Sasol share price rockets after update

Sasol says it is investigating the explosion which occurred last week at its Lake Charles Chemicals Project and caused to damage to a low-density polyethylene unit.

However, the petrochemical company said on Friday, initial findings indicate that the explosion occurred in a high-pressure section of the unit, that damage was limited to a small section, and critical equipment was not affected.

The incident occurred early this month at the US facility, which is still under construction. 

"The investigation is underway to determine the cause, extent of the damage, and the scope and timeline of repair," the company said in a statement.

"We expect to determine the repair scope and outage duration by the second half of February."

Sasol said as at the end of December 2019, engineering and procurement activities were substantially complete and construction progress was at 98%.

By late morning on Friday, Sasol's share price was up 6.5% to R276.79. The company has lost a third of its value over the past year amid concerns about its Lake Charles project.

The Lake Charles project has been marred by cost overruns, which have been blamed on poor project management and forced the resignation of joint CEOs Bongani Nqwababa and Stephen Cornell in October.

The project will have seven production units that deliver various chemicals, including a plastics variant called polyethylene.

"Overall project completion was at 99% and capital expenditure amounted to US$12.5 billion.The petrochemicals firm said during the time of the delay in the unit start-up, the ethylene produced by the cracker and destined for the unit will be sold externally.

"The projected earnings for the LCCP complex in this financial year will only be impacted by the loss in the margin of ethylene to low-density polyethylene," the company said.

Sasol also revealed full year production at its Secunda Synfuels Operations is forecast to be approximately 7.7 – 7.8 million tons, in line with previous market guidance.

Natref, which is a joint venture with Total South Africa, is targeting production rates of above 600m³/h for the remainder of the year.

The company stated that given the "continuing macroeconomic headwinds and the softer outlook on global GDP growth" in calendar year 2020, sales volumes in performance chemicals is expected to remain flat to slightly below the prior year’s  level (excluding LCCP).

Total sales volumes for the business are expected to be 7 - 9% higher than the prior year.

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