SOC
Sable Offshore CORP
NYSE
10-Q: Sable Offshore Corp. Reports Second Quarter 2024 Results Following Business Combination and Asset Acquisition
Sentiment:
Quarterly Report
13 August 2024 4:07 PM
Sable Offshore Corp. reports a net loss of $165.4 million for the second quarter of 2024, primarily due to operating expenses and changes in the fair value of warrant liabilities, following its business combination and acquisition of the Santa Ynez field.
Worse than expected
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
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
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.
Summary
- Sable Offshore Corp. reported a net loss of $165.4 million for the three months ended June 30, 2024, and a net loss of $345.5 million for the period from February 14, 2024 to June 30, 2024.
- The company completed a business combination and acquired the Santa Ynez field assets on February 14, 2024.
- Operating expenses were $62.2 million for the quarter and $221.4 million for the period from February 14, 2024 to June 30, 2024, including operations and maintenance, depletion, depreciation, amortization, and general and administrative costs.
- The company incurred a $81.2 million change in fair value of warrant liabilities for the quarter and $79.4 million for the period from February 14, 2024 to June 30, 2024.
- Interest expense was $19.2 million for the quarter and $29.0 million for the period from February 14, 2024 to June 30, 2024.
- The company raised $440.2 million through a private offering of common stock.
- The company has a senior secured term loan with an outstanding balance of $790.4 million as of June 30, 2024.
- The company's plans for production restart are contingent upon regulatory approvals and the completion of repairs.
- 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 document presents a challenging financial situation with significant losses, high operating expenses, and substantial doubt about the company's ability to continue as a going concern. While the company has secured funding and has a plan to restart production, the risks and uncertainties are considerable, leading to a negative sentiment.
Positives
- The company successfully completed its business combination and acquired the Santa Ynez field assets.
- Sable raised $440.2 million through a private offering, providing capital for operations and repairs.
- The company has a plan to restart production in late third quarter 2024 or early fourth quarter 2024.
- The company has a senior secured term loan in place to finance the acquisition.
Negatives
- 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.
- The company's restart of production is contingent on regulatory approvals and repairs, which introduces uncertainty.
Risks
- The company's ability to restart production is contingent upon approvals from federal, state, and local regulators.
- If the company's cost estimates for restarting production are less than the actual amounts needed, it may have insufficient funds.
- The company may need to raise additional capital, and there is no assurance that new financing will be available on commercially acceptable terms.
- The company's senior secured term loan has restrictive covenants that impose significant operating and financial restrictions.
- Failure to restart production by January 1, 2026, could result in Exxon having the right to reacquire the SYU assets without reimbursing the company's costs.
- The company is subject to risks associated with emerging growth companies.
- The company is subject to risks associated with the oil and gas industry, including commodity price volatility.
Future Outlook
The company expects to continue to incur losses until it can restart production of the SYU Assets, which is targeted for late third quarter 2024 or early fourth quarter 2024. The company's plans are contingent upon regulatory approvals and the completion of repairs. The company anticipates a rapid increase in operating cash flows after production restarts, which should allow it to 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 in late third quarter 2024 or early fourth quarter 2024.
- Management evaluates its cost estimates on an ongoing basis.
Industry Context
The announcement reflects the challenges and risks associated with restarting oil and gas production in a complex regulatory environment, particularly in California. The company's financial performance is heavily dependent on its ability to obtain regulatory approvals and complete necessary repairs to resume production. The company's reliance on a senior secured term loan and the potential for Exxon to reacquire the assets if production is not restarted by January 1, 2026, highlights the financial and operational risks involved in the oil and gas industry.
Comparison to Industry Standards
- The company's financial results are not directly comparable to other oil and gas companies due to the unique circumstances of the business combination and the shut-in status of the SYU assets.
- The company's operating expenses are higher than those of producing companies due to the costs associated with restarting production and the settlement of the Grey Fox Matter.
- The company's reliance on a senior secured term loan is common in the oil and gas industry, but the specific terms and conditions of the loan are unique to the company's situation.
- The company's warrant liabilities are a result of its structure as a special purpose acquisition company (SPAC) and are not typical for established oil and gas companies.
- The company's going concern uncertainty is a significant risk factor that is not common for established oil and gas companies.
Stakeholder Impact
- Shareholders are impacted by the company's net losses and the uncertainty surrounding its ability to continue as a going concern.
- Employees are impacted by the company's financial situation and the potential for job losses if the company is unable to restart production.
- Customers are impacted by the company's inability to produce oil and gas.
- Suppliers are impacted by the company's financial situation and the potential for reduced business.
- Creditors are impacted by the company's debt obligations and the uncertainty surrounding its ability to repay its debts.
Next Steps
- The company needs to obtain necessary regulatory approvals to restart production.
- The company needs to complete the pipeline repairs and bring the shut-in assets back online.
- The company needs to monitor and manage its cash flow and capital expenditures.
- The company needs to address the going concern uncertainty.
- The company needs to monitor the progress of the Grey Fox Matter settlement.
Legal Proceedings
- The company entered into a Settlement Agreement regarding the Grey Fox Matter, which is subject to court approval.
- The company is involved in legal proceedings related to the Pipelines.
Related Party Transactions
- The company entered into convertible promissory notes with Flame Acquisition Sponsor LLC, which were converted into warrants.
- The company entered into non-convertible promissory notes with the Sponsor, which were fully repaid in cash.
- The company reimbursed James C. Flores for out-of-pocket expenses related to the business combination.
Key Dates
- 2022-01-01: Effective date of the Sable-EM Purchase Agreement for accounting purposes.
- 2022-11-01: Sable Offshore Corp. (Legacy Sable) entered into the Sable-EM Purchase Agreement with Exxon Mobil Corporation.
- 2022-11-02: Flame Acquisition Corp. entered into the Merger Agreement with Sable Offshore Corp. and Sable Offshore Holdings, LLC.
- 2023-06-13: Amendment to the Sable-EM Purchase Agreement.
- 2023-12-15: Further amendment to the Sable-EM Purchase Agreement.
- 2024-02-12: Flame held a special meeting of stockholders to approve the Business Combination.
- 2024-02-13: Predecessor period ends.
- 2024-02-14: Closing date of the Business Combination and Sable-EM Purchase Agreement; Successor period begins.
- 2024-02-15: Sable's shares and warrants began trading on the NYSE.
- 2024-03-26: Sable entered into the Settlement Agreement regarding the Grey Fox Matter.
- 2024-05-01: Court granted preliminary approval of the Settlement Agreement.
- 2024-05-07: Company entered into a cash collateral agreement with JPMorgan Chase Bank, N.A.
- 2024-05-10: SEC declared the registration statement for the shares of Common Stock issuable upon exercise of the warrants effective.
- 2024-05-14: End of the Transition Services Agreement with EM.
- 2024-06-28: U.S. Treasury issued regulations regarding the Stock Buyback Tax.
- 2024-06-30: End of the reporting period.
- 2024-07-10: California Office of the State Fire Marshal re-affirmed the 2021 Risk Analysis and Implementation Plan.
- 2024-07-29: PPC submitted restart plans for the Pipelines to the OSFM.
- 2024-07-30: County of Santa Barbara determined Sable's applications to be complete.
- 2024-07-31: OSFM approved PPC's extension request for the implementation of the 2021 Plan.
- 2024-08-12: Date of share count for the report.
- 2024-08-13: Date of report filing.
- 2024-09-13: Fairness hearing scheduled for the Grey Fox Matter settlement.
- 2024-10-31: Deadline for reporting and paying the Stock Buyback Tax for taxable years ending after December 31, 2022, and on or before June 28, 2024.
- 2025-07-01: New deadline for implementation of the approved 2021 Plan.
- 2025-06-30: Final Payment Date for the Grey Fox Matter settlement.
- 2026-01-01: Restart Failure Date for the SYU Assets.
Keywords
Sable Offshore Corp, Santa Ynez field, oil and gas, business combination, asset acquisition, production restart, warrant liabilities, senior secured term loan, regulatory approvals, going concern
SOC
Sable Offshore CORP
NYSE
Sector: Energy
Filings with Classifications
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
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.
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.
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 4:10 PM
Earnings Release
- The company reported a net loss of $109.5 million, indicating worse than expected financial performance.
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.
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.
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.
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.
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
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.
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.
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 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.
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 4:29 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.
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.
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
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.
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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