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Researched by Industrial Info Resources (Sugar Land, Texas)--Sasol S.A. (NYSE:SSL) (Johannesburg, South Africa) continues to struggle against the tide of low commodity prices as it faces a massive string of writedowns, much of which are related to major natural gas-processing projects in Louisiana and Alberta. The company recently announced that its net profits for fiscal 2016 to date fell 55% to $914.4 million, with revenues dropping 6.6% to $12.15 billion. Industrial Info is tracking $38.77 billion in active projects involving Sasol, all but roughly $1 billion of which is located in the U.S. and Canada.
In response to the grim pricing environment, Sasol has been doubling down on cost reductions. The company reported cash savings of about $1.9 billion for the first half of calendar 2016, exceeding its initial goal by $840 million. Sasol is targeting savings of about $5.26 billion through 2018, assuming a per-barrel oil price of $40 to $50.
Sasol also said it has reduced its work force 15% since 2013. Executives said they do not expect to see any significant reductions in the near future.
All eyes are on Sasol's Lake Charles Chemical Project in Lake Charles, Louisiana. The cost of the facility now stands at $11 billion, up from Sasol's $8.9 billion estimate in October 2014. The company says the project is now half complete. For more information, see August 24, 2016, article - Sasol Confirms Higher Cost for Lake Charles Chemical Project.
"Our cost reduction and cash savings initiatives are exceeding their targets, which places us on a sound footing as we gear up our balance sheet to complete the world-scale, company-changing investment in Louisiana," said Bongani Nqwababa, a joint chief executive officer of Sasol, in a statement accompanying full-year earnings results. "Although the capital expenditure for our Lake Charles Chemicals Project has increased, we remain confident that the fundamental drivers for this investment are sound."
But low commodity prices have indefinitely stalled another Sasol project in the same state: the $14 billion ECHO gas-to-liquids plant in Westlake, Louisiana. Sasol confirmed earlier this year that it was suspending activity, and nothing appears to have budged since; the facility is intended to process natural gas from the Haynesville Shale into 48,000 barrels per day of liquid fuels, with a second phase that would double the capacity. Each phase is valued at roughly $7 billion. For more information, see Industrial Info's project reports on Phase I and Phase II.
Sasol' $680 million writedown on its $16 billion gas-to-liquids plant in Fort Saskatchewan, Alberta was one of its biggest blows in the first half of 2016. The proposed facility, which is still in its early analysis phase, has been hindered by low natural gas prices. As currently designed, it would produce 48,000 barrels per day of clean diesel, jet fuel and other liquid fuels from about 500 million standard cubic feet per day of natural gas, which would be sourced from British Columbia's Montney Basin; a proposed second phase would add another 48,000 barrels per day. For more information, see Industrial Info's project reports on Phase I and Phase II, each now valued at $8 billion.
Sasol shares drilling rights in the Montney Basin with Progress Energy Canada Limited (Calgary, Alberta), a natural gas exploration and production company that is the most active driller in British Columbia. Included in the writedown is $286 million to change the terms of Sasol's initial agreement with Progress, said Stephen Cornell, the other joint-CEO of Sasol, in the statement. The change of terms reflects a lack of interest in drilling Montney until gas prices strengthen.
Sasol also said the lower oil price had a "significant impact" on its interest in offshore Gabon oil production, adding $69.7 million to its writedowns.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
In response to the grim pricing environment, Sasol has been doubling down on cost reductions. The company reported cash savings of about $1.9 billion for the first half of calendar 2016, exceeding its initial goal by $840 million. Sasol is targeting savings of about $5.26 billion through 2018, assuming a per-barrel oil price of $40 to $50.
Sasol also said it has reduced its work force 15% since 2013. Executives said they do not expect to see any significant reductions in the near future.
All eyes are on Sasol's Lake Charles Chemical Project in Lake Charles, Louisiana. The cost of the facility now stands at $11 billion, up from Sasol's $8.9 billion estimate in October 2014. The company says the project is now half complete. For more information, see August 24, 2016, article - Sasol Confirms Higher Cost for Lake Charles Chemical Project.
"Our cost reduction and cash savings initiatives are exceeding their targets, which places us on a sound footing as we gear up our balance sheet to complete the world-scale, company-changing investment in Louisiana," said Bongani Nqwababa, a joint chief executive officer of Sasol, in a statement accompanying full-year earnings results. "Although the capital expenditure for our Lake Charles Chemicals Project has increased, we remain confident that the fundamental drivers for this investment are sound."
But low commodity prices have indefinitely stalled another Sasol project in the same state: the $14 billion ECHO gas-to-liquids plant in Westlake, Louisiana. Sasol confirmed earlier this year that it was suspending activity, and nothing appears to have budged since; the facility is intended to process natural gas from the Haynesville Shale into 48,000 barrels per day of liquid fuels, with a second phase that would double the capacity. Each phase is valued at roughly $7 billion. For more information, see Industrial Info's project reports on Phase I and Phase II.
Sasol' $680 million writedown on its $16 billion gas-to-liquids plant in Fort Saskatchewan, Alberta was one of its biggest blows in the first half of 2016. The proposed facility, which is still in its early analysis phase, has been hindered by low natural gas prices. As currently designed, it would produce 48,000 barrels per day of clean diesel, jet fuel and other liquid fuels from about 500 million standard cubic feet per day of natural gas, which would be sourced from British Columbia's Montney Basin; a proposed second phase would add another 48,000 barrels per day. For more information, see Industrial Info's project reports on Phase I and Phase II, each now valued at $8 billion.
Sasol shares drilling rights in the Montney Basin with Progress Energy Canada Limited (Calgary, Alberta), a natural gas exploration and production company that is the most active driller in British Columbia. Included in the writedown is $286 million to change the terms of Sasol's initial agreement with Progress, said Stephen Cornell, the other joint-CEO of Sasol, in the statement. The change of terms reflects a lack of interest in drilling Montney until gas prices strengthen.
Sasol also said the lower oil price had a "significant impact" on its interest in offshore Gabon oil production, adding $69.7 million to its writedowns.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
