[miningmx.com] – SASOL planned to improve on R4bn in sustainable savings by 2016 in a response to lower international oil prices, including delaying a final investment decision on its gas-to-liquids (GTL) plant in the US.
The oil price is about $50 per barrel weaker than the average $99/bbl price achieved in 2014 – a development that has led to a revamp of the group’s business enhancement strategy details of which would be published at its year-end review in March.
The measure will be supported by “… capital portfolio phasing and reductions, capital restructuring, working capital improvements, margin enhancement and further fixed cost reductions,” the group said.
Analysts said recently the decline in the oil price could seriously endanger Sasol’s ability to pay a dividend given that every $1 per barrel decline in the price of oil negatively affects Sasol’s profit from global operations by R750m.
The decline in the oil price, precipitated by Opec’s decision to over-supply the market in an effort to stem the growth in competing US-based oil and gas fracking businesses, had
lopped tens of millions of rands off Sasol/s market value which is 35% less than in June.
However, the group would proceed with its ethane cracker at the Lake Charles site in Louisana where the GTL plant is also planned to be built. Progress with the cracker would inform the investment decision on the GTL plant. Some $4bn in credit had been arranged for the industrial hub.
“Cash flow improvements actioned in terms of the response plan will be over and above the current target of at least R4bn in sustainable cost savings by 2016,” said Sasol. The savings programme was for 30 months.
Shares in Sasol had improved by 1.5% by mid-afternoon trade on the Johannesburg Stock Exchange which valued the company at R276bn.
“Albeit at a much slower pace, we will continue to progress the US GTL facility,” said David Constable, CEO of Sasol. “This will allow us to evaluate the possibility of phasing in the project in the most pragmatic … manner,” he said.
North America and Southern Africa remain strategic investment destinations for Sasol, said Constable who added that Sasol would continue with its mine replacement strategy and various gas and chemicals projects in the Southern Africa region.
