Sasol CFO Says Oil Price No Threat to Bonds as Hedge ConsideredPaul Burkhardt
Sasol Ltd. is considering hedges to protect against lower oil prices even as the decline to the weakest in four years poses no threat to debt of the world’s biggest producer of motor fuel from coal.
“The presently lower oil price does not pose a risk for investors in Sasol’s bond,” Acting Chief Financial Officer Paul Victor said in an e-mail response to questions today. “We have not hedged during the last few years as shareholders want exposure to oil-price movements, our gearing is negligible and we have substantial surplus cash.” The company is “currently considering an oil hedge for downside risk protection,” he said.
A global glut of oil has contributed to a 22 percent decline in the price since the start of September. Borrowing costs for Johannesburg-based Sasol, whose revenue is linked to the dollar price of crude, have increased, with yields on its dollar debt due November 2022 rising 26 basis points to 4.39 percent.
Sasol uses proprietary Fischer-Tropsch technology to make gasoline, diesel and jet fuel from the coal it mines in South Africa and from gas extracted below the ocean floor near Qatar.
Sasol expects the Impumelelo and Shondoni coal mines, part of a 14 billion-rand ($1.3 billion) mine-replacement program in the country, to become operational next year. It has arranged a term loan with FirstRand Ltd.’s Rand Merchant Bank at market-related terms, Victor said.