Sasol (NYSE:SSL) reports a 17% Y/Y drop in FY 2016 headline earnings to 41.40 rand/share ($2.87), in the middle of the range that the company had flagged to the market, and revenue fell 6.6% to 172.9B rand.
SSL's unadjusted full-year net profit fell 55% to 13.22B rand ($914M) after writing down 9.9B rand ($680M) on its Canadian shale gas project, an impairment which had stood at 7.4B rand when it released its interim results in March.
The South African company says it reaped 28B rand of cash savings for the year, exceeding an original target of 16B rand, and is targeting savings of 65B-75B rand by 2018.
On its half-finished chemical project in Lake Charles, La., whose cost has escalated by nearly 25% to $11B, SSL says it "remain(s) confident that the fundamental drivers for this investment are sound."
In June, then-CEO David Constable said an increase in the cost estimate to $11B would be a “worst-case scenario."
The Lake Charles complex, which includes a 1.5M tons/year ethane cracker, is more than 50% complete, and most units are expected to start producing in early 2019 with the remainder completed by the end of that year, SSL says.
South African energy workers expect to begin an indefinite strike over pay starting tomorrow, in a stoppage that potentially would hit oil refineries of companies including Royal Dutch Shell (RDS.A, RDS.B), BP, Chevron (NYSE:CVX) and Sasol (NYSE:SSL).
The union representing the ~23K workers wants a one-year 9% pay hike, while the National Petroleum Employer's Association says a weak domestic economy and low global oil prices means that it can offer only a 7% raise.
Shell and BP jointly operate the largest refinery in South Africa, a 190K bbl/day plant along the east coast, while CVX, SSL and PetroSA run smaller refineries; South Africa is a net importer of refined petroleum products, and a long strike could lead to shortages.
Sasol (SSL -11.2%) slides after saying profit in its fiscal year through June will fall by as much as 30% following writedowns.
SSL, which already impaired its stake in the Montney shale-gas properties in Canada by 7.4B rand in December, says it will recognize an additional writedown of ~4.1B rand because of lower natural gas prices.
SSL also raises the projected cost of its chemicals complex in Lake Charles, La., to as much as $11B from a previous ~$8.9B amid construction delays.
SSL reduces expected returns from the chemicals project, which will convert ethane into plastics and other products, to around its weighted average cost of capital, which stands at ~10.6%.
Mozambique missed a loan repayment deadline this month, prompting Fitch to downgrade the country's credit rating last week and warn of a default, but SSL says it plans to continue with oil and gas developments.
SSL says it drilled the first of 12 planned wells in its new oil and gas field in Mozambique last week with first production expected in mid-2019.
Sasol (NYSE:SSL) says it will move ahead at a slower pace with its $8.9B chemicals plant planned for Lake Charles, La., because of the slump in oil and chemical prices.
SSL says the operation of “some smaller derivative units” at the plant that will convert ethane into plastics and other products will start in 2019, after previously expecting to complete the facilities by 2018, and says a review of the project’s schedule and cost probably will be completed in the middle of the year.
The South African company reports a profit of 7.31B rand (~$475M) for H1 of its fiscal year, down 63% Y/Y, as it continued to cut costs in response to lower crude prices, while EPS fell 24% to 24.28 rand, in line with expectations.
SSL says it is raising its cost-cutting plan to 65B-75B rand from an earlier outlook for 30B-50B rand, as it delays its ethane cracker in Louisiana, cuts back drilling in Canada, and shifts its early focus on gas rather than both oil and gas at the same time at its big expansion in Mozambique.
Mozambique’s government awards six licenses to search for oil and gas, including three licenses for offshore blocks to Exxon Mobil (NYSE:XOM) in partnership with Rosneft (OTC:RNFTF), and one to a consortium led by Eni (NYSE:E) that includes Sasol (NYSE:SSL) and Statoil (NYSE:STO), Bloomberg reports.
The government says the proposed exploration programs have the potential for investments of up to $700M, with the opening of a minimum of 10 wells.
Mozambique hopes to attract investments to exploit huge gas finds in the offshore northern Rovuma basin that could help turn the country into the world’s third-biggest liquefied natural gas exporter in a decade.