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Sable Offshore(SOC) - 2024 Q4 - Annual Report
SOCSable Offshore(SOC)2025-03-17 20:15

Financial Condition and Performance - The company reported a net loss of 617,278thousandfortheperiodfromFebruary14,2024,toDecember31,2024,comparedtoanetlossof617,278 thousand for the period from February 14, 2024, to December 31, 2024, compared to a net loss of 93,673 thousand for the year ended December 31, 2023[340]. - The accumulated deficit as of December 31, 2024, stands at 698,296thousand,comparedtonodeficitreportedforthepredecessorperiod[338].−Thecompanyhasatotalliabilityof698,296 thousand, compared to no deficit reported for the predecessor period[338]. - The company has a total liability of 1,198,987 thousand as of December 31, 2024, significantly higher than 372,560thousandinthepreviousyear[338].−Thecompanyhasexperiencednegativecashflowsfromoperationssinceinception,raisingconcernsaboutitsabilitytocontinueasagoingconcern[360].−ThecompanyexpectstocontinueincurringlossesuntilitcanrestartproductionoftheSYUAssets[358].−Thecompanyreportedanetlossof372,560 thousand in the previous year[338]. - The company has experienced negative cash flows from operations since inception, raising concerns about its ability to continue as a going concern[360]. - The company expects to continue incurring losses until it can restart production of the SYU Assets[358]. - The company reported a net loss of 617,278 for the year ended December 31, 2024, compared to a net loss of 11,789forthepreviousperiod[345].−Thecompanyhascashandcashequivalentsof11,789 for the previous period[345]. - The company has cash and cash equivalents of 300,384 thousand as of December 31, 2024, indicating a strong liquidity position[338]. - The total stockholders' equity as of December 31, 2024, is 384,185thousand,anincreasefrom384,185 thousand, an increase from 339,021 thousand in the previous year[338]. - The company has incurred a change in fair value of warrant liabilities amounting to 227,454thousandduringthesuccessorperiod[340].−Thecompanyraised227,454 thousand during the successor period[340]. - The company raised 440.2 million from the First PIPE Investment by issuing 44,024,910 shares at 10.00pershare[351].−AsecondPIPEInvestmentraisedapproximately10.00 per share[351]. - A second PIPE Investment raised approximately 150.0 million by issuing 7,500,000 shares at 20.00pershare[352].−Approximately99.820.00 per share[352]. - Approximately 99.8% of the Public Warrants were exercised, resulting in 183.5 million in cash proceeds to the company[353]. - As of December 31, 2024, the company reported unrestricted cash of 300.4millionandanaccumulateddeficitof300.4 million and an accumulated deficit of 698.3 million[358]. - The company is classified as an "emerging growth company," which allows it to take advantage of reduced reporting requirements, potentially making its Common Stock less attractive to investors[241]. - The company is required to maintain effective disclosure controls and internal control over financial reporting to comply with the Sarbanes-Oxley Act, which may incur significant costs and challenges[225]. Production and Operational Challenges - The company estimates total remaining start-up expenses of approximately 152.0milliontorestartproduction,primarilyforregulatoryapprovalsandpipelinerepairs,withatargettobringshut−inassetsbackonlinebyQ22025[142].−ThecompanyfacesrisksrelatedtopermittingobligationsandotherrequirementsthatmustbesatisfiedbeforerestartingproductionoftheSYUAssets[140].−ThecompanymustrestartproductionoftheSYUAssetsbyMarch1,2026,orrisklosingownershipoftheseassetstoEMwithoutcompensation[170].−Thecompanyplanstorestartproductioncontingentuponregulatoryapprovalsandhasoutlinedpotentialcapitalfundingneeds[359].−Thecompanyhasnotgeneratedanyoilandgasrevenuetodateasitisworkingtorestartproductionassociatedwithitsoilandgasproperties[372].−ThecompanyhasbeenmaintainingSYUinanoperation−readystatesince2015,resultinginnodepreciation,depletion,oramortizationrecordedsinceitsacquisition[388].−Thecompanyfacespotentiallitigationandregulatorychallengesfromenvironmentalgroupsthatcoulddelayorpreventproductionrestarts,impactingfinancialperformance[208].−Thecompanyfacessignificantoperationalchallengesduetodisputesoverlandrights,whichcouldleadtoincreasedcostsandoperationaldisruptions[169].MarketandCommodityPriceRisks−Oil,naturalgas,andNGLpricesarevolatileandsignificantlyimpactthecompany′scashflowandfinancialcondition;sustainedlowpricescouldleadtoadeclineinoperations[144].−Anextendeddeclineincommoditypricescouldrenderthecompany′sbusinessuneconomical,resultinginpotentialimpairmentchargesthatadverselyaffectfinancialresults[148].−ThedifferentialbetweenNYMEXbenchmarkpricesandthewellheadpricesexpectedforfutureproductioncouldsignificantlyreducecashflowandadverselyaffectfinancialcondition[149].−ForthefiveyearsendedDecember31,2024,NYMEX−WTIoilfuturespricesrangedfromahighof152.0 million to restart production, primarily for regulatory approvals and pipeline repairs, with a target to bring shut-in assets back online by Q2 2025[142]. - The company faces risks related to permitting obligations and other requirements that must be satisfied before restarting production of the SYU Assets[140]. - The company must restart production of the SYU Assets by March 1, 2026, or risk losing ownership of these assets to EM without compensation[170]. - The company plans to restart production contingent upon regulatory approvals and has outlined potential capital funding needs[359]. - The company has not generated any oil and gas revenue to date as it is working to restart production associated with its oil and gas properties[372]. - The company has been maintaining SYU in an operation-ready state since 2015, resulting in no depreciation, depletion, or amortization recorded since its acquisition[388]. - The company faces potential litigation and regulatory challenges from environmental groups that could delay or prevent production restarts, impacting financial performance[208]. - The company faces significant operational challenges due to disputes over land rights, which could lead to increased costs and operational disruptions[169]. Market and Commodity Price Risks - Oil, natural gas, and NGL prices are volatile and significantly impact the company's cash flow and financial condition; sustained low prices could lead to a decline in operations[144]. - An extended decline in commodity prices could render the company's business uneconomical, resulting in potential impairment charges that adversely affect financial results[148]. - The differential between NYMEX benchmark prices and the wellhead prices expected for future production could significantly reduce cash flow and adversely affect financial condition[149]. - For the five years ended December 31, 2024, NYMEX-WTI oil futures prices ranged from a high of 123.70 per Bbl to a low of (37.63)perBbl,indicatingsignificantpricevolatility[147].−Managementexpectssignificantvolatilityinoilandgaspricesandindustrymarginsoverthelifespanofitsmajorassets[392].RegulatoryandEnvironmentalRisks−TheDodd−FrankActmayadverselyaffectthecompany′sabilitytousederivativeinstruments,potentiallyincreasingcostsandreducinghedgingopportunities[157].−Offshoreoperationsaresubjecttohigherrisks,includingenvironmentalhazardsandregulatoryscrutiny,whichcouldleadtosignificantliabilities[158].−TheCaliforniastategovernmenthasenactedmeasurestoreducefossilfuelsupplyanddemand,potentiallylimitingproductioncapabilities[195].−TheU.S.CourtofAppealshasprohibitednewpermitsforhydraulicfracturinginfederalwatersoffCaliforniauntilafullenvironmentalreviewiscompleted,affectingoperationalplans[198].−TheStateLandsCommissionhasauthorizedatemporarymoratoriumonnewoffshoreoilandgaspipelineleaseapplicationsuntilananalysisofpublictrustresourcesiscompletedbyDecember31,2026[200].−Thelistingofspeciesas"threatened"or"endangered"couldleadtoincreasedcostsandoperationalrestrictions,adverselyaffectingfinancialresults[186].−Climatechangemeasuresandtechnologicaladvancesmayreducedemandforoil,naturalgas,andNGLs,impactingbusinessandfinancialcondition[187].−TheInflationReductionActimposesawasteemissionschargeonfacilitiesexceedingaspecifiedemissionsthreshold,creatinguncertaintyinfutureimplementation[190].−TheInflationReductionActof2022imposesamethaneemissionschargestartingat(37.63) per Bbl, indicating significant price volatility[147]. - Management expects significant volatility in oil and gas prices and industry margins over the lifespan of its major assets[392]. Regulatory and Environmental Risks - The Dodd-Frank Act may adversely affect the company's ability to use derivative instruments, potentially increasing costs and reducing hedging opportunities[157]. - Offshore operations are subject to higher risks, including environmental hazards and regulatory scrutiny, which could lead to significant liabilities[158]. - The California state government has enacted measures to reduce fossil fuel supply and demand, potentially limiting production capabilities[195]. - The U.S. Court of Appeals has prohibited new permits for hydraulic fracturing in federal waters off California until a full environmental review is completed, affecting operational plans[198]. - The State Lands Commission has authorized a temporary moratorium on new offshore oil and gas pipeline lease applications until an analysis of public trust resources is completed by December 31, 2026[200]. - The listing of species as "threatened" or "endangered" could lead to increased costs and operational restrictions, adversely affecting financial results[186]. - Climate change measures and technological advances may reduce demand for oil, natural gas, and NGLs, impacting business and financial condition[187]. - The Inflation Reduction Act imposes a waste emissions charge on facilities exceeding a specified emissions threshold, creating uncertainty in future implementation[190]. - The Inflation Reduction Act of 2022 imposes a methane emissions charge starting at 900 per ton in 2024, increasing to 1,200in2025and1,200 in 2025 and 1,500 in 2026, which could significantly increase operational costs for the company[211]. Internal Control and Governance - The company has identified material weaknesses in internal control over financial reporting, which could adversely affect investor confidence and the accuracy of financial statements[139]. - There is a risk that the company may not conclude that its internal control over financial reporting is effective, which could lead to material weaknesses and adversely affect investor confidence[226]. - The company may face challenges in maintaining analyst coverage, which could impact stock price and trading volume if negative reports are published or coverage ceases[236]. - Increased scrutiny from government agencies on SPAC transactions may adversely affect the company's stock price and investor confidence[222]. Capital Structure and Financing - The Senior Secured Term Loan Agreement imposes restrictive covenants that limit the company's ability to engage in mergers, incur debt, or pay dividends, potentially hindering growth[171]. - A springing maturity date of 90 days after restarting production could necessitate refinancing under potentially unfavorable market conditions[174]. - Future refinancing may expose the company to interest rate risk, increasing debt service obligations if variable rates are incurred[175]. - The company anticipates significant capital needs, which may require issuing additional equity or debt, potentially diluting existing shareholders[176]. - The company may seek to obtain financing by issuing additional shares or debt securities, which could dilute existing stockholders' ownership and reduce the market price of Common Stock[230]. - The company is required to maintain reserve funds for decommissioning costs, which are subject to change and could materially affect financial condition if actual costs exceed estimates[212]. Operational Costs and Risks - The company faces high costs and risks associated with developing and producing oil, natural gas, and NGLs, particularly due to equipment being shut-in for over nine years[153]. - Risks include high costs, shortages of rigs and equipment, unexpected geological formations, and operational failures, which could lead to substantial losses[154]. - Shortages of rigs, equipment, and personnel could delay operations and increase costs, affecting revenue forecasts[163]. - Transportation services are subject to complex regulations, and any changes could impact costs and availability, adversely affecting the company's operations[165]. - The company may face increased operational costs due to security threats, including cybersecurity risks and potential disruptions from activist protests[216]. - The company’s ability to meet aspirational ESG targets is uncertain and may be impacted by unforeseen costs or technical difficulties[205]. - The company relies on the availability of water and waste disposal, with potential restrictions impacting operations and increasing costs[162].