Sable Offshore Closes $1 Billion Refinancing After $30 Million Exxon Extension
Distressed
Company Background
Sable Offshore Corp. is a Houston-based independent oil and gas company that in 2022 acquired the Santa Ynez Unit — a cluster of offshore California platforms and onshore pipeline infrastructure — from ExxonMobil. The fields had been shut since 2015, when a coastal pipeline spill halted all production. Sable spent years and hundreds of millions of dollars on repair work, navigating an escalating series of regulatory disputes with California agencies that at various points blocked its pipeline restart through cease-and-desist orders, injunctions, and new legislation.
Production restarted in May 2025, but the pipeline remained blocked and the company did not sell a single commercial barrel until March 2026, when the U.S. Secretary of Energy invoked the Defense Production Act to compel oil transportation through the federally regulated pipeline. By the time oil sales began, Sable had posted a $410.2 million net loss for full-year 2025 on zero revenue, and carried $921.6 million in short-term debt against $97.7 million in cash at year-end. First quarter 2026 added another $197 million net loss, leaving the company with $52.2 million in cash and $956.3 million in short-term debt.
As of June 18, 2026 — two weeks before the refinancing closed — 52 of 77 completed wells at Platforms Harmony and Heritage were online, producing approximately 43,000 gross barrels of oil per day. Platform Hondo, the third platform, was expected online in the third quarter of 2026.
What Was Disclosed
On June 16, 2026, Sable announced the launch of a proposed senior secured term loan to replace its existing Exxon facility. Six days later, on June 22, it paid Exxon a $30 million amendment fee to extend the existing loan's maturity to July 24, 2026 — a 32-day window — while Exxon simultaneously agreed to suspend the $25 million minimum liquidity covenant. The June 22 announcement also disclosed that the company intended to reduce the new term loan to up to $775 million in size and pursue "incremental unsecured capital markets solutions" alongside it.
What closed on July 2 was a three-part structure. First, $345 million aggregate principal of 6.5% Convertible Senior Notes due July 1, 2031, including the full exercise of a $45 million overallotment option. The notes are senior unsecured obligations, effectively subordinated to the new secured debt. The conversion rate is 249.7502 shares per $1,000 principal, equating to an initial conversion price of approximately $4.00 per share — a 30% premium to the $3.08 concurrent equity offering price. Net proceeds from the notes were approximately $332.5 million. Second, 37,337,662 shares of common stock at $3.08 per share, including the full overallotment, generating approximately $107 million in net proceeds. Third, a $675 million Term Loan B at 15% per annum, maturing December 15, 2028, arranged by JPMorgan Chase Bank with the proceeds used along with the notes and equity to repay the Exxon facility in full.
The Term Loan B carries significant structural weight. It requires mandatory prepayment of 100% of excess cash flow on a quarterly basis — a full sweep of free cash above a $25 million minimum liquidity floor. It also requires that upon maturity, refinancing, or acceleration, lenders receive payments sufficient to achieve a 1.25-to-1.00 minimum multiple on invested capital, creating a meaningful refinancing hurdle. Quarterly amortization runs at 2.5% of principal for the first two fiscal quarters and 5% thereafter. An affiliate of Exxon Mobil Corporation holds $299.17 million of the Term Loan B, meaning Exxon transitions from direct lender under the retired facility to a major participant in the new syndicated term loan.
Why It Matters
The deal's structure reflects the cost of financing a company with Sable's profile. The Term Loan B rate of 15% per annum matches exactly the punitive rate Exxon had extracted in the November 2025 amendment to the original loan. That rate was supposed to be a bridge; it is now the rate on a three-year, $675 million facility. Layered on top is $345 million in convertible notes that dilute existing shareholders if the stock trades above $4.00 — a price the company was priced through in its concurrent equity offering at $3.08. The combined interest burden on the two debt instruments alone is substantial, and the full excess-cash-flow sweep means that even as production ramps, cash will flow to lenders before the balance sheet builds meaningful liquidity.
The regulatory picture remains unresolved despite the pipeline now running. On June 9, 2026 — three weeks before the deal closed — the California Coastal Commission's executive director issued a new Notice of Intent to Commence Cease and Desist Order proceedings, alleging the pipeline's active operation constitutes unpermitted development under California Senate Bill 237. A consolidated Ninth Circuit hearing on the PHMSA pipeline jurisdiction litigation is scheduled for July 7, 2026. A criminal complaint filed by the Santa Barbara County District Attorney in September 2025 — 21 counts including five felonies for alleged violations of the Fish and Game Code and Water Code — remains pending. And Sable disclosed in December 2025 that it received subpoenas from the U.S. Attorney's Office for the Southern District of New York and the SEC relating to a short-seller report and trading in company securities; the company said it is cooperating with both requests.
The positive counterweight is real: PHMSA issued a 10-year special permit on June 25, 2026, confirming federal regulatory authority over the pipeline, and the Ninth Circuit denied a stay of PHMSA's restart approvals. Production is running, the Exxon debt is retired, and the company now has a runway to December 2028 without a maturity cliff. Whether that runway is sufficient depends heavily on how quickly Platform Hondo comes online and whether the California litigation finds a durable resolution.