Sasol price lifts on US progress

Sasol’s share price jumped the highest in 10 weeks after it announced the first production unit at its Lake Charles Chemicals Project came online on Wednesday.

Sasol’s share price jumped the highest in 10 weeks after the company announced the first production unit at its Lake Charles Chemicals Project came online on Wednesday.

The boost from the market has helped to reverse all the losses the share price suffered after the synfuels and chemicals company on Friday warned of further delays and cost overruns at the Louisiana site.

“Sasol is pleased to announce that its new linear low-density polyethylene unit in Lake Charles achieved beneficial operations on 13 February 2019,” the company said.

The unit is the first of seven to come online, it said.

The share price rose 5.59% to R411.90 and marks a full recovery from the beating it took last Friday, when it closed 6.5% lower at R384.78, its biggest oneday drop since September 2017.

In Friday’s trading statement Sasol warned that the Lake Charles project was expected to cost between $11.6bn and $11.8bn, a sudden upward revision from a previous estimate of $11.13bn. The company said the start-up of the project’s first production unit was also delayed by two months and instead of coming online in December, it would commence in February.

Analysts said the update was a cause for concern, because it was unexpected and brought the credibility of Sasol’s management into question.

Lake Charles, an ethane cracker and derivatives complex, is Sasol’s biggest project and is set to bring in significant cash flows. The project has however been plagued by cost overruns and delays. On inception in 2014 it was expected to cost $8.9bn and to be in operation by 2018.

Despite the boost from Wednesday’s news that the first unit has come online, the share is still down 27% over the last six months, driven largely by the decline in the oil price.

In Wednesday’s statement, Sasol noted that the steam system at Lake Charles produced first steam on August 1, 2018, a few weeks earlier than planned.

Utilities to support the early process units at the project were fully operational by the end of November.