Sable Offshore Corp. (NYSE:SOC) saw its stock price collapse by 48.5% to $3.59 in Tuesday afternoon trading, as investors reacted to a capital-raising plan that could significantly dilute existing shareholders. The steep decline erased approximately $508 million in market capitalization based on the 150.3 million shares outstanding as of March 31, far exceeding the $400 million the company aims to raise through a combination of equity and convertible notes.
At the heart of the sell-off is the arithmetic of the proposed $100 million common stock offering. According to the company's latest prospectus, the reference price as of June 29 stood at $6.97, which would have required selling about 14.3 million shares to raise $100 million before discounts. However, with the stock now trading at $3.59, the same $100 million would necessitate issuing approximately 27.9 million shares, representing roughly 18.5% of the total shares outstanding as of March 31, compared to just 9.5% at the higher reference price.
The equity offering is part of a broader refinancing package that also includes $300 million in convertible senior notes due 2031, with underwriters having 30-day options to purchase an additional $15 million in stock and $45 million in notes. J.P. Morgan, a unit of JPMorgan Chase & Co. (NYSE:JPM), is managing the offerings. All three components—the stock sale, the convertible notes, and a new $675 million term loan—are cross-conditioned, meaning none will close unless all close simultaneously.
The new term loan carries a 15.00% interest rate and matures on December 15, 2028, alongside a $500 million senior secured revolving credit facility with an initial zero borrowing base. Following these transactions, Sable's adjusted debt would rise to $975 million, up from $956.3 million as of March 31, indicating the company is locking in significantly higher borrowing costs compared to its existing debt structure.
The broader energy sector showed relative stability during the session. The Energy Select Sector SPDR ETF (NYSEARCA:XLE) eased just 0.3%, while the United States Oil Fund (NYSEARCA:USO) fell 1.2%. In contrast, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) gained 0.7%, highlighting that Sable's decline was company-specific rather than sector-wide. Exxon Mobil Corp. (NYSE:XOM) actually edged up 0.2% to $136.32.
Sable recently secured additional breathing room from Exxon. On June 22, the company paid a $30.0 million amendment fee, and Exxon agreed to suspend and waive a $25.0 million minimum liquidity covenant while extending the loan maturity to the earlier of July 24, 2026, or upon an acceleration event in case of default. This extension provides temporary relief as Sable works to complete its refinancing.
Despite the financing challenges, Sable's operational data continues to show progress. As of June 18, 52 of the 77 finished wells at the Harmony and Heritage fields were online, producing approximately 43,000 gross barrels of oil per day. Some wells remain offline due to compressor limitations caused by lower-than-expected gas output. The company expects Platform Hondo to begin production in the third quarter, which could boost overall output.
Sable acquired the Santa Ynez assets from Exxon in a 2024 SPAC transaction, which included 16 federal leases, three offshore platforms, and the Santa Ynez Pipeline System. The company began selling oil in March using the pipeline system to supply Chevron Corp. (NYSE:CVX). Chairman and CEO Jim Flores has characterized the output as "American oil from American soil." The terms of the convertible notes, including the interest rate and initial conversion rate, will be determined at pricing.
