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| PART I | | 3 | |
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| Item 1. | Business | | 3 |
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| Item 1A. | Risk Factors | | 18 |
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| Item 1B. | Unresolved Staff Comments | | 42 |
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| Item 1C. | Cybersecurity | | 42 |
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| Item 2. | Properties | | 42 |
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| Item 3. | Legal Proceedings | | 42 |
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| Item 4. | Mine Safety Disclosures | | 42 |
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| PART II | | 42 | |
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| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities | | 42 |
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| Item 6. | [Reserved] | | 42 |
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 42 |
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| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | | 51 |
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| Item 8. | Financial Statements and Supplementary Data | | 51 |
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| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | | 51 |
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| Item 9A. | Controls and Procedures | | 51 |
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| Item 9B. | Other Information | | 52 |
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| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | | 52 |
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| PART III | | 52 | |
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| Item 10. | Directors, Executive Officers and Corporate Governance | | 52 |
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| Item 11. | Executive Compensation | | 58 |
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | 58 |
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence | | 59 |
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| Item 14. | Principal Accountant Fees and Services | | 63 |
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| PART IV | | 63 | |
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| Item 15. | Exhibits, Financial Statements and Financial Statement Schedules | | 63 |
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BASIS OF PRESENTATION
Sable Offshore Corp. (“Sable”) (formerly known as Flame Acquisition Corp. or “Flame”) was a blank check company originally incorporated on October 16, 2020 as a Delaware corporation for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses or entities. On March 1, 2021, Flame consummated an initial public offering (the “Flame IPO”), after which its securities began trading on the New York Stock Exchange (“NYSE”). On November 2, 2022, Flame entered into that certain Agreement and Plan of Merger (the “Merger Agreement”), dated November 2, 2022 (as amended on December 22, 2022 and June 30, 2023), by and among Flame, Sable Offshore Holdings LLC, a Delaware limited liability company (“Holdco”), and Sable Offshore Corp., a Texas corporation and a wholly owned subsidiary of Holdco (“Legacy Sable”).
Legacy Sable entered into a Purchase and Sale Agreement (the“Sable-EM Purchase Agreement”) on November 1, 2022 (as amended on June 13, 2023 and December 15, 2023) with Exxon Mobil Corporation (“Exxon”) and Mobil Pacific Pipeline Company (“MPPC,” and together with Exxon, “EM”) pursuant to which Legacy Sable agreed to acquire from EM certain assets constituting the Santa Ynez field in Federal waters offshore California and associated onshore processing and pipeline assets (such “Assets,” as defined in the Sable-EM Purchase Agreement, the “SYU Assets”).
On February 14, 2024 (the “Closing Date”), Sable consummated the mergers and related transactions contemplated by the Merger Agreement (the “Business Combination”), following which Flame was renamed “Sable Offshore Corp.” Pursuant to the terms and subject to the conditions set forth in the Sable-EM Purchase Agreement, the transactions contemplated by the Sable-EM Purchase Agreement were also consummated on February 14, 2024, immediately after the Closing, as a result of which Sable purchased the SYU Assets, effective as of January 1, 2022. On February 15, 2024, Sable’s shares of Common Stock, par value $0.0001 per share (“Common Stock”) and warrants to purchase Common Stock at an exercise price of $11.50 per share (the “Public Warrants”) began trading on NYSE under the symbols, “SOC” and “SOC.WS,” respectively.
Unless otherwise noted or the context otherwise requires, references to (i) the “Company,” “Sable,” “we, “us,” or “our” are to Sable Offshore Corp, a Delaware corporation, and its consolidated subsidiaries, following the Business Combination, (ii) “Flame” refers to Flame Acquisition Corp. prior to the Business Combination, (iii) the “Pipelines” are to Pipeline Segments 901/903 and the other “901/903 Assets” (as defined in the Sable-EM Purchase Agreement) and (iv) “SYU” are to the SYU Assets and the Pipelines; provided that the combined financial statements of SYU do not include the Pipelines.
Unless otherwise indicated, the historical financial information included in this Annual Report on Form 10-K (the “Annual Report”), including the audited financial statements and the notes thereto in Part II. Item 8 and the information in Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are that of Flame prior to the consummation of the Business Combination. The audited consolidated financial statements of SYU as of and for the year ended December 31, 2023 will be included in Amendment No. 1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 14, 2024.
Certain monetary amounts, percentages and other figures included herein have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables and charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this annual report may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this annual report may include, for example, statements about:
| • | our ability to maintain the listing of our Common Stock and Public Warrants on the NYSE; |
| • | our ability to recommence production of the SYU Assets and the cost and time required therefor, and production levels once recommenced; |
| • | our financial performance; |
| • | our ability to satisfy future cash obligations; |
| • | restrictions in existing or future debt agreements or structured or other financing arrangements; |
| • | commodity price volatility, low prices for oil and/or natural gas, global economic conditions, inflation, increased operating costs, lack of availability of drilling and production equipment, supplies, services and qualified personnel, processing volumes and pipeline throughput; |
| • | uncertainties related to new technologies, geographical concentration of operations, environmental risks, weather risks, security risks, drilling and other operating risks, regulatory changes and regulatory risks; |
| • | the uncertainty inherent in estimating oil and natural gas resources and in projecting future rates of production; |
| • | reductions in cash flow and lack of access to capital; |
| • | the timing of development expenditures, managing growth and integration of acquisitions, and failure to realize expected value creation from acquisitions; |
| • | the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, our ability to grow and manage growth profitably, maintain relationships with customers and compete within our industry; |
| • | our success in retaining or recruiting, or changes required in, our officers, directors or other key personnel; |
| • | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business; |
| • | developments relating to our competitors and our industry; |
| • | the possibility that we may be adversely impacted by other economic, business, and/or competitive factors; |
| • | litigation, complaints and/or adverse publicity; |
| • | privacy and data protection laws, privacy or data breaches, or the loss of data; |
| • | our ability to comply with laws and regulations applicable to our business; |
| • | changes in applicable laws or regulations; or |
| • | other risks and uncertainties described in this annual report, including those under the section titled “Risk Factors.” |
The forward-looking statements contained in this annual report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the section of this annual report entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
