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Sol - Sasol Limited - Sasol Announces A Cad$1 050 Million (zar7 119 Million)

Release Date: 20/12/2010 08:00:01      Code(s): SOL
SOL - Sasol Limited - Sasol announces a CAD$1 050 million (ZAR7 119 million)    
acquisition of a 50% participation interest in the Montney shale basin in       
Canada                                                                          
Sasol Limited                                                                   
(Incorporated in the Republic of South Africa)                                  
(Registration number 1979/003231/06)                                            
JSE share code: SOL    ISIN: ZAE000006896                                       
NYSE share code: SSL    ISIN: US8038663006                                      
("Sasol" or "the Company")                                                      
SASOL ANNOUNCES A CAD$1 050 MILLION ACQUISITION OF A 50% PARTICIPATION          
INTEREST IN THE MONTNEY SHALE BASIN IN CANADA                                   
Transaction highlights                                                          
-    Sasol enters the North American shale gas market, through strategic        
    partnership with Talisman Energy Inc. ("Talisman");                         
-    acquisition of 50% participation interest in Farrell Creek`s shale gas     
assets and the associated gas gathering systems and processing facility     
    ("Farrell Creek Assets") for an aggregate purchase consideration of CAD$1   
    050 million (ZAR7 119 million) with effect from 1 January 2011;             
-    Farrell Creek is located in the Montney basin in north-eastern British     
Columbia, Canada;                                                           
-    Talisman will retain the remaining 50% participation interest in, and      
    continue to operate, the Farrell Creek Assets;                              
-    Talisman`s 51 635 acres of land covered by the Farrell Creek Assets        
represents an estimated contingent resource of 9,6 trillion cubic feet      
    ("tcf");                                                                    
-    the transaction allows for accelerated growth within Sasol`s upstream      
    portfolio; and                                                              
-    provides for the potential acceleration of Sasol`s gas-to-liquids ("GTL")  
    value proposition in North America.                                         
1. Introduction                                                                 
Sasol through its wholly owned subsidiary, Sasol Petroleum International (Pty)  
Limited, has reached an agreement to acquire a 50% participation interest in    
the high quality Farrell Creek Assets from Talisman for a total purchase        
consideration of CAD$1 050 million (ZAR7 119 million at the closing CAD/ZAR     
exchange rate of 6,78 on 17 December 2010) ("the Transaction") with effect      
from 1 January 2011.                                                            
2. Rationale for the transaction                                                
Recent advances in shale gas technology have fundamentally changed natural gas  
market dynamics in North America, enabling shale gas to become an economically  
feasible alternative to conventional natural gas.  Sasol believes that this     
market shift provides it with an opportunity to not only accelerate growth      
within its upstream portfolio by way of the acquisition of high quality         
natural gas assets but also to accelerate its GTL value proposition.            
The Company has therefore focused its efforts on increasing its natural gas     
resources through exploration and/or acquisition opportunities.  The quality    
(notably the thickness and richness of the shale) and size of the Farrell       
Creek resource base, as well as its expected production profile makes this a    
highly attractive asset for Sasol.  Furthermore, by partnering with a credible  
international shale gas operator such as Talisman, Sasol is able to leverage    
Talisman`s experience whilst continuing to grow its own shale gas expertise.    
Sasol is of the view that the favourable location of the Farrell Creek Assets   
in terms of its low operational risk and the proximity of, and access to, the   
existing North American pipeline infrastructure makes the Farrell Creek Assets  
sustainable, on a long-term, stand-alone basis.  The potential to use the gas   
from the Farrell Creek Assets as feedstock into an integrated GTL project       
provides an alternative monetisation route for Sasol, Talisman and other gas    
producers in the area.  The Company believes that there has been a structural   
shift in the dynamics between natural gas and oil, making GTL an even more      
attractive value proposition.                                                   
3. Details of the transaction                                                   
3.1 Seller                                                                      
Talisman, listed on the Toronto and New York stock exchanges, is a global,      
diversified, upstream oil and gas company with its headquarters in Canada. The  
company is an established player in the North American unconventional gas       
resource industry with strong operator skills and is committed to operating in  
a safe, environmentally responsible manner and to maintaining good working      
relationships with local communities near the areas of its operations.          
Talisman is a major producer of gas in the Marcellus shale and also holds       
leading positions in the Montney, Utica, and Eagle Ford shales.                 
3.2 Transaction description                                                     
Sasol and Talisman have agreed to establish a 50/50 general partnership in      
Canada that will own the Farrell Creek Assets, whilst each of Sasol and         
Talisman will also hold an undivided 50% participation interest in the          
associated gas gathering systems and processing facility.  Talisman will        
continue to operate the Farrell Creek Assets and the associated gas gathering   
systems and processing facility.  Sasol will establish a Canadian legal entity  
to ultimately hold its 50% partnership interest in the Farrell Creek Assets     
and its 50% participation interest in the associated gas gathering systems and  
processing facility.                                                            
Furthermore, Sasol and Talisman have agreed to jointly conduct a feasibility    
study on the economic viability of a GTL facility in western Canada.  The two   
companies have also agreed to collaborate on other western Canadian natural     
gas opportunities.                                                              
3.3 Description of assets                                                       
The Montney basin is organically rich shale located in Canada`s western         
Alberta and north-eastern British Columbia.  Its primary formations are of mid- 
Triassic age and found at depths of around 8 000 feet.  The average shale       
thickness of the Farrell Creek Assets is 1 200 feet.  Talisman`s 51 635 acres   
of Farrell Creek represents an estimated contingent resource of 9,6 tcf, this   
being the central estimate within a range from 4tcf to 12tcf.  At the present   
time, as only the initial phase of the development plan has been approved and   
as production data exist only for the very early period of well performance,    
no more than a small percentage of this volume is anticipated to be included    
in Sasol`s filing at the end of its current reporting year.  Talisman           
currently produces approximately 40 - 60 mmscf per day of natural gas from      
Farrell Creek, selling all of it into the North American natural gas market.    
3.4 Purchase consideration                                                      
The aggregate purchase consideration of CAD$1 050 million (ZAR7 119 million)    
is structured as a cash payment of CAD$262,5 million (ZAR1 780 million) at      
closing for the acquisition of the Farrell Creek Assets and CAD$787,5  million  
(ZAR5 339 million) in the form of a carry of 75% of Talisman`s 50% portion of   
the future cost to further develop the Farrell Creek Assets until such time     
that the aggregate purchase consideration has been paid in full.  Thereafter,   
each partner will fund its 50% portion of the capital development costs for     
the Farrell Creek Assets.  The aggregate purchase consideration will be funded  
from surplus cash available within the Sasol group.                             
3.5 Suspensive conditions                                                       
The Transaction is conditional upon the fulfilment of the following suspensive  
conditions:                                                                     
-    conclusion of the definitive agreements;                                   
-    South African Exchange Control approval by the South African Reserve       
Bank;                                                                       
-    receipt of all required regulatory approvals and consents; and             
-    no material adverse change to the Farrell Creek Assets .                   
It is envisaged that closing will take place in the first half of 2011.         
4 Pro forma financial effects                                                   
The pro-forma financial effects of the Transaction on Sasol Limited`s           
consolidated results for the year ended and financial position as at 30 June    
2010, calculated in terms of the provisions of the JSE listing requirements,    
are not significant.                                                            
Johannesburg                                                                    
20 December 2010                                                                
Exclusive Financial advisor                                                     
Morgan Stanley & Co                                                             
Legal advisor                                                                   
Fraser, Milner & Casgrain                                                       
Sponsor                                                                         
Deutsche Securities (SA) (Pty) Limited                                          
Forward-looking statement:                                                      
The estimates of contingent resources contained in this announcement are based  
on definitions provided by the Society of Petroleum Engineers.  Contingent      
resources do not constitute, and should not be confused with, reserves.         
Contingent resources are defined as those quantities of petroleum estimated,    
as of a given date, to be potentially recoverable from a known accumulation by  
application of development projects, but which are not currently considered to  
be commercially recoverable due to one or more contingencies.  There is         
therefore uncertainty as to the portion of the volumes identified as            
contingent resources that will be commercially producible.                      
Sasol may, in this announcement, make certain statements that are not           
historical facts and relate to analyses and other information which are based   
on forecasts of future results and estimates of amounts not yet determinable.   
These statements may also relate to our future prospects, developments and      
business strategies. Examples of such forward-looking statements include, but   
are not limited to, statements regarding exchange rate fluctuations, volume     
growth, increases in market share, total shareholder return, resource volumes   
and values and cost reductions. Words such as "believe", "anticipate",          
"expect", "intend", "seek", "will", "plan", "could", "may", "endeavour" and     
"project" and similar expressions are intended to identify such forward-        
looking statements, but are not the exclusive means of identifying such         
statements.                                                                     
By their very nature, forward-looking statements involve inherent risks and     
uncertainties, both general and specific, and there are risks that the          
predictions, forecasts, projections and other forward-looking statements will   
not be achieved. If one or more of these risks materialise, or should           
underlying assumptions prove incorrect, our actual results may differ           
materially from those anticipated. You should understand that a number of       
important factors could cause actual results to differ materially from the      
plans, objectives, expectations, estimates and intentions expressed in such     
forward-looking statements. Some of these factors are discussed more fully in   
our most recent annual report under the Securities Exchange Act of 1934 on      
Form 20-F filed on 28 September 2010 and in other filings with the United       
States Securities and Exchange Commission. The list of factors discussed        
therein is not exhaustive; when relying on forward-looking statements to make   
investment decisions, you should carefully consider both these factors and      
other uncertainties and events. Forward-looking statements apply only as of     
the date on which they are made, and we do not undertake any obligation to      
update or revise any of them, whether as a result of new information, future    
events or otherwise.                                                            
Morgan Stanley & Co and its affiliates are acting as independent financial      
advisor to Sasol Limited and no one else in connection with the transaction     
and will not be responsible to anyone other than Sasol Limited for providing    
the protections afforded to the clients of Morgan Stanley & Co nor for          
providing advice in relation to the transaction, the contents of this           
announcement or any other matter referred to herein.                            
Date: 20/12/2010 08:00:01 Supplied by www.sharenet.co.za                     
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