v3.26.1
Debt
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
Debt
Note 4 — Debt
Senior Secured Term Loan
The Company entered into the Senior Secured Term Loan with an initial principal of $625.0 million. The initial principal balance was increased by $16.6 million for material and supplies and $140.0 million for paid-in-kind interest from the effective date through the Closing Date less an $18.8 million cash deposit (which was paid on the Closing Date). The proceeds of the Senior Secured Term Loan were deemed funded on the Closing Date in connection with consummation of the Sable-EM Purchase Agreement. The Senior Secured Term Loan was secured by first-priority liens on substantially all assets of the Company.
On November 3, 2025, the Company and Exxon entered into an amendment (the “Second Debt Amendment”) to the Senior Secured Term Loan, the effectiveness of which was contingent 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.
On November 24, 2025, the Second Debt Amendment became effective which extended the maturity date of the Senior Secured Term Loan to the earlier of (i) March 31, 2027 or (ii) 90 days after first sales of Hydrocarbons (as defined in the Senior Secured Term Loan). The Second Debt Amendment also increased the interest rate from ten percent (10%) per annum to fifteen percent (15.0%) per annum, compounded annually (computed on a 360-day year), payable in arrears on January 1st of each year following the effective date. 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 Senior Secured Term Loan. The Second Debt Amendment also included additional reporting covenants and a financial liquidity covenant that required the Company to have not less than $25.0 million in unrestricted cash, measured at the end of each month.
On March 29, 2026, the Company initiated oil sales upon filling the SYPS, which accelerated the maturity date of the Senior Secured Term Loan to June 26, 2026.
On June 22, 2026, the Company entered into a third amendment (the “Third Amendment”) to the Senior Secured Term Loan Agreement with Exxon, 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, and associated legal costs, on June 22, 2026. Approximately $8.3 million of the amendment fee and the associated legal costs were recognized as interest expense during the three
months ended June 30, 2026, while the remaining $22.2 million was capitalized as debt issuance cost and will be amortized to interest expense through the refinancing date.
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 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. Refer to Note 10—Subsequent Events for additional information regarding the 2026 Refinancing Transactions and the related financing agreements.
The Senior Secured Term Loan permitted interest to be paid in cash or, absent a written election, accrued and compounded annually as paid-in-kind interest. The agreement also required that James C. Flores, the Company’s Chairman and Chief Executive Officer, remain directly and actively involved in the Company’s day-to-day management, subject to the lender's approval right (not to be unreasonably withheld) over any replacement.
The Senior Secured Term Loan contained restrictive covenants limiting the Company’s ability to, among other things, engage in mergers, consolidations, liquidations, or dissolutions; incur additional debt or liens; make certain debt prepayments; pay dividends, distributions, management fees, or other restricted payments; make investments, acquisitions, loans, or property purchases; sell, assign, or otherwise dispose of property; enter into affiliate transactions; or change the nature of the Company’s business, in each case without EM’s consent. The agreement also included customary representations, warranties, affirmative and negative covenants, and events of default, including change of control. As of June 30, 2026, the Company was in compliance with all covenants under the Senior Secured Term Loan. On July 2, 2026, the Senior Secured Term Loan was repaid in full in connection with the 2026 Refinancing Transaction. See Note 10—Subsequent Events for further discussion. Debt consisted of the following as of:
(in thousands)June 30, 2026December 31, 2025
Term Loan, including paid-in-kind interest$242,167 $921,868 
Less: Debt issuance costs, net(5,418)(284)
Total Term Loan — current, net$236,749 $921,584 
Term Loan, including paid-in-kind interest$748,839 $— 
Less: Debt issuance costs, net(16,752)— 
Total Term Loan — non–current, net$732,087 $— 
Total debt, net$968,836 $921,584 
In accordance with ASC 470-10-45-14, a short-term obligation shall be excluded from current liabilities so long as the entity intends to refinance the obligation on a long-term basis and such intent is supported by the issuance of the long-term obligation that refinances the short-term obligation on a long-term basis after the balance sheet date but before that balance sheet is issued or is available to be issued. As further discussed in Note 10 — Subsequent Events, on July 2, 2026, the Senior Secured Term Loan was refinanced through the 2026 Refinancing Transactions. However, the terms of the Term Loan B require i) the quarterly amortization of 2.5% of the aggregate principal amount of the term loans for the fiscal quarters ending on September 30, 2026 and December 31, 2026, increasing to 5.0% for fiscal quarters ending thereafter, and ii) the mandatory prepayments equal to 100% of excess cash flow. As a result, the Company excluded the estimated portion of the Senior Secured Term Loan refinanced on a long-term basis from current liabilities, while the estimated portion attributable to these short-term repayment obligations remained classified within current liabilities on the unaudited condensed consolidated balance sheet as of June 30, 2026.
For the three and six months ended June 30, 2026, the Company incurred interest expense of $43.1 million and $77.7 million, respectively, and $21.0 million and $42.0 million for the three and six months ended June 30, 2025, respectively, which is included as Interest expense on the unaudited condensed consolidated statements of operations and the paid-in-kind interest is accrued and included in the Senior Secured Term Loan on the unaudited condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025. The Company’s effective interest rate for the three and six months ended June 30, 2026 was approximately 18.7% and 16.9%, respectively, and 10.0% and 10.0%, for the three and six months ended June 30, 2025, respectively. The effective interest rate is higher for the three and six months ended June
30, 2026 than the corresponding periods in 2025 due to the increase in the interest rate from 10.0% to 15.0% under the Second Debt Amendment and the amortization of the $30.0 million debt issuance costs associated with the Third Debt Amendment.