3 factors that will fuel Noble's energy segment

It's currently a whopping 78% of group profit.

According to CIMB, Noble Group's energy segment has been Noble’s strongest growth driver, contributing 78% of the group’s gross profits today from just 33% in 2007.

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The energy segment’s profits took flight in 2010 after Noble embarked on a series of acquisitions, namely of SemFuel in 2009 (fuel terminal and storage assets in US), Northville in 2010 (blending, trading, distribution and marketing in US) and Sempra in 2010 (retail power, energy and electricity marketing in US).

Noble is now the fifth-largest distributor of electricity in the US. Newly-formed offtake agreements with producers in Mongolia, Indonesia and Australia helped push profits higher in FY12. Gross profits hit a record high of US$1.2bn in FY12 on all-time-high revenue and tonnage.

The strong earnings momentum is evidence that Noble’s inorganic growth initiatives have paid off.

These should form a strong recurring earnings base.

Going forward, growth drivers will stem from 1) new marketing agreements signed in 2012 with producers in Africa and Mongolia, 2) new offtake agreements with miners.

The mining industry is facing a funding crunch. Nobleis on the lookout for opportunistic investments in exchange for offtake, and 3) Noble’s participation in the nascent shale gas industry, specifically in the areas of logistics, exports, marketing and storage.