarter loss of up to $1.8 billion in a market update.
The company, which has watched its shares get crushed by the slide in commodity prices and concerns about the valuation of contracts, also announced the sale of its Americas oil and gas business to Mercuria Energy America for $248 million.
The massive loss comes as the embattled company said it would revalue term contracts, contracts they had previously defended as being appropriately valued. The company also announced it was seeking to sell its global oil liquids business as part of an asset disposal program aimed at raising between $800 million and $1 billion over two years,
Noble Group also said they expected to report an operating loss from its supply chains of between $200 million and $300 million after trading losses in April in its global oil liquids business.
Exceptional items are expected to total between $1.25 billion and $1.3 billion, with the company reporting a net loss of between $1.7 billion and $1.8 billion in the second quarter.
JPMorgan says the issue remains the company’s cash burn:
The key variable however remains cash burn since that could lower the recovery estimates. Noble guides expected loss in 2Q17 for US$250-300 million part of which could be cash loss in oil business as it had to scale back risk positions and non-cash losses from Hard Commodity businesses. Pro-forma for $650 million loan repayment, we had expected usable cash to decline to US$500-550 million in Mar-17 which now should further decline to ~US$200-300million given the above mentioned losses. We believe Noble’s management would need to present a tangible plan on asset sale and liquidity till the sale of more assets (primarily oil liquids) conclude in order to gain their continued support for covenant waiver and a favorable outcome of the discussion would lead to the 2020 bond coupon payment.
The stock last traded at SGD0.42 a share after falling 49% earlier in the session.