Sable Offshore(SOC) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents unaudited financial statements, highlighting the lack of comparability between Predecessor and Successor periods Condensed Consolidated Balance Sheets Total assets grew to $1.77 billion and total liabilities rose to $1.33 billion, with stockholders' equity increasing to $445.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,772,038 | $1,583,172 | | Cash and cash equivalents | $247,141 | $300,384 | | Total oil and gas properties - net | $1,427,039 | $1,194,447 | | Total Liabilities | $1,326,411 | $1,198,987 | | Senior Secured Term Loan (Current) | $875,561 | $— | | Senior Secured Term Loan (Non-current) | $— | $833,542 | | Total Stockholders' Equity | $445,627 | $384,185 | Condensed Consolidated Statements of Operations The company reported zero revenue and a Q2 2025 net loss of $128.1 million, an improvement due to fair value changes in warrant liabilities Statement of Operations Summary (Successor, in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | :--- | | Total Revenue | $— | $— | $— | | Loss from operations | $(128,888) | $(62,235) | $(188,684) | | Net loss | $(128,066) | $(165,436) | $(237,610) | | Basic and diluted net loss per share | $(1.40) | $(2.75) | $(2.70) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $445.6 million, driven by a $282.6 million stock issuance offset by a net loss of $237.6 million - The primary drivers for the change in stockholders' equity were a $282.6 million capital raise from a stock issuance, offset by a net loss of $237.6 million[16][29] Condensed Consolidated Statements of Cash Flows Cash decreased by $53.0 million as cash used in operations and investing was partially offset by financing activities from a stock offering Cash Flow Summary (Successor, Six Months Ended June 30, 2025, in thousands) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | $(142,948) | | Net cash used in investing activities | $(192,982) | | Net cash provided by financing activities | $282,933 | | Net change in cash | $(52,997) | | Cash, cash equivalents and restricted cash, end of period | $282,775 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, debt, legal issues, and a substantial doubt about the company's ability to continue as a going concern - On May 15, 2025, the company restarted production at the Santa Ynez Unit (SYU) and began flowing oil to its onshore storage facility[28] - The company discloses that substantial doubt exists about its ability to continue as a going concern due to the need to refinance its Senior Secured Term Loan and obtain regulatory approvals[36][33] - The company is involved in multiple legal and regulatory proceedings with state and federal agencies that could impact its ability to operate[124][129][132] Senior Secured Term Loan Details | Metric | Value | | :--- | :--- | | Balance (June 30, 2025) | $875.9 million (incl. PIK interest) | | Interest Rate | 10.0% per annum | | Maturity Date | January 10, 2026 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, production restart, liquidity challenges, and significant legal and regulatory hurdles Overview and Recent Events The company acquired SYU assets, restarted production, raised capital, and faces ongoing legal and regulatory challenges - On May 19, 2025, the company announced it had restarted production at SYU as of May 15, 2025, and completed its pipeline anomaly repair program[198] - In May 2025, the company closed an upsized public offering of 10 million shares, raising approximately $282.6 million in net proceeds[193] - The company is engaged in legal disputes with the California Coastal Commission, which has imposed an $18.0 million administrative penalty that the company is contesting[205] Results of Operations Q2 2025 net loss decreased to $128.1 million due to warrant value changes, despite significant increases in operating and G&A expenses Comparison of Operating Results (Successor, Q2 2025 vs Q2 2024, in thousands) | Account | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Operations and maintenance expenses | $50,398 | $26,294 | 91.7% | | General and administrative expenses | $75,318 | $33,217 | 126.7% | | Loss from operations | $(128,888) | $(62,235) | 107.1% | | Change in fair value of warrant liabilities | $(27,146) | $81,178 | nm | | Net loss | $(128,066) | $(165,436) | (22.6)% | - The increase in Q2 2025 G&A expenses was primarily due to $35.7 million in higher restart-related incentive compensation costs and $7.8 million in higher legal costs[217] Liquidity and Capital Resources Liquidity depends on equity offerings to cover expenses and refinance a term loan maturing in January 2026, raising going concern doubts - The restart of production triggered an acceleration of the Senior Secured Term Loan's maturity date to January 10, 2026, requiring it to be refinanced[227][232] - Management estimates remaining start-up expenses of approximately $66.6 million are needed to commence sales of production, anticipated in Q3 2025[229] - For the six months ended June 30, 2025, net cash used in operating activities was $142.9 million, while net cash provided by financing activities was $282.9 million[234][238] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, this section is not required - As a smaller reporting company, Sable Offshore Corp. is not required to provide quantitative and qualitative disclosures about market risk[264] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[266] - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[267] PART II – OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 8 of the financial statements for details on material legal proceedings - For a full description of material pending legal and regulatory matters, the report refers to Part I, Item 1, Note 8 — Commitments and Contingencies[268] Item 1A. Risk Factors No material changes to risk factors disclosed in the 2024 Form 10-K have occurred - As of the date of this report, there have been no material changes to the risk factors disclosed in the company's 2024 Form 10-K[269] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported[270] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[271] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable[272] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - During the three months ended June 30, 2025, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement[273] Item 6. Exhibits This section lists all exhibits filed as part of the quarterly report