Sable Offshore Corp.SOC
Sable Offshore Corp. Fair Value Disclosure
Note 11 — Fair Value Measurements
Certain of the Company’s financial assets and liabilities are reported at fair value on the consolidated balance sheets. An established fair value hierarchy prioritizes the relative reliability of inputs used in fair value measurements. The hierarchy gives highest priority to Level 1 inputs that represent unadjusted quoted market prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are directly or indirectly observable inputs other than quoted prices included within Level 1. Level 3 inputs are unobservable inputs and have the lowest priority in the hierarchy.
Recurring Fair Value Measurements
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| As of December 31, 2025 | |||||||||||||||||||||||
| (in thousands) | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Senior Secured Term Loan | $ | — | $ | 921,584 | $ | — | $ | 921,584 | |||||||||||||||
| Private Placement Warrants | — | — | 22,331 | 22,331 | |||||||||||||||||||
| Working Capital Warrants | — | — | 15,407 | 15,407 | |||||||||||||||||||
Restricted Stock Unit Liability(1) | — | 719 | — | 719 | |||||||||||||||||||
(1) As discussed in Note 10—Share Based Compensation, certain restricted stock units qualify for liability treatment and are remeasured at the end of each reporting period. | |||||||||||||||||||||||
| As of December 31, 2024 | |||||||||||||||||||||||
| (in thousands) | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Senior Secured Term Loan | $ | — | $ | 833,542 | $ | — | $ | 833,542 | |||||||||||||||
| Private Placement Warrants | — | — | 79,263 | 79,263 | |||||||||||||||||||
| Working Capital Warrants | — | — | 47,678 | 47,678 | |||||||||||||||||||
The following table presents the changes in the fair value of the Level 3 Private Placement Warrants and Working Capital Warrants:
| (in thousands) | Private Placement Warrants (Level 3) | Working Capital Warrants (Level 3) | Total Fair Value Liabilities (Level 3) | ||||||||||||||
| Fair Value as of February 14, 2024 | $ | 19,813 | $ | — | $ | 19,813 | |||||||||||
| Additions | — | 10,283 | 10,283 | ||||||||||||||
| Transfer out of Level 3 | (21,054) | — | (21,054) | ||||||||||||||
| Liabilities removed due to warrant exercises | (4,214) | — | (4,214) | ||||||||||||||
| Change in valuation inputs or other assumptions | 84,718 | 37,395 | 122,113 | ||||||||||||||
| Fair Value as of December 31, 2024 | 79,263 | 47,678 | 126,941 | ||||||||||||||
| Change in valuation inputs or other assumptions | (56,932) | (32,271) | (89,203) | ||||||||||||||
| Fair Value as of December 31, 2025 | $ | 22,331 | $ | 15,407 | $ | 37,738 | |||||||||||
During the period from February 14, 2024 through December 31, 2024 (Successor), 1,609,564 Private Placement Warrants ceased to be held by the initial purchasers or their permitted transferees and therefore became redeemable by the Company and exercisable by the holders of such warrants on the same basis as the Public Warrants. As a result, $21.1 million was transferred out of Level 3 and into Level 1 in the fair value hierarchy during the period from February 14, 2024 through December 31, 2024 (Successor).
There were no other transfers in or out of Level 3 from other levels in the fair value hierarchy for the year ended December 31, 2025 (Successor) or for the period from February 14, 2024 through December 31, 2024 (Successor).
There were no financial assets or liabilities accounted for at fair value on a recurring basis in the Predecessor financial statements for the period from January 1, 2024 to February 13, 2024 (Predecessor) or for the year ended December 31, 2023 (Predecessor).
Fair Value of Financial Assets
The carrying amount of cash and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate their fair value because of the short-term nature of the instruments.
Senior Secured Term Loan
As of December 31, 2025 and 2024, the estimated fair value of the Senior Secured Term Loan approximates the amount of principal and paid-in-kind interest outstanding because the interest rate is reflective of market rates and such outstanding amount may be repaid, in full or in part, at any time without penalty. The associated inputs are considered a Level 2 fair value measurement.
Warrant Liabilities
Prior to the Redemption, the Public Warrants were measured at the observable quoted price in active markets. Refer to Note 7—Warrants for details regarding the Warrant exercises and redemptions for the period from February 14, 2024 through December 31, 2024 (Successor). The estimated fair values of the Private Warrants and the Working Capital Warrants are measured using the Modified Black-Scholes Optional Pricing Model, which utilizes Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. A change in these significant unobservable inputs to a different value could result in a significantly higher or lower fair value measurement at future reporting dates. The Company estimates the volatility of its Common Stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The aforementioned warrant liabilities are not subject to qualified hedge accounting. Changes in the estimated fair value of the Private Placement Warrants and Working Capital Warrants are included in the Change in fair value of warrant liabilities on the Company’s consolidated statements of operations for the year ended December 31, 2025 (Successor), the period from February 14, 2024 through December 31, 2024 (Successor), the period January 1, 2024 through February 13, 2024 (Predecessor), and the year ended December 31, 2023 (Predecessor).
As Private Placement Warrants held by FL Co-Investment, LLC (“FL Co-Investment”) and Intrepid Financial Partners will not be exercisable more than five years from the effective date of the registration statement, the exercise period end date is different than other Private Placement Warrants and Working Capital Warrants which will expire five years after the Closing Date or earlier upon redemption or liquidation. Accordingly, they have different inputs to the Modified Black-Scholes Optional Pricing Model.
The following table provides quantitative information regarding Level 3 inputs used to determine the fair values of Private Placement Warrants held by Intrepid Financial Partners as of December 31, 2025.
| Inputs | December 31, 2025 | ||||
| Stock price | $ | 9.02 | |||
| Strike price | $ | 11.50 | |||
| Term (in years) | 0.15 | ||||
| Volatility | 180.0 | % | |||
| Risk-free rate | 3.64 | % | |||
| Dividend yield | 0.00 | % | |||
The following table provides quantitative information regarding Level 3 fair value measurements used to determine the fair value of the Working Capital Warrants and the Private Placement Warrants, excluding Private Placement Warrants held by Intrepid Financial Partners as of December 31, 2025.
| Inputs | December 31, 2025 | ||||
| Stock price | $ | 9.02 | |||
| Strike price | $ | 11.50 | |||
| Term (in years) | 3.12 | ||||
| Volatility | 85.0 | % | |||
| Risk-free rate | 3.50 | % | |||
| Dividend yield | 0.00 | % | |||
The following table provides quantitative information regarding Level 3 inputs used to determine the fair values of Private Placement Warrants held by Intrepid Financial Partners as of December 31, 2024.
| Inputs | December 31, 2024 | ||||
| Stock price | $ | 22.90 | |||
| Strike price | $ | 11.50 | |||
| Term (in years) | 1.15 | ||||
| Volatility | 60.0 | % | |||
| Risk-free rate | 4.09 | % | |||
| Dividend yield | 0.00 | % | |||
The following table provides quantitative information regarding Level 3 fair value measurements used to determine the fair value of the Working Capital Warrants and the Private Placement Warrants, excluding Private Placement Warrants held by Intrepid Financial Partners, as of December 31, 2024.
| Inputs | December 31, 2024 | ||||
| Stock price | $ | 22.90 | |||
| Strike price | $ | 11.50 | |||
| Term (in years) | 4.12 | ||||
| Volatility | 45.0 | % | |||
| Risk-free rate | 4.24 | % | |||
| Dividend yield | 0.00 | % | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Apr 4, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.