Morningstar | Sasol Expects Increased Lake Charles Project Costs; Stock Remains in 3-Star Territory. See Updated Analyst Note from 25 Feb 2019
No-moat Sasol’s Lake Charles Chemical Project continues to hit bumps in the road. The company announced that total costs are over budget and increased its cost estimates again from $11.3 billion to the range of $11.6 billion-$11.8 billion. The project is now 94% complete, and management still expects the project to be placed into service later this year.Sasol reported its first-half 2019 fiscal year results for six months ended Dec. 31, 2018, that were a mixed bag. The company’s liquid production averaged 769 million barrels of oil equivalents, up slightly from the prior-year period and ahead of our expectations. Natural gas production averaged 67.6 billion cubic feet, which was down slightly from the prior-year period and slightly below our expectations. Sasol also reported continued refined products declines to 14.8 mmboe/d from 15.8 mmboe/d in the first half of fiscal year 2018.
We intend to incorporate the company’s results in our model shortly, but at this time, we are changing our fair value estimate to $32 (ZAR 444) from $30 (ZAR 424) based on changes in foreign exchange rates. We are maintaining our no-moat rating.
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