Noble Group Annual Report 2016

1 Noble Group Annual Report 2016 Noble Group Annual Report 2016 1 Table of ContentsAbout NobleNoble Group (SGX: N21) is a leading supply chain manager: we buy physical commodities and transform them into customised, consumable products that meet the requirements of our customers through (1) our logistics and transportation services (2) our price risk management and hedging services (3) our processing and blending capabilities and (4) our structured and trade financing seek to be partners rather than competitors with our producer customers and with investors looking to invest in producing assets, while Noble supplies best-in-class execution. Our most valuable assets are our network of relationships with our producers and consumer customers and our people who provide value-added services to our customers and objective is to build long term value for our shareholders, our partners, our customers and our people.

2 With sustainable focused franchises built upon long term supplier and customer Report provides an update on Noble Group s operations and performance for the year ended 31 December 2016 Introduction2 Chairman s Message 3 Co-CEOs MessageOur Business6 Financial Highlights8 Year in Review9 Business Reviews12 Finance13 Market Risk & Credit Risk14 People15 Giving Back to the Community16 ResponsibilityOur Management19 Board of Directors24 Senior ManagementOur Financials28 Corporate Governance30 Report of the Directors46 Financial Summary48 Independent Auditor s Report55 Consolidated Income Statement56 Consolidated Statement of Comprehensive Income57 Consolidated Statement of Financial Position60 Consolidated Statement of Changes in Equity62 Consolidated Statement of Cash Flows63 Statement of Financial Position64 Notes to Financial Statements166 Shareholding and Capital Securities Statistics2 Noble Group Annual Report 2016It was almost 20 years to the day, on 27 February 1997, that we issued the prospectus that was the precursor to Noble listing its shares on the Stock Exchange of Singapore.

3 The intervening two decades have been full of many - some seemingly insurmountable - challenges which we have had no choice but to overcome. From the Asian crisis, which erupted as soon as we had listed, to the 2008 financial crisis and the more recent severe bear market in commodity related businesses, we have always taken on the challenges and, as of yet, have not been found an active player in the real business of moving product from producer to customer we have never had the luxury of being able to step aside and observe from a distance as we have managed your business as best we can through all the turmoil. Interspersed between these long drawn out battles of attrition have been the moments of great success - events that could only be enjoyed momentarily before having to meet some new , of course, the last 12 months have been a particularly challenging period for us as we came to recognise that we needed to reposition the company, back towards its asset light trading roots - a more nimble, more focused and much smaller company.

4 I will be the first to put up my hand and admit that mistakes have been made along the way but I believe that we have now taken the key initial actions to correct these mistakes. During 2016 , as we took the consistent and determined action that we needed to take to correct the imbalances, it was vital that all of the people involved gave us their full support in achieving these goals. I want to thank our Shareholders, the Board and all the people at Noble for their steadfast support. I am also delighted, that through all the stresses and strains, we continued to place our customer relations at the forefront of what we do. Equally, I have learnt two things over the last two decades as a listed company: I know that hindsight and soul searching don t generate returns while I am also pretty convinced that making mistakes is not the sole preserve of the Chairman of Noble Group .

5 So now, after the very determined and focused work of the last six months or so, we have arrived at the start of 2017 with a solid platform and a clear vision of how we are going to develop our core business franchises. Don t for one moment think that we are going to relax and take a rest. We still have a lot more work to do in order to move the company forward but we now operate a series of businesses that have exciting growth opportunities and, as has been the case over the last couple of decades, there will be some opportunities that are best exploited on our own and there will be some where we are best off in partnership with others. Whichever approach we use, we do fully expect that we will be able to exploit these opportunities profitably as the constrictions that we placed on our businesses in 2016 to preserve liquidity , as we look to the future, I was again reminded in a timely manner the other day that I am the only remaining director from the Board that oversaw the Singapore offering two decades ago.

6 This reinforced the fact that it is coming to the time for me to step back and allow the next generation to take the business forward. The Board is tasked with managing this process and will be making announcements concerning this transition at the appropriate time. But I will continue to be involved in the Group in an advisory role as and when needed. As the major shareholder I can assure you that I have a keen interest in ensuring that our Executive Directors and Co-CEOs - Will Randall and Jeff Frase - and their team, continue the excellent work that they have put in over the last nine months or so. Finally, turning away from my talking about my own plans, and before ending this piece, I want to express our sincere condolences to the family and friends of Burt Levin, another of the original IPO Directors of Noble , who passed on in late 2016 .

7 Burt was a great friend and sage adviser to all of us and we miss him greatly. The short tribute that is included in this Annual Report can only be a modest token of our esteem for the Samuel Elman, Chairman & FounderChairman s MessageDear Shareholders, Noble Group Annual Report 2016 3 We were sure that they would battle through, but the resilience and resolve of our colleagues has been exceptional and beyond the call of duty. Co-CEOs MessageSince taking on our new roles in the late spring of 2016 we set out, both internally and externally, the clear and simple message that we were going to spend the balance of the year, and much of 2017, implementing measures that would reassure both our business partners and the capital markets that we were capable of successfully transitioning to a smaller more nimble, asset light, Group .

8 The willingness to accept the need to change in the first instance and then subsequently implement the necessary steps to achieve that goal is daunting for any company or individual. In our case, in particular, the changes that we needed to make simply could not have been achieved without the wholehearted support of the people that were going to be most immediately impacted the people at Noble . Both of us have been involved in hiring and working closely with many of the people in the trenches whose support in transforming Noble back to a simpler, nimbler, structure was always going to be vital as we started the journey to re-position the company. We were sure that they would battle through, but the resilience and resolve of our colleagues has been exceptional and beyond the call of duty.

9 It s true that we still have more to do in repositioning the company, but much has been achieved and we want to thank the entire staff at Noble for the unflagging support that we have received. We also want to express our gratitude for the similar levels of support that have been shown to us by those who know us day to day our key long term external customers and suppliers. The plan to reposition the business that we adopted was simple to write down, but rather harder to execute: get out of those businesses that would only generate returns in the medium term, and where we were yet to have built a competitive edge and focus on our established franchise businesses. Dispose of those legacy businesses that were more valuable to other companies and reduce the Group s footprint and scale, both through asset disposals and head count reduction.

10 And, finally, and in many ways more importantly, make sure that through our actions we bolster the capital markets confidence in our ability to reposition, with a laser focus on reducing debt and first retaining, and then re-building, liquidity. We have now been able to implement some of the key steps on this path. In particular, we launched a US$ 500 million rights issue in August 2016 and completed the sale of Noble Americas Energy Solutions in December, ensuring that we exceeded our target of raising US$ 2 billion in capital in the second half of 2016 . While, additionally, we also raised US$ 3 billion in borrowing base facilities for our oil the capital we raised, and the working capital we extracted from low return or loss making businesses, we have reduced debt, lowered our gearing and increased liquidity headroom to over US$ 2 billion by year end.