FLME Filings — Sable Offshore Corp.

FLME Filings — Sable Offshore Corp. - FilingSpy

10-Q · Quarter ended Jun 30, 2026 · SEC filing ↗

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Original filing text

Management's Discussion and Analysis

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 Third Amendment to Senior Secured Term Loan Agreement On June 22, 2026, the Company entered into a third amendment (the “Third Amendment”) to the Senior Secured Term Loan Agreement (“Senior Secured Term Loan”) with Exxon Mobil Corporation (“Exxon” or “EM”), which, among other things, extended the maturity date of the Senior Secured Term Loan to the earlier of (i) July 24, 2026 or (ii) the occurrence of an event of default. In connection with the Third Amendment, the Company paid Exxon a $30.0 million amendment fee on June 22, 2026. Exxon also agreed to suspend and waive, until the amended maturity date, the $25.0 million minimum liquidity covenant that had been introduced under the Second Amendment to the Senior Secured Term Loan Agreement. Additionally, in connection with the Third Amendment, the Company obtained a limited waiver (the “Limited Waiver”) from Exxon and Mobil Pacific Pipeline Company under the Sable-EM Purchase Agreement, which defers the Company’s obligation to provide plugging and abandonment financial security under Section 11.18(c) of the Sable-EM Purchase Agreement until the earlier of (i) December 22, 2028, (ii) the date on which the new money secured financing to be entered into prior to the maturity date of Term Loan B (as defined below) for the primary purposes of refinancing the Senior Secured Term Loan is redeemed, repaid or otherwise refinanced, or (iii) the occurrence of an event of default. The Third Amendment and Limited Waiver were entered into to provide the Company with additional time and flexibility to complete its planned refinancing while preserving liquidity. 28 Table of Contents 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 $332.5 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 $107.0 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, and to pay related fees and expenses, with the remainder available for general corporate purposes. Defense Production Act Order On March 13, 2026, the President of the United States, Donald J. Trump, signed an Executive Order to, among other things, delegate certain authorities under the Defense Production Act (“DPA”) to the United States Secretary of Energy. Subsequently on March 13, 2026, the United States Secretary of Energy, Chris Wright, issued an order (the “DPA Order”) pursuant to that delegated authority in order to address the energy scarcity and supply disruption risks that have left the region and U.S. military forces dependent on foreign oil. The DPA Order states that “[a]n affordable and reliable domestic supply of energy is a fundamental requirement for the national and economic security of any nation.” It observes that the nation’s energy “problems are most pronounced in our Nation’s West Coast, ‘where dangerous State and local policies jeopardize our Nation’s core national defense and security needs, and devastate the prosperity of not only local residents but the entire United States population.’” The DPA Order also states that the SYU is a “critical energy resource on the West Coast” but “cannot be used to address the shortages identified in EO 14156 and the resulting vulnerabilities, including adversarial dependence” because “California agencies have deployed an array of state measures [ ] to block pipeline operations.” Accordingly, the DPA Order directs Sable “to immediately prioritize and allocate pipeline transportation services for hydrocarbons from the SYU through the SYPS” and “immediately commence performance under contracts or orders for services…for hydrocarbon transportation capacity in the SYPS[.]” The DPA Order requires Sable to “comply with this order immediately and maintain such compliance until such time as the conditions necessitating the issuance of this order abate or until Sable is directed otherwise.” On March 14, 2026, the Company resumed transportation of oil through Pipeline Segments 324 and 325 of the Santa Ynez Pipeline System, pursuant to the DPA Order (as defined above). On March 30, 2026, the State of California filed a Complaint for Declaratory and Injunctive Relief alleging that the DPA Order violates provisions of the Administrative Procedure Act and the U.S. Constitution. The matter is captioned State of California v. Chris Wright, et al., Case No. 2:26-cv-03396, in U.S. District Court, Central District of California. The Court held a hearing on the State’s Motion for Preliminary Injunction on June 8, 2026, and ordered supplemental briefing, which was completed by the parties on June 18, 2026. On June 29, 2026, Defendants Chris Wright and the U.S. Department of Energy filed a Motion to Dismiss, in which Sable and PPC joined. On July 20, 2026, the State filed a First Amended Complaint which mooted the pending Motion to Dismiss. The parties submitted, and are currently awaiting entry of, a stipulation for briefing a renewed Motion to Dismiss addressed to the First Amended Complaint. On July 30, 2026, the Court issued a scheduling order setting a briefing schedule for a Motion to Dismiss the First Amended Complaint with a hearing scheduled on September 28, 2026. 29 Table of Contents Initiation of Oil Sales On March 29, 2026, the Company initiated oil sales upon filling the SYPS, resulting in total sales volumes of approximately 1,923 thousand barrels of oil equivalent (“Mboe”) for the six months ended June 30, 2026. Consent Decree The United States Department of Justice has moved to terminate or modify the Consent Decree in the United States District Court, Central District of California. Sable is not a party to this litigation, but is participating in briefing related to the Consent Decree termination or modification, which was heard on June 8, 2026. Offshore Buoy Alternative Sable is evaluating 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 has not started any preparations or installations of the Buoy. 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.” Offshore Storage and Treating Vessel Alternative On September 29, 2025, Sable announced that it is 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 Santa Ynez Pipeline System prompted Sable to evaluate the OS&T Strategy and on October 9, 2025, Sable submitted a Development and Production Plan update for the SYU to the Bureau of Ocean Energy Management (“BOEM”). Prior to implementation of the OS&T Strategy, regulatory authorizations would be required, including clearance from BOEM. Following the resumption of oil transportation through Pipeline Segments 324 and 325 of the SYPS, the OS&T Strategy is no longer the Company’s primary development pathway. Under the DPA Order (as defined above), the Company has been directed to immediately prioritize and allocate pipeline transportation services for oil transportation from the SYU through the SYPS. Nonetheless, 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. Preparations for the OS&T Strategy, if implemented, would include the acquisition of a suitable OS&T vessel, certain refitting and upgrades to the vessel and the SYU equipment, transportation of the vessel to SYU, and related installation. 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.” 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 six months ended June 30, 2026, the Company issued 1,640,844 and 7,000,634 shares of its Common Stock, respectively, in connection with the ATM Program, for aggregate gross proceeds of approximately $22.6 million and $95.0 million, respectively. Associated marketing and legal fees of approximately $0.6 million and $2.3 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 six months ended June 30, 2026, respectively. 30 Table of Contents Recent Trends and Outlook Trends Commodity prices have been highly volatile during the six months ended June 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 following the outbreak of armed conflict between the United States and Iran in late February 2026 and the related disruption to shipping through the Strait of Hormuz, with Brent crude briefly exceeding $118 per barrel — its highest level since the onset of the COVID-19 pandemic — before briefly moderating as the conflict de-escalated and a temporary ceasefire took hold. As of the date of this filing, Brent and WTI crude oil prices have remained elevated and volatile relative to pre-conflict levels, and renewed armed conflict and increased risk to Strait of Hormuz shipping lanes in July 2026 illustrate the continued sensitivity of global crude prices to developments in the region. 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 and 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 Following the resumption of oil production at the Santa Ynez Unit in 2025 and the resumption of oil sales in March 2026, along with the completion of the 2026 Refinancing Transactions in July 2026, the Company’s near-term strategy is focused on ramping production across its offshore platforms while managing its capital structure, liquidity, and debt service obligations. In July 2026, an average of approximately 47 wells at Platforms Harmony and Heritage were online, producing an average of approximately 720 gross barrels of oil per day per well. Sable expects to bring all 77 production wells on these platforms online during the third quarter of 2026. The Company expects Platform Hondo to commence production in September 2026. In July 2026, the Company entered into a series of costless collar arrangements covering approximately 28.0 mbo/d for the period from July 1, 2026 through December 31, 2026 (with a $65.00 put and $89.39 call), approximately 25.0 mbo/d for the period from January 1, 2027 through December 31, 2027 (with a $65.00 put and $80.00 call), and approximately 21.0 mbo/d for the period from January 1, 2028 through December 31, 2028 (with a $65.00 put and $73.17 call), in order to manage its exposure to fluctuations in crude oil prices. Sable is coordinating with the federal government in various legal matters to defend its vested rights to operate its assets and ensure compliance with certain federal mandates, including the Defense Production Act. Sable is also actively pursuing damages and taking proactive legal action to curb state and county regulatory overreach. 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 third 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 31 Table of Contents 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 six months ended June 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 and sales volumes for the three and six months ended June 30, 2026 and 2025. The Company had no natural gas revenue or sales volumes for the periods presented. Three Months Ended June 30, Six Months Ended June 30, Revenues (In millions): 2026 2025 Change 2026 2025 Change Oil sales $ 136.6 $ — $ 136.6 $ 137.9 $ — $ 137.9 Natural gas liquid sales 0.1 — 0.1 0.1 — 0.1 Total oil and natural gas liquid revenues $ 136.7 — 136.7 138.0 — 138.0 Sales Volumes: Oil (MBbls) 1,905 — 1,905 1,918 — 1,918 Natural gas liquids (MBbls) 5 — 5 5 — 5 Total sales volumes (MBOE) 1,910 — 1,910 1,923 — 1,923 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 six months ended June 30, 2025. 32 Table of Contents Three Months Ended June 30, 2026 vs. Three Months Ended June 30, 2025 The following table presents selected unaudited condensed consolidated financial results of operations for the six months ended June 30, 2026 and 2025. Three Months Ended June 30, Increase (Decrease) (in thousands) 2026 2025 $ % Revenue Oil and natural gas liquids sales $ 136,709 $ — $ 136,709 $ — 100 % Other 416 — 416 100 % Total revenue 137,125 — 137,125 100 % Operating Expenses Operations and maintenance expenses 113,474 50,398 63,076 125 % Depletion, depreciation, amortization and accretion 32,024 3,172 28,852 910 % General and administrative expenses 58,521 75,318 (16,797) (22) % Total operating expenses 204,019 128,888 75,131 58 % Loss from operations (66,894) (128,888) 61,994 (48) % Other (income) expenses: Change in fair value of warrant liabilities (72,056) (27,146) (44,910) nm Other income, net (665) (2,508) 1,843 nm Interest expense 43,066 21,009 22,057 105 % Total other income, net (29,655) (8,645) (21,010) nm Loss before income taxes (37,239) (120,243) 83,004 (69) % Income tax expense 26,977 7,823 19,154 nm Net loss $ (64,216) $ (128,066) $ 63,850 (50) % nm: not meaningful Revenue. The Company recognized $136.7 million in oil and natural gas liquids sales and $0.4 million in other revenue for the three months ended June 30, 2026, compared to no revenue recognized for the three months ended June 30, 2025, as oil sales did not commence until March 2026. Operating and maintenance expenses. Operating and maintenance expenses were $113.5 million for the three months ended June 30, 2026, an increase of $63.1 million, or 125%, compared to $50.4 million for the three months ended June 30, 2025. The increase was primarily attributable to restart-related activities. Platform Harmony commenced initial production in May 2025, such that the three months ended June 30, 2025 reflected only approximately one month of associated operating costs, whereas the three months ended June 30, 2026 reflected a full quarter of Platform Harmony operating costs. In addition, Platform Heritage commenced initial production in April 2026 and contributed a full quarter of operating costs during the three months ended June 30, 2026, with no comparable costs recognized in the prior-year period. The increase was also attributable to $18.5 million of start-up related demurrage charges and $12.0 million of operator rights expenditures which were recognized for the three months ended June 30, 2026. Additionally, during the three months ended June 30, 2026, non-reoccurring expenses were incurred associated with platform commissioning activities, which the Company does not expect to recur in future periods. Operating and maintenance expenses are expected to remain elevated as compared to prior periods until all production wells are online. Depletion, depreciation, amortization and accretion. Depletion, depreciation, amortization and accretion was $32.0 million for the three months ended June 30, 2026, an increase of $28.9 million, or 910%, compared to $3.2 million for the three months ended June 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 June 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 June 30, 2026, the Company recognized $29.6 million of depletion, depreciation and amortization associated with the SYU assets, $1.4 million of which was capitalized to Inventory on the unaudited condensed consolidated balance sheet, as the associated production was used to increase the volumes held in storage tanks at LFC as of June 30, 2026. Depletion, depreciation, amortization and accretion expense is expected to increase in future periods as production volumes and sales activity increase. 33 Table of Contents General and administrative expenses. G&A expenses were $58.5 million for the three months ended June 30, 2026, a decrease of $16.8 million, or 22%, compared to $75.3 million for the three months ended June 30, 2025. The decrease was primarily attributable to $25.9 million of lower compensation expense. Upon the Company's achievement of first production in May 2025, the Company made certain related restart incentive compensation payments and initiated accruing annual incentive compensation based on management’s expectations, both of which were recognized during the three months ended June 30, 2025. This decrease was partially offset by $6.2 million of higher stock-based compensation for the three months ended June 30, 2025. Total other income, net. Total other income, net was $29.7 million for the three months ended June 30, 2026, compared to total other income, net of $8.6 million for the three months ended June 30, 2025, an increase of $21.0 million. The increase was primarily attributable to a $44.9 million change in the fair value of warrants, driven by a shorter remaining term, a decrease in the market price of the Company’s common stock, and changes in market volatility. This increase was partially offset by $1.8 million decrease in other income, reflecting lower interest income due to a reduced average cash balance during the period, and a $22.1 million increase in interest expense, primarily attributable to the amortization of additional debt issuance costs recognized in connection with the Third Amendment. Income tax expense. Income tax expense for the three months ended June 30, 2026 was $27.0 million, compared to an income tax expense of $7.8 million for the three months ended June 30, 2025. The Company’s effective tax rate was negative 72.4 percent for the three months ended June 30, 2026. The effective tax rate for the three months ended June 30, 2026 reflects the cumulative effect of a change in the estimated annual effective tax rate, which the Company had estimated to be zero as of March 31, 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 Company recognized a discrete tax expense of $2.2 million for the three months ended June 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 effective tax rate also differed from the U.S. federal statutory tax rate of 21% primarily due to changes in valuation allowance on the deferred tax assets and disallowed expenses. The Company’s effective tax rate was negative 6.5% for the three months ended June 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 the prior-year period. 34 Table of Contents Six Months Ended June 30, 2026 vs. the Six Months Ended June 30, 2025. The following table presents selected unaudited condensed consolidated financial results of operations for the six months ended June 30, 2026 and 2025. Six Months Ended June 30, Increase (Decrease) (in thousands) 2026 2025 $ % Revenue Oil and natural gas liquids sales $ 137,980 $ — $ 137,980 $ — 100 % Other 416 — 416 100 % Total revenue 138,396 — 138,396 100 % Operating Expenses Operations and maintenance expenses 181,507 84,841 96,666 114 % Depletion, depreciation, amortization and accretion 35,966 6,193 29,773 481 % General and administrative expenses 106,571 97,650 8,921 9 % Total operating expenses 324,044 188,684 135,360 72 % Loss from operations (185,648) (188,684) 3,036 (2) % Other (income) expenses: Change in fair value of warrant liabilities (27,899) (5,851) (22,048) 377 % Other income, net (1,218) (5,948) 4,730 (80) % Interest expense 77,734 42,019 35,715 85 % Total other expense, net 48,617 30,220 18,397 61 % Loss before income taxes (234,265) (218,904) (15,361) 7 % Income tax expense 26,977 18,706 8,271 44 % Net loss $ (261,242) $ (237,610) $ (23,632) 10 % nm: not meaningful Revenue. The Company recognized $138.0 million in oil and natural gas liquids sales and $0.4 million in other revenue for the six months ended June 30, 2026, compared to no revenue recognized for the six months ended June 30, 2025, as oil sales did not commence until March 2026. Operating and maintenance expenses. Operating and maintenance expenses were $181.5 million for the six months ended June 30, 2026, representing an increase of $96.7 million, or 114%, compared to $84.8 million for the six months ended June 30, 2025. The increase was primarily attributable to resumption-related activities, including one-time platform commissioning expenses. Platform Harmony commenced initial production in May 2025, such that the six months ended June 30, 2025 reflected only approximately one month of associated operating costs, whereas the six months ended June 30, 2026 reflected a full six months of Platform Harmony operating costs. In addition, Platform Heritage recommenced production in April 2026 and contributed a full quarter of operating costs during the six months ended June 30, 2026, with no comparable costs recognized for the six months ended June 30, 2025. The increase was also attributable $18.5 million of start-up related demurrage charges and $24.0 million of operator rights expenditures which were recognized for the six months ended June 30, 2026. Additionally, during the six months ended June 30, 2026, non-reoccurring expenses were incurred associated with platform commissioning activities, which the Company does not expect to recur in future periods. Operating and maintenance expenses are expected to remain elevated as compared to prior periods until all production wells are online. Depletion, depreciation, amortization and accretion. Depletion, depreciation, amortization and accretion was $36.0 million for the six months ended June 30, 2026, representing an increase of $29.8 million, or 481%, compared to $6.2 million for the six months ended June 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 six months ended June 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 six months ended June 30, 2026, the Company recognized $33.5 million of depletion, depreciation and amortization associated with the SYU assets, $5.2 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 June 30, 2026 (refer to Note 2 — Significant Accounting Policies for additional details regarding linefill). Depletion, 35 Table of Contents 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 $106.6 million for the six months ended June 30, 2026, an increase of $8.9 million, or 9% compared to $97.7 million for the six months ended June 30, 2025. The increase in G&A expenses was primarily attributable to a $15.1 million increase in share-based compensation expense and a $14.5 million increase in legal expenses related to ongoing legal and regulatory matters. The increase was partially offset by a $21.8 million decrease in other compensation costs. Upon the Company's achievement of first production in May 2025, the Company made certain related restart incentive compensation payments and initiated accruing annual incentive compensation based on management’s expectations, both of which were recognized during the six months ended June 30, 2025. Total other expense, net. Total other expense, net was $48.6 million for the six months ended June 30, 2026, an increase of $18.4 million compared to total other expense, net of $30.2 million for the six months ended June 30, 2025. The increase in total other expense, net was primarily attributable to a $35.7 million increase in interest expense, due to the increase in the Company’s Senior Secured Term Loan interest rate from 10% to 15% in accordance with the terms of the Second Amendment, as well as due to the amortization of additional debt issuance costs recognized in connection with the Third Amendment. This increase was partially offset by $4.7 million increase in other income, net, and a $22.0 million favorable change in the fair value of the warrant liabilities, driven by a shorter remaining term, a decrease in the market price of the Company’s common stock, and changes in market volatility. Income tax expense. Income tax expense for the six months ended June 30, 2026 was $27.0 million, representing an increase of $8.3 million compared to $18.7 million for the six months ended June 30, 2025. The Company’s effective tax rate was negative 11.5% for the six months ended June 30, 2026. The effective tax rate differed from the U.S. federal statutory tax rate of 21% 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 six months ended June 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 8.5% for the six months ended June 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 the prior-year period. 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. Based on the Company’s current financial plan, management expects operating cash flows, together with the remaining proceeds of the 2026 Refinancing Transactions, to be sufficient to fund operating expenses and service indebtedness; however, this expectation is subject to commodity price volatility, regulatory developments, and other factors that could impact future liquidity. Planned Capital Expenditures. Capital expenditures across the Company’s SYU Assets are expected to total approximately $85.9 million for the remainder of 2026, or approximately $148.5 million for the full year 2026 (excluding non-cash linefill capital expenditures), as the Company continues to focus on facility upgrades, maintenance capital, and low-cost production optimization initiatives. The Company expects to fund these capital expenditures primarily through operating cash flows and the remaining net proceeds of the 2026 Refinancing Transactions. 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 capital expenditures related to such strategies are planned for 2026. Capital Raising Activities. Prior to commencing sales of production volumes through the SYPS, the Company’s capital requirements were primarily funded through proceeds from equity issuances of Common Stock and warrant exercises. 36 Table of Contents 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 $155.0 million remaining at June 30, 2026. Subsequent to quarter-end, on July 2, 2026, the Company completed the 2026 Refinancing Transactions. The Company used the net proceeds of the 2026 Refinancing Transactions to repay in full on July 2, 2026 the Senior Secured Term Loan and to pay related fees and expenses. Going Concern and Liquidity As of June 30, 2026, the Company reported unrestricted cash of $21.6 million, current debt of $236.7 million, and an accumulated deficit of $1.4 billion. In connection with the preparation of its unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2026, management evaluated the Company’s ability to continue as a going concern in accordance with ASC 205-40, Presentation of Financial Statements — Going Concern, and concluded that substantial doubt existed regarding the Company’s ability to continue as a going concern within one year of the date such financial statements were issued, due to the Company’s then current debt maturity profile and related liquidity considerations. 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. Accordingly, substantial doubt regarding the Company’s ability to continue as a going concern no longer exists as of 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: Six Months Ended June 30, Change (dollars in thousands) 2026 2025 $ % Cash flows (used in) provided by: Operating activities $ (72,807) $ (142,948) $ 70,141 49% Investing activities (52,559) (192,982) 140,423 73% Financing activities 49,281 282,933 (233,652) 83% Net change in cash and cash equivalents $ (76,085) $ (52,997) Cash Flows from Operating Activities. Since the Company initiated oil sales in March 2026, revenues were recognized for only a portion of the six months ended June 30, 2026, and no operating revenues were recognized for the six months ended June 30, 2025. Net cash used in operating activities was $72.8 million for the six months ended June 30, 2026, a decrease of $70.1 million, or 49%, compared to net cash used in operating activities of $142.9 million for the six months ended June 30, 2025. The primary use of cash during the six months ended June 30, 2026 related to commissioning Platforms Harmony and Heritage and the resulting operations occurring thereafter, while the primary use of cash during the six months ended June 30, 2025 was attributable to maintenance and operational readiness activities. For the six months ended June 30, 2026, the Company incurred a net loss of $261.2 million, which included non-cash charges of $69.1 million of interest expense, $36.0 million of depletion, depreciation, amortization and accretion, $30.4 million of share-based compensation, $27.0 million of income tax expense, and $8.6 million of amortization of debt issuance costs, partially offset by $27.9 million related to the decrease in the fair value of warrants. Changes in accounts payable of $98.3 million and changes in accounts receivable of $50.1 million were primarily attributable an increase in accruals following the commencement of production from Platforms Harmony and Heritage in May of 2025 and April of 2026, respectively. For the six months ended June 30, 2025 the Company incurred a net loss of $237.6 million, which included non-cash charges of $41.7 million of interest expense, $18.7 million of income tax expense, $16.5 million of share-based compensation, $6.2 million of depletion, depreciation, amortization and accretion, and $5.9 million related to the decrease in the fair value of warrants. Changes in accounts payable of $22.4 million were primarily attributable to the increase an increase in vendor payables associated with the restart efforts. 37 Table of Contents Cash Flows from Investing Activities. Net cash used in investing activities was $52.6 million for the six months ended June 30, 2026, a decrease of $140.4 million, or 73%, compared to $193.0 million for the six months ended June 30, 2025. Cash used in investing activities in both periods primarily consisted of capital expenditures associated with restart efforts. Cash Flows from Financing Activities. Net cash provided by financing activities was $49.3 million for the six months ended June 30, 2026, primarily consisting of $95.0 million of gross proceeds from the ATM Program, net of $15.0 million of related offering costs and offering costs associated with 2025 equity offering paid during 2026 and $30.7 million of cash paid for debt issuance costs related to the Third Amendment. Net cash provided by financing activities for the six months ended June 30, 2025, consisting of $295.0 million of gross proceeds from a 2025 equity offering, net of $12.1 million of related offering costs. Contractual Obligations Pursuant to the Senior Secured Term Loan, which financed most of the Purchase Price (as defined in the Senior Secured Term Loan), Sable incurred interest for the period prior to the effectiveness of the Second Debt Amendment of ten percent (10%) per annum, and fifteen percent (15%) per annum subsequent to the Second Debt Amendment, compounded annually (refer to Note 4 — Debt for additional details regarding the Second Debt Amendment). Interest on the Senior Secured Term Loan is payable in arrears on January 1st of each year but, at Sable’s election, accrued but unpaid interest may be deemed paid on each interest payment date by adding the amount of interest owed to the outstanding principal (paid-in-kind) amount. Upon the execution of the Third Amendment, the maturity date of the Senior Secured Term Loan was extended to July 26, 2026. However, on July 2, 2026, the Company successfully completed the 2026 Refinancing Transactions to refinance the Senior Secured Term Loan. Refer to the Recent and Significant Events section and Note 10—Subsequent Events to the condensed consolidated financial statements for additional details regarding the Refinancing Transaction. Additional obligations include the performance of ARO as referenced under “Critical Accounting Policies and Estimates—Asset Retirement Obligations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Off Balance Sheet Arrangements As of June 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 six months ended June 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 The Company currently sells crude oil under a short-term agreement at prevailing market prices, with certain adjustments for product quality and geographic location. The Company recognizes revenue when control transfers to the purchaser at the delivery point and the customer has assumed the risk and rewards of ownership. Oil and Gas Properties Linefill. The SYPS is an interstate pipeline that includes (among other pipeline segments and components) (i) Pipeline Segment 324, which extends from LFC to the Gaviota Pump Station in Santa Barbara County, California, and (ii) Pipeline Segment 325, which extends from the Gaviota Pump Station in Santa Barbara County, California, to Pentland Station in Kern County, California with an intermediate station at Sisquoc in San Luis Obispo, California. The Company classifies the quantity of oil used to fill Pipeline Segments 324 and 325 as linefill such that when an incremental barrel of oil is pumped into Pipeline Segments 324 and 325 it forces oil out at the Pentland Station sales point location. Pipeline Segments 324 and 325 have a capacity of approximately 540 MBbls. This linefill is accounted for at historical cost and recognized as a long term asset within Oil and gas properties on the unaudited condensed consolidated balance sheet as of June 30, 2026. The Company capitalized costs incurred that were directly attributable to filling Pipeline Segments 324 and 325, 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. 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 it has elected to comply with certain reduced public company reporting requirements. 38 Table of Contents We will no longer be an EGC as of December 31, 2026, after which we will not be able to take advantage of such reduced reporting and disclosure requirements.

Quantitative and Qualitative Disclosures About Market Risk

Regulatory Risk The Company’s operations are subject to extensive regulation by federal, state, and local authorities, including regulatory oversight by BOEM, BSEE, and PHMSA. Additionally, California maintains a complex regulatory framework governing offshore and onshore oil and gas operations, pipeline transportation, environmental compliance, and permitting. Regulatory approvals required to modify infrastructure may be subject to additional conditions, delays, or legal challenge, which could increase costs or affect the timing of planned activities. Certain regulatory matters and related uncertainties are discussed in Note 6 — Commitments and Contingencies to the unaudited condensed consolidated financial statements. While the Company cannot reasonably quantify the financial impact of future regulatory actions, delays or changes in regulatory requirements, such occurrences could result in incremental capital expenditures, periods without revenue, or reduced cash flows, which could adversely affect the Company’s liquidity as described in Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations. Debt Refinance and Liquidity Risk The Company’s Senior Secured Term Loan was scheduled to mature on July 26, 2026. On July 2, 2026, the Company completed the 2026 Refinancing Transactions, repaid the Senior Secured Term Loan in full, entered into the New Senior Secured Credit Facilities and issued the Convertible Notes. Refer to “Recent and Significant Events” above and Note 10—Subsequent Events to the condensed consolidated financial statements for additional details regarding the 2026 Refinancing Transactions. Commodity Price Risk The Company’s financial performance is sensitive to fluctuations in crude oil prices. Changes in oil prices could materially affect the Company’s revenues, operating cash flows, capital investment decisions, and ability to service its indebtedness. Crude oil prices are subject to significant volatility driven by global supply and demand dynamics, geopolitical events, regulatory actions, and regional market dynamics, including those specific to California. While the Company has engaged in risk management activities following the 2026 Refinancing Transactions, it did not have commodity price hedging arrangements in place as of June 30, 2026. Accordingly, a sustained decline in oil prices could adversely affect the economics of the Company's production and its financial condition. Refer to Note 10—Subsequent Events to the condensed consolidated financial statements for additional details regarding commodity hedging activity executed in July 2026.

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Risk Factors

The following discussion supplements the risk factors affecting the Company as set forth in Part I, Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2025 and any subsequently filed Quarterly Reports on Form 10-Q, as well as the factors identified under “Cautionary Note Regarding Forward-Looking Statements” at the beginning of Part I, Item 2 of this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition or future results. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. The requirements to transport petroleum through Pipeline Segments 324 and 325 include those set forth in a Consent Decree with federal and state agencies, and we believe the Company has substantially complied with such requirements. While we also believe that the prerequisites for terminating the Consent Decree have been satisfied, there is no assurance that the Consent Decree will be terminated or, in the alternative, modified. In May 2015, Pipeline Segment 324 (then known as “Line 901”) experienced a leak while operated by Plains All American Pipeline, L.P. (the “Line 901 Incident”). Production from the SYU Assets was suspended as a result of the Line 901 Incident and consequent suspension of service. In May 2025 we restarted production from the SYU Assets and resumed petroleum transportation through the SYPS. In March 2026, in compliance with the DPA Order, we resumed petroleum transportation through Pipeline Segments 324 and 325 and subsequently resumed oil sales from the SYU Assets. We are required to satisfy certain requirements related to Pipeline Segments 324 and 325 in connection with recommencing oil sales. Such requirements include conditions set forth in a U.S. federal district court Consent Decree executed by Plains and relevant U.S. and State of California government agencies. Sable believes all such requirements have been satisfied. On January 14, 2026, both Plains and the Company submitted letters to the United States Department of Justice Environment and Natural Resources Division and the California Office of the Attorney General Natural Resources Law Section regarding the termination of the Consent Decree because the prerequisites for termination have been satisfied. On March 16, 2026, OSFM and State Parks (“California Plaintiffs”) filed an ex parte Emergency Motion to Enforce Consent Decree in United States, et al. v. Plains All American Pipeline, L.P., et al., Case No. 2:20-cv-02415 (C.D. Cal) in U.S. District Court seeking an order enforcing the Consent Decree and ordering Sable not to restart or continue operating Pipeline Segments 324 and 325 of the SYPS. The Department of Justice (“DOJ”), on behalf of the United States of America (the “United States”), filed its opposition to California Plaintiffs’ Ex Parte Motion on March 18, 2026. On March 23, 2026, the Court denied the California Plaintiffs’ Ex Parte Motion, finding “no evidence to support a showing of irreparable prejudice” to California Plaintiffs’ cause if required to seek relief through a regularly noticed motion. On March 30, 2026, the DOJ, on behalf of the United States, filed a Motion to Terminate or Modify the Consent Decree. Sable and PPC, as nonparties to the cases, filed a Memorandum in Support of the United States’ motion on April 1, 2026, and filed a combined brief in opposition to California’s Motion to Enforce and reply brief in support of the United States’ Motion to Terminate or Modify the Consent Decree on April 27, 2026. A hearing was held on California Plaintiffs’ Motion to Enforce Consent Decree and the United States’ Motion to Terminate or Modify the Consent Decree on June 8, 2026, and the Court ordered supplemental briefing, which was completed by the parties June 25, 2026. There is no guarantee that the Court will grant the DOJ’s Motion to Terminate or Modify the Consent Decree. If the Consent Decree is not modified or otherwise terminated, State of California government agencies which are parties to the Consent Decree have alleged that the Company has not satisfied its requirements, which may delay or interrupt our operations and limit our growth and revenue, which could have a material adverse effect on our business and financial condition or may impact our ability to service and repay or refinance the New Senior Secured Credit Facilities or the Convertible Notes. 40 Table of Contents The DPA Order is subject to legal challenges and any adverse ruling could require us to cease or curtail petroleum transportation through the SYPS, which could have a material adverse effect on our results of operations, financial condition, and ability to service the notes. Our ability to transport petroleum through Pipeline Segments 324 and 325, and accordingly our ability to generate revenue from oil sales, is currently based on the requirements set forth in the DPA Order. On March 30, 2026, the State of California filed a Complaint for Declaratory and Injunctive Relief in the U.S. District Court for the Central District of California (State of California v. Chris Wright, et al., Case No. 2:26-cv-03396), alleging that the DPA Order violates provisions of the Administrative Procedure Act and the U.S. Constitution. The Court held a hearing on the State’s Motion for Preliminary Injunction on June 8, 2026, and ordered supplemental briefing. On July 20, 2026, the State filed a First Amended Complaint. The outcome and timeline of this litigation, including with respect to the supplemental briefing ordered by the Court, remain uncertain. If the State of California’s challenge, or any future legal challenge, to the DPA Order is successful, including through the granting of a preliminary injunction or other injunctive relief, the requirement that we transport petroleum through Pipeline Segments 324 and 325 could be vacated, enjoined, or otherwise rendered ineffective, and we could be required to cease or curtail petroleum transportation through the SYPS. Any such cessation or curtailment would materially reduce or terminate our ability to sell oil produced from the SYU Assets, which could have a material adverse effect on our business, results of operations, financial condition, and our ability to service and repay or refinance the New Senior Secured Credit Facilities or the notes. In addition, even if the current challenge is resolved favorably, we cannot assure you that additional legal challenges to the DPA Order will not be brought by other parties in the future. The State of California or its agencies may also pursue additional regulatory, legislative, or enforcement actions directed at impeding pipeline operations on the SYPS, including through further enforcement proceedings by the Coastal Commission, the enactment of additional legislation similar to SB 237, or other state or local measures. Any such actions, or the threat thereof, could create additional uncertainty around our operations, increase our legal and compliance costs, and further impair our ability to transport petroleum through the SYPS, any of which could have a material adverse effect on our business, financial condition, results of operations, and our ability to service the notes. The timing of returning wells to production is subject to risks that may cause delays and initial production rates are expected to decline. We returned a number of wells to production on Platform Harmony beginning in May 2025 and Platform Heritage beginning in April 2026, and we expect to return a number of additional wells to production on Platforms Harmony, Heritage and Hondo. Operations on offshore platforms are subject to numerous risks and potential delays. In addition, oil and natural gas wells typically exhibit a decline in production over time. Accordingly, initial production rates as our wells are brought back into production are expected to be higher than the rate of sustained production at such wells. There is substantial uncertainty regarding the amount and timing of production decline from recently reopened wells. Our assumptions and estimates regarding the total costs associated with the OS&T Strategy may be inaccurate. If pursued, we currently estimate remaining start-up expenses associated with the OS&T Strategy of approximately $475.0 million to recommence offshore oil sales, excluding corporate working capital. The expenditures will primarily be directed towards the procurement of a suitable vessel and necessary upgrade and installation costs with respect to such vessel and our platforms, and obtaining necessary regulatory approvals. This estimate of costs to recommence offshore oil sales considers currently available facts and presently enacted laws and regulations, but it is subject to uncertainties associated with the assumptions that we have made. For example, because the markets for OS&T vessels and vessel refurbishment and upgrading are competitive, and our estimates for the cost of procurement and planned upgrades are based on our understanding of the relevant markets and current supply of suitable vessels and contracts, the actual cost of such a vessel and the related upgrades may exceed our expectations. In addition, the costs of equipment, repairs and maintenance, the costs of operating personnel, the costs to obtain governmental approvals, and legal, consulting and other professional expenses could turn out to be higher than we have estimated. In addition, if we pursue the OS&T Strategy, we will need to procure additional financing, which may not be available on acceptable terms or at all. We also may experience increases in costs and delays. In addition, the New Senior Secured Credit Facilities limit our capital expenditures, our general and administrative costs and our ability to incur additional debt, and accordingly we may require consent of the lenders in order to complete the capital expenditures and general and administrative costs necessary to implement the OS&T strategy and/or incur additional indebtedness to fund such expenditures. 41 Table of Contents Our assumptions and estimates regarding the total costs associated with the Buoy Strategy may be inaccurate. If we pursue the Buoy Strategy, we currently estimate remaining start-up expenses of approximately $125.0 million to recommence offshore oil sales via the Buoy Strategy, excluding corporate working capital. The expenditures will primarily be directed towards preparing for the implementation of the Buoy Strategy, including installation costs with respect to such buoy and laying flowlines from our platforms, obtaining necessary regulatory approvals and recommencing offshore oil sales. This estimate of costs to commence offshore oil sales via the Buoy Strategy considers currently available facts and presently enacted laws and regulations, but it is subject to uncertainties associated with the assumptions that we have made. For example, because our estimates for the cost of installation are based on our understanding of the relevant markets and current supply of materials and contracts, the actual cost of a buoy and the installation thereof may exceed our expectations. In addition, the costs of equipment, repairs and maintenance, the costs of operating personnel, the costs to obtain governmental approvals, and legal, consulting and other professional expenses could turn out to be higher than we have estimated. In addition, if we pursue the Buoy Strategy, we will need to procure additional financing, which may not be available on acceptable terms or at all. We also may experience increases in costs and delays. We are subject to complex federal, state, local and other laws, regulations and permits that could adversely affect the cost, manner, ability or feasibility of conducting our operations. Our oil and natural gas development and production operations are subject to complex and stringent laws and regulations administered by governmental authorities vested with broad authority relating to the exploration for and the development, production and transportation of oil, natural gas, and NGLs. To conduct our operations in compliance with these laws and regulations, we must obtain and maintain numerous permits, approvals and certificates from various federal, state and local governmental authorities. We must comply with a number of requirements related to the SYPS, including Pipeline Segments 324 and 325, which include those conditions set forth in a U.S. federal district court Consent Decree executed by Plains and relevant U.S. and State of California government agencies. While we believe we are in compliance with the Consent Decree, State of California government agencies which are parties to the Consent Decree alleged that the Company has not satisfied its requirements, which may delay or interrupt our operations and limit our growth and revenue, or may impact our ability to service and repay or refinance the New Senior Secured Credit Facilities or the notes. In order to commence offshore oil sales pursuant to the OS&T Strategy or the Buoy Strategy, if pursued, we would need to obtain regulatory authorizations, including clearance from BOEM. We may incur substantial costs in order to maintain compliance with these existing laws and regulations, and we may experience delays in procuring required approvals, which may increase our costs or delay our ability to produce revenue. Failure to comply with laws and regulations or to obtain necessary regulatory clearances applicable to our operations, including any evolving interpretation and enforcement by governmental authorities, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our oil, natural gas, and NGLs development and production operations are also subject to stringent and complex federal, state and local laws and regulations governing the release or discharge of materials into or through the environment, worker health and safety aspects of our operations, or otherwise relating to property rights, environmental protection, resource protection, and damage to natural resources. These laws and regulations may impose numerous obligations applicable to our operations, including regulated drilling activities; operation, repair and maintenance of the Santa Ynez Pipeline System; potential installation and use of an OS&T or the Buoy; the restriction of types, quantities and concentrations of materials that can be released or discharged into or through the environment; required authorizations for, or the limitation or prohibition of, drilling, production and transportation activities on certain lands lying within wilderness, wetlands, seismically active, park and recreation areas and other protected or preserved areas; the application of specific health and safety criteria addressing worker protection; and the imposition of substantial liabilities for pollution and natural resources damages potentially resulting from our operations. The EPA, BOEM, BSEE, PHMSA, OSFM, Coastal Commission, CDFW, Regional Board, the SLC, State Parks and numerous other governmental authorities have the authority to enforce compliance with these laws and regulations and the permits or other authorizations issued by them, often requiring difficult and costly compliance measures or corrective actions. Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil or criminal penalties, the imposition of investigatory or remedial obligations, injunctive and mitigation relief, the suspension or revocation of necessary permits, licenses and authorizations, the requirement that additional pollution controls be installed and, in some instances, the issuance of orders limiting or prohibiting some or all of our operations. We may also experience delays in obtaining or be unable to obtain required permits which may delay or interrupt our operations and limit our growth and revenue, or may impact our ability to service and repay or refinance the New Senior Secured Credit Facilities or the notes. On March 29, 2026, the Company initiated oil sales upon filling the SYPS, which accelerated the maturity date of the Existing Senior Secured Term Loan to June 26, 2026. On June 22, 2026, the Company and Exxon entered into the Existing Senior Secured Term Loan Amendment, which 42 Table of Contents extended the maturity date of the Existing Senior Secured Term Loan to the earlier to occur of (a) July 24, 2026, and (b) the acceleration of the Existing Senior Secured Term Loan following any Event of Default (as defined therein). Under certain environmental laws that impose strict as well as joint and several liability, we may be required to remediate or conduct other response actions at or in relation to contaminated properties currently owned or operated by us or facilities of third parties that received waste generated by our operations regardless of whether such contamination resulted from the conduct of others or from the consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of our operations. Moreover, public interest in the protection of the environment has increased in recent years. New laws and regulations continue to be enacted, particularly at the state level, and environmental legislation and regulations applied to the crude oil and natural gas industry could continue, resulting in increased costs of doing business and consequently affecting profitability. Additionally, any changes in environmental regulations related to biodiversity protection could impose further operational constraints and costs. To the extent laws are enacted, or other governmental action is taken that restricts drilling, production and transportation activities, or imposes more stringent and costly operating, waste handling, disposal and cleanup requirements, our business, prospects, financial condition or results of operations could be materially adversely affected. Environmental groups may initiate litigation and take other actions to delay or prevent us from obtaining or maintaining required approvals. Environmental groups have had increasing success in limiting oil and gas production by appealing to regulatory agencies, filing lawsuits and applying political pressure. We are required to obtain and maintain a series of permits or regulatory approvals from, federal and state agencies, including PHMSA and BOEM. The laws and procedures governing these and other permits and regulatory approvals often allow third parties, including environmental groups, to challenge the draft permits and/or permit approvals through the relevant agencies and other administrative appeal processes. These groups may also file lawsuits that delay or prevent the issuance of the approvals through an injunction and/or prevailing on the legal merits or a ruling that additional approval is required. In addition, these groups may leverage the increased public attention and concern with respect to climate change and other environmental and social impacts in order to encourage government officials to withhold or delay the necessary approvals or require additional approvals. There is no assurance that these groups will not be successful in delaying or preventing us from obtaining or maintaining the required approvals through litigation or other actions. In order to commence offshore oil sales pursuant to the OS&T Strategy or the Buoy Strategy, we will require clearances and permitting, including from BOEM. If we choose to implement the OS&T Strategy or the Buoy Strategy, we may experience delays in obtaining or be unable to obtain required permits, including authorizations necessary to recommence offshore oil sales pursuant to the OS&T Strategy or the Buoy Strategy, which may delay or interrupt our operations and limit our growth and revenue or may impact our ability to service and repay or refinance the New Senior Secured Credit Facilities or the notes. In particular, prior to implementation of the OS&T Strategy or the Buoy Strategy, regulatory authorizations are required, including clearance from BOEM. If we do not receive regulatory clearances in connection with the OS&T Strategy or the Buoy Strategy in a timely manner, we may not be able to reach commercial sales pursuant to the OS&T Strategy or the Buoy Strategy. While the previous operator of the SYU was able to utilize the OS&T Strategy to process SYU production in federal waters from 1981 to 1994 under previously issued permits, there is no assurance that we will be able to successfully obtain the agency clearance or permits required to recommence oil sales pursuant to the OS&T Strategy or that no additional state or federal clearances or permits will be required in the future. We are required to hedge our expected proved developed production pursuant to the terms of the New Senior Secured Credit Facilities, and such hedging activities may expose us to counterparty risk, limit potential gains from increasing commodity prices, and expose us to cash losses. The New Senior Secured Credit Facilities required us to (x) hedge within five business days of the closing of the New Senior Secured Credit Facilities, reasonably anticipated production of crude oil from proved, developed and producing oil and gas properties for each calendar month through December 15, 2028 and (y) on a go forward basis, use commercially reasonable efforts to hedge substantially all of the anticipated production of crude oil from proved, developed and producing oil and gas properties through December 15, 2028, which may limit our ability to realize the benefits of higher commodity prices. 43 Table of Contents The prices and quantities at which we enter into commodity derivative contracts covering our production in the future will be dependent upon oil and natural gas prices and price expectations at the time we enter into these transactions, which may be substantially higher or lower than current or future oil and natural gas prices. Accordingly, our commodity hedging strategy may not protect us from significant declines in prices received for our future production. In addition, our commodity derivative contracts expose us to risk of financial loss if a counterparty fails to perform under a commodity derivative contract. We are unable to predict sudden changes in a counterparty’s creditworthiness or ability to perform. Even if we do accurately predict sudden changes, our ability to negate the risk may be limited depending upon market conditions. Many of the derivative contracts to which we will be a party will require us to make cash payments to the extent the applicable index exceeds a predetermined price, thereby limiting our ability to realize the benefit of increases in prices. If our actual production and sales for any period are less than our hedged production and sales for that period (including reductions in production due to operational delays or cessation of production due to regulatory or legal rulings or challenges or otherwise) or if we are unable to perform our drilling activities as planned, we might be forced to satisfy all or a portion of our hedging obligations without the benefit of the cash flow from our sale of the underlying physical commodity, which may materially impact our liquidity and financial condition. Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under the notes. As of June 30, 2026, on an as adjusted basis after giving effect to the 2026 Refinancing Transactions, we have (i) $1.02 billion principal amount of outstanding indebtedness, including $675.0 million principal amount of secured indebtedness under the Term Loan B which would rank effectively senior to the notes to the extent of the value of the collateral securing such indebtedness. In addition, upon consummation of the 2026 Refinancing Transactions, the Senior Revolver will permit secured indebtedness for secured hedging arrangements, which would rank effectively senior to the notes to the extent of the value of the collateral securing such indebtedness. Upon establishment of a borrowing base, any borrowings under the Senior Revolver would also rank effectively senior to the notes to the extent of the value of the collateral securing such indebtedness. We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: •increasing our vulnerability to adverse economic and industry conditions; •limiting our ability to obtain additional financing (which may include indebtedness that would be used for future capital expenditures, including with respect to the OS&T Strategy and the Buoy Strategy); •requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; •limiting our flexibility to plan for, or react to, changes in our business; •diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the notes; and •placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital. Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the notes, and our cash needs may increase in the future. Restrictive covenants in the New Senior Secured Credit Facilities or any future agreements governing our indebtedness could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests. Restrictive covenants in the New Senior Secured Facilities impose significant operating and financial restrictions on us and our subsidiaries and we may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by the New Senior Secured Credit Facilities unless we obtain amendments or waivers from the applicable lenders. These restrictions limit our ability to, subject to certain exceptions, among other things: 44 Table of Contents •engage in mergers, consolidations, liquidations, or dissolutions; •create or incur debt or liens; •make certain debt prepayments (including in respect of the Notes); •pay dividends, distributions or certain other restricted payments; •make investments, capital expenditures, general and administrative expenditures, acquisitions or loans; •operate in certain geographical boundaries; •sell, assign, farm-out or dispose of any property; •enter into transactions with affiliates; •enter into, subject to certain exceptions, any agreement that prohibits or restricts liens securing the New Senior Secured Credit Facilities, payments of dividends to us, or payment of debt owed to us and our subsidiaries; and •create new subsidiaries or change the nature of our business. The New Senior Secured Credit Facilities also contain representations and warranties, affirmative covenants, additional negative covenants and events of default (including a change of control), including in the case of the Term Loan B, amortization and repayments of principal with excess cash flow, subject to a minimum liquidity amount. The New Senior Secured Credit Facilities also require us to (x) hedge within five business days of the closing of the New Senior Secured Credit Facilities, 100% of reasonably anticipated production of crude oil from proved, developed and producing oil and gas properties for each calendar month through December 15, 2028 and (y) on a go forward basis, use commercially reasonable efforts to hedge substantially all of the anticipated production of crude oil from proved, developed and producing oil and gas properties through December 15, 2028, which may limit our ability to realize the benefits of higher commodity prices. 45 Table of Contents