Sable Offshore Corp.
11/09/2026 | Press release | Distributed by Public on 11/09/2026 05:29
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise noted or the context otherwise requires, references to (i) the "Company", "Sable", "we", "us", or "our" in this Item 2 are to Sable Offshore Corp, a Delaware corporation, and its consolidated subsidiaries, following the Business Combination, (ii) "Flame" are to Flame Acquisition Corp. prior to the Business Combination, (iii) the "Santa Ynez Unit" or "SYU" are to the 16 federal leases, three offshore platforms (Hondo, Harmony and Heritage), and associated ancillary facilities located in federal water offshore California, and (iv) the "Santa Ynez Pipeline System" (or "SYPS") are to the interstate pipeline connecting the SYU to the Pentland Station terminal, inclusive of "Pipeline Segment 324" and "Pipeline Segment 325", or collectively referred to as "Pipeline Segments 324 and 325" (formerly known as "901/903 Assets" and as defined in the Sable-EM Purchase Agreement), the Las Flores Canyon ("LFC") onshore processing, storage, and related pipeline assets, and the offshore pipeline connecting the SYU to LFC. The SYU Assets include the SYU and the SYPS. 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 Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
The unaudited condensed consolidated financial statements include 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. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the risk factors described in Part I, Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2025, and those described in our other filings with the Securities and Exchange Commission ("SEC"). The Company's securities filings can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Recent Events
2026 Refinancing Transactions
On July 2, 2026, the Company consummated a series of transactions to refinance the Senior Secured Term Loan and strengthen its capital structure and liquidity position (collectively, the "2026 Refinancing Transactions" or the "Refinancing"). The Refinancing consisted of the following components:
•Convertible Notes Offering. The Company issued $345.0 million aggregate principal amount of 6.5% Convertible Senior Notes due 2031 (the "Convertible Notes") in an underwritten public offering, resulting in net proceeds of approximately $332.7 million.
•Concurrent Common Stock Offering. The Company issued 37,337,662 shares of Common Stock in an underwritten public offering, resulting in net proceeds of approximately $109.2 million (the "Common Stock Offering").
•New Senior Secured Credit Facilities. The Company entered into (i) a new $675.0 million senior secured Term Loan B credit facility (the "Term Loan B"), which was fully drawn at closing, and (ii) a new senior secured reserve-based revolving credit facility of up to $500.0 million (the "Senior Revolver"), which was undrawn at closing. The Term Loan B and the Senior Revolver are collectively referred to as the "New Senior Secured Credit Facilities." Both facilities mature on December 15, 2028 and are secured by first-priority liens on substantially all of the Company's assets.
The Company used the net proceeds of the Convertible Notes and the Common Stock Offering, together with borrowings under the Term Loan B, to repay in full the Company's Senior Secured Term Loan Agreement ("Senior Secured Term Loan") with Exxon Mobil Corporation ("Exxon" or "EM"), and to pay related fees and expenses, with the remainder available for general corporate purposes.
Commodity Derivative Activity
In conjunction with the 2026 Refinancing Transactions, the Company was required to enter into hedging agreements within five days of closing. In July 2026, the Company entered into crude oil costless collars with Brent floor prices of $65.00 per barrel to manage its exposure to fluctuations in crude oil prices. The derivatives are not designated as hedges for accounting purposes. As a result, they are recorded at fair value each period, with changes in fair value recognized in earnings. For the three and nine months ended September 30, 2026, the Company recognized a loss on commodity derivatives of $168.7 million, including $10.0 million of realized losses and $158.7 million of unrealized losses due to changes in fair value. The Company expects to hedge additional volumes opportunistically as production increases.
Defense Production Act Order
On March 13, 2026, President Trump signed an Executive Order delegating certain authorities under the Defense Production Act ("DPA") to the U.S. Secretary of Energy. That same day, Secretary of Energy Chris Wright issued an order pursuant to that delegated authority (the "DPA Order") which found that the SYU is a critical West Coast energy resource that has been blocked by California state measures. The DPA Order directs Sable to immediately prioritize and allocate pipeline transportation services for hydrocarbons from the SYU through the SYPS, and to maintain compliance until the conditions necessitating the issuance of the order abate or Sable is directed otherwise. On March 14, 2026, the Company resumed transportation of oil through Pipeline Segments 324 and 325 of the SYPS pursuant to the DPA Order.
On March 30, 2026, the State of California filed suit in the U.S. District Court for the Central District of California, alleging that the DPA Order violates the Administrative Procedure Act and the U.S. Constitution (State of California v. Chris Wright, et al., Case No. 2:26-cv-03396). After a June 8, 2026 hearing on the State's Motion for Preliminary Injunction and supplemental briefing, the federal defendants moved to dismiss, and Sable and Pacific Pipeline Company joined the motion, which was fully briefed and taken under submission on September 17, 2026. On August 19, 2026, the Court denied the State's Motion for Preliminary Injunction. The State subsequently filed a notice of appeal of the Court's August 19 Order and filed its opening brief with the U.S. Court of Appeals for the Ninth Circuit on October 2, 2026.
Federal Court Rulings Regarding the Consent Decree and the Santa Ynez Pipeline System
On August 19, 2026, the U.S. District Court for the Central District of California (the "Court") issued rulings in several proceedings relating to the onshore portion of the SYPS. The rulings were largely favorable to the positions the Company took in the proceedings. The Court modified the Consent Decree to substitute OSFM with PHMSA as the regulatory authority over the onshore portions of the SYPS, declined to enjoin the DPA Order, and held that "a state court may not impose or enforce state laws that might burden Sable from complying with the DPA Order." The rulings are summarized below:
•Consent Decree. The U.S. Department of Justice moved to terminate or, alternatively, modify the 2020 consent decree entered in United States and the People of the State of California v. Plains All American Pipeline, L.P., et al. (the "Consent Decree"). The Company submitted briefing supporting the United States' motion as a nonparty to the litigation, and the United States' motion was heard on June 8, 2026. The Court denied the motion to terminate the Consent Decree and granted the motion to modify it. As modified, the Consent Decree substitutes PHMSA for OSFM as the regulatory authority overseeing pipeline operations, and it dismisses Plains All American Pipeline, L.P. from the Consent Decree.
•DPA Order. In State of California v. Chris Wright, et al. (2:26-cv-03396), the Court denied the State of California's motion for a preliminary injunction enjoining the DPA Order.
•Consent Decree penalty. The Court granted in part California's motion to enforce the Consent Decree. It found that the Company violated the Consent Decree by resuming petroleum transportation through the onshore portions of the SYPS without OSFM authorization and assessed a civil penalty of $1.5 million. The penalty is included in operations and maintenance expenses in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2026. The Court also determined that Sable is no longer in violation of the Consent Decree as of the date of the Court's Order modifying the Consent Decree to substitute PHMSA for OSFM.
•Sable Offshore Corp., et al. v. Quintero. The Court declared that the DPA Order bars State Parks from taking legal action to prevent the Company from complying with the DPA Order by operating the onshore portions of the SYPS. The Court further stated that this declaration is dispositive of the parallel trespass action brought by State Parks and invited Sable to file a motion for summary judgment in that proceeding.
•Center for Biological Diversity, et al. v. California Department of Forestry and Fire Protection. The Court remanded the case to the Superior Court of California, County of Santa Barbara. However, the Court "note[d] that, pursuant to this Order and the doctrine of collateral estoppel, due to the preemptive authority of the DPA Order, a state court may not impose or enforce state laws that might burden Sable from complying with the DPA Order."
On August 20, 2026, the State of California filed a notice of appeal of the Court's order denying its motion for a preliminary injunction enjoining the DPA Order. On August 21, 2026, the defendant in Sable Offshore Corp., et al. v. Quintero filed a notice of appeal. On October 19, 2026, the United States filed a notice of appeal in Center for Biological Diversity, et al. v. California Department of Forestry, appealing the order to remand the case to state court. The Company cannot predict the outcome of these appeals. Refer to Note 6 - Commitments and Contingencies, for additional disclosures regarding ongoing litigation.
Offshore Buoy Alternative
Sable continues to evaluate the installation of an oil sales buoy (the "Buoy") to provide access to additional markets for federal crude oil produced from the SYU in the Pacific Outer Continental Shelf Area (the "Buoy Strategy"). Sable is working on permitting for the Buoy Strategy. Sable estimates that the total capital required to install the Buoy would be approximately $125.0 million. See "Risk Factors-Risks Associated with Our Operations-In order to commence operations pursuant to the OS&T Strategy or the Buoy Strategy, we will require clearances and permitting, including from BOEM", included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 10-K"), our Quarterly Report on Form 10-Q for the period ended March 31, 2026 (the "2026 Q1 10-Q"), and our Quarterly Report on Form 10-Q for the period ended June 30, 2026 (the "2026 Q2 10-Q").
Offshore Storage and Treating Vessel Alternative
On September 29, 2025, Sable announced that it was evaluating an offshore storage and treating vessel ("OS&T") strategy to provide access to domestic and global markets via shuttle tankers for federal crude oil produced from the SYU in the Pacific Outer Continental Shelf Area (the "OS&T Strategy"). Continued delays related to the SYPS at that time prompted Sable to evaluate the OS&T Strategy. On October 9, 2025, Sable submitted a Development and Production Plan update for the SYU to the Bureau of Ocean Energy Management ("BOEM"), whose functions, together with those of the Bureau of Safety and Environmental Enforcement ("BSEE"), were consolidated into the Marine Minerals Administration (the "MMA") effective July 10, 2026. Regulatory authorizations, including clearance from the MMA, would be required before the OS&T Strategy could be implemented.
Oil transportation through Pipeline Segments 324 and 325 of the SYPS has resumed, and the Company has been directed under the DPA Order to immediately prioritize and allocate pipeline transportation services for oil from the SYU through the SYPS. As a result, the pipeline delays that prompted the Company to evaluate the OS&T Strategy as an alternative to the SYPS have been resolved, and the Company's near-term development plan is focused on transportation through the SYPS. The Company continues to evaluate the OS&T Strategy as a longer-term option to diversify sales channels, expand access to domestic and international purchasers, and provide additional flexibility in navigating potential regulatory developments.
If implemented, preparations for the OS&T Strategy would include acquiring a suitable OS&T vessel, refitting and upgrading the vessel and the SYU equipment, transporting the vessel to the SYU, and installing it. Sable estimates that the total capital required to execute the OS&T Strategy would be approximately $475.0 million. See "Risk Factors-Risks Associated with Our Operations-In order to commence operations pursuant to the OS&T Strategy or the Buoy Strategy, we will require clearances and permitting, including from BOEM" included in our 2025 10-K, 2026 Q1 10-Q, and 2026 Q2 10-Q.
At-the-Market Common Stock Offering
On February 2, 2026, the Company entered into a Sales Agreement (the "Sales Agreement") with TD Securities (USA) LLC and Jefferies LLC, as agents (the "Agents"), under which the Company may offer and sell, from time to time at its sole discretion, an aggregate gross sale price of up to $250.0 million of shares of its Common Stock through the Agents, pursuant to an effective shelf registration statement on Form S-3 (Registration No. 333-286675), which was declared effective by the SEC on May 1, 2025 (the "ATM Program"). The Company filed a prospectus supplement with the SEC on
February 2, 2026 in connection with the ATM Program. Under the terms of the Sales Agreement, the Agents may sell the Company's Common Stock by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415 of the Securities Act of 1933, as amended.
During the three and nine months ended September 30, 2026, the Company issued 16,110,711 and 23,111,345 shares of its Common Stock, respectively, in connection with the ATM Program, for aggregate gross proceeds of approximately $76.6 million and $171.5 million, respectively. Associated marketing and legal fees of approximately $1.4 million and $3.1 million were paid and recognized as an offset to the proceeds within Additional paid-in capital in the unaudited condensed consolidated balance sheet and statement of changes in stockholders' equity for the three and nine months ended September 30, 2026, respectively.
Oil Marketing
The California crude oil market is challenged by a lack of in-state refining capacity. California is geographically isolated from other U.S. refining centers and has limited pipeline connectivity to them. The number of refineries operating in the state has declined significantly over time, including the recent closures of the Phillips 66 Los Angeles refinery and the Valero Benicia refinery. These closures have reduced the number of potential purchasers for California-produced crude oil. On October 22, 2026, President Trump signed a Presidential Determination pursuant to Section 303 of the DPA determining that domestic petroleum production, refining, and logistics capacity are essential to the national defense. The determination makes available DPA financial support and other incentives intended to encourage the expansion of domestic refining capacity, including in regions such as the West Coast where refining capacity has been identified as insufficient. The Company cannot predict whether or when any such incentives will result in additional refining capacity in California.
The Company has historically sold all of its crude oil production to a single purchaser. As described in Note 1 - Organization, Business Operations, and Going Concern, on October 6, 2026, the purchaser temporarily curtailed its purchases of the Company's crude oil due to an operational issue on the part of the purchaser, and the curtailment has continued through the date of this filing. To diversify its customer base and reduce its reliance on a single purchaser, the Company has received commitments from additional refiners in California and began selling barrels to these purchasers in November 2026. However, the volumes committed by these additional purchasers are currently less than the volumes historically purchased by the Company's primary purchaser, and there can be no assurance that the Company will be able to secure sufficient additional commitments to offset the curtailed volumes. Refer to the section entitled "Part II, Item 1A. Risk Factors-We depend upon a limited number of purchasers for the sale of most of our crude oil. The loss of one or more of these purchasers could, among other factors, limit our access to suitable markets for the crude oil we produce."
Recent Trends and Outlook
Trends
Commodity prices have been highly volatile during the nine months ended September 30, 2026, driven primarily by geopolitical developments in the Middle East. Benchmark crude oil prices began 2026 near multi-year lows, with Brent trading in the low-$60s per barrel amid a well-supplied global market and moderate demand growth. Prices rose sharply after armed conflict broke out between the United States and Iran in late February 2026 and to the related disruptions to shipping through the Strait of Hormuz. Brent crude briefly reached $118.35 per barrel on March 31, 2026, its highest level since the onset of the COVID-19 pandemic, before moderating as the conflict de-escalated and a temporary ceasefire took hold. During the third quarter of 2026, Brent declined to a low of $71.57 per barrel in early July following a memorandum of understanding between the United States and Iran. It then rose to $100.69 per barrel in late July after renewed attacks on tankers transiting the Strait of Hormuz. Brent averaged approximately $91.29 per barrel during the third quarter of 2026 and was approximately $103.53 per barrel as of September 30, 2026. As of the date of this filing, crude oil prices remain elevated and volatile relative to pre-conflict levels, and they remain sensitive to developments affecting shipping through the Strait of Hormuz.
The Company is subject to ongoing litigation and regulatory proceedings, including matters involving California state agencies, refer to Note 6 - Commitments and Contingencies for additional details. Continued regulatory scrutiny and legal proceedings contribute to an uncertain operating environment. They may result in increased compliance costs, operational delays, or other constraints, which could adversely affect the Company's business, results of operations, financial condition, and capital expenditures.
Outlook
Oil production at the Santa Ynez Unit resumed in 2025, oil sales resumed in March 2026, and the Company completed its 2026 Refinancing Transactions in July 2026. The Company's near-term strategy is to increase production across its offshore platforms while managing its capital structure, liquidity and debt service obligations. Oil sales averaged approximately 27.5 thousand net barrels per day during the three months ended September 30, 2026.
As a result of the curtailment of crude oil purchases by the Company's purchaser beginning October 6, 2026, as described under "Oil Marketing" above and in Note 1 - Organization, Business Operations, and Going Concern, the Company no longer expects to achieve its previously announced guidance of average net crude oil sales of 40.0 to 45.0 thousand barrels of oil per day ("MBoe/d") for the second half of 2026. The Company currently expects average net crude oil sales of 20 to 30 MBoe/d for the second half of 2026, which excludes the impact of any potential sale of the Company's existing crude oil inventory. The Company expects the current sales constraints to be resolved during the fourth quarter of 2026 as the Company anticipates recommencing sales with our purchaser, initiating sales with the additional California refiners, and Platform Hondo is fully commissioned and brought online. These expectations are forward-looking statements and are subject to significant risks and uncertainties, including the timing and volumes of sales to new purchasers, the duration of our purchasers curtailment, the timing of the restart of Platform Hondo, the Company's liquidity, and the outcome of ongoing litigation and regulatory proceedings. Actual results may differ materially from these expectations.
Platform Hondo. Reconstruction and internal operational commissioning of Platform Hondo are complete. The Company expects to receive the MMA's final review and approval of the Platform Hondo instrumentation, control and safety commissioning submission and to restart Platform Hondo in November 2026. The Company is completing operational and facility upgrades at LFC to increase emulsion processing capacity, so that LFC can process production from all three platforms at full productive capacity.
Sable is coordinating with the federal government in various legal matters to defend its vested rights to operate its assets and to ensure compliance with certain federal mandates, including the DPA Order. Sable is also pursuing damages and other legal remedies in response to state and county regulatory actions. The following discussion should be read in conjunction with the risk factors and other disclosures included elsewhere in this report.
Components of Results of Operations
Revenue
On March 29, 2026, the Company initiated oil sales after filling the SYPS with oil produced from Platform Harmony. In April 2026, the Company resumed oil production from Platform Heritage with such produced oil contributing to sales thereafter. The Company expects to resume oil production from Platform Hondo during the fourth quarter of 2026. The Company's revenue stems from the sale of the oil produced from the SYU, processed by LFC, and transported via the interstate SYPS to its ultimate sales point at Pentland Station.
Operating Expenses
•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.
•Depletion, depreciation, amortization, and accretion. Depletion, depreciation and amortization are primarily determined under either the unit-of-production method or the straight-line method, which is based on estimated asset service life taking obsolescence into consideration. Also included in the 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.
•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. Increased general and administrative services may be required in the future, commensurate with planned operations activity levels.
•Taxes other than income. Management anticipates future increases in ad valorem taxes, in line with the restarting sales of production volumes.
Results of Operations
The following review of operations for the three and nine months ended September 30, 2026 and 2025 should be read in conjunction with the unaudited condensed consolidated financial statements of the Company and notes thereto included in this Quarterly Report on Form 10-Q.
Revenue. The following table presents our oil and NGL revenues, sales volumes, and average realized prices for the three and nine months ended September 30, 2026 and 2025. The Company had no natural gas revenue or sales volumes for the periods presented.
| (in millions, except per Bbl or per BOE amounts) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| Revenues: | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Oil sales | $ | 153.2 | $ | - | $ | 291.0 | $ | - | |||||||||||||||
| Natural gas liquid sales | 0.5 | - | 0.6 | - | |||||||||||||||||||
| Total oil and natural gas liquid revenues | $ | 153.7 | $ | - | $ | 291.6 | $ | - | |||||||||||||||
| Sales Volumes Data: | |||||||||||||||||||||||
| Oil (MBbls) | 2,508 | - | 4,426 | - | |||||||||||||||||||
| Natural gas liquids (MBbls) | 18 | - | 24 | - | |||||||||||||||||||
| Total sales volumes (MBOE) | 2,526 | - | 4,450 | - | |||||||||||||||||||
| Total daily sales volumes (BOE/d) | 27,457 | - | 24,051 | - | |||||||||||||||||||
| Average Realized Prices: | |||||||||||||||||||||||
| Oil ($ per Bbl) | $ | 61.08 | $ | - | $ | 65.76 | $ | - | |||||||||||||||
| Natural gas liquids ($ per Bbl) | $ | 25.55 | $ | - | $ | 25.01 | $ | - | |||||||||||||||
| Combined ($ per BOE) | $ | 60.82 | $ | - | $ | 65.54 | $ | - | |||||||||||||||
|
Oil, hedged ($ per Bbl)(1)
|
$ | 57.10 | $ | - | $ | 63.50 | $ | - | |||||||||||||||
|
(1)Hedged oil prices reflect the effect of our commodity derivative transactions on our average sales prices and include gains and losses on cash settlements for matured commodity derivatives, which we do not designate for hedge accounting.
|
|||||||||||||||||||||||
The Company initiated oil sales in March 2026, following the completion of filling the SYPS on March 29, 2026. Accordingly, no sales volumes or revenues were recognized for the three and nine months ended September 30, 2025.
Three Months Ended September 30, 2026 vs. Three Months Ended September 30, 2025
The following table presents selected unaudited condensed consolidated financial results of operations for the three months ended September 30, 2026 and 2025.
|
Three Months Ended September 30,
|
Increase (Decrease)
|
||||||||||||||||||||||
|
(in thousands)
|
2026 | 2025 |
$
|
%
|
|||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Oil and natural gas liquids sales |
$
|
153,636
|
$
|
-
|
$
|
153,636
|
$
|
-
|
nm | ||||||||||||||
| Other |
734
|
-
|
734
|
nm | |||||||||||||||||||
| Total revenue |
154,370
|
-
|
154,370
|
100 | % | ||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Operations and maintenance expenses |
114,094
|
79,405
|
34,689
|
44 | % | ||||||||||||||||||
| Depletion, depreciation, amortization and accretion |
43,981
|
3,259
|
40,722
|
1,250 | % | ||||||||||||||||||
| General and administrative expenses |
37,928
|
36,719
|
1,209
|
3 | % | ||||||||||||||||||
| Total operating expenses |
196,003
|
119,383
|
76,620
|
64 | % | ||||||||||||||||||
| Loss from operations |
(41,633)
|
(119,383)
|
77,750
|
(65) | % | ||||||||||||||||||
| Other expense (income): | |||||||||||||||||||||||
| Change in fair value of warrant liabilities |
5,828
|
(34,817)
|
40,645
|
nm | |||||||||||||||||||
| Loss on derivatives, net |
168,651
|
-
|
168,651
|
nm | |||||||||||||||||||
| Other income, net |
(523)
|
(1,828)
|
1,305
|
nm | |||||||||||||||||||
| Interest expense |
41,370
|
21,010
|
20,360
|
97 | % | ||||||||||||||||||
| Loss on extinguishment of debt |
15,025
|
-
|
15,025
|
nm | |||||||||||||||||||
| Total other expense (income), net |
230,351
|
(15,635)
|
245,986
|
nm | |||||||||||||||||||
| Loss before income taxes |
(271,984)
|
(103,748)
|
(168,236)
|
162 | % | ||||||||||||||||||
| Income tax (benefit) expense |
(2,662)
|
6,630
|
(9,292)
|
nm | |||||||||||||||||||
| Net loss |
$
|
(269,322)
|
$
|
(110,378)
|
$
|
(158,944)
|
144 | % | |||||||||||||||
|
nm: not meaningful
|
|||||||||||||||||||||||
Revenue. The Company recognized $153.6 million in oil and natural gas liquids sales and $0.7 million in other revenue for the three months ended September 30, 2026, compared to no revenue recognized for the three months ended September 30, 2025, as oil sales did not commence until March 2026.
Operating and maintenance expenses. Operating and maintenance expenses were $114.1 million for the three months ended September 30, 2026, an increase of $34.7 million, or 44%, compared to $79.4 million for the three months ended September 30, 2025. The increase was primarily attributable to restart-related activities and operator rights expenditures. Platform Heritage commenced initial production in April 2026 and contributed a full quarter of operating costs during the three months ended September 30, 2026, with no comparable costs recognized during the three months ended September 30, 2025. The increase was also attributable to $6.6 million of start-up related demurrage charges which were recognized for the three months ended September 30, 2026, with no comparable costs recognized in the prior-year period. The Company expects overall operating and maintenance expenses to remain elevated relative to prior periods until all production wells are online and steady state operations is achieved.
Depletion, depreciation, amortization and accretion. Depletion, depreciation, amortization and accretion was $44.0 million for the three months ended September 30, 2026, an increase of $40.7 million, or 1,250%, compared to $3.3 million for the three months ended September 30, 2025. The increase was primarily attributable to the initial depletion expense recognized following the Company's commencement of oil sales in March 2026. For the three months ended September 30, 2025, depletion, depreciation, amortization and accretion primarily consisted of accretion expense related to asset retirement obligations, as depletion expense had not yet commenced. During the three months ended September 30, 2026, the Company recognized $40.0 million of depletion, depreciation and amortization associated with the SYU assets, $38.0 million of which was associated with current period production. Volumes held in the storage tanks at LFC decreased during the current period, resulting in $2.0 million of depletion, depreciation and amortization associated with prior period production being expensed during the three months ended September 30, 2026. Depletion, depreciation, amortization and accretion expense is expected to increase in future periods as production volumes and sales activity increase.
General and administrative expenses. G&A expenses were $37.9 million for the three months ended September 30, 2026, an increase of $1.2 million, or 3%, compared to $36.7 million for the three months ended September 30, 2025. The increase was primarily attributable to $1.3 million of higher compensation expense for three months ended September 30, 2026.
Total other expense (income), net. Total other expense, net was $230.4 million for the three months ended September 30, 2026, compared to total other income, net of $15.6 million for the three months ended September 30, 2025, a change of $246.0 million. The change was primarily attributable to a $168.7 million loss on derivatives, net, consisting of $10.0 million of realized losses on settled contracts and $158.7 million of unrealized losses from changes in fair value. The losses reflect increases in oil prices relative to the fixed prices in the Company's commodity derivative contracts, which resulted in cash settlements paid on contracts that settled during the period and a decline in the fair value of the remaining open positions. The change was also attributable to a $40.6 million change in the fair value of warrants that was driven by a shorter remaining term and changes in market volatility. Further contributing to the change, the Company recognized a $20.4 million increase in interest expense and a $15.0 million loss on extinguishment of debt related to the 2026 Refinancing Transactions that occurred during the three months ended September 30, 2026 (refer to Note 4 - Debt for additional details regarding the 2026 Refinancing Transactions).
Income tax (benefit) expense. Income tax benefit for the three months ended September 30, 2026 was $2.7 million, compared to an income tax expense of $6.6 million for the three months ended September 30, 2025. The Company's effective tax rate was 1.0 percent for the three months ended September 30, 2026. The effective tax rate for the three months ended September 30, 2026 reflects the cumulative effect of a change in the estimated annual effective tax rate, which the Company had estimated to be negative 11.5% as of June 30, 2026. In accordance with ASC 740-270-35-2, the effect of a change in the estimated annual effective tax rate is recognized in the interim period in which the change occurs, resulting in a disproportionate rate for the current quarter relative to the year-to-date rate. The effective tax rate also differed from the U.S. federal statutory tax rate of 21.0% primarily due to changes in valuation allowance on the deferred tax assets and disallowed expenses.
The Company's effective tax rate was negative 6.4% for the three months ended September 30, 2025. Based on its ongoing assessment of the realizability of deferred tax assets, the Company concluded that it was more likely than not that a portion of such assets would not be realized. Accordingly, the Company recorded an additional valuation allowance in the prior-year period. This determination was primarily driven by limitations on the utilization of net operating losses, including the limitation to 80% of taxable income. As a result, the increase in the valuation allowance resulted in income tax expense in for the for the three months ended September 30, 2025.
Nine Months Ended September 30, 2026 vs. the Nine Months Ended September 30, 2025.
The following table presents selected unaudited condensed consolidated financial results of operations for the nine months ended September 30, 2026 and 2025.
|
Nine Months Ended September 30,
|
Increase (Decrease)
|
||||||||||||||||||||||
|
(in thousands)
|
2026 | 2025 |
$
|
%
|
|||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Oil and natural gas liquids sales | $ | 291,616 | $ | - | $ | 291,616 |
$
|
-
|
nm | ||||||||||||||
| Other | 1,150 | - | 1,150 | nm | |||||||||||||||||||
| Total revenue |
292,766
|
-
|
292,766
|
100 | % | ||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Operations and maintenance expenses | 295,601 | 164,246 | 131,355 | 80 | % | ||||||||||||||||||
| Depletion, depreciation, amortization and accretion | 79,947 | 9,452 | 70,495 | 746 | % | ||||||||||||||||||
| General and administrative expenses | 144,499 | 134,369 | 10,130 | 8 | % | ||||||||||||||||||
| Total operating expenses | 520,047 | 308,067 | 211,980 | 69 | % | ||||||||||||||||||
| Loss from operations | (227,281) | (308,067) | 80,786 | (26) | % | ||||||||||||||||||
| Other (income) expenses: | |||||||||||||||||||||||
| Change in fair value of warrant liabilities | (22,071) | (40,668) | 18,597 | (46) | % | ||||||||||||||||||
| Loss on derivatives, net | 168,651 | - | 168,651 | nm | |||||||||||||||||||
| Other income, net | (1,741) | (7,776) | 6,035 | (78) | % | ||||||||||||||||||
| Interest expense | 119,104 | 63,029 | 56,075 | 89 | % | ||||||||||||||||||
| Loss on extinguishment of debt | 15,025 | - | 15,025 | nm | |||||||||||||||||||
| Total other expense, net | 278,968 | 14,585 | 264,383 | 1,813 | % | ||||||||||||||||||
| Loss before income taxes | (506,249) | (322,652) | (183,597) | 57 | % | ||||||||||||||||||
| Income tax expense | 24,315 | 25,336 | (1,021) | (4) | % | ||||||||||||||||||
| Net loss | $ | (530,564) | $ | (347,988) | $ | (182,576) | 52 | % | |||||||||||||||
|
nm: not meaningful
|
|||||||||||||||||||||||
Revenue. The Company recognized $291.6 million in oil and natural gas liquids sales and $1.2 million in other revenue for the nine months ended September 30, 2026, compared to no revenue recognized for the nine months ended September 30, 2025, as oil sales did not commence until March 2026.
Operating and maintenance expenses. Operating and maintenance expenses were $295.6 million for the nine months ended September 30, 2026, an increase of $131.4 million, or 80%, from $164.2 million for the nine months ended September 30, 2025. The increase for the nine months ended September 30, 2026 was attributable to (i) $103.6 million of higher operating costs primarily related to contract labor, chemicals, repair and maintenance, energy usage, and insurance, (ii) $25.1 million of demurrage charges associated with commencing oil sales; and (iii) operator rights expenditures. These increases are due to ramp-up activity at the three offshore platforms, LFC, and SYPS toward full operating capacity, and due to higher variable operating costs following the commencement of oil sales in March of 2026. The Company expects overall operating and maintenance expenses to remain elevated relative to prior periods until all production wells are online and steady state operations is achieved.
Depletion, depreciation, amortization and accretion. Depletion, depreciation, amortization and accretion was $79.9 million for the nine months ended September 30, 2026, representing an increase of $70.5 million, or 746%, compared to $9.5 million for the nine months ended September 30, 2025. The increase was primarily attributable to the initial depletion expense recognized following the Company's commencement of oil sales in March 2026. During the nine months ended September 30, 2026, the Company recognized $71.6 million of depletion, depreciation and amortization associated with the SYU assets, $3.2 million of which was capitalized to Inventory and linefill within Oil and gas properties on the unaudited condensed consolidated balance sheet, as the associated production was used to increase the volumes held within the SYPS and the storage tanks at LFC as of September 30, 2026 (refer to Note 2 - Significant Accounting Policies for additional details regarding linefill). For the nine months ended September 30, 2025, depletion, depreciation, amortization and accretion primarily consisted of accretion expense related to asset retirement obligations, as depletion expense had not yet
commenced. Depletion, depreciation, amortization and accretion expense is expected to increase in future periods as production volumes and sales activity increase.
General and administrative expenses. G&A expenses were $144.5 million for the nine months ended September 30, 2026, an increase of $10.1 million, or 8% compared to $134.4 million for the nine months ended September 30, 2025. The increase in G&A expenses was primarily attributable to a $14.5 million increase in share-based compensation expense and a $14.8 million increase in legal expenses related to ongoing legal and regulatory matters, partially offset by a $20.5 million decrease in incentive compensation costs. Upon the Company's achievement of first production in May 2025, the Company made certain restart related incentive compensation payments and initiated accruing annual incentive compensation based on management's expectations, both of which were recognized during the nine months ended September 30, 2025.
Total other expense, net. Total other expense, net was $279.0 million for the nine months ended September 30, 2026, an increase of $264.4 million compared to $14.6 million for the nine months ended September 30, 2025. The increase in total other expense, net was primarily attributable to a $168.7 million loss on derivatives, net, consisting of $10.0 million of realized losses on settled contracts and $158.7 million of unrealized losses from changes in fair value. The losses reflect increases in oil prices relative to the fixed prices in the Company's commodity derivative contracts, which resulted in cash settlements paid on contracts that settled during the period and a decline in the fair value of the remaining open positions. The increase was also attributable to a $56.1 million increase in interest expense and a $15.0 million loss on extinguishment of debt which were driven by (i) prior amendments to the Senior Secured Term Loan that increased the amortization of debt issuance costs incurred in relation to such amendments and increased the Company's interest rate from 10% to 15%, and (ii) the additional interest and the loss on extinguishment of debt due to the 2026 Refinancing Transactions (refer to Note 4 - Debt for additional details regarding the 2026 Refinancing Transactions). Further contributing to the increase in total other expense, net was an $18.6 million change in the fair value of the warrant liabilities, driven by a shorter remaining term and changes in market volatility.
Income tax expense. Income tax expense for the nine months ended September 30, 2026, was $24.3 million, representing a decrease of $1.0 million, or 4%, compared to $25.3 million for the nine months ended September 30, 2025. The Company's effective tax rate was negative 4.8% for the nine months ended September 30, 2026. The effective tax rate differed from the U.S. federal statutory tax rate of 21.0% primarily due to changes in valuation allowance on the deferred tax assets and disallowed expenses. The Company recognized a discrete tax expense of $2.2 million for the nine months ended September 30, 2026, resulting from a tax shortfall on stock-based compensation vesting for which the related deduction did not fully offset the associated book expense.
The Company's effective tax rate was negative 7.9% for the nine months ended September 30, 2025. Based on its ongoing assessment of the realizability of deferred tax assets, the Company concluded that it was more likely than not that a portion of such assets would not be realized. Accordingly, the Company recorded an additional valuation allowance. This determination was primarily driven by limitations on the utilization of net operating losses, including the limitation to 80% of taxable income. As a result, the increase in the valuation allowance resulted in income tax expense for the nine months ended September 30, 2025.
Capital Resources and Liquidity
Overview. Prior to commencing sales of production volumes through the SYPS, the Company incurred significant capital expenditures in excess of operating cash flows to achieve first sales. Additional capital will be required to resume oil production from the remaining wells at SYU, as well as to activate certain LFC facilities that are not yet fully operational. Historically, the SYU's primary source of liquidity has been operational cash flows, supplemented by the Company's access to the debt and equity capital markets. As discussed above, on July 2, 2026, the Company consummated the 2026 Refinancing Transactions, which extended the maturity of the Company's senior secured indebtedness and enhanced the Company's liquidity position. As of October 31, 2026 we had unrestricted cash and cash equivalents of $37.5 million.
Going Concern. As a result of the Company's primary purchaser's temporary curtailment of its purchases of the Company's crude oil beginning October 6, 2026, as described in Note 1 - Organization, Business Operations, and Going Concern, management does not currently expect operating cash flows, together with the remaining proceeds of the 2026 Refinancing Transactions, to be sufficient to fund operating expenses and service indebtedness in the near term. The curtailment of sales from our primary purchaser continued throughout October 2026 and remains ongoing as of the date of this filing. In response, the Company has reduced production to manage crude oil inventory levels at its dedicated storage facilities. In early November 2026, the Company began selling crude oil to additional purchasers, and the Company anticipates that its primary purchaser will resume purchasing barrels in the near term. However, the timing and volume of any such resumption are uncertain. Refer to the section entitled "Part II, Item 1A. Risk Factors-We depend upon a limited
number of purchasers for the sale of most of our crude oil. The loss of one or more of these purchasers could, among other factors, limit our access to suitable markets for the crude oil we produce."
Management is actively pursuing a sale of its current crude oil inventory and additional marketing options for its future production, as well as pursuing other liquidity solutions, including equity and unsecured debt offerings. However, there can be no assurance that these plans will be successfully implemented. In addition, the Company's liquidity remains subject to commodity price volatility, regulatory developments, and other factors. Accordingly, management has concluded that substantial doubt exists regarding the Company's ability to continue as a going concern within one year after the date of the unaudited condensed consolidated financial statements included in this Quarterly Report are issued. The unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty, including adjustments to the carrying amounts of assets or the classification of liabilities. Refer to the section entitled "Part II, Item 1A. Risk Factors-Our ability to meet our obligations as they become due over the next twelve months depends on our ability to sell our crude oil and obtain additional financing, which raises substantial doubt about our ability to continue as a going concern."
Planned Expenditures. Planned expenditures, including capital, operational and general and administrative expenses across the Company's operations, are expected to total approximately $110.0-$120.0 million for the remainder of 2026. Capital expenditures will continue to focus on facility upgrades, maintenance capital, and low-cost production optimization initiatives. The Company expects to fund these expenditures primarily through operating cash flows; however, as a result of the curtailment of crude oil sales to our purchaser described above, the Company may need to defer certain of these expenditures or seek alternative sources of funding. As previously discussed, the OS&T Strategy and the Buoy Strategy are not expected to be pursued in the near term and, accordingly, no material expenditures related to such strategies are planned for 2026.
Capital Raising Activities. During the first quarter of 2026, the Company entered into the ATM Program to support its capital requirements and enhance liquidity, pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares of its Common Stock having an aggregate gross sales price of up to $250.0 million, with approximately $78.5 million remaining at September 30, 2026 under the ATM Program.
On July 2, 2026, the Company completed the 2026 Refinancing Transactions, which extended the maturity of the Company's debt obligations and improved its liquidity position. As a result, management re-evaluated the Company's ability to continue as a going concern and concluded that the conditions and events that previously raised substantial doubt had been alleviated. However, as a result of the curtailment of crude oil sales to by our purchaser beginning on October 6, 2026, as described in Note 1 - Organization, Business Operations, and Going Concern, management has concluded that substantial doubt exists regarding the Company's ability to continue as a going concern within one year after the issuance date of the unaudited condensed consolidated financial statements contained in this Quarterly Report, which have been prepared on a basis that assumes the Company will continue as a going concern.
Cash Flows
The following table summarizes cash flows from Operating, Investing and Financing activities:
|
Nine Months Ended September 30,
|
Change | ||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | $ | % | |||||||||||||||||||
| Cash flows (used in) provided by: | |||||||||||||||||||||||
| Operating activities | $ | (146,520) | $ | (253,574) | $ | 107,054 | 42% | ||||||||||||||||
| Investing activities | (111,595) | (323,093) | 211,498 | 65% | |||||||||||||||||||
| Financing activities | 198,470 | 282,524 | (84,054) | 30% | |||||||||||||||||||
| Net change in cash and cash equivalents | $ | (59,645) | $ | (294,143) | |||||||||||||||||||
Cash Flows from Operating Activities. Since the Company initiated oil sales in March 2026, revenues were recognized for only a portion of the nine months ended September 30, 2026, and no operating revenues were recognized for the nine months ended September 30, 2025. Net cash used in operating activities was $146.5 million for the nine months ended September 30, 2026, a decrease of $107.1 million, or 42%, compared to net cash used in operating activities of $253.6 million for the nine months ended September 30, 2025. The primary use of cash during the nine months ended September 30, 2026 related to commissioning Platforms Heritage and Hondo and the resulting ramp of operational activity occurring following the completion of Platforms Harmony and Heritage which occurred in May of 2025 and April of 2026, respectively. The primary use of cash during the nine months ended September 30, 2025 was attributable to maintenance and operational readiness activities.
For the nine months ended September 30, 2026, the Company incurred a net loss of $530.6 million, which included non-cash charges of $168.7 million for the loss on derivatives, net, comprised of a $158.7 million mark-to-market loss on derivatives and a $10.0 million loss on realized derivatives payable, $79.9 million of depletion, depreciation, amortization and accretion, $72.8 million of paid-in-kind interest, $42.5 million of share-based compensation, $24.3 million of income tax expense, $15.8 million of amortization of debt discount and issuance costs, including accretion of the exit fee, and a $15.0 million loss on extinguishment of debt, partially offset by a $22.1 million decrease in the fair value of warrants. The change in accounts receivable of $73.4 million relates to the commencement of oil sales in March of 2026 and the change in accounts payable of $56.3 million is primarily attributable to an increase in accruals related to the commissioning efforts for Platform Hondo and the completion of Platforms Harmony and Heritage in May of 2025 and April of 2026, respectively.
For the nine months ended September 30, 2025, the Company incurred a net loss of $348.0 million, which included non-cash charges of $62.6 million of paid-in-kind interest, $30.0 million of share-based compensation, $25.3 million of income tax expense, and $9.5 million of depletion, depreciation, amortization and accretion, partially offset by $40.7 million related to the decrease in the fair value of warrants. Changes in accounts payable of $20.7 million were primarily attributable to an increase in vendor payables associated with the restart efforts.
Cash Flows from Investing Activities. Net cash used in investing activities was $111.6 million for the nine months ended September 30, 2026, a decrease of $211.5 million, or 65%, compared to $323.1 million for the nine months ended September 30, 2025. Cash used in investing activities for the nine months ended September 30, 2026 was primarily attributable to the commissioning of Platforms Heritage and Hondo, while the investing activities for the nine months ended September 30, 2025 primarily consisted of capital expenditures associated the commissioning of Platform Harmony and restart efforts to return LFC and the SYPS to full operational capacity.
Cash Flows from Financing Activities. Net cash provided by financing activities was $198.5 million for the nine months ended September 30, 2026, which was primarily attributable to $700.6 million of debt proceeds associated with the 2026 Refinancing Transactions and $286.5 million of gross proceeds from common stock offerings. $171.5 million of the gross proceeds from common stock offerings was attributable to the ATM Program and $115.0 million was associated with the 2026 Refinancing Transactions. Such proceeds were net of (i) $712.4 million of cash for the repayment of the Senior Secured Term Loan and scheduled principal payments for the Term Loan B, $54.0 million of cash paid for debt issuance costs associated with the 2026 Refinancing Transactions and prior amendments to the Senior Secured Term Loan, and $22.3 million of cash paid for equity issuance costs associated with the 2026 Refinancing Transactions and the ATM Program. Net cash provided by financing activities was $282.5 million for the nine months ended September 30, 2025, which consisted of $295.0 million of gross proceeds from a 2025 equity offering and $12.5 million of cash paid for related offering costs.
Contractual Obligations
On July 2, 2026, the Company completed the 2026 Refinancing Transactions, which repaid in full the Senior Secured Term Loan that had financed most of the Purchase Price. As of September 30, 2026, the Company's principal debt obligations were as follows:
•Term Loan B. $658.1 million of principal outstanding under a $675.0 million senior secured Term Loan B maturing December 15, 2028. The Term Loan B bears interest at a fixed rate of 15.00% per annum and requires quarterly amortization payments of 2.5% of the original principal amount for the quarters ending September 30 and December 31, 2026, and 5.0% per quarter thereafter. It also requires mandatory prepayments of 100% of excess cash flow, subject to a $25.0 million minimum unrestricted cash balance. An exit fee of 1.0% to 3.0% applies to repayments made on or after June 30, 2027, increasing over time. At maturity, refinancing, or acceleration, the lenders must also have received at least a 1.25x multiple on invested capital.
•Convertible Notes. $345.0 million aggregate principal amount of 6.5% Convertible Senior Notes due July 1, 2031, issued July 2, 2026. Interest is payable semiannually in arrears on January 1 and July 1, beginning January 1, 2027. The notes are convertible at an initial conversion rate of 249.7502 shares of common stock per $1,000 principal amount, equivalent to approximately $4.00 per share, subject to customary adjustments. The Company may settle conversions in cash, shares, or a combination of both.
Refer to "Recent Events" and Note 4 - Debt to the unaudited condensed consolidated financial statements for additional details.
ExxonMobil P&A Financial Security. Under the Fifth Amendment to the Sable-EM Purchase Agreement, dated October 14, 2025, the Company is required to obtain a $350.0 million performance bond, with ExxonMobil as sole beneficiary, as
financial security for plugging and abandonment obligations at the SYU ("P&A Financial Security"). ExxonMobil may request that the bond be increased to $500.0 million. The P&A Financial Security was originally due within three business days of the maturity date of the Senior Secured Term Loan. Under a Limited Waiver dated June 22, 2026, ExxonMobil temporarily waived this requirement until the earliest of (i) December 22, 2028, (ii) the repayment or refinancing of the Term Loan B, and (iii) the occurrence of an event of default under the Company's financing agreements or other contractual obligations to ExxonMobil. Refer to Note 6 - Commitments and Contingencies for additional details.
Additional obligations include the performance of ARO, as described under "Critical Accounting Policies and Estimates - Asset Retirement Obligations" in our Annual Report on Form 10-K for the year ended December 31, 2025.
Off Balance Sheet Arrangements
As of September 30, 2026, the Company had no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The critical accounting policies and estimates applied in the preparation of the Sable's interim unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2026 are the same as those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 except as follows.
Revenue Recognition
As of September 30, 2026, the Company has sold all of its crude oil to a single purchaser under a short-term agreement at prevailing market prices, with certain adjustments for product quality and geographic location. The Company recognizes revenue at the point in time when its performance obligation is satisfied and control transfers to the purchaser, which occurs at the delivery point. Accordingly, the Company is dependent on this purchaser for substantially all of its revenue. Refer to Note 1 - Organization, Business Operations, and Going Concern for a discussion of the purchaser's curtailment of crude oil purchases beginning October 6, 2026.
Oil and Gas Properties
Linefill. The SYPS is an interstate pipeline that transports crude oil from the SYU through LFC in Santa Barbara County, California, to Pentland Station in Kern County, California. The Company classifies the quantity of oil used to fill the portion of the SYPS from LFC to Pentland as linefill, such that when an incremental barrel of oil is pumped into that portion of the SYPS, it forces oil out at the Pentland Station sales point. The linefill capacity is approximately 540 thousand barrels ("MBbls"). Crude oil linefill is carried at historical cost and classified as a long-term asset within Oil and gas properties on the unaudited condensed consolidated balance sheets.
The Company capitalized costs incurred that were directly attributable to filling the portion of SYPS described above, including associated depletion, depreciation, and amortization. Linefill will not be depreciated, but is subject to impairment in accordance with Financial Accounting Standards Board ("FASB") guidance with respect to accounting for the impairment or disposal of long-lived assets. Carrying amounts that are not expected to be recoverable through future cash flows are written down to estimated fair value.
Derivative Instruments
The Company uses derivative instruments to hedge its exposure to cash flow variability from commodity prices. Financial commodity derivative instruments are recorded at fair value and included on the unaudited condensed consolidated balance sheets as assets or liabilities with such amounts classified as current or long-term based on their anticipated settlement dates. The Company marks its derivative instruments to fair value and recognizes the cash and non-cash change in fair value on derivative instruments for each period as Loss on derivatives, net in the unaudited condensed consolidated statements of operations. The related cash flow impact of settled contracts is reflected as cash flows from operating activities. To the extent that contracts with the same counterparty are allowed to be netted upon payment subject to a master netting arrangement, these amounts are reported on a net basis on the unaudited condensed consolidated balance sheets.
By using derivative instruments to economically hedge exposure to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company has entered into commodity derivative instruments only with counterparties that are also lenders under the Senior Revolver and have been deemed an acceptable credit risk. As such, collateral is not required from either the counterparties or the Company on its outstanding commodity derivative contracts.
Emerging Growth Company
We are an "emerging growth company," or EGC, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we have elected to comply with certain reduced public company reporting requirements.
We will cease to be an EGC as of December 31, 2026, the last day of the fiscal year following the fifth anniversary of the closing of Flame Acquisition Corp.'s initial public offering. Beginning with our Annual Report on Form 10-K for the year ending December 31, 2026, we will no longer be able to take advantage of such reduced reporting requirements.
Sable Offshore Corp. published this content on November 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 09, 2026 at 11:30 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]