SOC
Sable Offshore CORP
NYSE
10-Q: Sable Offshore Corp. Reports First Quarter 2024 Results Following Business Combination
Sentiment:
Quarterly Report
15 May 2024 4:38 PM
Sable Offshore Corp. reports its first quarter 2024 results, which includes the impact of a recent business combination and preparations for restarting production at the Santa Ynez field.
Worse than expected
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.
Capital raise
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.
Summary
- Sable Offshore Corp. (formerly Flame Acquisition Corp.) completed a business combination on February 14, 2024, acquiring the Santa Ynez field (SYU) assets.
- The company is focused on restarting production at SYU, which has been shut in since 2015 due to a pipeline incident.
- The first quarter results include a net loss of $180.1 million, primarily due to a $70 million settlement, $46.4 million in share-based compensation, and $16.8 million in legal and professional fees related to the business combination.
- Operating expenses were $159.1 million, including $150.4 million in general and administrative costs.
- The company raised $440.2 million through a private placement of common stock and secured a $625 million term loan with Exxon Mobil.
- As of March 31, 2024, Sable had $209.1 million in cash and an accumulated deficit of $261.1 million.
- The company expects to incur losses until production at SYU restarts, which is targeted for the third quarter of 2024.
- There is substantial doubt about the company's ability to continue as a going concern due to the remaining regulatory approvals and the timing of ongoing construction repair efforts.
Sentiment
Score: 3
Explanation: The sentiment is negative due to the substantial net loss, high operating expenses, and the going concern uncertainty. While the company has secured funding, the risks associated with restarting production and the potential for further capital raises weigh heavily on the outlook.
Positives
- The company successfully completed its business combination and acquired the SYU assets.
- Sable raised $440.2 million in capital through a private placement.
- The company secured a $625 million term loan to finance the acquisition and restart efforts.
- Management believes the company has sufficient capital to maintain operations and complete the repairs necessary to restart production of the SYU Assets.
Negatives
- The company reported a significant net loss of $180.1 million for the period from February 14, 2024 to March 31, 2024.
- General and administrative expenses were exceptionally high at $150.4 million, driven by a $70 million legal settlement and $46.4 million in share-based compensation.
- There is substantial doubt about the company's ability to continue as a going concern.
- The company is not generating revenue and is reliant on external funding until production restarts.
- The restart of production is contingent upon regulatory approvals and the completion of repairs.
Risks
- The company's ability to restart production at SYU is contingent upon obtaining necessary regulatory approvals.
- The actual costs of restarting production may exceed current estimates, potentially requiring additional capital raises.
- If the company fails to restart production by January 1, 2026, Exxon Mobil has the option to reacquire the SYU assets without reimbursing Sable's costs.
- Restrictive covenants in the senior secured term loan impose significant operating and financial limitations on the company.
- The company is subject to risks associated with being an emerging growth company and a smaller reporting company.
- The company has a history of losses and negative cash flows from operations.
Future Outlook
The company expects to continue to incur losses until production at the Santa Ynez field restarts, which is targeted for the third quarter of 2024. The company anticipates a rapid increase in operating cash flows after production restarts, which should allow Sable to fund further capital expenditures and service its debt.
Management Comments
- Management believes the company has sufficient capital to maintain operations and complete the repairs necessary to restart production of the SYU Assets.
- Management expects production to restart during the third quarter of 2024.
- Management evaluates its cost estimates on an ongoing basis.
Industry Context
This announcement reflects a company in the oil and gas sector undergoing a significant transition, moving from a special purpose acquisition company to an operating entity focused on restarting a previously producing asset. The challenges faced by Sable, including regulatory hurdles and the need for substantial capital expenditures, are common in the industry, particularly for companies involved in restarting mature fields.
Comparison to Industry Standards
- The high general and administrative expenses, driven by the legal settlement and share-based compensation, are unusual compared to typical operating expenses for oil and gas companies.
- The reliance on a large term loan from the seller (Exxon Mobil) is not a standard financing structure and indicates a unique situation.
- The company's focus on restarting a shut-in field is less common than developing new fields, and the associated risks and costs are specific to this type of project.
- The company's financial performance is not directly comparable to peers due to the lack of revenue and the significant one-time expenses related to the business combination.
- Companies like California Resources Corporation (CRC) and Berry Corporation (BRY) are examples of companies that operate in California and have experience with mature fields, but their financial situations and operational strategies may differ significantly from Sable's.
Stakeholder Impact
- Shareholders are impacted by the significant net loss and the uncertainty surrounding the company's ability to continue as a going concern.
- Employees are impacted by the company's focus on restarting production and the potential for future growth.
- Customers are impacted by the company's ability to bring oil and gas production back online.
- Suppliers and creditors are impacted by the company's financial condition and its ability to meet its obligations.
Next Steps
- The company needs to obtain necessary regulatory approvals to restart production at the Santa Ynez field.
- The company must complete the pipeline repairs and bring the shut-in assets back online.
- The company needs to manage its cash flow and capital expenditures to ensure it can continue operations until production restarts.
- The company must monitor and address the risks associated with the senior secured term loan and the potential for Exxon Mobil to reacquire the SYU assets.
- The company must continue to work towards the final approval of the settlement agreement.
Legal Proceedings
- Sable entered into a settlement agreement on March 26, 2024, regarding claims related to the Pipelines, which resulted in a $70 million accrual.
- The settlement agreement is subject to final approval by the United States District Court for the Central District of California.
Related Party Transactions
- The company entered into nine convertible promissory notes with Flame Acquisition Sponsor LLC totaling $3.3 million, which were converted into warrants at the closing of the business combination.
- The company entered into four non-convertible promissory notes with the Sponsor totaling $1.1 million, which were repaid in cash at the closing of the business combination.
- The company reimbursed James C. Flores, the Chairman and CEO, $2.9 million for out-of-pocket expenses related to the business combination.
Key Dates
- 2022-11-01: Sable Offshore Corp. (Legacy Sable) entered into a purchase and sale agreement with Exxon Mobil Corporation to acquire the Santa Ynez field assets.
- 2022-11-02: Flame Acquisition Corp. entered into a merger agreement with Sable Offshore Corp. and Sable Offshore Holdings, LLC.
- 2024-02-12: Flame held a special meeting of stockholders to approve the business combination.
- 2024-02-13: Predecessor period ends.
- 2024-02-14: The business combination was consummated, and Flame was renamed Sable Offshore Corp. The acquisition of the SYU Assets was also completed.
- 2024-02-15: Sable's shares of Common Stock and warrants began trading on NYSE.
- 2024-03-26: Sable entered into a settlement agreement regarding claims related to the Pipelines.
- 2024-03-31: End of the first quarter 2024 reporting period.
- 2024-05-01: The Court entered an order granting preliminary approval of the Settlement Agreement.
- 2024-05-10: The SEC declared effective the registration statement for the shares of Common Stock issuable upon exercise of the warrants.
- 2024-05-14: Date of the share count for the report.
- 2024-05-15: Date of the report.
- 2024-09-13: Fairness hearing scheduled to determine whether the proposed settlement should be finally approved by the Court.
Keywords
Santa Ynez field, oil and gas, production restart, business combination, term loan, private placement, regulatory approvals, pipeline repairs, financial results, 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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