Sasol climbs on oil recovery

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Sasol climbs on oil recovery

Published Date: 2021-01-07 | Source: Stephen Gunnion | Author: Stephen Gunnion

Sasol climbs on oil recovery

After a delayed reaction to a jump in the price of Brent crude on Tuesday, Sasol rose to its highest since last February.

Sasol rallied to its highest level in almost five months yesterday, a day after the oil price bounced more than 4% on news that Saudi Arabia plans to cut production. At its best, shares of the energy and chemicals group traded 10% higher at R145.30, also benefitting from a weaker rand.

Reuters reported that Brent crude oil rose to $54.63 a barrel, its best level since last February, extending Tuesday's gains after the world's biggest producer said it would make additional, voluntary oil output cuts of 1-million barrels per day next month and into March following a meeting of OPEC and other producers, including Russia.

Sasol's shares have been under pressure due to a big decline in the oil price last year as demand plunged due to worldwide lockdowns. Delays and cost overruns at its Lake Charles Chemicals Project in the US have also weighed on the stock. In November, the last unit at Lake Charles, the Low Density Polyethylene Unit (LDPU), finally reached beneficial operation after it was damaged in a fire during commissioning a year ago.

Last month, the company told investors that it aimed to cut annual capital expenditure by 30% and reduce costs over the next three to four years as part of its turnaround strategy and as it adapts to an oil price of about $45 per barrel. It has also sold a number of non-core businesses to help reduce debt. On Monday, it completed the sale of its 50% stake in the Gemini high-density polyethylene joint venture in the US to JV partner INEOS for $404 million (R6.1 billion). That's followed last month's sale of its 49% stake in the Central Termica de Ressano Garcia gas-to-power plant in Mozambique to Azura Power for $145 million. The latest disposals follow the sale of a 50% interest in its base chemicals business at Lake Charles to LyondellBasell Industries for $2 billion. While a rights issue of up to $2 billion may also be on the cards as the final step of its response plan to Covid-19 and current oil prices, the company only plans to make a decision next month.

Its shares closed 9% up at R143.82.





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