8-K: Sable Offshore Corp. Reports 2024 Financial and Operational Results; Anticipates Production Restart in Q2 2025

Sable Offshore Corp. announced its 2024 financial results, highlighting a net loss primarily due to non-cash items, and anticipates restarting production at its Santa Ynez Unit (SYU) in the second quarter of 2025.

Summary

• Sable Offshore Corp. reported a net loss of $617.3 million for 2024, mainly due to non-cash changes in fair value of warrant liabilities, non-cash interest expense, and production restart-related operating expenses.
• The company ended the year with 89,310,996 shares of Common Stock outstanding after raising $773.8 million in gross equity proceeds in 2024.
• Outstanding debt at year-end was $833.5 million, including paid-in-kind interest, additional principal from debt amendment, and debt issuance costs.
• Sable finished the year with $300.4 million in cash and cash equivalents, excluding a restricted cash balance of $35.4 million.
• The company expects to restart production at the SYU offshore platforms in the second quarter of 2025, contingent on completing the anomaly repair program, hydrotest of the Pipeline, and OSFM approval of their updated start-up plan.
• Sable anticipates sequentially restarting the SYU offshore platforms, starting with Harmony, followed by Heritage, and then Hondo.
• Updated capex and production guidance for the second half of 2025 reflects remaining capital expenditure plans after the expected restart in the second quarter of 2025.
• Net average daily production for the second half of 2025 is projected to be between 20,000 and 25,000 BOE/D.
• Total capex for the second half of 2025 is estimated to be between $70 million and $90 million, including facilities capex of $50-$60 million and workover capex of $20-$30 million.

Sentiment

Score: 7

Explanation: The sentiment is cautiously optimistic. While the company reported a significant net loss, it is largely attributed to non-cash items. The focus on restarting production and the progress made on pipeline repairs are positive indicators. The forward-looking statements and guidance suggest confidence in future performance.

Positives

• Sable received approval from the California Office of the State Fire Marshal (OSFM) for its enhanced pipeline integrity standards, a significant milestone.
• The company made significant progress in executing the anomaly repair program on the Pipeline.
• Sable received confirmation from the County of Santa Barbara that certain Pipeline anomaly repair work in the Coastal Zone is authorized by existing permits.
• The U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) does not object to the OSFM's approval of Sable's implementation of enhanced pipeline integrity standards.
• Sable initiated hydrotesting of the Pipeline in early 2025 in advance of a potential restart of the SYU offshore platforms and associated Las Flores Canyon processing facilities.
• Sable management has a track record of excellence as a safe and responsible steward of California's onshore and offshore resources.

Negatives

• Sable reported a net loss of $617.3 million for 2024.
• The company has outstanding debt of $833.5 million.
• The SYU assets have not produced commercial quantities of hydrocarbons since June 2015.

Risks

• The ability to recommence production of the SYU assets and the cost and time required therefor is uncertain.
• Global economic conditions and inflation could impact results.
• Increased operating costs could negatively affect profitability.
• Lack of availability of drilling and production equipment, supplies, services and qualified personnel could delay restart.
• Regulatory changes and uncertainties could impact operations.
• Litigation, complaints and/or adverse publicity could harm the company's reputation and financial performance.
• If Restart Production is not achieved by March 1, 2026, the terms of the asset acquisition with ExxonMobil Corporation would potentially result in the assets being reverted to ExxonMobil Corporation without any compensation to Sable therefor.

Future Outlook

Sable expects to restart production at the SYU offshore platforms in the second quarter of 2025 and has provided production and capex guidance for the second half of 2025.

Management Comments

• Sable's Chairman and Chief Executive Officer, Jim Flores, stated that the team looks forward to finishing the restoration of the Pipeline and restarting production at the Santa Ynez Unit.
• He added that the restart will provide low carbon intensity energy to California and enhance domestic energy security and affordability.

Industry Context

Sable's efforts to restart production at the SYU are aligned with the broader industry focus on increasing domestic energy production and providing low carbon intensity energy solutions. The company's focus on carbon capture and storage (CCS) also reflects a growing trend in the oil and gas industry to address climate change concerns.

Comparison to Industry Standards

• The document mentions a peer group including BRY, CHRD, CIVI, CRC, KOS, MGY, MUR, TALO and WTI.
• Sable's TEV / Low Estimate Contingent Resources (Including Workover Program) is $9.41, which is a ~44% Discount to Peer Group on PD Reserves versus a peer group average of $16.87.

Stakeholder Impact

• Shareholders: Potential for increased value with production restart and future growth.
• Employees: Job security and potential for new opportunities with the restart of operations.
• Customers: Access to a reliable source of energy.
• California: Access to low carbon intensity energy and enhanced domestic energy security and affordability.

Next Steps

• Complete the anomaly repair program on the Pipeline.
• Complete hydrotest of the Pipeline.
• Obtain OSFM approval of the updated start-up plan.
• Sequentially restart the SYU offshore platforms, beginning with Harmony, followed by Heritage, and then Hondo.

Key Dates