Sasol restructures existing oil hedges, increases hedge cover ratio
Johannesburg – 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 price volatility.
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 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.