Sable Offshore Corp. (FLME)·Q1 2024 Earnings Summary

Executive Summary

• Sable Offshore closed its business combination and SYU asset acquisition, ending Q1 with $209.1M cash and $771.2M of term loan debt; the quarter posted a net loss of $180.1M driven by a $70.0M litigation settlement accrual, $46.4M stock-based comp, and transaction-related costs .
• Management raised total net estimated contingent resources to 646 MMboe and PV-10 to ~$10.0B (SEC April-2024 pricing), a 21% uplift vs Dec-2023; restart targeted for September 2024 with initial net production of ~28 Mboe/d once all wells are producing and Q4’24 net production guidance of 23–28 Mboe/d with detailed cash cost ranges .
• Key regulatory milestones progressed: BOEM approved record title assignments (May 21), and BSEE approved Sable as SYU operator (May 22), de-risking restart execution steps tied to pipelines and facilities .
• Risk flags remain: going-concern language tied to approvals and restart timing; reversion clause to Exxon if production not restarted by Jan 1, 2026; high leverage and covenant constraints until cash generation resumes .

What Went Well and What Went Wrong

• What Went Well

  • Closed Business Combination and asset handover; hired former Exxon field employees and added staff to execute restart plan .
  • Regulatory traction: BOEM record title and BSEE operator approvals received in late May, enabling operational control and permitting momentum .
  • Resource and value update: Management now estimates 646 MMboe contingent resources and ~$10.0B PV-10; CEO: “we believe this asset development planning has resulted in significant resource addition... repair program is well underway” .

• What Went Wrong

  • Large Q1 net loss ($180.1M) driven by $70.0M Grey Fox settlement accrual, $46.4M share-based comp, and other G&A/transaction costs; diluted EPS (successor period) was $(2.99) .
  • Going-concern uncertainty persists given dependency on approvals and repair timing; liquidity sufficient for restart plan but sensitive to cost overrun/approval risk .
  • Structural risks: 10% PIK-able term loan with covenants; reversion right allows Exxon to reclaim assets if production not restarted by Jan 1, 2026, which would effectively eliminate the business .

Financial Results

• Context: SYU remained shut-in; no revenue recognized. Successor/Predecessor split limits period comparability.

• Balance sheet and capital structure (as of Mar 31, 2024):
  • Cash and cash equivalents: $209.1M .
  • Senior Secured Term Loan (incl. PIK, net): $771.2M; effective rate ~10% .
  • ARO liability: $91.5M (Successor) .
  • Shares outstanding: 60.17M .

Segment breakdown/KPIs:

• No reportable segments; the business centers on SYU restart .
• Key operational KPIs and plan:
  • Target restart: September 2024; initial net production once all wells are producing ~28 Mboe/d .
  • Q4’24 net production guidance: 23–28 Mboe/d; cash cost ranges below .
  • Contingent resources: 646 MMboe; PV-10 ~$10.0B at SEC April-2024 pricing (oil $83.14/bbl; gas $2.40/MMBtu; NGL $64.85/bbl) .

Estimates vs. Actuals

• S&P Global consensus for FLME not available via our SPGI feed (mapping missing). Values not shown; do not infer a beat/miss.

Guidance Changes

Note: On May 21–22, 2024, BOEM approved record title transfers and BSEE approved Sable as SYU operator, supporting restart execution .

Earnings Call Themes & Trends

Note: No earnings call transcript found for Q1 2024; themes drawn from press release, investor presentation, and 10-Q.

Management Commentary

• CEO Jim Flores: “Our geoscience and reservoir engineering management has been focused on reservoir development optimization and we believe this asset development planning has resulted in significant resource addition... Our onshore pipeline repair program is well underway after entering into the legal settlement related to the Sable-owned pipelines.” .
• On execution and permitting: “We have... initiated maintenance, construction, and repairs at the Las Flores Canyon Processing Facility and offshore platforms... working closely with [BOEM and BSEE] towards the approval of our assignment of ownership and operatorship of SYU.” .
• On strategy: “We’ve also initiated the planning and permitting phase of our carbon sequestration business where we intend to utilize Sable-owned infrastructure to sequester carbon offshore at SYU.” .

Q&A Highlights

• No earnings call transcript was available for Q1 2024; no Q&A themes could be retrieved. We searched for earnings-call-transcript documents and found none.

Estimates Context

• S&P Global consensus (Revenue and EPS) was not available for FLME in our feed due to a mapping issue; comparisons to estimates are therefore not presented. Values retrieved from S&P Global were unavailable due to missing CIQ mapping.

Key Takeaways for Investors

• Restart execution is the primary catalyst: BOEM/BSEE approvals materially de-risk operatorship; next milestones are pipeline repairs and September restart to hit Q4’24 23–28 Mboe/d guidance .
• Valuation support from resource update: 646 MMboe contingent resources and ~$10.0B PV-10 at SEC pricing expand intrinsic value; sustained execution could narrow discount to asset value .
• Balance sheet leverage is high and covenanted; interest accrues at 10% with PIK, amplifying urgency to restart and generate cash .
• Legal and regulatory risks persist: settlement cash outflows and final approval (Sept 13, 2024 hearing) plus remaining permitting/workstreams are critical path items .
• Downside scenario remains severe: failure to restart by Jan 1, 2026 could trigger reversion of assets to Exxon, effectively wiping equity .
• Operating cost guidance suggests competitive cash costs post-restart (LOE $17–$19/boe; GP&T $2.50–$3.50/boe; Cash G&A $4.50–$5.50/boe), implying attractive margins at Brent-linked pricing if execution stays on track .

Appendix: Sources searched and read

• Q1 2024 8-K 2.02 with Exhibit 99.1 press release and Exhibit 99.2 investor presentation; full document reviewed -.
• Q1 2024 10-Q for full financial statements, MD&A, liquidity, debt, settlement, and going concern -.
• 8-K (Other Events) for BOEM/BSEE approvals (May 23, 2024) .

Notes on prior quarters and earnings call materials

• No prior two quarters’ 8-K 2.02 earnings releases or earnings call transcripts were found for FLME/Sable; Predecessor periods are presented within Q1 2024 10-Q for context .