Shale gas blows hole in Sasol shares

2014-12-07 15:30

Petrochemicals giant Sasol’s share price, which opened at R509.80 on the day of an Organisation of the Petroleum Exporting Countries (Opec) meeting on November 27, fell to R503 after the oil producers announced they would keep production levels steady.

Sasol’s share price has since slumped more than 13%, closing at R435.51 on Wednesday.

The Opec decision was an apparent salvo at North American shale gas producers, who have flooded the market with the cheap, but expensively produced, product.

Reuters reported that Saudi Arabian Petroleum Minister Ali al-Naimi persuaded fellow Opec members to keep production levels intact in order

to depress prices and undermine the profitability of North American producers. Natural gas prices have continued to drop since the announcement.

Sasol has shale gas assets in Canada’s Montney Basin, which are not producing as well as expected.

In the year to June, Sasol was forced to impair the assets by R5.3?billion and add further depreciation of R1.9?billion on them.

But Sasol spokesperson Alex Anderson said the plunging oil price was outside the company’s business.

“It would be irresponsible for Sasol to offer immediate speculation on macro factors that affect our share price performance.

“It is also up to shareholders to make up their own minds on the oil and currency markets.”

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