Would it be possible for Sable to still send the natural gas to the Las Flores Canyon processing facility? Sable's September 29 presentation indicates that there is a separate gas transmission line to the shore. My understanding is that the Las Flores Canyon facility processes the natural gas, uses it to generate electricity, which they could continue to do, and sells the balance to Southern California Gas Company. That would improve the numbers a bit at least.
I'm looking this over and trying to understand. Sable has said that they plan to lease a FPSO so shouldn't there be no purchase cost for the FPSO (which reduces the capital required) but an increase to OPEX to reflect the leasing costs?
With respect to the plug and abandonment bonding support, isn't this an annual expense for a surety bond that is a percentage of the ultimate future cost? Do they have to set aside the entire cost of sealing every well now?
With respect to lease operating expense and G&A, would you please set out how you arrive at that number. Is this just for 2026? You deduct OPEX and G&A in 2027 as annual expenses but the $350 million is still in the capital required.
In the 2027 FCF calculation, you assume WTI is $60. I think Sable claims they can sell at Brent prices. This may not affect your assumption of the sale price but it should probably be labelled as Brent in the table.
From what I know, they are going to purchase the OS&T.
Abandonment bonding is restricted cash that needs to be held on the balance sheet.
Lease operating expense and G&A is until the end of 2027.
Capex is not related to lease operating expense or G&A, this is the cost of investing into drilling and completing the wells.
I use WTI and do not apply a crude quality discount rate. It’s effectively the same price. Sable produces heavy crude, so this is at a discount to light sweet crude (WTI and Brent benchmark).
You then need to adjust the revenue by the % the production is oil weighted. FPSO = zero natural gas revenue.
I take it you are assuming that production does not begin until late 2027/early 2028 in making these calculations? That was not clear to me because the annual FCF calc was entitled 2027 so I thought you were assuming production began late 2026/early 2027.
One last question. If they purchase the FPSO, would they not likely finance the purchase and secure the debt against the FPSO? That would reduce the amount of shares needed to be issued (at the cost of more interest expense).
So glad I got out early(ish)
What's happened since, and is it worth a punt at its now very low price..??
No. It’s not a buy.
Would it be possible for Sable to still send the natural gas to the Las Flores Canyon processing facility? Sable's September 29 presentation indicates that there is a separate gas transmission line to the shore. My understanding is that the Las Flores Canyon facility processes the natural gas, uses it to generate electricity, which they could continue to do, and sells the balance to Southern California Gas Company. That would improve the numbers a bit at least.
I have no idea.
Hi Wilson,
I'm looking this over and trying to understand. Sable has said that they plan to lease a FPSO so shouldn't there be no purchase cost for the FPSO (which reduces the capital required) but an increase to OPEX to reflect the leasing costs?
With respect to the plug and abandonment bonding support, isn't this an annual expense for a surety bond that is a percentage of the ultimate future cost? Do they have to set aside the entire cost of sealing every well now?
With respect to lease operating expense and G&A, would you please set out how you arrive at that number. Is this just for 2026? You deduct OPEX and G&A in 2027 as annual expenses but the $350 million is still in the capital required.
In the 2027 FCF calculation, you assume WTI is $60. I think Sable claims they can sell at Brent prices. This may not affect your assumption of the sale price but it should probably be labelled as Brent in the table.
Thanks!
From what I know, they are going to purchase the OS&T.
Abandonment bonding is restricted cash that needs to be held on the balance sheet.
Lease operating expense and G&A is until the end of 2027.
Capex is not related to lease operating expense or G&A, this is the cost of investing into drilling and completing the wells.
I use WTI and do not apply a crude quality discount rate. It’s effectively the same price. Sable produces heavy crude, so this is at a discount to light sweet crude (WTI and Brent benchmark).
You then need to adjust the revenue by the % the production is oil weighted. FPSO = zero natural gas revenue.
Thank you for explaining this.
I take it you are assuming that production does not begin until late 2027/early 2028 in making these calculations? That was not clear to me because the annual FCF calc was entitled 2027 so I thought you were assuming production began late 2026/early 2027.
Using the WTI price also makes sense now.
I assume no production until the end of 2027.
But used 2027 given that’s the company’s guidance.
Cash burn model does not equal FCF model.
Thank you for clarifying that too.
One last question. If they purchase the FPSO, would they not likely finance the purchase and secure the debt against the FPSO? That would reduce the amount of shares needed to be issued (at the cost of more interest expense).
Yes, in theory, but there’s an issue with timing.
If you sign the FPSO, the debt deal would have to include Exxon financing + FPSO purchase, which would be well over 1.4 billion.
Fed backed loan would not include interest portion of Exxon debt. Thats $250 mil give or take.
So you would still need to raise $550-$600 million.