Sable Offshore (NYSE:SOC) outlined plans to restart Platform Hondo by the end of September, pursue a broader refinancing in 2027 and address near-term crude marketing constraints during its second-quarter 2026 investor update call.
Chairman and Chief Executive Officer Jim Flores said the company restarted production at Platform Heritage in April and completed a refinancing in July that retired the prior ExxonMobil seller note. Sable also began a commodity hedging program during July.
Refinancing and Hedging Program
Executive Vice President and Chief Financial Officer Gregory Patrinely said Sable completed a bridge refinancing in early July that included a $675 million senior secured Term Loan B and approximately $345 million of convertible senior unsecured notes.
The Term Loan B matures Dec. 15, 2028, and is fully amortizing, with mandatory quarterly amortization of 2.5% in the second half of 2026, increasing to 5% per quarter beginning in 2027. The loan also includes a 100% excess cash flow sweep that could accelerate repayment depending on commodity prices, Patrinely said.
The convertible notes mature July 1, 2031, carry a 6.5% coupon and have an initial conversion price of $4 per share. Sable also established a $500 million revolving credit facility with a zero borrowing base, designed in part to support its hedging obligations.
Patrinely said the company expects to seek a second phase of its refinancing after issuing a full 3P reserve report, currently anticipated in the first quarter of 2027. That effort is intended to reduce borrowing costs and extend Sable’s debt maturity profile. The company has set a long-term target of one times net debt-to-EBITDA leverage.
Sable’s hedging program includes costless collars covering about 26,000 barrels per day in the third quarter and 29,000 barrels per day in the fourth quarter, each with a $65-per-barrel Brent floor. The program covers 25,000 barrels per day in 2027 and 21,000 barrels per day in 2028, according to the company.
Marketing Constraints and Production Ramp
Management said near-term crude marketing conditions in California have affected realized pricing and sales volumes, rather than the performance of the company’s producing wells. Patrinely said Sable has been filling its 540,000-barrel storage tanks at Las Flores Canyon while working through third-party throughput constraints.
Flores said sulfur-related charges, demurrage, price differentials and transportation costs have produced discounts of as much as $30 per barrel. He said sulfur and demurrage each account for about $10 per barrel of that total. Management expects the sulfur penalty to improve as Platform Hondo returns to service, because crude from Hondo has lower sulfur content than production from the company’s western platforms.
The company expects demurrage costs to remain relatively steady through the third quarter, with improvement anticipated in the fourth quarter. Flores said Sable’s guidance assumes a roughly $20-per-barrel discount going forward, consisting of approximately $3 of transportation costs and $17 of refinery-related deductions.
Sable is working with Chevron and other potential refinery customers to expand crude outlets in the Los Angeles refining basin through Plains’ Line 2000. The company is also evaluating northern pipeline options, including the San Pablo Bay Pipeline. Flores said these alternatives are important before Sable begins adding drilling rigs and increasing production.
Management said it is pursuing regulatory support for a potential offshore sales buoy near Platform Harmony. Flores said the project is dependent on regulatory developments rather than market signals, although he said waterborne marketing could offer materially improved economics and additional flexibility. If approvals are obtained, the company expects engineering to take four to six months and procurement another six to nine months, potentially supporting installation in summer 2028.
Platform Hondo Work and Capital Plans
Flores said work at Platform Hondo has exceeded initial expectations, with about 50% more work than anticipated because of additional structural needs. He said the platform’s controls also require a complete replacement, unlike Platforms Harmony and Heritage, where controls primarily needed updates. Hondo also handles Sable’s gas sales.
The company said it expects a lower steady-state cost structure in 2027 as restart-related contract labor and other temporary spending decline. Patrinely said 2027 guidance is intended to reflect a more fully ramped operating profile, while excluding potential benefits from waterborne marketing, chemical treatments intended to lower sulfur content and other marketing improvements.
Sable’s capital spending is limited by the Term Loan B to $100 million annually in 2027 and 2028 unless the company obtains a waiver or refinances. The agreement includes a separate $150 million carveout for a potential buoy project. Flores said capital plans for 2028 would otherwise resemble the company’s 2026 and 2027 program, focused on well additions and related work.
Management said it plans to prioritize debt reduction before returning capital to shareholders. Flores said a dividend could be considered first once the balance sheet is in a more regular position, followed by potential share repurchases depending on oil prices and board decisions.
About Sable Offshore (NYSE:SOC)
Sable Offshore (NYSE:SOC) is an independent upstream oil and natural gas company specializing in offshore hydrocarbon exploration and production. The company identifies and secures exploration and development rights, conducts detailed seismic interpretation, and advances offshore prospects through appraisal and development phases. Its focus on the offshore environment drives investments in specialized drilling techniques, subsea infrastructure and production facility design.
Core business activities include offshore seismic surveys, the drilling of exploration and appraisal wells, installation and operation of production platforms or subsea systems, and well intervention services.
