Sasol Restructures Existing Oil Hedges and Increases the Hedge Cover Ratio for Oil for Financial Year 2022

Rhea-AI Summary

Sasol has made strides in reducing its debt following a strong operational performance, supported by favorable macroeconomic conditions and cash conservation efforts. The company aims to lower debt levels further, potentially reinstating dividend payments. Sasol has restructured its hedging program, raising the floor oil price from US$43.11 to approximately US$60.09 per barrel, while providing a cap at about US$71.97 per barrel. The hedge cover ratio has increased to 90%, covering 24 million barrels for the financial year 2022, enhancing financial stability despite ongoing oil price volatility.

Positive

• Reduced debt levels following strong operational performance.
• Restructured hedging program raising floor oil price to approximately US$60.09 per barrel.
• Increased hedge cover ratio to 90%, enhancing financial stability.

Negative

• Debt metrics still vulnerable to oil price volatility.

JOHANNESBURG, June 9, 2021 /PRNewswire/ - Sasol has made significant progress in deleveraging its balance sheet following a strong operating performance in a more supportive macroeconomic environment, continuing cash conservation measures and ongoing asset divestments. One of the Company's main objectives remains to reduce absolute debt levels, which will trigger the consideration to resume dividend payments. Debt metrics are currently following a positive trajectory but may still be negatively impacted by oil price volatility. 

The current hedging program consists mainly of put options and provides protection against oil prices decreasing to below approximately US$43,11 per barrel. Following the recent material rise in the oil price, Sasol has been able to restructure and enhance its financial year 2022 hedging programme, ensuring cash flow robustness and protection against future oil price volatility.

The existing oil put hedges of 24 million barrels for financial year 2022, as reported in the Production and Sales Metrics ending 31 March 2021, have been restructured and replaced by a zero cost collar hedging structure. This has allowed the Company to increase the gross average floor oil price on the existing 24 million barrels from US$43,11 per barrel to approximately US$60,09 per barrel, albeit with a cap of approximately US$71,97 per barrel. The premium paid on the original put options for financial year 2022 will be realised as an expense of approximately US$30 million to US$34 million, reflecting the cancelled options and new hedges which were executed in terms of the updated hedging strategy.

The oil hedge cover ratio for financial year 2022 has also been increased by hedging an additional 18 million barrels or an incremental 4,5 million barrels per quarter. This was achieved by increasing the hedge cover ratio from 80% to 90% of total Synfuels synthetic crude oil production, and including 90% of Sasol's share of Oryx production and equivalent commodity chemicals volumes where there is a strong correlation to oil price.

The incremental 4,5 million barrels for quarter one to three of financial year 2022 have been executed using swaps at an average strike level of US$67,52; US$67,03 and US$67,21 per barrel respectively. Completion of the last 4,5 million barrels for quarter four is still in progress. The actual realised chemical margins for the base chemical sales volumes for financial year 2022 will be unaffected by this hedging program.

The updated hedging levels underpin the strengthening of the balance sheet and the reduction of the Company's absolute debt levels. The restructuring was focused on financial year 2022 only. The Company will however continue to update the market on any changes to our financial risk management positions in our quarterly market disclosures.

For further information, please contact:

Sasol Investor Relations,
Tiffany Sydow, Investor Relations Officer
Telephone: +27-(0)-71-673-1929
investor.relations@sasol.com

Disclaimer - Forward-looking statements

Sasol may, in this document, make certain statements that are not historical facts and relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, expectations, developments and business strategies. Examples of such forward-looking statements include, but are not limited to, the impact of the novel coronavirus (COVID-19) pandemic on Sasol's business, results of operations, financial condition and liquidity and statements regarding the effectiveness of any actions taken by Sasol to address or limit any impact of COVID-19 on its business; statements regarding exchange rate fluctuations, changing crude oil prices, volume growth, changes in demand for Sasol's products, increases in market share, total shareholder return, executing our growth projects, oil and gas reserves, cost reductions, legislative, regulatory and fiscal development, our climate change strategy and business performance outlook. Words such as "believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could", "may", "endeavour", "target", "forecast" and "project" and similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and other forward-looking statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove incorrect, our actual results may differ materially from those anticipated. You should understand that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors and others are discussed more fully in our most recent annual report on Form 20-F filed on 24 August 2020 and in other filings with the United States Securities and Exchange Commission. The list of factors discussed therein is not exhaustive; when relying on forward-looking statements to make investment decisions, you should carefully consider both these factors and other uncertainties and events. Forward-looking statements apply only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

 

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SOURCE Sasol Limited

FAQ

What is Sasol's stock symbol?

Sasol's stock symbol is SSL.

What recent changes did Sasol make to its hedging program?

Sasol restructured its hedging program, increasing the floor oil price from US$43.11 to approximately US$60.09 per barrel.

How much oil is Sasol hedging for financial year 2022?

Sasol is hedging 24 million barrels for financial year 2022.

What is the current hedge cover ratio for Sasol?

The current hedge cover ratio for Sasol is 90%.

How does Sasol's debt situation affect its dividends?

Sasol aims to reduce its debt levels, which may lead to the resumption of dividend payments.