Sasol (NYSE: SSL) has entered into hedging transactions (zero cost collars) for 4,56 million barrels of oil, equivalent to circa 30% of its planned South African synfuels and West African crude oil production for the final quarter of the 2011 financial year. The zero cost collars expire on 15 June 2011.
The hedge will provide downside protection should monthly average dated Brent crude oil prices decrease below US$85 per barrel (put level) on the hedged portion of production. Conversely, Sasol will incur opportunity losses on the hedged portion of production should monthly average oil prices exceed a volume weighted average US$172.77 per barrel (call level). Call levels between US$170 per barrel and US$175 per barrel were entered into.
Sasol assesses the appropriateness of oil price hedging continuously and periodically enters into hedging transactions to improve the stability and predictability of cash flows as part of its risk management activities.