I know they hedged their oil to some extent so they will not get full benefit from these high oil prices, there are surely some profit taking going on and still no dividend, but why is the share price struggling this much?
Not sure how much if any from their revenues are generated (chemical sales or other products) through sales to Russia which might be lost due to sanctions but surely looking at current oil prices it should trade closer to the R400+ mark than at current levels?
What am I missing?
They seem to be losing quite a bit of the cream on their not well played hedges.
SASOL RESTRUCTURES EXISTING OIL HEDGES AND INCREASES THE HEDGE
COVER RATIO FOR OIL FOR FINANCIAL YEAR 2022
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
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.