Sable Offshore Corp.
For the period ended Dec 31, 2024. Filed Mar 17, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 17, 2025
SOC$1.93+6.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-28.
0001193125-24-080879
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-17.
0001831481-25-000016
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 97 previous paragraphs and 80 current paragraphs.
8 unchanged; 9 reworded; 63 added; 79 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 3 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (63)
Current report
On November 1, 2022 (as amended on June 13, 2023 and December 15, 2023), Sable Offshore Corp., a Texas corporation (“SOC”), entered into a purchase and sale agreement (as amended, the “Sable-EM Purchase Agreement”) with Exxon Mobil Corporation (“Exxon”) and Mobil Pacific Pipeline Company (“MPPC,” and together with Exxon, “EM”) pursuant to which SOC agreed to acquire from EM certain assets constituting the Santa Ynez field in Federal waters offshore California (“SYU”) and associated onshore processing and pipeline assets (such “Assets,” as defined in the Sable-EM Purchase Agreement, collectively the “SYU Assets”).
Current report
First PIPE Investment
Current report
On February 14, 2024, in connection with the Business Combination, the Company issued 44,024,910 shares of Common Stock, at a price of $10.00 per share for aggregate gross proceeds of $440.2 million (the "First PIPE Investment"). The shares of Common Stock issued in the First PIPE Investment were offered in a private placement under the Securities Act of 1933, as amended (the “Securities Act”). Upon the closing of the Business Combination, an associated marketing fee and legal fees of approximately $22.9 million was paid in full, and is recognized as an offset to the proceeds from the First PIPE Investment.
Current report
Second PIPE Investment
Current report
On September 26, 2024, the Company issued 7,500,000 shares of Common Stock of the Company, at a price of $20.00 per share for aggregate gross proceeds of approximately $150.0 million (the "Second PIPE Investment"). The shares of Common Stock issued in the Second PIPE Investment were offered in a private placement under the Securities Act. An associated marketing fee and legal fees of approximately $7.8 million was recognized as an offset to the proceeds from the Second PIPE Investment.
Current report
Public Warrant Exercises
Current report
On October 3, 2024, Sable issued a press release announcing the redemption of all of its outstanding Public Warrants to purchase shares of Common Stock that were issued under the Warrant Agreement, as part of the units sold in the Company IPO.
Current report
On October 31, 2024, the Public Warrants ceased trading on the New York Stock Exchange. As of November 4, 2024 (the “Redemption Date”), approximately 99.8% of the Company’s outstanding Public Warrants were exercised by the holders thereof to purchase fully paid and non-assessable shares of Common Stock at an exercise price of $11.50 per share. As a result, holders of the Public Warrants received an aggregate of 15,957,820 shares of the Company’s Common Stock in exchange for $183.5 million in cash proceeds to the Company. All unexercised and outstanding Public Warrants as of 5:00 p.m. New York City time on the Redemption Date were redeemed at a price of $0.01 per Public Warrant and, as a result, no Public Warrants currently remain outstanding and the Public Warrants have ceased trading on the New York Stock Exchange. The private placement warrants and working capital warrants to purchase Common Stock that were issued under the Warrant Agreement and that are still held by the initial holders thereof or their permitted transferees were not subject to this redemption and remain outstanding. Refer to Note 7 — Warrants for additional details regarding the warrant exercises.
Current report
SYU Assets
Current report
Beginning in 1968 and over the course of 14 years, EM consolidated more than a dozen offshore federal oil leases and organized them into a streamlined production unit known as SYU. SYU consists of three offshore platforms and a wholly owned onshore processing facility located along the Gaviota Coast at Las Flores Canyon in Santa Barbara County, California. SYU’s onshore facilities and the three offshore platforms remained in continuous operation until 2015. In May 2015, a pipeline operated by Plains All American Pipeline, L.P. (“Plains”) that transported produced oil from SYU experienced a leak, as further described under“Business—Pipeline 901 Incident.” The SYU platforms and facilities suspended production after the incident, the SYU Assets were shut in and the facilities were placed in a safe state. The facilities are not currently producing oil and gas; however, all equipment remains in place in an operation-ready state, requiring ongoing inspections, maintenance and surveillance. As part of these suspension efforts, all equipment was drained, flushed and purged in 2016. All hydrocarbon pipelines within SYU have been placed in a safe state and remain under regular monitoring. In 2020, Plains entered into a Consent Decree, described further under“Business—Pipeline 901 Incident,” that provides a path for a potential restart of the Pipelines.
Current report
The discussion of the results of operations for the Predecessor periods below do not include the results from the Pipelines and the Pipelines are not included in the combined financial statements of the Predecessor included in the financial statements and related notes thereto included elsewhere in this Annual Report. Financial statements of the Pipelines have not been included because SEC guidance provides that the financial statements of recently acquired businesses such as the Pipelines need not be filed unless their omission would render Predecessors combined financial statements misleading or substantially incomplete. Based upon our quantitative and qualitative analysis, we do not believe omitting the financial statements of the Pipelines renders the Predecessor combined financial statements misleading or substantially incomplete. The Successor financial statements include the results from the Pipelines and the Pipelines are included in the consolidated financial statements.
Current report
For the purposes of the consolidated financial statements, periods on or before February 13, 2024 reflect the financial position, results of operations and cash flows of SYU prior to the Business Combination, referred to herein as the “Predecessor,” and periods beginning on or after February 14, 2024 reflect the financial position, results of operations and cash flows of the Company as a result of the Business Combination, referred to herein as the “Successor.”
Current report
Components of Results of Operations
Current report
Revenue
Current report
The Company has not had any substantial revenues since the shut-in. The Company’s various operating expenses are the principal metrics used to assess its performance.
Current report
Operating Expenses
Current report
•Operations and maintenance. The Company’s most significant costs to operate and maintain its assets are direct labor and supervision, power, repair and maintenance expenses, and equipment rentals. Fluctuations in commodity prices impact operating cost elements both directly and indirectly. For example, commodity prices directly impact costs such as power and fuel, which are expenses that increase (or decrease) in line with changes in commodity prices. Commodity prices also affect industry activity and demand, thus indirectly impacting the cost of items such as labor and equipment rentals.
Current report
•Depreciation, depletion, amortization, and accretion. Depreciation, depletion and amortization are primarily determined under either the unit-of-production method, which is based on estimated asset service life taking obsolescence into consideration. Since being shut in, no depletion or amortization has been recorded for the Successor periods presented. An immaterial amount of depreciation was reflected for idle plants in the historical Predecessor financial statements. Also included in the Successor and Predecessor financial statements is the accretion associated with the Company's estimated asset retirement obligations (“ARO”). The ARO liabilities are initially recorded at their fair value and then are accreted using the Company’s applicable discount rate over the period for the change in their present value until the estimated retirement of the asset.
Current report
•General and administrative. General and administrative (“G&A”) costs are comprised of overhead expenditures directly and indirectly associated with operating the assets. These support services include information technology, risk management, corporate planning, accounting, cash management, human resources, and other general corporate services. For the Predecessor period, any general and administrative expenses that were not specifically identifiable to SYU were allocated to SYU for the year ended December 31, 2023, and for the period from January 1, 2024 to February 13, 2024. To calculate a reasonable allocation, aggregated historical benchmarking data from comparable companies with similar operated upstream assets was used to identify general and administrative expenses as a proportion of operating expenses. Increased general and administrative services may be required in the future, commensurate with planned operations activity levels.
Current report
•Taxes other than income. Management anticipates future increases in ad valorem taxes, in line with the projected restart of production.
Current report
The comparability of our operating results for the period February 14, 2024 through December 31, 2024 (Successor), the period January 1, 2024 through February 13, 2024 (Predecessor), and the year ended December 31, 2023 (Predecessor) was impacted by the Business Combination. In the discussion of our results of operations for these periods, we may quantitatively disclose the impacts of the Business Combination to the extent they remain ascertainable. Following the Closing Date, all of our operations have focused on restarting production of the SYU Assets. We lack the ability to generate any operating revenues until we receive the necessary regulatory approvals and complete the repairs necessary to restart production. Our only source of non-operating income is generated in the form of interest income on cash and cash equivalents. Post the Business Combination, we expect to incur additional expenses as a result of being an operating public company, for legal, accounting and compliance expenses.
Current report
The following table presents selected consolidated financial results of operations for the Successor and Predecessor periods presented.
Current report
Operating and maintenance expenses. Operating and maintenance expenses were $7.3 million and $87.9 million for the periods from January 1, 2024 through February 13, 2024 (Predecessor) and February 14, 2024 through December 31, 2024 (Successor), respectively, or a combined $95.2 million, representing an increase of $34.5 million, or 56.9%, compared to $60.7 million for the year ended December 31, 2023 (Predecessor). The increase in operating and maintenance expenses was primarily attributable to activities associated with restart, which includes an 88% increase in operations employee headcount since the Closing Date. Operations and maintenance expenses are expected to increase over the next several years as production is restarted and additional employees are hired to support safe production operations.
Current report
Depletion, depreciation, amortization and accretion. Depletion, depreciation, amortization and accretion was $2.6 million and $9.7 million for the periods from January 1, 2024 through February 13, 2024 (Predecessor) and February 14, 2024 through December 31, 2024 (Successor), respectively, or a combined $12.4 million, representing a decrease of $8.7 million, or 41.2%, compared to $21.0 million for the year ended December 31, 2023 (Predecessor). The decrease in depletion, depreciation, amortization and accretion was primarily attributable to the Company not recognizing depletion expense following the Business Combination, as the assets were not in service since repairs are necessary prior to achieving production restart. Depletion will resume once production commences and the assets are placed in service. The decrease can also be attributed to a decrease in accretion expense associated with the lower ARO recognized in the Business Combination in accordance with the accounting for the transaction. The $9.7 million depletion, depreciation, amortization and accretion expense recognized for the period February 14, 2024 through December 31, 2024 (Successor) primarily represents the recognition of ARO accretion for the period. Depletion, depreciation, amortization and accretion expense is expected to increase over the next several years as production is restarted.
Current report
General and administrative expenses. General and administrative expenses were $1.7 million and $229.1 million for the periods from January 1, 2024 through February 13, 2024 (Predecessor) and February 14, 2024 through December 31, 2024 (Successor), respectively, or a combined $230.9 million, representing an increase of $218.1 million compared to $12.8 million for the year ended December 31, 2023 (Predecessor). The increase in general and administrative expenses was primarily attributable to general and administrative related stock-based compensation of $86.6 million following the Business Combination, the $70.0 million settlement of the Grey Fox Matter (Refer to Note 8 — Commitments and Contingencies), $17.5 million in legal expenses and professional fees related to the Business Combination, restart efforts, and other legal matters, and the recognition of salaries and wages following the Company's commencement of operations following the Business Combination. Predecessor G&A expenses were allocated to SYU as a portion of certain other operating costs based on aggregated historical benchmarking data as previously noted.
Current report
Total other expense (income), net. Total other expense, net was $0.1 million and $290.6 million for the periods from January 1, 2024 through February 13, 2024 (Predecessor) and February 14, 2024 through December 31, 2024 (Successor), respectively, or a combined $290.7 million, representing an increase of $291.5 million compared to $0.8 million in other income for the year ended December 31, 2023 (Predecessor). The increase in total other expense, net was primarily attributable to an increase of $227.5 million in fair value of the warrants and $67.3 million in interest expense, partially offset by interest income of $4.2 million. The increase during the Successor period is also due to the fact that the Predecessor did not have any debt or associated interest expense, warrants, or interest income.
Current report
Income tax benefit. Income tax benefit was zero and less than $0.1 million for the periods from January 1, 2024 through February 13, 2024 (Predecessor) and February 14, 2024 through December 31, 2024 (Successor), respectively, representing an increase of less than $0.1 million compared to zero for the year ended December 31, 2023 (Predecessor). Based on our ongoing assessment of our ability to recover our deferred tax assets, we concluded that it was more likely than not that our deferred tax assets in excess of deferred tax liabilities would not be realized. For the Successor period, we concluded that certain deferred tax liabilities in future periods do not have deferred tax assets available to offset, which is primarily due to our net operating losses being limited to 80% of future estimated taxable income. Our judgment regarding the likelihood of realization of these deferred tax assets could change in future periods, which could result in a material impact to our income tax provision in the period of change.
Current report
Overview. Our plans for restarting production, including restarting the existing wells and facilities and recommencing transportation through the Pipelines, will require significant capital expenditures in excess of current operational cash flow. Historically, SYU’s primary source of liquidity has been its operational cash flow and, since the shut-in, capital contributions from its parent. While production is in the process of being restarted and prior to generating positive cash flow from production, capital expenditure needs will be substantial and are expected to come from cash on hand. Prior to the Business Combination, Flame had approximately $62.2 million in its trust account, which consisted of proceeds from the public stockholders and the private placement investors in connection with the Company’s initial public offering, less redemptions. Sable raised $440.2 million in gross proceeds from the First PIPE Investment in connection with the Business Combination, $150.0 million in gross proceeds from the Second PIPE Investment, and approximately $183.5 million from the exercise of 15,957,820 warrants for 15,957,820 shares of Common Stock. Additionally, more than $600 million of the Purchase Price was seller-financed through a Senior Secured Term Loan with EM. Based on its current financial plan, Sable management expects production to restart in the second quarter 2025, after which its operating cash flows are expected to be sufficient to service Sable’s operating expenses and indebtedness.
Current report
Capital Requirements. Sable currently estimates remaining start-up expenses of approximately $152.0 million in order to restart production in the second quarter 2025. Management evaluates its cost estimates on an ongoing basis. The expenditures will primarily be directed toward obtaining the necessary regulatory approvals and completing the pipeline repairs and bringing the shut-in assets back online in the second quarter 2025. After production restarts, Sable management expects a rapid increase in operating cash flows that should allow Sable to fund further capital expenditures. If Sable is unable to obtain funds or provide funds as needed for the planned capital expenditure program, Sable may not be able to finance the capital expenditures necessary to restart production or sustain production thereafter.
Current report
Cash Flows
Current report
The following table summarizes cash flows from Operating, Investing and Financing activities:
Current report
Cash Flows from Operating Activities. The SYU Assets have been shut in since 2015 and therefore there has been no production and associated revenues for the comparative periods. The net cash used in operating activities for the Company was $22.5 million and $163.0 million for the periods from January 1, 2024 through February 13, 2024 (Predecessor) and February 14, 2024 through December 31, 2024 (Successor), respectively, or a combined $185.4 million, representing an increase of $115.3 million, or 164.5% compared to the year ended December 31, 2023 (Predecessor). The primary use of cash can be attributed to maintenance and operational readiness activities in the Predecessor and Successor periods, with additional general and administrative costs incurred post the Business Combination in the Successor period. For the period from February 14, 2024 through December 31, 2024 (Successor), we had a net loss of $617.3 million, which consists of a non-cash increase of $227.5 million in fair value of the warrants, non-cash stock-based compensation of $91.6 million, non-cash paid-in-kind interest of $66.3 million, changes in accounts payable of $54.0 million, non-cash depreciation, depletion, amortization and accretion of $9.7 million and a non-cash effect from the First Amendment to the Senior Secured Term Loan of $5.0 million. Changes in accounts payable for that period is primarily attributable to the Grey Fox Matter settlement, with $35.0 million remaining in accounts payable and accrued expenses as of December 31, 2024 (Refer to Note 2 — Significant Accounting Policies), and other vendor payables associated with the restart efforts. Future cash flow from operations will depend on our ability to bring the associated oil and gas production of the assets back online, as well as the prices of oil, NGLs and natural gas.
Current report
For the year ended December 31, 2023 (Predecessor), the $70.1 million cash used in operating activities was related to maintenance and operational readiness expenses.
Current report
Cash Flows from Investing Activities. The net cash used in investing activities for the Company was zero and $276.2 million for the periods from January 1, 2024 through February 13, 2024 (Predecessor) and February 14, 2024 through December 31, 2024 (Successor), respectively. The Successor investing cash flow is primarily comprised of $203.9 million paid to EM at Closing, with the remaining $72.3 million cash paid for capital expenditures associated with restart efforts.
Current report
For the year ended December 31, 2023 (Predecessor), the net cash used in investing activities for the Predecessor period was zero since the SYU Assets have been shut in since 2015, without investing activities, but has been maintained in an operation-ready state.
Current report
Cash Flows from Financing Activities. The net cash provided by financing activities for the Company was $22.5 million and $721.7 million for the periods from January 1, 2024 through February 13, 2024 (Predecessor) and February 14, 2024 through December 31, 2024 (Successor), respectively. The Successor financing activities for the period are comprised of the aggregate $590.2 million in gross proceeds received from the First PIPE Investment and the Second PIPE Investment, less $30.6 million of capitalized transaction expenses, or approximately $559.7 million net, cash received from Warrant exercises of $183.5 million, less the deposit paid to EM for the Senior Secured Term Loan of $18.8 million, payment of debt issuance costs of $1.6 million, and repayment of Flame's non-convertible promissory notes—related parties for $1.1 million.
Current report
For the year ended December 31, 2023 (Predecessor), the net cash used in financing activities was $70.1 million. Predecessor financing activities consists of EM capital contributions financing the maintenance and operational readiness activities.
Current report
Contractual Obligations
Current report
Pursuant to the Senior Secured Term Loan, which financed most of the Purchase Price (as defined in the Senior Secured Term Loan), Sable will pay interest at ten percent (10%) per annum compounded annually, payable in arrears on January 1st of each year. At Sable’s election, accrued but unpaid interest may be deemed paid on each interest payment date by adding the amount of interest owed to the outstanding principal (paid-in-kind) amount under the Senior Secured Term Loan. On December 13, 2024, the Company entered into the Fourth Amendment to the Sable-EM Purchase Agreement, pursuant to which the following definitions were amended. “Restart Production” was redefined as 150 days after first production, extending the maturity date of the EM Term Loan by 60 days. “Restart Failure Date” was extended an additional 60 days to March 1, 2026. In the absence of further negotiations, Restart Production must take place prior to March 1, 2026, and the Senior Secured Term Loan must be refinanced within 240 days following such first production date. Refer to Note 6 — Debt for additional disclosures regarding the Senior Secured Term Loan.
Current report
Pursuant to the Transition Services Agreement with EM, EM provided to Sable certain operational, accounting, cash management, information technology and other general transition services with respect to the Assets (as such term is defined in the Sable-EM Purchase Agreement) for three months following the Closing Date, or until May 14, 2024.
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Removed paragraphs (79)
Previous report
This annual report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-K. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those set forth under “Item 1A. Risk Factors” and elsewhere in this annual report, and those described in our other Securities and Exchange Commission filings.
Previous report
Special Meeting and Closing of the Transactions
Previous report
PIPE Subscription Agreements
Previous report
In connection with the Business Combination, Holdco and Flame entered into subscription agreements (collectively, as amended, supplemented or otherwise modified, the “Initial PIPE Subscription Agreements”) with certain investors (the “PIPE Investors”) for an aggregate commitment amount of $520,000,000 (the “Initial PIPE Investments”), pursuant to which such investors agreed to purchase an aggregate of 52,000,000 shares of common stock of New Sable, par value of $0.0001 per share (“Common Stock”), at a price of $10.00 per share upon the consummation of the Business Combination. On February 12, 2024, following the Special Meeting, a PIPE Investor that subscribed for $125,000,000 of the Initial PIPE Investment informed the Company that it would not be able to fund that subscribed amount by the Closing due to difficulties it experienced related to receiving called capital from certain of its foreign investors. The inability of that PIPE Investor to fund its commitment did not relieve the obligations of the other PIPE Investors to fund their commitments in connection with the Closing. On February 12, 2024 and February 13, 2024, the Company entered into subscription agreements (collectively, the “Additional PIPE Subscription Agreements” and, together with the Initial PIPE Subscription Agreements, the “PIPE Subscription Agreements”) (including an additional $25,000,000 commitment from James C. Flores, our Chairman and Chief Executive Officer) on substantially the same terms as those contained in the Initial PIPE Subscription Agreements to replace, in the aggregate, $55,000,000 of the amount previously committed by the PIPE Investor described above (the “Additional PIPE Investments” and, together with the Initial PIPE Investments, the “PIPE Investments”). On February 14, 2024, immediately following the Closing, New Sable issued 44,024,910 shares of Common Stock, at a price of $10.00 per share for an aggregate PIPE Investment of $440,249,100 in accordance with the terms of the PIPE Subscription Agreements. The shares of Common Stock issued in the PIPE Investments were offered in a private placement under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the PIPE Subscription Agreements.
Previous report
Registration Rights Agreement
Previous report
On the Closing Date, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, the holders of the limited liability company interests in Holdco designated as Holdco Class A shares entered into a registration rights agreement with New Sable (the “Registration Rights Agreement”) pursuant to which the holders were granted certain registration rights with respect to the Common Stock received as consideration in the Merger.
Previous report
Pursuant to the Registration Rights Agreement, New Sable agreed to file a registration statement within 30 calendar days after the consummation of the Merger registering the resale of the registrable securities under the Registration Rights Agreement, and use its commercially reasonable efforts to have the registration statement declared effective by the SEC by the earlier of (i) the 90th calendar day (or 120th calendar day if the SEC notifies New Sable that it will review the registration statement) following the closing of the Merger and (ii) the 10th business day after the date New Sable are notified (orally or in writing, whichever is earlier) by the SEC that the registration statement will not be reviewed or will not be subject to further review. New Sable thereafter will be required to maintain a registration statement that is continuously effective and to cause the registration statement to regain effectiveness in the event that it ceases to be effective. At any time the registration statement is effective, any holder signatory to the Registration Rights Agreement may request, one time in any 12-month period, to sell all or a portion of its securities that are registrable in an underwritten offering pursuant to the registration statement for a total offering price reasonably expected to exceed, in the aggregate, $25 million. In addition, the holders have certain “piggyback” registration rights with respect to registrations initiated by New Sable and other New Sable stockholders. New Sable will bear the expenses incurred in connection with the filing of any registration statements pursuant to the Registration Rights Agreement, subject to limited exceptions.
Previous report
Pursuant to the Registration Rights Agreement, the holders of Holdco Class A shares immediately prior to the effective time of the Holdco Merger, subject to limited exceptions, agreed to alock-up on their shares of Common Stock, pursuant to which such parties agreed to not transfer shares of Common Stock held by such parties for a period of three years following the closing of the Business Combination.
Previous report
The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the form Registration Rights Agreement filed as an exhibit to New Sable’s Current Report on Form 8-K, filed with the SEC on February 14, 2024.
Previous report
Recent Events
Previous report
On February 21, 2023, to mitigate the risk of us being deemed to have been operating as an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act), the investments in U.S. government securities or money market funds held in the Trust Account were liquidated to thereafter be held in cash (which may include an interest bearing demand deposit account at a national bank) until earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account to the Company’s stockholders.
Previous report
On February 27, 2023, at a special meeting of stockholders, the Company’s stockholders voted to approve an amendment (the “Extension Amendment Proposal”) to the amended and restated certificate of incorporation to extend the date by which the Company must complete a business combination (the “Extension”) from March 1, 2023, to September 1, 2023 (the “Extended Date”). In connection with the Extension, stockholders holding 20,317,255 shares of our Class A common stock, par value $0.0001 per share (“Flame Class A common stock”) exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account, representing approximately 70.67% of our issued and outstanding Flame Class A common stock. As a result, $206,121,060 (approximately $10.15 per share) was removed from the Trust Account to pay such redeeming holders on March 2, 2023.
Previous report
On February 27, 2023, in connection with the Extension, we filed an amendment (the “Extension Amendment”) to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. The Extension Amendment extends the date by which we must consummate our initial business combination from March 1, 2023 to September 1, 2023.
Previous report
On June 13, 2023, Sable and EM entered into a First Amendment (the “First Amendment”) to the Sable-EM Purchase Agreement. Pursuant to the First Amendment, Sable and EM agreed to amend the Sable-EM Purchase Agreement to, among other things, provide that the closing of the transactions contemplated by the Sable-EM Purchase Agreement was scheduled to take place on June 30, 2023 (the “Sable-EM Scheduled Closing Date”), unless one or more of the conditions to closing described in the Sable-EM Purchase Agreement was not satisfied as of the Sable-EM Scheduled Closing Date, in which case the closing would be held three business days after all such conditions were satisfied or waived, or such other date as the parties may mutually agree in writing, but in no event later than December 31, 2023. The First Amendment also lowered the “Minimum Cash Threshold” (as defined in the Sable-EM Purchase Agreement) from $200,000,000 to $150,000,000. On December 15, 2023, Sable and EM entered into a Second Amendment (the “Second Amendment”) to the Sable-EM Purchase. Pursuant to the Second Amendment, Sable and EM agreed to amend the Sable-EM Purchase Agreement to, among other things, provide that the closing of the transactions contemplated by the Sable-EM Purchase Agreement was scheduled to take place on February 1, 2024 (the “Second Sable-EM Scheduled Closing Date”), unless (i) Sable and EM agreed to close on a date prior to the Second Sable-EM Scheduled Closing Date, in which case the closing would be held on such agreed date, or (ii) one or more of the conditions to closing described in the Sable-EM Purchase Agreement were not satisfied as of the Second Sable-EM Scheduled Closing Date, in which case the closing would be held three business days after all such conditions have been satisfied or waived, or such other date as the parties may mutually agree in writing, but in no event later than February 29, 2024. The obligations of EM to consummate the transactions contemplated by the Sable-EM Purchase Agreement were subject to the satisfaction by Sable (unless waived by EM) of, among other conditions, the condition that the amount of Available Cash of Sable was not less than the Minimum Cash Threshold.
Previous report
On June 30, 2023, Flame and Sable entered into a Second Amendment to the Merger Agreement, pursuant to which the parties agreed to extend the date by which the parties must consummate the Business Combination, or otherwise either Flame or Sable would be able to terminate the Merger Agreement, from June 30, 2023 to March 1, 2024.
Previous report
On August 22, 2023, we issued an aggregate of 7,187,500 shares of Flame Class A common stock to Sponsor, FLCo-Investment, Intrepid Financial Partners, Flame’s independent directors and certain of our executive officers, upon the conversion of an equal number of shares of Flame Class B common stock (the “Class B Conversion”). The 7,187,500 shares of Flame Class A common stock issued in connection with the Class B Conversion are subject to the same restrictions as applied to the shares of Flame Class B common stock before the Class B Conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial business combination, as described in the prospectus for the Flame IPO. After the Class B Conversion, no shares of Flame Class B common stock remained outstanding.
Previous report
On August 29, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Second Extension Amendment Proposal to the Flame certificate of incorporation to extend the date by which we must complete a business combination from September 1, 2023 to March 1, 2024. In connection with the Second Extension, stockholders holding 2,328,063 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account (approximately $10.31 per share), representing approximately 27.61% of Flame’s then issued and outstanding public shares. After giving effect to such redemptions, approximately $63.0 million remained in the trust account.
Previous report
On August 29, 2023, in connection with the Second Extension, we filed the Second Extension Amendment to the Flame certificate of incorporation with the Secretary of State of the State of Delaware. The Second Extension Amendment extended the date by which we had to consummate our initial business combination from September 1, 2023 to March 1, 2024.
Previous report
On December 5, 2023, the California State Lands Commission voted unanimously to approve amendments toright-of-way leases held directly or indirectly by EM, for existing infrastructure serving offshore platforms Hondo, Harmony and Heritage in SYU. The amendments, among other things, extend the holdover periods for each of the leases by five years to December 31, 2028 and January 31, 2029, increase the bonding requirements from $1,000,000 to $15,000,000 and from $1,000,000 to $5,000,000, and provide for increased inspection and monitoring requirements. These leases were subsequently assigned to Sable. Sable does not expect the assignment of the leases to have an impact on the regulatory approval process.
Previous report
Our entire activity since inception through December 31, 2023 was related to our formation, the preparation for our initial public offering, and since the closing of our initial public offering, the search for a target for our initial business combination (see Note 1 to our financial statements included elsewhere in this annual report). We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial business combination. We will generatenon-operating income in the form of interest income on cash and cash equivalents and changes in fair value of our derivative warrant liabilities and promissory notes. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
Previous report
Until consummation of its Business Combination, the Company used the funds not held in the Trust Account, and any additional Working Capital Loans (as defined in Note 5 to our financial statements included elsewhere in this annual report) from the initial stockholders, the Company’s officers and directors, or their respective affiliates (which is described in Note 5 to our financial statements included elsewhere in this annual report), for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.
Previous report
For the year ended December 31, 2023, we had a net loss of $32,180,557, which consisted of interest income on our amounts held in the Trust Account of $4,415,456, offset by an increase in the fair value of warrants of $27,064,500 (due to a corresponding increase in the market price of the warrants) operating costs of $4,918,801, income tax expense of $914,318 and an increase in fair value of the previously issued promissory notes of $3,698,394.
Previous report
For the year ended December 31, 2022, we had a net loss of $2,590,948, which consisted of interest income on our amounts held in the Trust Account of $3,989,061, and a decrease in the fair value of warrants of $498,000, offset by operating costs of $6,150,199, income tax expense of $757,069 and an increase in fair value of the previously issued promissory notes of $170,741.
Previous report
As of December 31, 2023, we had cash outside the Trust Account of $267,816 available for working capital needs and a working capital deficit of $16,407,803. All remaining cash held in the Trust Account was generally unavailable for the Company’s use, prior to our initial business combination, and was restricted for use either in a Business Combination, to redeem common stock or to use for payment of taxes. As of December 31, 2023, $2,969,263 of the amount in the Trust Account was available to be withdrawn as described above, which is net of the $1,446,193 the Company withdrew for payment of taxes during the period ended December 31, 2023. Through December 31, 2023, the Company’s liquidity needs were satisfied through various promissory notes from our sponsor (see further discussion of the individual promissory notes in Note 5).
Previous report
As of December 31, 2023, we had cash of $267,816. Until the consummation of our initial public offering, our only sources of liquidity were an initial purchase of common stock by our founders and a loan from the Sponsor, FLCo-Investment and Intrepid Financial Partners.
Previous report
Our registration statement for our initial public offering was declared effective on February 24, 2021. On March 1, 2021, we consummated our initial public offering of 28,750,000 units, which included 3,750,000 units issued pursuant to the full exercise by the underwriters of their over-allotment option, at $10.00 per Unit, generating gross proceeds of $287,500,000 and incurring offering costs of $16,670,251, inclusive of $10,062,500 in deferred underwriting commissions pursuant to the Business Combination Marketing Agreement with Cowen and Company, LLC and Intrepid Partners, LLC (the “Business Combination Marketing Agreement”).
Previous report
Simultaneously with the closing of our initial public offering, we consummated the private placement of 7,750,000 warrants to our initial stockholders, each exercisable to purchase one share of Flame Class A common stock at $11.50 per share, at a price of $1.00 per private placement warrant, generating gross proceeds to us of $7,750,000.
Previous report
Upon the closing of our initial public offering and the private placement, $287,500,000 of the net proceeds of the sale of the Units in our initial public offering and the sale of private placement warrants in the private placement were placed in the Trust Account, located in the United States at J.P. Morgan Chase Bank, N.A., with American Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of our initial business combination and (ii) the distribution of the Trust Account as described below. Except with respect to interest earned on the funds held in the Trust Account that may be released to us to pay our taxes, if any, the funds held in the Trust Account would not be released until the earliest to occur of: (a) the completion of our initial business combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or redeem 100% of our public shares if we did not complete our initial business combination by March 1, 2024, or (B) with respect to any other provision relating to stockholders’ rights orpre-initial business combination activity and (c) the redemption of our public shares if we were unable to complete our initial business combination by March 1, 2024, subject to applicable law. On February 21, 2023, the Trust Account was liquidated to thereafter be held in cash.
Previous report
Related Party Transactions
Previous report
Founder Shares
Previous report
In November 2020, our founders acquired 7,187,500 shares of Flame Class B common stock (the “founder shares”) for an aggregate purchase price of $25,000. Our Sponsor purchased 4,671,875 founder shares, FLCo-Investment purchased 1,257,813 founder shares and Intrepid Financial Partners purchased 1,257,812 founder shares. Also in November 2020, our Sponsor transferred 434,375 founder shares to our independent director nominees and certain individuals, including Gregory D. Patrinely, our Executive Vice President and Chief Financial Officer, at their original purchase price. Simultaneously with such transfer, each of FLCo-Investment and Intrepid Financial Partners transferred 13,125 founder shares to our Sponsor, respectively, at their original purchase price.
Previous report
The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the founder shares until the earlier to occur of:
Previous report
(a) one year after the completion of our initial business combination or (b) subsequent to our initial business combination, (x) if the last reported sale price of our Flame Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and other similar transactions) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. Any permitted transferees would be subject to the same restrictions and other agreements of our initial stockholders with respect to any founder shares.
Previous report
On August 22, 2023, we issued an aggregate of 7,187,500 shares of Flame Class A common stock to the Sponsor, FL Co-Investment, Intrepid Financial Partners, our independent directors and certain of our executive officers, upon the Class B Conversion. The 7,187,500 shares of Flame Class A common stock issued in connection with the Class B Conversion are subject to the same restrictions as applied to the shares of Flame Class B common stock before the Class B Conversion, including, among other things, certain transfer restrictions and waiver of redemption rights, as described in the prospectus for the IPO described below (See Note 3 - Initial Public Offering). After the Class B Conversion, no shares of Flame Class B common stock remained outstanding.
Previous report
Private Placement Warrants
Previous report
Simultaneously with the closing of our initial public offering, we consummated the private placement of 7,750,000 private placement warrants to our initial stockholders, each exercisable to purchase one share of Flame Class A common stock at $11.50 per share, at a price of $1.00 per private placement warrant, generating gross proceeds to us of $7,750,000.
Previous report
Each private placement warrant is exercisable for one whole share of Flame Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the private placement warrants to the initial stockholders was added to the proceeds from our initial public offering held in the Trust Account. If we had not completed a business combination by March 1, 2024, the private placement warrants would have expired worthless. Except as set forth below, the private placement warrants arenon-redeemable for cash and exercisable on a cashless basis so long as they are held by the initial stockholders or their permitted transferees.
Previous report
The purchasers of the private placement warrants agreed, subject to limited exceptions, not to transfer, assign or sell any of their private placement warrants (except to permitted transferees) until 30 days after the completion of the initial business combination.
Previous report
Related Party Loans
Previous report
On November 25, 2020, our founders agreed to loan us an aggregate of up to $300,000 to cover expenses related to our initial public offering pursuant to a promissory note (the “Initial Promissory Note”). This loan wasnon-interest bearing and payable upon the completion of our initial public offering. We borrowed $75,000 under the Initial Promissory Note and repaid the Initial Promissory Note to our founders in full as of September 30, 2021.
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Reworded paragraphs (9)
Previous wording
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following as our critical accounting policies:
Current wording
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Previous wording
Unless otherwise indicated, references to “we”, “us”, “our”, “Flame” or the “Company” in this Item 7 are to Flame Acquisition Corp. before the consummation of the Business Combination. References to “New Sable” are to Sable Offshore Corp., after the consummation of the Business Combination. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes thereto included elsewhere in this annual report. The financial information included in this Item 7 is that of the Company prior to the Business Combination because the Business Combination was consummated subsequent to the period covered by the audited financial statements included in this annual report.
Current wording
Unless otherwise indicated, references to “we”, “us”, “our”, “Sable” or the “Company” in this Item 7 are to Sable Offshore Corp. (f/k/a Flame Acquisition Corp.) and its consolidated subsidiaries, following the Business Combination. References to “Flame” are to Flame Acquisition Corp. before the consummation of the Business Combination. References to the “Pipelines” are to Pipeline Segments 324/325 (formerly known as Pipeline Segments 901/903) and the other “324/325 Assets” (formally known as "901/903 Assets" and as defined in the Sable-EM Purchase Agreement). As a result of the closing of the Business Combination, which was accounted for as a forward merger in accordance with GAAP, the financial statements of Successor (as defined below) are now the financial statements of the Company. The following discussion and analysis of our financial condition and results of operations is provided as a supplement to, and should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Annual Report. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed in “Cautionary Notice Regarding Forward-Looking Statements” and Part I, Item 1A, “Risk Factors.”
Previous wording
We were incorporated in Delaware on October 16, 2020 and, until February 14, 2024, were a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Current wording
Sable Offshore Corp. is an independent oil and gas company headquartered in Houston, Texas. We were incorporated in Delaware on October 16, 2020 and, until February 14, 2024, were a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Previous wording
On November 2, 2022, we entered into an agreement and plan of merger, dated as of November 2, 2022 (as amended, the “Merger Agreement”), with Sable Offshore Corp., a Texas corporation (“SOC”), and Sable Offshore Holdings, LLC, a Delaware limited liability company and the parent company of SOC (“Holdco” and, together with SOC, “ Legacy Sable”). Pursuant to the Merger Agreement, on February 14, 2024, (i) Holdco merged with and into Flame, with Flame surviving such merger (the “Holdco Merger”) and (ii) SOC merged with and into Flame, with Flame surviving such merger (the “SOC Merger” and, together with the Holdco Merger, the “Mergers” and, along with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the Business Combination, Flame changed its name to “Sable Offshore Corp.”.
Current wording
On November 2, 2022, Flame entered into an agreement and plan of merger, dated as of November 2, 2022 (as amended, the “Merger Agreement”), with SOC and Sable Offshore Holdings, LLC, a Delaware limited liability company and the parent company of SOC (“Holdco” and, together with SOC, “Legacy Sable”), which provided for the following transactions at the closing: (i) Holdco would merge with and into Flame, with Flame surviving such merger (the “Holdco Merger”) and (ii) SOC would merge with and into Flame, with Flame surviving such merger (the “SOC Merger” and, together with the Holdco Merger, the “Mergers” and, along with the other transactions contemplated by the Merger Agreement, the “Business Combination”).
Previous wording
On February 12, 2024, we held a special meeting of stockholders (the “Special Meeting”), at which the Flame stockholders considered and adopted, among other matters, a proposal to approve the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement.
Current wording
On February 12, 2024, Flame held a special meeting of stockholders (the “Special Meeting”), at which the Flame stockholders considered and adopted, among other matters, a proposal to approve the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement.
Previous wording
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, following the Special Meeting, on February 14, 2024 (the “Closing Date”), the Business Combination was consummated (the “Closing”).
Current wording
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, following the Special Meeting, on February 14, 2024 (the “Closing Date”), the Business Combination was consummated (the “Closing”). In connection with the Business Combination, Flame changed its name to “Sable Offshore Corp.”
Previous wording
Management has addressed near-term capital funding needs with the PIPE capital raise and the consummation of the Business Combination and believes the Company has sufficient capital to maintain operations and complete the repairs necessary to restart production at SYU. However, the Company’s plans for production restart are contingent upon approvals from federal, state and local regulators. Additionally, if the Company’s estimates of the costs of restarting production are less than the actual amounts necessary to do so, the Company may have insufficient funds available to operate its business prior to first production and will need to raise additional capital. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, among other things, suspending repair efforts and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
Current wording
Prior to the Business Combination, EM funded the Predecessor SYU operational expenses. Since the consummation of the Business Combination, Sable has addressed near-term capital funding needs with the First PIPE Investment, the Second PIPE Investmentand proceeds from the exercise of Warrants (refer to Note 7 — Warrantsfor additional details regarding the warrant exercises) and believes the Company has sufficient capital to maintain operations and complete the repairs necessary to restart production. However, the Company’s plans for production restart are contingent upon approvals from federal, state and local regulators. Additionally, if the Company’s estimates of the costs of restarting production are less than the actual amounts necessary to do so, the Company may have insufficient funds available to operate its business prior to first production and will need to raise additional capital. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, among other things, reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
Previous wording
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, isre-assessed at the end of each reporting period.
Current wording
Derivative Warrant Liabilities. We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Previous wording
We issued 14,375,000 common stock warrants to investors in our initial public offering and issued 7,750,000 private placement warrants. All of our outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The difference between the fair value of the private placement warrants and the initial purchase consideration thereof is recorded as compensation expense. The liabilities are subject tore-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of the Public Warrants and Private Warrants were initially and subsequently measured at fair value using a Monte-Carlo simulation model. Beginning as of December 31, 2021, the fair value of Public Warrants have been measured based on the listed market price of such Public Warrants. The private placement warrants are measured by reference to the listed trading price of the Public Warrants at December 31, 2023.
Current wording
All of our outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The private placement warrants and the working capital warrants are measured at fair value using the Modified Black-Scholes Optional Pricing Model.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Cautionary Note Regarding Forward-Looking Statements