SOC
Sable Offshore CORP
NYSE
8-K/A: Sable Offshore Corp. Files Amended 8-K with Audited Financials for Santa Ynez Unit
Sentiment:
Amended 8-K Filing
1 April 2024 4:31 PM
Sable Offshore Corp. has filed an amendment to its previous 8-K report, including audited carve-out financial statements for the Santa Ynez Unit (SYU) for the years ended December 31, 2023 and 2022.
Worse than expected
The company reported a significant net loss of $1.5 billion in 2022 due to a $1.4 billion impairment, indicating worse than expected financial performance.
The company has a going concern warning, indicating worse than expected financial stability.
Delay expected
The closing date of the purchase agreement was delayed from June 30, 2022, to December 31, 2022, and then to February 1, 2024, and finally closed on February 14, 2024.
The restart of production is contingent upon regulatory approvals and the timing of ongoing construction repair efforts, which could lead to further delays.
Capital raise
The company raised $440.2 million through a private placement of shares at $10.00 per share.
The company may need to raise additional capital if the costs of restarting production exceed estimates.
Summary
- Sable Offshore Corp. filed an amendment to its previous 8-K report to include audited financial statements for the Santa Ynez Unit (SYU).
- The SYU assets were acquired from Exxon Mobil Corporation and include offshore oil and gas properties and onshore processing facilities.
- The financial statements are presented on a carve-out basis, reflecting the assets, liabilities, and expenses directly attributable to SYU.
- The SYU has been shut in since 2015 due to a pipeline incident, and the financial statements reflect this operational status.
- The audited financials include balance sheets, statements of operations, changes in parent net investment, and cash flows for 2023 and 2022.
- The SYU reported a net loss of $93.7 million in 2023 and $1.5 billion in 2022, primarily due to a $1.4 billion impairment in 2022.
- Sable management anticipates start-up expenses of approximately $197 million to restart production during the third quarter of 2024.
- The company has secured a $622.9 million secured term loan with Exxon, with interest accruing at 10% per annum.
- The company raised $440.2 million through a private placement of shares at $10.00 per share.
- There is substantial doubt about the company's ability to continue as a going concern due to the need for regulatory approvals and the timing of repairs.
Sentiment
Score: 3
Explanation: The document highlights significant financial losses, a going concern warning, and reliance on regulatory approvals, indicating a negative outlook despite the capital raise and secured loan.
Positives
- Sable has secured a $622.9 million secured term loan with Exxon to finance the purchase of SYU.
- The company raised $440.2 million through a private placement of shares, providing capital for restart efforts.
- The California State Lands Commission approved amendments to right-of-way leases, extending them to 2028 and 2029.
- The SYU assets have been maintained in an operation-ready state since the 2015 shut-in.
Negatives
- The SYU has been shut in since 2015, resulting in no revenue generation.
- The company reported a significant net loss of $1.5 billion in 2022 due to a $1.4 billion impairment.
- There is substantial doubt about the company's ability to continue as a going concern due to regulatory and repair uncertainties.
- The company needs to raise additional capital if the costs of restarting production exceed estimates.
- The company is dependent on regulatory approvals to restart production.
Risks
- The company's ability to restart production is contingent upon obtaining regulatory approvals.
- The actual costs of restarting production may exceed the company's estimates, requiring additional capital.
- The company may need to suspend repair efforts and reduce overhead expenses if additional capital is not raised.
- There is a risk of nonpayment or nonperformance by third-party customers or derivative counterparties.
- The company is exposed to commodity price risk once production restarts.
- The company is subject to risks of loss resulting from nonpayment or nonperformance by, or the insolvency or liquidation of, potential third-party customers or derivative counterparties.
Future Outlook
Sable management expects production to restart during the third quarter of 2024, after which its operating cash flows are expected to be sufficient to service Sables indebtedness. However, this is contingent upon regulatory approvals and the completion of repairs.
Management Comments
- Sable management believes it has sufficient capital to maintain operations and complete the repairs necessary to restart production at SYU.
- Management believes the allocation methodologies used are reasonable and result in an allocation of the Seller's indirect costs of operating SYU as a stand-alone entity.
- Management anticipates future increases in ad valorem taxes, in line with the projected restart of production.
Industry Context
This announcement reflects the challenges and complexities of acquiring and restarting mature oil and gas assets, particularly those that have been shut in for an extended period. The need for significant capital investment, regulatory approvals, and the inherent risks associated with commodity price volatility are all evident in this situation. The company is attempting to bring a previously producing asset back online, which is a common activity in the oil and gas industry.
Comparison to Industry Standards
- The impairment of $1.4 billion in 2022 is significant and highlights the risks associated with acquiring assets that have been shut in for an extended period, similar to other acquisitions of mature fields.
- The need for $197 million in start-up expenses is typical for restarting production in a complex offshore environment, comparable to other projects in the Gulf of Mexico and other offshore regions.
- The 10% interest rate on the secured term loan is relatively high, reflecting the risk associated with the project and the company's financial position, which is not uncommon for companies in the oil and gas sector with high capital needs.
- The reliance on regulatory approvals is a common challenge in the oil and gas industry, with similar projects facing delays and uncertainties due to permitting processes.
- The going concern uncertainty is a significant issue, which is not uncommon for companies undertaking large capital projects with uncertain timelines and regulatory hurdles, similar to other companies in the oil and gas sector.
Stakeholder Impact
- Shareholders face significant risk due to the company's going concern uncertainty and the potential need for additional capital.
- Employees are impacted by the uncertainty surrounding the restart of production and the company's financial stability.
- Customers are impacted by the delay in production and the uncertainty of future supply.
- Suppliers are impacted by the uncertainty of the company's financial stability and the timing of future orders.
- Creditors are impacted by the company's going concern uncertainty and the potential need for additional financing.
Next Steps
- The company needs to obtain the remaining regulatory approvals necessary to restart production.
- The company needs to complete the repairs necessary to restart production at SYU.
- The company needs to monitor the costs of restarting production and secure additional capital if needed.
Related Party Transactions
- The company has a secured term loan with Exxon Mobil Corporation.
- The company receives management and administrative services from Exxon Mobil Corporation.
Key Dates
- 1968: Exxon Mobil Corporation (EM) began initial discovery of oil and gas properties that comprise SYU.
- 1981: The Hondo platform was placed in service.
- 1994: The Harmony and Heritage platforms were placed in service.
- 2015: SYU was shut in due to a pipeline incident.
- 2020: Plains entered into a Consent Decree providing a path for a potential restart of Lines 901 and 903.
- 2022-11-01: Exxon Mobil Corporation entered into a purchase and sale agreement with Sable Offshore Corp.
- 2022-12-31: The original scheduled closing date of the purchase agreement.
- 2023-12-05: California State Lands Commission approved amendments to right-of-way leases.
- 2023-12-15: EM, MPPC and Sable entered into an amendment to the Sable-EM Purchase Agreement.
- 2024-02-01: The scheduled closing date of the purchase agreement.
- 2024-02-14: The Sable-EM Closing Date, when the transactions were consummated.
- 2024-04-01: Date of the audit report and the filing of the amended 8-K.
Keywords
Santa Ynez Unit, SYU, Sable Offshore Corp, Oil and Gas, Financial Statements, Carve-out, Impairment, Production Restart, Regulatory Approvals, Going Concern
SOC
Sable Offshore CORP
NYSE
Sector: Energy
Filings with Classifications
Better than expected
23 May 2025 4:07 PM
Equity Offering Update
- The offering size was increased from a previously announced $200.0 million of shares, indicating higher demand than initially anticipated.
- The underwriters fully exercised their option to purchase an additional 1,304,346 shares, demonstrating strong investor interest and confidence in the offering.
- The company successfully raised approximately $295.0 million in gross proceeds, providing significant capital for its stated corporate purposes.
Capital raise
23 May 2025 4:07 PM
Equity Offering Update
- Sable Offshore Corp. completed an upsized underwritten public offering of 10,000,000 shares of common stock.
- The shares were sold at a public offering price of $29.50 per share.
- The gross proceeds from the offering amounted to approximately $295.0 million.
- The net proceeds, estimated at $283.2 million, are intended for capital expenditures, working capital, and general corporate purposes.
- The offering included the full exercise of the underwriters' 30-day option to purchase an additional 1,304,346 shares.
Better than expected
19 May 2025 6:19 AM
Current Report on Form 8-K
- The updated 2H25 production guidance of 40,000-50,000 BOE/D is significantly higher than the prior guidance of 20,000-25,000 BOE/D.
- Initial well tests at Harmony Platform have exceeded expectations.
Worse than expected
9 May 2025 4:10 PM
Earnings Release
- The company reported a net loss of $109.5 million, indicating worse than expected financial performance.
Delay expected
9 May 2025 4:10 PM
Earnings Release
- The Santa Ynez Unit assets have been non-producing since June 2015 due to a pipeline shutdown, representing a significant delay in production.
Worse than expected
9 May 2025 4:03 PM
Quarterly Report
- The company reported a net loss of $109.5 million, indicating worse than expected financial performance.
- The company's ability to continue as a going concern is subject to substantial doubt, indicating worse than expected operational outlook.
Delay expected
17 March 2025 8:15 PM
Annual Report
- The company faces regulatory hurdles and legal proceedings that could delay or prevent the restart of production.
Worse than expected
17 March 2025 8:15 PM
Annual Report
- The company has a history of net losses and negative cash flows from operations.
- The company is not currently generating revenue from its SYU Assets.
- The company is reliant on external funding to continue operations.
Worse than expected
19 February 2025 10:14 AM
8-K Filing
- The company is facing a Cease and Desist Order from the California Coastal Commission.
- The company is involved in a lawsuit with the California Coastal Commission.
- The company's pipeline repair operations could be delayed or halted.
Delay expected
19 February 2025 10:14 AM
8-K Filing
- The dispute with the California Coastal Commission could potentially delay Sable's pipeline repair operations.
Delay expected
2 January 2025 7:35 AM
Litigation Update
- The lawsuit and subsequent remand introduce uncertainty regarding the timeline for restarting production at the Santa Ynez Unit.
- The potential for third-party interference could further delay the restart of operations.
Delay expected
14 November 2024 5:20 PM
Quarterly Report and Regulatory Update
- The California Coastal Commission asked Sable to stop all work in the Coastal Zone at the end of September, causing delays in pipeline maintenance and repair.
- The need to agree on an interim work plan with the CCC to fill open excavations is causing further delays.
Worse than expected
14 November 2024 5:20 PM
Quarterly Report and Regulatory Update
- The company reported a significant net loss of $255.6 million, which is worse than expected for a company of this size.
- The ongoing issues with the California Coastal Commission and the potential reversion of assets to ExxonMobil are also worse than expected.
Worse than expected
14 November 2024 4:14 PM
Quarterly Report
- The company reported a significant net loss, driven by high operating expenses and changes in the fair value of warrant liabilities.
- The company's assets are not currently producing, leading to a lack of revenue and substantial operating losses.
- There is substantial doubt about the company's ability to continue as a going concern.
Capital raise
14 November 2024 4:14 PM
Quarterly Report
- The company completed a second private placement of shares, raising $150 million.
- The company received $72.5 million from warrant exercises.
- The company may need to raise additional capital if its cost estimates for restarting production are insufficient.
Capital raise
11 October 2024 5:10 PM
S-1 Filing
- The document details the issuance of 7,500,000 shares of Common Stock in a private placement (Second PIPE Investment) for an aggregate purchase price of $150,000,000.
Capital raise
24 September 2024 5:27 PM
Private Placement Announcement
- Sable Offshore Corp. raised approximately $150 million through a private placement.
- The company issued approximately 7.5 million new shares of common stock to investors.
- The shares were sold at a price of $20.00 per share.
Worse than expected
13 August 2024 4:29 PM
Quarterly Report
- The company reported a significant net loss of $165.4 million, which is worse than expected for a company in the process of restarting production.
Delay expected
13 August 2024 4:29 PM
Quarterly Report
- The company has a new deadline of July 1, 2025, to implement its 2021 Risk Analysis and Implementation Plan, which is a delay from the original timeline.
- The company is facing delays in obtaining permits from the County of Santa Barbara.
Worse than expected
13 August 2024 4:07 PM
Quarterly Report
- The company reported a significant net loss of $165.4 million for the quarter and $345.5 million for the period from February 14, 2024 to June 30, 2024.
- Operating expenses were substantial at $62.2 million for the quarter and $221.4 million for the period from February 14, 2024 to June 30, 2024.
- The company recorded a large change in fair value of warrant liabilities of $81.2 million for the quarter and $79.4 million for the period from February 14, 2024 to June 30, 2024.
- There is substantial doubt about the company's ability to continue as a going concern.
Delay expected
13 August 2024 4:07 PM
Quarterly Report
- The company's restart of production is contingent on regulatory approvals and repairs, which introduces uncertainty and potential delays.
- The OSFM approved PPC's extension request for the implementation of the 2021 Plan, setting a new deadline of July 1, 2025.
Capital raise
13 August 2024 4:07 PM
Quarterly Report
- The company may need to raise additional capital if its cost estimates for restarting production are less than the actual amounts needed.
- There is no assurance that new financing will be available on commercially acceptable terms.
Delay expected
11 July 2024 9:05 AM
Current Report
- The restart of operations has been delayed and is now expected in late third quarter 2024 or early fourth quarter 2024.
Better than expected
15 May 2024 4:54 PM
Quarterly Report
- The company increased its Total Net Estimated Contingent Resources by 21% to 646 MMboe, with a PV-10 value of $10.0 billion, which is a significant improvement over previous estimates.
Capital raise
15 May 2024 4:38 PM
Quarterly Report
- The company raised $440.2 million through a private placement of common stock.
- The company secured a $625 million senior secured term loan from Exxon Mobil.
Worse than expected
15 May 2024 4:38 PM
Quarterly Report
- The company reported a significant net loss of $180.1 million, which is worse than expected for a company that has just completed a business combination and is preparing to restart production.
- The high general and administrative expenses, driven by a $70 million legal settlement and $46.4 million in share-based compensation, contributed to the worse than expected results.
Worse than expected
1 April 2024 4:31 PM
Amended 8-K Filing
- The company reported a significant net loss of $1.5 billion in 2022 due to a $1.4 billion impairment, indicating worse than expected financial performance.
- The company has a going concern warning, indicating worse than expected financial stability.
Capital raise
1 April 2024 4:31 PM
Amended 8-K Filing
- The company raised $440.2 million through a private placement of shares at $10.00 per share.
- The company may need to raise additional capital if the costs of restarting production exceed estimates.
Delay expected
1 April 2024 4:31 PM
Amended 8-K Filing
- The closing date of the purchase agreement was delayed from June 30, 2022, to December 31, 2022, and then to February 1, 2024, and finally closed on February 14, 2024.
- The restart of production is contingent upon regulatory approvals and the timing of ongoing construction repair efforts, which could lead to further delays.
Worse than expected
28 March 2024 5:21 PM
Annual Report
- The company's independent auditor has expressed substantial doubt about its ability to continue as a going concern.
- The company has a working capital deficit of $16.4 million as of December 31, 2023.
Capital raise
28 March 2024 5:21 PM
Annual Report
- The company may need to raise additional capital to fund the restart of production if its current cash on hand is insufficient.
- The company may issue additional equity or debt securities in the future, which may dilute existing stockholders or introduce restrictive covenants.
Capital raise
12 February 2024 5:30 PM
Merger Announcement
- The company initially secured a $520 million PIPE investment.
- One investor was unable to fund $125 million of their commitment.
- The company secured an additional $53 million in PIPE investments to partially offset the shortfall.
- The company will continue to seek additional investments to provide liquidity after the merger.
Capital raise
16 January 2024 4:26 PM
Merger Financing Update
- Flame Acquisition Corp. has secured $520 million in PIPE financing.
- The financing involves the sale of 52 million shares of Class A common stock at $10.00 per share.
- The PIPE includes $100 million from new Flame PIPE investors and $420 million from Holdco PIPE investors.
- The Holdco PIPE investors will purchase 34.85 million shares of Holdco Class B shares at $10.00 per share.
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