Page 19 - AfrOil Week 25

AfrOil NEWS IN BRIEF AfrOil

PERFORMANCE
Sasol issues update

on response to oil price
volatility and COVID-19

pandemic

Sasol continues to make significant progress
on the response plan measures announced on
March 17, 2020, and April 23, 2020, to address
the impacts of oil price volatility and the
COVID-19 pandemic (COVID-19).
The situation remains highly dynamic, but as
lockdown regulations are eased in South Africa Sasol is pleased to announce the successful implementation of its self-help measures, as
and elsewhere, Sasol is now ramping up opera- conclusion of discussions with lenders regard- communicated on March 17 and April 23, 2020.
tions whilst taking action to ensure the safety of ing increased balance sheet flexibility in the con- For FY 2020, Sasol is well on track to achieve the
employees and service providers. text of COVID-19 impacts and market volatility. targets set, whilst for financial year 2021 plans to
As previously communicated, an unprece- Our lenders have agreed to waive the covenant at achieve the targets set have been developed to a
dented decrease in fuel demand in South Africa June 2020 and lift the December 2020 covenant high level of probability.
as a result of COVID-19 resulted in us reducing from three times to four times Net Debt: Earn- Sasol reaffirms that liquidity headroom will
our production rates at Secunda Synfuels Oper- ings Before Interest, Taxation, Depreciation and remain well above $1bn, with improved liquidity
ations (SSO) and suspending production at the Amortisation (EBITDA). balances in Sasol’s US dollar and Rand liquidity
Natref Refinery in Sasolburg, in a joint decision This additional flexibility is subject to con- facilities. Several focused management actions
with Sasol’s partner, Total South Africa. ditions which are customary for such covenant over the past couple of months have improved
Sasol used this period of lower production to amendments and consistent with Sasol’s broader our liquidity position.
bring forward its planned September 2020 main- capital allocation framework. These include pro- Sasol remains committed to the delivery of its
tenance shutdown at SSO. This shutdown was visions to prioritise debt reduction at this time, response plan to bring leverage back in line with
successfully completed in May 2020 and ensures such as commitments that there will be no div- target levels and mitigate the impacts of recent
production will be uninterrupted for the remain- idend payments nor acquisitions while Sasol’s market volatility and COVID-19.
der of the calendar year. Similarly, maintenance leverage is above three times Net Debt: EBITDA. The process to accelerate and expand our
work planned for later during calendar year 2020 Sasol will also reduce the size of its facilities as asset disposal programme has yielded good
at Natref was successfully completed during the debt levels are reduced, whilst continuing to progress for several of Sasol’s assets despite the
lockdown period. maintain a strong liquidity position. macro environment volatility in recent months.
Since the lockdown restrictions in South In conjunction with these amendments and Any divestment or similar activity will be exe-
Africa were eased on June 1, 2020, SSO has in light of Sasol’s two notch credit rating down- cuted in line with balance sheet, shareholder
ramped up production, and Natref is expected grade earlier this year, the interest costs across value and strategic objectives, including the
to start production by the end of June 2020 and Sasol’s debt facilities will increase by approxi- potential for partnering options at Sasol’s US
will ramp up to full capacity as jet fuel demand mately $40mn per annum, before any reduction Base Chemicals business.
resumes. The ammonia, nitric acid and chlor-vi- in borrowings through any self-help measures or Further updates on the progress of the dis-
nyl plants in Sasolburg also started up in May disposals. The applicable interest rate will reduce posal transactions will be made as and when
2020. in the event that Sasol’s credit rating improves. appropriate.
Outside South Africa, Sasol’s operations are Management continues to progress with the Positioning Sasol for the future: As previously
performing to plan. Oryx GTL’s train 1 came execution of its crude oil hedging programme communicated, a key part of Sasol’s response
back into operation at the beginning of June for financial year 2021. For the first quarter of FY plan is to look beyond the near-term measures
2020, and train 2 is expected to be back in pro- 2021, approximately 80% of Synfuels’ liquid fuels and position the business for sustained profit-
duction in the second quarter of financial year exposure was hedged, translating to 6mn barrels. ability in a low oil price environment. The new
2021 following the extended planned shutdown This consists of 2.5mn barrels of zero cost collars strategy will focus on Sasol’s core portfolios of
of the plant. at a put strike price of $31 per barrel and a call chemicals and energy. A focused and robust
Sasol previously guided the beneficial opera- strike price of $39 per barrel, and 3.5mn barrels review of the business, and the associated work-
tion of the Ziegler and Guerbet units at the Lake of put options at an average net strike price of force structures, is underway and a detailed
Charles Chemicals Project (LCCP) by end June $37 per barrel. Oil hedges for the remainder of update will be provided to stakeholders along-
2020 and is pleased to announce that the Ziegler financial year 2021 are in progress, with 2mn side the full year results.
unit achieved beneficial operation on 16 June barrels using put options hedged at an average A key decision as a result of this includes the
2020 and the Guerbet unit’s beneficial opera- net strike price of $30 per barrel and 500,000 discontinuation of all oil growth activities in
tion is imminent. Remediation work on the low barrels hedged using zero cost collars at a put West Africa. The reset of the strategy necessitates
density polyethylene (LDPE) unit is progressing strike of $36 per barrel and a call strike of $45 per a revised operating model, which is still under
according to plan, and we expect to bring this barrel. These oil hedges will significantly protect development and will be announced in the sec-
unit into production before the end of the third liquidity during the forthcoming months. ond quarter of FY 2021.
quarter of calendar year 2020. Sasol made significant progress with the Sasol, June 18 2020

Week 25 24•June•2020 www. NEWSBASE .com P19