By Ed Stoddard

South African petrochemicals group Sasol has found promising signs of oil and gas in wells drilled off Mozambique, raising the hydrocarbon profile of the impoverished southern African country.

Mozambique has vast untapped offshore gas reserves and inland coal deposits but is one of the world’s poorest countries and is in the throes of a financial and debt crisis.

Sasol, which announced first-half results on Monday, said it remained committed to its projects in Mozambique despite the financial challenges the country is facing.

The company said four of 12 planned wells had been drilled and the results had been surprising.

“We always expected to see both oil and gas. We have drilled four wells, two of them gas, two of them oil, all showing positive results. In one of the areas where we expected mostly gas we found gas and oil,” joint Chief Executive Stephen Cornell said on a conference call with journalists.

The company has issued a “notice of discovery” to the Mozambican authorities.

Sasol also said it was scaling back planned capital expenditure this year in the face of a strengthening rand as it posted a fall in interim earnings partly rooted in the currency’s gains.

Its capex estimate for the full year was cut to 66 billion rand ($5 billion) from 75 billion rand “largely due to the impact of the stronger rand/U.S. dollar exchange rate coupled with our cash conservation initiatives and active management of our capital portfolio”.

Sasol’s products are priced in dollars but much of its costs are rand based. Forex movements also have valuation implications for the company’s balance sheet.

Half-year headline earnings per share (HEPS) fell 38 percent to 15.12 rand, in line with what the company previously flagged to the market. Sasol attributed the decline to rand gains and to a strike at its Secunda mining operations.

Sasol’s net cash position decreased from 52 billion rand in June 2016 to 28 billion rand at Dec. 31, 2016, mainly due to the funding of the company’s ethane cracker project in Louisiana and the effect of a stronger rand/U.S. dollar exchange rate.

The board declared a gross interim dividend of 4.80 rand per share, 15.8 percent lower compared with the prior period.

($1 = 12.9615 rand)

(Editing by Susan Thomas)