Earlier this week, my Foolish colleague Brian Pacampara presciently tapped South African energy ace Sasol (NYSE: SSL) as a stock poised to pop. Pop it has, on the back of extremely strong full-year earnings results.
In broad strokes, both revenue and per-share earnings lifted more than 30%. Zeroing in on Sasol's many segments will give a clearer picture of what's fueling the fuel maker.
Coal mining, the foundation of Sasol's synthetic fuels business, cranked up operating profits by 19% as global coal markets heated up. Sasol's domestic gas, synfuels, and oil segments were all driven by the surging oil price. Profit in the oil segment more than doubled, in fact.
Internationally, Sasol saw huge results from its upstream activities in Mozambique and Gabon -- both popular destinations for other oil majors. Portuguese-speaking Petrobras (NYSE: PBR) and Vale (NYSE: RIO) are naturally drawn to Mozambique's natural gas potential, while Total SA (NYSE: TOT) happens to be fluent in Gabon's national language. Sasol ramped up its Oryx gas-to-liquids (GTL) plant after wrangling with some tiny intruders, while scaling back its investment in Chevron's (NYSE: CVX) Nigerian GTL venture because of cost overruns.
Even further abroad, Sasol continues to pursue coal-to-liquids (CTL) efforts in China, but plans have been scaled back from a pair of projects to just one. The Chinese government has actually suspended all but two CTL projects, on account of a coal shortage combined with water use and emissions concerns. Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B), which has been studying CTL feasibility with Sasol partner Shenhua Group, may just have to pack up and look for brighter prospects elsewhere.
While international CTL developments are drooping today, Sasol is powering ahead on the home front, and generating massive cash flows in the meantime. This profit pileup has enabled the company to both reduce debt and repurchase close to 6% of outstanding shares. Sasol has outperformed just about every other integrated oil company this year, and remains an attractive option for Big Oil bulls.
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