Sable Offshore Corp. 2026 Q2 Earnings Call

Thank you, Alice. Good morning, everyone, and welcome to our second quarter 2026 earnings conference call. Joining me today to discuss our results are Jim Flores, Chairman and Chief Executive Officer, Caldwell Flores, President and Chief Operating Officer, Gregory Patrinely, Executive Vice President and Chief Financial Officer, and Anthony Duenner, Executive Vice President, General Counsel, and Secretary, as well as various other members of the Sable team. Please refer to our website to download a copy of our new investor presentation posted yesterday, as well as our recently filed financial statements, which will both be discussed today. We will actively display the presentation on this webcast and reference certain items by page number, and then proceed to Q&A. We will also be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions and are subject to risk and uncertainties.

Actual results could differ materially from those described in the forward-looking statements because of factors discussed in our earnings release, in our investor presentation, in the comments made during this conference call, in our most recent Form 10-K, Forms 10-Q, and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statements. With that, I will turn it over to Jim Flores to begin going through the investor presentation.

Jim? Thanks, Harrison, and good morning, everyone.

As promised, we said we'd have a conference call at some point in time. This is our first conference call for earnings from Sable Offshore, so welcome, everyone. After looking at page 3 of the presentation, it's more of the summary stuff you've seen before, but page 4 is the milestones achieved, the next steps. We've listed them all since the beginning of this saga in 2025. Then the three updated ones, restarting production with Platform Heritage in April 2026, refinance the senior secured term note July of 2026, and commence the commodity hedging program July 2026. The next steps are restart production at Platform Hondo, which is expected at the end of September 2026.

We get a full fourth quarter, and establish full 3P reserve report expected first quarter 2027. Then we refinance the senior secured term loan B note and convertible senior unsecured notes, and potentially install a full sales buoy at Santa Ynez unit and continue to legally protect Sable's vested interest and pursue all monetary damages. Those are five big milestones ahead of us, and we expect the next 12 months to achieve those. On page 5, which is our corporate update, our operations we're going to go through extensively today. The second quarter 2026 exit rate oil sales of 40,000 barrels a day represents a huge growth into what our oil sales have been prior to that.

We've kicked off a wireline campaign now that we have all the wells open or potentially open to mitigate water influx and really try to trim up our production to wherever it is efficiently as possible. We're working feverishly on Platform Hondo. Platform Hondo is a 45-year-old platform. It's in bad need of restoration. That's probably the best word for it. But we're doing great work there. We've got a great team and so forth, and we're just hoping we can hit that timing in September. Then we're working with the refineries and the downstream. We brought in a large quantity of oil for the California onshore refinery market, and we're working our way through that process of making sure everybody's getting comfortable with our oil, the quality of it, and also the volume of it. We'll go into detail on that in another slide.

For regulatory and legal, we continue to wait on the U.S. District Court for their findings and also the Ninth Circuit, as we've been side by side with the U.S. federal government, working along with the Justice Department to be in a situation where all the federal regulations that we're adhering to at Sable Offshore are being recognized through the courts. We'll continue to update that as go, but there's no update today from that standpoint. On the finance side, we completed the refinancing of July 2nd, 2026. Proceeds were to retire the former ExxonMobil senior term note. That was really key because there are a lot of restrictions, the ExxonMobil senior term note that we now have a little more flexibility with the current financial structure. It's not optimal for us at this point, but it was a big step for us.

The commodity hedging program, one of the things we put in place, you'll see we've got some floor protection for a significant portion of our production. Just in case all the volatility goes the wrong direction, we'll be protected. We'll look at further balance sheet optimization in 2027, once all our wells are on and our reserve port's out there and we're at full power. On page 4, Gregory, I'm going to turn it over to you and let you take us through the financing overview we did and a couple of other financial slides.

Yeah. Sure. Thanks, Jim. Page six, the refinancing overview, like Jim just mentioned, we completed our bridge refinancing in early July that fully satisfied and took out the ExxonMobil seller note, seller financing, the prior senior secured term loan. We did so with a series of transactions, starting with the $675 million senior secured term loan B.

This term loan B has a maturity of December 15, 2028, and it was structured as a fully amortizing loan through the maturity of the security itself. So that is fully amortizing through a mandatory amortization of 2.5% per quarter in the back half of this year, stepping up to 5% per quarter beginning in 2027. It also includes a 100% excess cash flow sweep feature, which could potentially accelerate that amortization depending on the prevailing commodity prices. It does have a 1.25 times MOIC minimum takeout, and we will certainly be looking to de-lever on the amortization front and the excess cash flow sweep front. But as Jim mentioned, when we achieve our additional milestones and get a full 3P reserve report, we will be pursuing phase two of the refinancing efforts.

I think we are very happy to complete this bridge financing, satisfy our obligations with the seller note, ExxonMobil, but we certainly have room to improve on the interest rate front, interest rate reduction, and we look forward to approaching the market here in 2027. In addition to the $675 million senior secured term loan B, we issued about $345 million of convertible senior unsecured notes. Those notes, the five-year notes, July 1, 2031 maturity, 6.5% coupon with a $4 per share initial conversion price. Overall, we lowered our weighted average cost to debt, but we certainly have a room to improve and looking forward to further optimizing the balance sheet.

In conjunction with those debt securities, we put in place a zero borrowing base, $500 million revolving credit facility that was designed to allow us to commence that hedging program and fulfill our obligations under the term loan deed, meet those minimum hedging requirements by hedging 100% of our Netherland, Sewell & Associates, Inc. projected PDP production. We have the ability to hedge beyond those minimums, and we are currently evaluating adding additional volumes, which we will get into. Slide seven is a brief overview of our updated financial guidance, which includes our sales and cost guidance. Like Jim mentioned, we do have slightly elevated short-term marketing and GP&T deducts reflected here for the back half of 2026. We will get into why we think these issues will be alleviated here in the near term, but it is part and parcel of the California energy market with all the regulatory headwinds and constraints.

Our capital structure, as we illustrated on the prior page, an enterprise value of $1.9 billion, equity value of $911 million at the $4.75 share price as of August 7th. Our financial objectives, as we mentioned, we fully plan to de-lever under the terms of the new senior secured term loan B and/or refinance and take out that paper as soon as possible after we issue the full 3P reserve report where we get credit for all the PDP reserves that we will bring online at Hondo here in September. Also all of our PUD locations, which were not included in the prior interim Netherland, Sewell & Associates, Inc. report. We will continue to optimize the balance sheet with the phase two of our refinancing, lower our cost of debt, and increase our maturity runway beyond 2028. We will certainly opportunistically manage the convertible notes to minimize any potential dilution there.