I didn’t think I would be writing about Sable Offshore SOC 0.00%↑ again, but the developments of the last couple weeks are worth talking about. If you haven’t read the Hunterbrook pieces (links below), I would start with those. I currently have no position and I won’t be touching it again, but if you haven’t cut it loose already, I think it’s probably time to flush it and move on.
The Pipeline Is Now A Pipe Dream
As things stand currently, the chances of bringing the pipeline online are effectively zero. First, they would need to win the Kern County court case, where the court needs to decide if SB 237 applies to Sable’s pipeline. Sable will argue that PHMSA only defines active and abandoned. There is no definition for “idle” and as a result, Sable’s pipeline has been active this entire time, and was never idled. If they lose, the January 1, 2026 deadline for SB 237 kicks in and would require a Coastal Development Permit. They would also need to win the appeal of Judge Anderle’s ruling from October 15, 2025, where he denied the writ.
The CCC currently has a cease and desist (CDO) order, a restoration order (RO), and an $18 million fine. The permit transfer was also denied yesterday, this time with a 4-1 vote. If they can figure out 237, overturn Anderle’s decision, and resolve the permit transfer (all unlikely, but 3 for 3 is even less likely), then they would need to resubmit the final restart plan to California’s State Fire Marshal (OSFM) and get an approval (also unlikely). Then they would need to get by Geck after the 10 day period, and if they somehow did manage all of this, you can expect more delays and litigation. All of this is a long way of saying that the pipeline is dead.
The Offshore Route Isn’t Much Better
The short version is that the offshore route requires a shitload (the technical term) of money and time, and Sable has neither. Reuters put the number at $1.7B, and there is talk that they could get it done by the end of 2026, but I would take the over on $2B (and probably more), and if you still trust management timelines on this one, I have a bridge to sell you. Whether the exact number is $2B, $3B or $4B doesn’t really matter because they don’t have that kind of firepower unless the Federal government backstops it. That brings to the permitting and timeline problems with the offshore route.
The Santa Barbara County air permit is a major roadblock, and the only way the company can avoid that roadblock is if they park the FPSO 25 nautical miles outside of the coastal zone. That triggers the National Environmental Policy Act (NEPA), which brings me back to the Federal backstop. The Department of Energy (DOE) projects must comply with NEPA for something like a federal loan guarantee, and the Bureau of Ocean Energy Management (BOEM) also has to comply with NEPA for the permit. Whether it’s 9 months for an environmental assessment or 2 years for an environmental impact statement is beside the point, because Sable doesn’t have that kind of time.
Most agency actions are subject to “categorical exclusions” or short “environmental assessments,” but major federal actions with significant effects are reviewed in longer “environmental impact statements.” Environmental assessments typically take months or longer to prepare. For example, a Department of Transportation report indicates that its recent environmental assessments took an average of 9.6 months. Environmental impact statements take much longer, with the most recent government study showing that the median time to complete one is 2.8 years.
NEPA: Are New Developments Actually Speeding Federal Permit Reviews?
The point is that I don’t think that the permit Jim was talking about on the leaked investor call is coming by Thanksgiving. They did put out an 8-K on October 10, saying that they were updating the Development and Production Plan for the Santa Ynez Unit (DPP) and said that they believe the existing permit is still “active”. Unless they somehow get an air permit from Santa Barbara County (not happening), you need to put the FPSO outside of their reach, which is the 25 miles I mentioned above. That takes a lot of money (which they don’t have), time (which they don’t have), and a new permit, probably after a lengthy BOEM review process, because it would effectively be a brand new project (list below).
Air permit (EPA OCS above 25 nautical miles): This will also trigger its own CZMA review (6-months, below for more info). It will require Commerce Secretary override.
NEPA (above).
National Pollutant Discharge Elimination System (NPDES) authorization.
Oil Spill Financial Responsibility (OSFR) and Certificate of Financial Responsibility (COFR).
Oil Spill Response Plan (OSRP), Vessel Response Plan (VRP), and Facility Response Plan (FRP).
BSEE safety systems approval (Subpart H), pipeline approvals (Subpart J), and construction/installation notices.
Coastal Zone management Act (CZMA): This gives a coastal state a binding say (federal consistency) over federal actions. The California Coastal Commission (CCC) is the state reviewer. The CZMA process takes 6-months and given Sable’s history with the CCC, they will likely reject the plan. This is the part that will be sent to the Commerce Secretary, where the company thinks Howard Lutnick will override on the premise of “national security.”
Is That All?
None of that adds up to a quick turnaround, and whether it’s one year or two is beside the point. It’s time and cash the company doesn’t have. If they get all of that done, and manage to get a Federal backstop, then they can start building the infrastructure required. They can’t spend money (that they don’t have) to lock down an FPSO without a permit, and they legally can’t start building the infrastructure until they have the permit. That brings me to the Exxon loan.
On November 3, 2025, Sable Offshore Corp. (the “Company” or “Sable”) and Exxon Mobil Corporation (“Exxon”) entered into an amendment (the “Amendment”) to the Senior Secured Term Loan Agreement (the “Existing Secured Term Loan” and, after the Amendment is effective, the “Senior Secured Term Loan”). The Amendment will become effective upon the satisfaction of certain conditions, including the Company receiving equity contributions in an amount of no less than $225.0 million, net of underwriting fees and other transaction costs and expenses, and other customary closing conditions. However, there is no guarantee that the Company will be able to satisfy the necessary conditions to effect the Amendment.
The Amendment, once effective, extends the maturity date of the Existing Secured Term Loan to the earlier of (i) March 31, 2027 or (ii) the date falling 90 days after first sales of Hydrocarbons (as defined in the Existing Secured Term Loan). The Amendment increases the interest rate from ten percent (10%) per annum to fifteen percent (15%) per annum, compounded annually, payable in arrears on January 1st of each year. At the Company’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 under the Existing Senior Secured Term Loan. The Amendment also includes additional reporting covenants and a financial liquidity covenant that requires the Company to have not less than $25.0 million in unrestricted cash, measured at the end of each month.
Conclusion
Basically Exxon is coming back for their $225M pound of flesh, and the amount of dilution required to extend the maturity of the loan would be enormous, and then the debt starts PIKing at 15%. Even if that was possible, what bank is going to help them raise equity? What institution is going to buy the equity? That doesn’t even get into their accounts payable and cash levels, or the year plus of cash burn from today to their first dollar of revenue.
We will see what they say with the Q3 10-Q, but the picture looks very bleak for the company and for anyone that is currently long. If they somehow figure out a way through the Labyrinth of Daedalus above, what is the outstanding share count by the time they have a single dollar of revenue? The other thing to consider is management, and I was too slow to change my opinion on the management team. They certainly don’t deserve the benefit of the doubt anymore, and I don’t see any reason to trust what they have to say on timeline, dilution, the legal situation, permitting, or how much the offshore plan would cost.
I cut it loose after the Anderle hearing, so I have no position, but I don’t think it makes sense to hang on and bank on the federal government riding in to save the day. I should have got rid of it sooner, and I learned a lot of expensive lessons with this one, including to never invest in California. The stock has already been cut in half in the last week, and the market is starting to price in a donut. The death spiral has already started, and I don’t see any reason for it to stop.