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#41 Spell Jammer

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Posted 23 April 2020 - 10:00 AM

Good luck selling Lake Charles stake at a reasonable price and in light of it not generating revenue. That's excluding the horrendous economic climate. The Sasol share price movement at the moment defies belief. 

 


Sasol now expects a loss from Lake Charles in 2020

Embattled chemicals group Sasol now expects its Lake Charles project in the US to make a loss in 2020 due to the recent oil price rout.

 

The project is expected to weigh on earnings before interest, taxes, depreciation and amortisation (ebitda) by $50m (R950m)-$100m in its year to end-June.

Sasol had previously given guidance of positive ebitda of $50m-$100m.

Oil prices have plummeted in 2020 due to a combination of a price war between Russian and Saudi Arabia and plummeting demand due to the Covid-19 outbreak.

Sasol’s share price has lost more than 80% in 2020, with cost overruns at its Lake Charles project and an explosion at that facility earlier in the year also putting pressure on the group.

To pay down debt, the group is looking to generate cash of $6bn through cost-cutting measures, asset disposals and a possible rights issue.

Sasol said on Thursday it was cutting management salaries, with directors’ fees being reduced by between 20% and 40% and the salaries of middle to junior management being cut by between 10% and 15%.

Salary sacrifices are planned for eight months, though this would be assessed against the group’s savings targets.


Edited by Spell Jammer, 23 April 2020 - 10:04 AM.

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#42 Spell Jammer

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Posted 21 April 2020 - 08:23 PM

Damn I think there is big trouble coming. Sold out all my positions at a loss :/ Too much risk involved here at the moment. WTI futures going into negative is no good, the brent crude price might even go to 10 dollars soon. All economies are basically shut with no air travel etc. Supply has stayed the same however usage of oil worldwide dropped to all time lows. I cannot see this one turning around before end of q2


Brent crude touched $20 dollars tonight and is hovering at $21. SOL trying to sell a stake in Lake Charles during this horrific economic market explains the desperation to reduce debt.
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#43 andi222

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Posted 21 April 2020 - 11:25 AM

Damn I think there is big trouble coming. Sold out all my positions at a loss :/ Too much risk involved here at the moment. WTI futures going into negative is no good, the brent crude price might even go to 10 dollars soon. All economies are basically shut with no air travel etc. Supply has stayed the same however usage of oil worldwide dropped to all time lows. I cannot see this one turning around before end of q2


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#44 Spell Jammer

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Posted 21 April 2020 - 05:50 AM

Not all governments. European countries are lifting some restrictions and a lot more countries are going to do the same in the next few weeks as their economies just cannot handle the economic impact of a lengthy lockdown.


That may be true but social distancing will still restrict travel and I wager that at least 10-20% of the global workforce will continue to leave some elements of remote working in place. This will continue to impact demand. It will definately increase, but I doubt that things will go back to the way they were pre lockdown.
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#45 Shi

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Posted 20 April 2020 - 11:40 PM

Industrial and economic activity is grinding to a halt as governments around the globe extend shutdowns

 

Not all governments. European countries are lifting some restrictions and a lot more countries are going to do the same in the next few weeks as their economies just cannot handle the economic impact of a lengthy lockdown.


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#46 Tom

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Posted 20 April 2020 - 11:03 PM

Industrial and economic activity is grinding to a halt as governments around the globe extend shutdowns


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#47 Tom

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Posted 20 April 2020 - 11:00 PM

minus $37.63 a barrel. Sellers were actually paying buyers to take the stuff off their hands. there is so much unused oil sloshing around


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#48 Spell Jammer

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Posted 20 April 2020 - 08:49 PM

American oil crashes below 0dollars/barrel, at 1 point it was negative.... Yooohh hectic times ahead

Yep simply no demand or enough space to store it all. Oil producers are having to pay to get rid of the excess supply. The OPEC cuts are now where near sufficient to stem the supply.

What a time to be alive. Goodness me..
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#49 Lionelza1

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Posted 20 April 2020 - 08:25 PM

American oil crashes below 0dollars/barrel, at 1 point it was negative.... Yooohh hectic times ahead
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#50 Spell Jammer

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Posted 20 April 2020 - 08:12 PM

$10 dollar WTI oil is officially here while Brent crude is approaching the $25 mark again. Sasol can potentially ride out low prices until the end of June 20 as they have hedged at $32/BBL. If the price continues to collapse beyond this date, a rights issue is inevitable and its potentially RIP Sasol.

 

Interesting day ahead tomorrow.


Edited by Spell Jammer, 20 April 2020 - 08:13 PM.

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#51 Spell Jammer

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Posted 17 April 2020 - 01:02 PM

 

You can't compare ASC's debt levels with that of Sasol. But agreed they need to reduce their debt. 

Agreed, but i am merely highlighting that you are using the same logic that others are applying with ASC in terms of their views around debt and the underlying value they see in the company, and the particular products that each company is pushing under these uncertain times.


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#52 andi222

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Posted 17 April 2020 - 12:47 PM

Don't think that the market has overreacted. Sasol's handling of Lake Charles has been nothing short of diabolical which has both destroyed value and increased debt to unsustainable levels. There lack of a hedging strategy has also put them at the mercy of a weak rand and a $35 dollar oil price. If you think ASC's paltry R3Bil debt is bad, Sasol's is currently sitting at an eye watering R164 Billion rand with no demand, higher debt repayments as a result of credit downgrades and despite Opec artificially increases oil prices. Dont take my word for it. This is what Opec says:

 

"The Organization of the Petroleum Exporting Countries now expects global demand to contract by 6.9 million barrels per day, or 6.9%, in 2020, it said in a monthly report. Last month, OPEC expected a small increase in demand of 60,000 bpd.

 
“Downward risks remain significant, suggesting the possibility of further adjustments, especially in the second quarter,” OPEC said of the demand forecast.
 
“The oil market is currently undergoing historic shock that is abrupt, extreme and at global scale.”"

 

If we look at a U shaped post COVID economic recovery pattern, economists predict that it will take 6-18 months for the economy to recover. With oil prices dropping and a 6-18 month economic recovery path, a Sasol share rights issue is inevitable which will further decrease the share price. You have to be extremely brave with cash to burn to long this one. Fortune favors the brave however..

 

Hi Spell Jammer, thanks for your view. Agreed if a rights issue will happen I'm selling my shares as history has proven that a rights issue is poison for any share price. 

 

However I'm still convinced Sasol can navigate through this storm without a rights issue. I think management will try their best to avoid a rights issue. 

You can't compare ASC's debt levels with that of Sasol. But agreed they need to reduce their debt. 

 

Sasol is expecting that the LCCP project will contribute to a positive EBITDA towards the end of 2020. They have also declared no dividends for Dec 19. 

The new CEO Fleetwood Grobler for me can turn this one around. But let's wait and see. Only time will tell.


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#53 Spell Jammer

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Posted 17 April 2020 - 12:12 PM

Here's a good article summarizing the current situation.

https://www.business...eset-for-sasol/

 

I think market has overreacted badly on this one. Sasol is still a huge company generating between 150 and 200 Billion of revenue each year. The EBITDA is forecasted to be at between 30 and 40 billion rands. Current market value lies at 36 billion rands. 

 

For me sasol is heavy undervalued at the moment. There will be a nice increase in volumes once sasol is back into the JSE top 40. In my opinion there was a huge oversupply of shares due to it falling out of numerous indexes and as all shares falling badly it needs to find enough buyers. 

 

Keep an eye out for this one guys. Again just my own opinion.

 

Don't think that the market has overreacted. Sasol's handling of Lake Charles has been nothing short of diabolical which has both destroyed value and increased debt to unsustainable levels. There lack of a hedging strategy has also put them at the mercy of a weak rand and a $35 dollar oil price. If you think ASC's paltry R3Bil debt is bad, Sasol's is currently sitting at an eye watering R164 Billion rand with no demand, higher debt repayments as a result of credit downgrades and despite Opec artificially increases oil prices. Dont take my word for it. This is what Opec says:

 

"The Organization of the Petroleum Exporting Countries now expects global demand to contract by 6.9 million barrels per day, or 6.9%, in 2020, it said in a monthly report. Last month, OPEC expected a small increase in demand of 60,000 bpd.

 
“Downward risks remain significant, suggesting the possibility of further adjustments, especially in the second quarter,” OPEC said of the demand forecast.
 
“The oil market is currently undergoing historic shock that is abrupt, extreme and at global scale.”"

 

If we look at a U shaped post COVID economic recovery pattern, economists predict that it will take 6-18 months for the economy to recover. With oil prices dropping and a 6-18 month economic recovery path, a Sasol share rights issue is inevitable which will further decrease the share price. You have to be extremely brave with cash to burn to long this one. Fortune favors the brave however..


Edited by Spell Jammer, 17 April 2020 - 12:14 PM.

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#54 andi222

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Posted 17 April 2020 - 11:18 AM

The fact that they have had to shut down 25% of production explains the challenges, (lack of the demand on Oil and their fuel with lockdown), and the fact that they didn't hedge the oil price which is still dropping like a stone and looks to be testing $20-25 again. If the rand strengthens and these levels of demand are maintained for more than a year, Sasol is toast.

 

This isn't a phenomenon exclusive to Sasol at the moment, the entire Oil industry is feeling it. Theirs is just magnified by their cost overruns in America during these lean times and the debt which they have incurred as result, ratings downgrades aside.

 

Here's a good article summarizing the current situation.

https://www.business...eset-for-sasol/

 

I think market has overreacted badly on this one. Sasol is still a huge company generating between 150 and 200 Billion of revenue each year. The EBITDA is forecasted to be at between 30 and 40 billion rands. Current market value lies at 36 billion rands. 

 

For me sasol is heavy undervalued at the moment. There will be a nice increase in volumes once sasol is back into the JSE top 40. In my opinion there was a huge oversupply of shares due to it falling out of numerous indexes and as all shares falling badly it needs to find enough buyers. 

 

Keep an eye out for this one guys. Again just my own opinion.


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#55 Spell Jammer

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Posted 15 April 2020 - 04:26 PM

So did my research over the weekend and I do not understand why the share price has plunged 90% over the last 3 months. Yes oil, dollar etc had a negative impact and debt levels are high but if u look at latest financials its still a profitable company and for me there is great potential here for the long run. Rights issue might be a pain tho. But let's see.

The fact that they have had to shut down 25% of production explains the challenges, (lack of the demand on Oil and their fuel with lockdown), and the fact that they didn't hedge the oil price which is still dropping like a stone and looks to be testing $20-25 again. If the rand strengthens and these levels of demand are maintained for more than a year, Sasol is toast.

 

This isn't a phenomenon exclusive to Sasol at the moment, the entire Oil industry is feeling it. Theirs is just magnified by their cost overruns in America during these lean times and the debt which they have incurred as result, ratings downgrades aside.


Edited by Spell Jammer, 15 April 2020 - 04:28 PM.

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#56 andi222

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Posted 15 April 2020 - 04:19 PM

So did my research over the weekend and I do not understand why the share price has plunged 90% over the last 3 months. Yes oil, dollar etc had a negative impact and debt levels are high but if u look at latest financials its still a profitable company and for me there is great potential here for the long run. Rights issue might be a pain tho. But let's see.


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#57 Spell Jammer

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Posted 12 April 2020 - 10:35 PM

Historic OPEC deal done. We wait to see how this impacts the share price does on Tuesday.
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#58 Lionelza1

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Posted 09 April 2020 - 09:56 PM

Nothing official yet but market not happy it seems. There’s a follow-up meeting tomorrow with G20 energy ministers to discuss non-OPEC countries contribution to supply reduction:

Oil Falls Into the Red as Deal Surrounds a 23% Cut

Oil slid into the red with WTI initially taking a bigger hit than Brent after OPEC+ cut production, but apparently not enough for the market’s liking. The group is discussing a 23% cut in May and June. For the Russians and Saudis, that would bring their output to 8.5 million barrels a day should this deal go through. Investors clearly think that isn’t enough to make up for the demand destruction.
Something to keep in mind, though, as we see these numbers roll out is that while the underlying economy continues to deal with the virus threat, these cuts may be putting a floor on how far oil can drop. Avoiding crude in the teens may be more important now than restoring prices to where they had been.


Indeed, thank you for that info, just checked it out on CNN

scarey and uncertain times indeed
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#59 Burnt as well

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Posted 09 April 2020 - 08:13 PM

Decent afyernoon run up.... Any news on that meeting?


Nothing official yet but market not happy it seems. There’s a follow-up meeting tomorrow with G20 energy ministers to discuss non-OPEC countries contribution to supply reduction:

Oil Falls Into the Red as Deal Surrounds a 23% Cut

Oil slid into the red with WTI initially taking a bigger hit than Brent after OPEC+ cut production, but apparently not enough for the market’s liking. The group is discussing a 23% cut in May and June. For the Russians and Saudis, that would bring their output to 8.5 million barrels a day should this deal go through. Investors clearly think that isn’t enough to make up for the demand destruction.
Something to keep in mind, though, as we see these numbers roll out is that while the underlying economy continues to deal with the virus threat, these cuts may be putting a floor on how far oil can drop. Avoiding crude in the teens may be more important now than restoring prices to where they had been.
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#60 andi222

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Posted 09 April 2020 - 05:27 PM

Took my first bite today. Will read up over the weekend on Financials and then might top up next week.

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