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Sasol revamp to cut jobs, end West African oil ops

Petrochemicals is struggling with high debt, falling oil prices and lower demand.
Image: Moneyweb

Sasol plans to cut jobs and end West African oil operations as part of a business revamp, the petrochemicals producer said on Thursday, and has also agreed a deal with lenders to relax borrowing rules.

Sasol has been reviewing its business as it grapples with high debt levels, falling oil and chemical prices and lower demand due to the Covid-19 pandemic.

Its shares, which are down 54% since the start of this year, were trading down 6.73% at R133.91 by 13:25.

Sasol intraday share movement

The world’s top producer of motor fuel from coal, Sasol said it would refocus on chemicals and energy as it seeks to win back investors’ trust after delays at the Lake Charles Chemicals project hit profits and led to the company’s joint CEOs stepping down last October.

Sasol’s interests in West African oil include a 27.75% stake in the Etame Marin Permit offshore Gabon, operated by VAALCO Energy, and a 10% interest in a 33,000 barrel per day gas-to-liquids project in Nigeria.

Sasol said the revamp would affect its workforce, but did not say how many jobs might be lost. It is seeking consultations with trade unions in South Africa and aims to do the same in other countries.

Read:
Sasol: What happened, and what now?
Sasol’s amazing recovery

Sasol also said lenders agreed to waive its June debt covenant due and relax the December covenant.

That test will now allow Sasol to have net debt of four times earnings before interest, tax, depreciation and amortisation (Ebitda), up from three times previously, on the condition that Sasol prioritise debt reduction.

Under the agreement with lenders, Sasol will pay no dividends and pursue no acquisitions while its leverage is above three times net debt to Ebitda.

Liquidity headroom would remain well above $1 billion, Sasol said.

Sasol will focus on gas as a key feedstock and renewables as a secondary energy source in its Southern African energy business, with an aim to reduce emissions, the company also said.

Read the full Sens announcement here.

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I have said this before here, but where are Constable, Cornell and Nqwababa now? To put this in perspective, Sasol went through a restructuring in 2015 under Constable (Project Phoenix), then a repositioning in 2019 under Cornell and Nqwababa which cost the company a lot of technical skills, and now again? So much for “fixing the roof while the sun is shining” – a quote often used in these restructurings.

Never appoint clever Americans as CEO and never as dual ceo’s.

And never look to parachute cadres into executive and Board positions.

Who are these cadres that you speak of?

Yes, construct more unnecessary shiny buildings in expensive suburbs, that will prepare you better. Hardworking bread winners are the biggest losers, shareholders and executives will march on.

The “shining building” does not belong to Sasol, Sasol are renting it from the owners of that building.

I wonder how much is the $32bbl hedge established in March going to cost them if Brent stays at $40bbl for the rest of the year??

Good question, some experts forecast brent to reach 50 again by year end. Massive loss for sasol if that happens.

End of comments.

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