Sable Offshore (SOC) risk factors, FY2024 10-K

Risks Related to Restart of Production

1. 01Our assumptions and estimates regarding the total costs associated with restarting production may be inaccurate
2. 02There is no guarantee that we will have sufficient cash to restart production of the SYU Assets

Risks Related to the Business of the Company

1. 03If commodity prices decline and remain depressed for a prolonged period, our business may become uneconomical and result in additional write downs of the value of our properties, which may adversely affect our financial condition and our ability to fund operations
2. 04An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we expect to receive for our future production could significantly reduce our cash flow and adversely affect our financial condition
3. 05Our hedging strategy in the future may not effectively mitigate the impact of commodity price volatility from our cash flows, and our hedging activities could result in cash losses and may limit potential gains
4. 06The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business
5. 07Development and production of oil, natural gas and NGLs in offshore waters have inherent and historically higher risk than similar activities onshore
6. 08Oil and natural gas producers’ operations are substantially dependent on the availability of water and the disposal of waste, including produced water and drilling fluids. Restrictions on the ability to obtain water or dispose of waste may impact our operations
7. 09The unavailability or high cost of rigs, equipment, supplies and crews could delay our operations, increase our costs and delay forecasted revenue
8. 10The third parties on whom we rely for transportation services are subject to complex federal, state and other laws that could adversely affect the cost, manner or feasibility of conducting our business
9. 11Our business depends in part on pipelines, gathering systems and processing facilities owned by us or others. Any limitation in the availability of those facilities could interfere with our ability to market our oil, natural gas and NGL production
10. 12Loss of our key executive officers or other key personnel, or an inability to attract and retain such officers and personnel, could negatively affect our business and, in one instance, could cause a default under the primary agreement governing our existing indebtedness
11. 13We may incur losses as a result of title defects or deficiencies in our properties
12. 14We do not own all of the land on which our assets are located or all of the land that we must traverse in order to conduct our operations. There are disputes with respect to certain of the rights-of-way or other interests and any unfavorable outcomes of such disputes could require us to incur additional costs
13. 15Restrictive covenants in the Senior Secured Term Loan Agreement 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
14. 16Under the terms of the Senior Secured Term Loan Agreement, restarting production will trigger a springing maturity date following a specified grace period, and the terms on which we will be able to refinance the Senior Secured Term Loan Agreement, if necessary, will depend on then-prevalent market conditions
15. 17We may in the future refinance our existing indebtedness or incur new indebtedness at variable rates and without the option to pay interest in-kind, which would subject us to interest rate risk and could cause our debt service obligations to increase significantly
16. 18Our business plans require a significant amount of capital. In addition, our future capital needs may require us to issue additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or ability to pay dividends
17. 19We are exposed to trade credit risk in the ordinary course of our business activities
18. 20We may be unable to compete effectively with larger companies
19. 21We 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
20. 22The listing of a species as either “threatened” or “endangered” under the U.S. Endangered Species Act and/or the California Endangered Species Act could result in increased costs, new operating restrictions, or delays in our operations, which could adversely affect our results of operations and financial condition
21. 23Conservation measures, technological advances and increasing public attention and activism with respect to climate change and environmental matters could reduce demand for oil, natural gas and NGLs and have an adverse effect on our business, financial condition and reputation
22. 24Climate change legislation or regulations restricting emissions of “greenhouse gases,” or GHGs, could result in increased operating costs and reduced demand for the oil, natural gas and NGLs we expect to produce
23. 25If engaged in intrastate common carrier operations, our financial results with respect to the Pipelines will primarily depend on the outcomes of ratemaking proceedings with the California Public Utilities Commission and we may not be able to earn an adequate rate of return in a timely manner or at all
24. 26Attempts by the California state government to restrict the production of oil and gas could negatively impact our operations and result in decreased demand for fossil fuels in California
25. 27At this time, we cannot predict the potential future actions that may result from these orders or how such actions might potentially impact our operations
26. 28Our assets are located exclusively onshore and offshore in California, making us vulnerable to risks associated with having operations concentrated in this geographic area
27. 29All of our operations are conducted in areas that may be at risk of damage from fire, mudslides, earthquakes or other natural disasters
28. 30Increasing attention to environmental, social and governance (“ESG”) matters may impact our business
29. 31Environmental groups may initiate litigation and take other actions to delay or prevent us from obtaining required approvals to restart and continue production
30. 32The Inflation Reduction Act of 2022 could accelerate the transition to a low carbon economy and will impose new costs on our operations
31. 33The cost of decommissioning and the cost of financial assurance to satisfy decommissioning obligations are uncertain
32. 34Our business could be negatively affected by security threats, including cybersecurity threats, destructive forms of protest and opposition by activists and other disruptions

Risks Related to Being a Public Company

1. 35The market prices of our securities could be highly volatile or may decline regardless of our operating performance. You may lose some or all of your investment
2. 36We cannot assure you that our securities will continue to be listed on the NYSE in the future. In order for our securities to remain listed on the NYSE, we must maintain certain financial, distribution and stock price levels
3. 37Future sales, or the perception of future sales, of our Common Stock by us or our existing stockholders in the public market could cause the market price for our Common Stock to decline
4. 38Our issuance of additional shares of Common Stock or convertible securities may dilute your ownership of us and could adversely affect our stock price
5. 39Members of our management team and our Board and their respective affiliated companies have been, and may from time to time be, involved in legal proceedings or governmental investigations unrelated to our business
6. 40If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline
7. 41Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance it may provide
8. 42Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations
9. 43We are an “emerging growth company” and the reduced reporting and disclosure requirements applicable to emerging growth companies could make our Common Stock less attractive to investors
10. 44Because there are no current plans to pay cash dividends on our Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your shares of our Common Stock at a price greater than what you paid for it