Thank you, Alice. Good morning, everyone, and welcome to our second quarter 2026 earnings conference call.

Joining me today to discuss our results are Jim Flores, Chairman and Chief Executive Officer; Caldwell Flores, President and Chief Operating Officer; Gregory Patrinely, Executive Vice President and Chief Financial Officer; and Anthony Donner, Executive Vice President, General Counsel, and Secretary; as well as various other members of the Sable team. Please refer to our website to download a copy of our new investor presentation posted yesterday, as well as our recently filed financial statements, which will both be discussed today.

We will actively display the presentation on this webcast, and reference certain items by page number, and then proceed to Q&A. We will also be making statements during this call that are forward-looking.

These statements are based on current expectations and assumptions, and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements because of factors discussed in our earnings release, in our investor presentation, in the comments made during this conference call, in our most recent Form 10-K, Forms 10-Q, and other reports and filings with the SEC.

We do not undertake any duty to update any forward-looking statements. With that, I will turn it over to Jim Flores to begin going through the investor presentation.

Jim?

Thanks, Harrison, and good morning, everyone. As promised, we said we'd have a conference call at some point in time.

This is our first conference call for earnings from Sable Offshore, welcome, everyone. After looking at page 3 of the presentation, it's more of the summary stuff you've seen before.

Page 4 is the milestones achieved and next steps. We've listed them all since the beginning of this saga in '25.

Then the three updated ones: restarted production from Platform Heritage in April '26, refinanced the senior secured term note in July of '26, and commenced the commodity hedging program in July of '26. The next steps are: restart production Platform Hondo, which is expected at the end of September '26, we get a full fourth quarter; and establish full 3P reserve report, expected first quarter '27; and then we refinance the senior secured term B notes and convertible senior unsecured notes, and potentially install a offshore sales buoy at Santa Ynez Unit, and continue legally protect Sable's vested interest and pursue all monetary damages.

Those are five big milestones ahead of us, and we'd like the next 12 months to achieve those. On page 5, which is our corporate update, operations, we're going to go through extensively today, the second quarter '26 exit rate oil sales of 40,000 barrels a day represents a huge growth in what our oil sales have been prior to that.

We kicked off a wireline campaign now that we have all the wells open or potentially open to mitigate water influx and really try to trim up our production to wherever it is as efficiently as possible. We're working feverishly on Platform Hondo.

Platform Hondo is 45-year-old platform. It was in bad need of restorations.

That's probably the best word for it. We're doing great work there, we've got a great team, and so forth, and we're just hoping we can hit that timing in September.

Then we're working with refineries in the downstream. We've brought on a large quantity of oil for the California onshore refinery market, and we're working our way through that process of making sure everybody is getting comfortable with our oil, the quality of it, and also the volume of it, and we'll go into detail of that in another slide.

On regulatory legal, we continue to wait on the US District Court for their findings and also the 9th Circuit as we've been side-by-side with the US federal government working along with the Justice Department to be in a situation where all of the federal regulations that we're adhering to at Sable Offshore are being recognized through the courts. We'll continue to update that as it goes, but there's no update today from that standpoint.

On the finance side, we completed the refinancing of July 2nd, 2026. Proceeds were used to retire the former ExxonMobil senior term note.

That was really key because of the lot of restrictions that ExxonMobil senior term note that we now have a little more flexibility with the current financial structure. It's not optimal for us at this point, but it was a big step for us.

The commodity hedging program, one of the things we put in place, you'll see where we've got some floor protection for a significant portion of our production, just in case all the volatility goes the wrong direction, we'll be protected. Then we'll look at further balance sheet optimization in '27 once all our wells are on, and our reserve report's out there, and we're at full power.

On page 4, Gregory, I want to turn it over to you and let you take us through the financing overview what we did and a couple other financial slides.

Sure. Thanks, Jim.

Page 6, the refinancing overview, like Jim just mentioned, we we completed our our bridge refinancing in early July that fully satisfied and and took out the ExxonMobil seller note, seller financing, the prior senior secured term loan. We did so with a series series of transactions starting with the $675 million senior secured term loan B.

This term loan B has a maturity of December 15th, 2028, and it was structured as a a fully amortizing loan through the maturity of of the of the security itself. That is that's that is fully amortizing through mandatory amortization of 2.5% per quarter in the back half of this year, stepping up to 5% per quarter beginning in 2027.

It also includes a 100% excess cash flow sweep feature, which could potentially accelerate that that amortization depending on the prevailing commodity prices. It does have a 1.25 times MOIC minimum take-out, and so we're we'll certainly be looking to to delever on the on the amortization front and the excess cash flow sweep front.

As Jim mentioned, when we achieve our additional milestones and get a full 3P reserve report, we will be we will be pursuing, phase two of the refinancing efforts. I think we're very happy to to complete these this bridge financing, satisfy our obligations with our the seller note ExxonMobil.

We certainly have room to improve on the on the interest rate front, interest rate reduction, and we look forward to approaching the market here in 2027. In addition to the $675 million senior secured term loan B, we issued $345 million of convertible senior unsecured notes.

Those notes, the 5-year 5-year notes with July 1st, 2031 maturity, 6.5% coupon with a $4 per share initial conversion price. Overall, we've we lowered our our weighted average cost of debt, but we certainly have a room to improve and look forward to further optimizing the balance sheet.

In conjunction with those debt securities, we put in place a zero borrowing base $500 million revolving credit facility that was designed to allow us to commence that hedging program and fulfill our obligations under the term loan B to meet those minimum hedging requirements by hedging 100% of our Netherland, Sewell projected PDP production. We have the ability to hedge beyond those minimums and and we're currently evaluating adding additional volumes, which we'll get into.

Slide 7 is a brief overview of our updated financial guidance, which includes, our sales and and cost guidance. Like Jim mentioned, we we do have finely elevated short-term marketing and GP&T dedux reflected here for the back half of '26.

We'll get into why we think these issues will be alleviated here in in the near term, but it's it's part and parcel of the the California energy market with all the regulatory headwinds and and constraints. Our capital structure, as we illustrated on the on the prior page, an enterprise value of $1.9 billion, equity value of of $911 million at the $4.75 share price as of August the 7th.

Our financial objectives, as we mentioned, we we fully plan to delever under the terms of the new senior secured term loan B and/or refinance and take out that paper as as soon as possible after the after we issue the full 3P reserve report where we get credit for all of the PDP reserves that we will bring online at Hondo here in September, and also all of our PUD locations, which were not included in in the prior interim Netherland, Sewell report. We'll continue to optimize the balance sheet with the phase two of our refinancing, lower our cost of debt, and increase our maturity runway beyond 2028.

We will certainly opportunistically manage the convertible notes to minimize any any potential dilution there, and we have we have the ability to do that with cash. We'll progress our rating agency discussions in advance of this phase two global refinancing of the balance sheet and look forward to look forward to continuing those discussions as well.

Long term, we still have a a 1.0 times net net debt-to-EBITDA leverage target, and we we fully plan to to hit that metric. Like I mentioned, we're going to advance the hedging strategy by adding additional floor pricing protection, likely in the $65 to $70 a barrel range, to protect the downside relative to our our current our current volumes.

Then long term, post a phase two of the global refinancing, we we plan to implement our our shareholder return program and focus on reducing the share count with share repurchases and instituting a dividend at the appropriate time. Slide 8 is our our unlevered free cash flow guidance at at strip pricing.

We're basically walking through and doing a little bit of math math for you here, which leads into to the following slide and the value proposition that Sable Offshore creates with with the free cash flow profile today. Even with all of the marketing and crude quality constraints, near-term constraints, we're still projected to generate, midpoint of $152 million of unlevered free cash flow for the back half of 2026.

Into 2027, based on a Brent oil price of $70 $75 a barrel, we're projected to generate over $500 $500 million of unlevered free cash flow. Slide 9, we we believe that, the current trading valuation of Sable doesn't fully reflect the the projected earnings power, the cash flow profile, and the capital allocation of the company.

We think this this analysis on slide 9, illustrates that. When you take a look at our levered free cash flow per share on the top left here for estimated 2027 levered free cash flow per share, $2.19, and you compare that to our peer free cash flow yield of relatively 14%, it's implying a share price of over $15 a share, and that's represents a 220% premium to our our our share price as of as of August 7th, which is about $4.75.

We think, on a on a basic, outstanding share count basis and even on a fully diluted share count basis, which includes all of the potential shares from a a from the convertible notes, which we believe would be unrealistic, you still have 125% premium to today's today's price. We think the value proposition on our shares is is real, and we look forward to we look forward to moving forward as we as we ramp up this asset.

Because remember, restarting an asset of this of this quality and at this scale, the the toughest part is is, it's like it's like flying a plane: the hardest parts are take-off and landing. Right now, we're on the ascent, and we're we're very much looking forward to getting into the fourth quarter and into 2027 cruising at altitude and attacking our our financial objectives that are all laid out in front of us.

Slide 10, this is our our current hedging program. We've we've layered in costless collars, which we were required to we were required to place 5 days after the closing of the refinancing on on July 2nd, 2026.

For the for the third quarter '26, we've got collars hedged, about 26,000 barrels a day growing to 29,000 barrels a day in the fourth quarter, all with $65 floor pricing. In the in the back half of this year, our our ceiling is about $89 $89.39 on Brent.

In '27, remember recall these are 100% PDP hedged volumes, we've got 25,000 barrels a day, and in 20 2028, 21,000 barrels a day. We were required to layer in that 100% of PDP volumes per the term loan through maturity, so that's why we've we've layered in these these collars.

We think they give us solid floor pricing protection to the downside, but also allows to participate on the upside, and certainly with the with the unhedged unhedged volumes as well.

Great, Greg. Gregory, on the midstream of Brent crude marketing overview on page 11, it's a lot of moving parts here with the California market.

More importantly for us, at SYU, we don't have Platform Hondo on, which is our easternmost platform. If you look at the field from west to east, the higher sulfur contents are to the west, and the lower sulfur contents to the east.

Once we get all the wells on and so forth, it should be able to mitigate most of the sulfur dedux that we've had got hit with here in the in the second quarter, and we'll also be dealing with in the third quarter, and plus some some chemical things we're trying as well, that's going that should work out well. Really appreciate all the refiners working with us because of the the magnitude of the flows out of our field, they they were, surprised and and and we're from the upside, but we had to make a lot of movements around there.

Chevron's been over backwards trying to help us get get get all the crude moved. With that, we we have a plan we have a plan to to debottleneck that with Chevron starting in September, as well as is two other refineries that are looking at taking our crude and so forth, we'll have ample output in in the in the Los Angeles refining basin going through going through the Plains Line 2000.

Additionally, there's there's additional pipelines that we're looking at going north. Now that San Pablo Bay pipeline looks like it's going to be going to be in service thanks to thanks to California Resources, we look at being a third-party customer to those guys as well as another outlet for excess crude.

We've got to solve those those situations for us to put drilling rigs out here and start start increasing production. We want to do that sooner rather than later, we we want as many multiple outlets as possible when we hit capacity in in certain areas like going south on Line 2000.

Then finally, we're moving along with our legal strategy toward getting a an offshore buoy off of off of Platform Harmony and SYU. It's premature to discuss the ins and outs of that, but that's still hot on our hot on our deal and looking forward to some some good work out of Washington, D.C.

to get to get that in a position where we can start working on that and get it and get it built and funded here in '27 for '28 as a long-term potential safety valve to make sure we had we have the best marketing for you. All that's in progress.

We're working hard on it and so forth. We feel like during third quarter is going to be kind of low point on the marketing, all the all the demurrage charges and things of that nature, and then fourth quarter, fourth quarter on, we should be should be improving solely going into into '27.

The same thing we hear from our refining party partners as well. On page 12, I mentioned mentioned the buoy.

It's we have an illustration where it's sitting off Platform Harmony. This is more of a cartoon at this point in time, but you can see that the aspect it gives gives us a lot of flexibility bypassing the onshore market if we, if we have to, and and give us the better marketing opportunities here with waterborne crude in in the captured captured California market.

Page 13 is just to remind everybody the significance of this asset. The asset has not changed.

Prices have changed, marketing has changed, legal has changed, but this has not changed. Santa Ynez Unit is still the number one field in the United States based on estimated recovered reserves and in cumulative production it ranks number four.

Page 14, one of the aspects we're working on is is our total reserves out here. We've got a tremendous reservoir that that has only had 25% of of of the of the proved reserves ultimate recovery taken out of the 671 million barrels, or 4.3 of the total barrels produced to date.

We think we have about 10% remain remaining barrels, about double that amount, which which gets up to as big as 517, which is 899 of the of the primary forecast, and then our heavy oil forecast below 13 gravity oil, 9 to 13 gravity, another 618 million barrels. We got a lot of oil to get out of the ground, and we're glad we're getting started finally on it.

On page 15 is our operating development plan going forward. You see it's it's very light on capital because of all the wireline work and so forth.

Caldwell and his team is have have commenced a wireline work where we're doing a lot of water mitigation on Hondo excuse me, on Harmony and Heritage. Some wells with a high water cut, we're we're either sliding sleeves on them or putting through-tubing plug plugs trying to shut off some of the water from the from the lowest zone and allow the upper upper zone oil to flow better.

We're in the middle of that program and look forward some some really good good results, and also help relieve a lot of our handling capacity issues because of all so we can get 100% of the wells on production by the fourth quarter. Right now, we're constrained for because of pump pump sizes at Heritage, and also we're not making enough gas at Harmony and Heritage to run all the compressors.

We have to get all the wells on. It's a it's a chicken-and-egg deal.

We shut off some of the water that we're we want to process onshore, then we'll have room room for these these wells to bring on more more gas to get all the compressors on, and with the new pumps be able to pump it out. The the field is is is coming on spectacularly.

We're still seeing no decline in our in our in our productive volumes. The wells are very strong and so forth.

It's just getting consistent topside and and unrestrained topside throughput, which is which is the main goal going forward. On page 16, we talked about the the previous perf adds and so forth that we've done.

It added about 600 barrels a day per per perf add, and we've got several of those planned for '26 and also for '27 that that are that are coming on. We're accelerating that, and we look forward to having a lot of those behind us and and enjoying that production starting in '27.

On page 17 is an illustration of the the massive reservoir we have, covering 77,000 acres, this over 1,400 feet of pay, and and many places the Upper Siliceous hasn't even been hasn't even been perforated, and that's that's easy stuff we're going for, as well as the massive chert's got tremendous reserves based on developed drilling, and then the heavy oil stuff we haven't touched yet, and that's that's for that's for down the road. On page page 18 is our initial drilling inventory just in the Upper Siliceous.

You think about it, you have these 500 million barrel oil fields sitting on top of each other, three of them, with the Upper Siliceous, the massive chert, and the and the heavy heavy oil and so forth. We're just in the next 20 years will just be drilling wells for the for the Upper Siliceous.

We have a a long inventory, multi-decade inventory to drill and and produce, but we need to make sure everything is running topside in first-class shape. On page 19, you see the investment highlights.

We transitioned federal oversight successfully, we're primed for low-cost production growth, forth, we're able to control our costs, you can see that in in in what our what our CapEx looks like going forward, and our ability to maintain production if not grow it here in the near term. We have a large development inventory once we get our our marketing debottlenecks and so forth, we'll be looking at putting some rigs out there and build develop that with our large production base, shallow decline.

Therefore, our maintenance CapEx is very low, high operational control, we own 100%, and and control and operate everything. Then linking linking our crude sales to Brent is important, we just got to get rid of the discounts.

Our our safety and stewardship is is outstanding, we continue to pride ourselves there and have have have continued to get rewarded for that going forward. We're going to continue a a conservative financial policy by amortizing our debt until we until we refinance it.

Everything else is in the in the appendix. Happy to take questions.

Harrison, I'll turn it over to you guys and and we'll get some questions and and make sure what else is what else is going on.

Sure, thank you, Jim. At this time, we will now answer questions from analysts.

Please use the raise hand feature in the webcast. We'll pause a moment while the queue forms.

Alice, please proceed with Q&A.

Hey, good morning. Thank you for all the information, guys.

Can you just walk through the discounts a little bit more, and then what the discount looks like when you can blend the sulfur? Then maybe, Jim, also, what are the other options for lowering that discount going forward?

Does the SPR play into that? Just how do we think about those on a going-concern basis?

Then I have one quick follow-up.

With the sulfur and the demurrage and also the differential and the transportation tolls up to $30 a barrel discount, okay? The sulfur is about $10 out of it, and sulfur and demurrage is about $10 out of it.

We see that being mitigated as I said, as we bring on Platform Hondo to get our field-wide production down below our penalty level, as well as some of the chemical stuff we're doing, as well as the demurrage. Basically, we had to cover Chevron's costs as they turned tankers around and to take our production as quickly as they did.

We have one more of those to do in the third quarter, I think here in the second and third quarter, those costs are going to be pretty steady, and then going forward in the fourth quarter, that's what we'll see the relief from the demurrage and also the sulfur get back down to around $20 a barrel. That's what's reflected in the guidance.

Now, that $20 a barrel is going to be market-driven because you got $3 of transportation and $17 worth of diffs. We're going to continue to work with refiners to see if we can't mitigate that, but we're not forecasting any changes at this point in time.

Okay. All right, thanks.

Then can you just talk a little bit about what '28's capital program looks like? Obviously, lowered the capital spent this year, and then raise it a little bit in '27.

How does '28 look and what kind of the trajectory going forward there?

It's page page 15, Lloyd. Assuming assuming we we don't we don't refinance the debt, page 15, the 20 the '28 capital will look a lot like '27 and '26, forth.

It would strictly be wireline work and so forth. If if we're able to successfully refinance, then we'd be looking at putting some rigs out there and growing production and accelerating our rig program, but it's all it's up to it's all depends on where we are financially and and and what our balance sheet looks like.

Gregory?

Lloyd, great question. Remember, we have capital covenants for '27 and '28 per the new senior secured term loan B of $100 million a year.

Beyond 2026, we're capped out, absent some waiver, at $100 million for '27 and '28. Like Jim mentioned, we refinance that, we'll have some freedom to adjust the capital budget.

That'd be a very good reason to do it. Also, we have a carve-out of $150 million for a buoy if we get in position to build that.

Correct.

Okay. Awesome.

Thank you, guys.

Sure.

Good morning to the Sable team. Can you hear me okay?

Yes, we can. Good

morning, Michael.

Great. All right, thanks for the confirmation.

Look, I think it's safe to say it's been a pretty eventful second quarter. Maybe we can just start with the production ramp.

We recognize there's no guidebook to restarting an asset like the Santa Ynez Unit, and this is the first for the Sable team as well. The production ramp does seem to be going a little slower than expectations, at least versus our expectations.

I think what we and others would like is just more confirmation and clarity on what the economics and cash flows are going to look like when the asset reaches its plateau. We appreciate the guidance update and we can kind of piece through the math, but just how confident are you in achieving the run-rate operating cost of roughly $160 million and $190 million next year after operating costs were nearly $95 million before considering the demurrage charges in 2Q?

Maybe it's just something as simple as having fewer employees and less work on the platforms once reaching a steady state. Anything you could provide detail-wise on the operations that would increase confidence in margin guidance going forward would be helpful.

Michael, great question. I think the key point here is it's not a production issue, right?

They're third-party sales constraints that have not allowed us to sell all of the barrels that we've produced. The wells are performing outstanding, what Jim laid out, and I think you've seen that detail in our earnings materials.

We've been filling inventory in our 540,000 barrel storage tanks at Las Flores Canyon, and trying to deplete that inventory and have run into short-term throughput constraints due to third parties. That's part of it.

I feel very, very comfortable about our ability to hit our production targets. As these short-term constraints on the throughput side, both on midstream and downstream, get alleviated here in the near term, as in the next several weeks to months, or month by September, we feel like there won't be a disconnect between our ability to produce barrels and our ability to sell the barrels that we've produced.

That's one thing. The second item is on the operating cost front.

Remember, we have a tremendous amount of contract labor and other labor dedicated to restarting these three platforms, which we're still in the process of in terms of Platform Hondo, right? We won't be in the restart phase forever, and what we're projecting here as we come out of that, we start coming out of that restart phase in the fourth quarter.

The reason why we provided the 2027 guidance was to give you a look at what fully ramped production and sales would look like with a more of a steady-state operating cost posture. I would say '27 is a great look.

What '27 doesn't include, importantly, is any type of waterborne marketing optionality, any type of additional marketing leverage. Doesn't include potential chemical solutions that we're looking at to reduce our sulfur content, which right now we think could potentially for every dollar you spend on the chemical could yield a $4 cost savings.

None of that is included in our guidance, we think there's a lot of upside ahead. Like I mentioned, look, we're on the ascent of this takeoff, and this is an asset of the size and the scale that we're going to do it right.

We're not managing this business for the next several months. We've got a 50-plus year reserve life asset that we're going to take care of and make sure that we spend the capital to be safe.

All the capital and what you've seen in the capital reduction between our June guidance and now here in August is we've deferred any and all capital that's not related to producing and selling more barrels, maintaining safe operations, and attacking our restart at Platform Hondo.

Right, Gregory. I just add a little bit more to that.

The aspect of unintended consequences with the volume of out of the wells, basically double than what we expected and so forth, it's overrun some of the pump capacities of the platforms. We've got new pumps on order to increase that.

These are all great problems to have, but at the same point in time, you can't get all the wells on that you want because you can't handle all the production through the pipeline. We're going through that whole process.

There's also another constraint we have is it's a lot more oil than gas, and the gas production's low, therefore, getting all the compressors for the gas lift restarted. We're working through all those, and there's solutions for it all, but these are all great problems to have.

That's why we pointed everybody during the financing to the fourth quarter of this year all our marketing contracts, our marketing bottlenecks would be behind us. We have line of sight to that right now here in August what we're seeing by fourth quarter.

Then all our production will be unconstrained and so forth, and we'll probably have some wireline results as well from there. We're like everybody else.

It's going to be a long, hot summer, the rest of the summer, but we're looking at the fourth quarter and strongly into '27 to get really be able to show the asset we have.

All right, that's great. I appreciate the clarification and detailed response.

Maybe we can just follow up on that point of the waterborne marketing angle, Gregory. When do you think the company'd be in a position to move forward with that decision to install a sales buoy?

I understand it's maybe a bit premature to discuss, but ultimately you'd want to try to avoid moving forward with that capital spend if the midstream constraints are going to alleviate themselves. Of course, there's other considerations when going down that route.

What market signals are you looking for the next 6 months, and when do you think you would need to make the decision to move forward with the buoy path for a year-end '28 installation?

It's really regulatory. It's not market signals.

The market signals are there. It's about at least a 50% improvement in diffs and so forth, and just having the flexibility out there.

We're looking at the regulatory aspect that we've got a lot of conversation with a lot of federal authorities on what we need to get done and so forth. They look at this is an important part of security of the offshore barrels staying offshore.

We're waiting to hear on all that. We didn't get anything done by the August recess, but this fall is going to be very active.

Once we get that, then we'll have about 4 to 6 months of engineering, another 6 to 9 months of procurement. It'll be every bit of summer '28 getting it installed and getting it put on there.

I think that's hard to move that up at all. Under our timeline, we're right on that schedule right now.

All right, thanks for your time.

Sure.

Good morning here, guys. Wanted to just follow up on where do you think things stand these days with the potential SPR declaration in California?

Is that something you think is moving forward at a good pace here?

Leo, I think it's getting widespread support, CIPA came out with a big 12-page report, California Independent Producers, and it just debottlenecks the whole California energy onshore market, pipelines and so forth. It definitely needs to happen, and it's going to benefit all the producers and all the refiners, and so forth, keep them in business.

Just connect more pipes, more flexibility. We haven't heard any headwinds in D.C.

from it. We're just hear about mechanics.

We're looking forward to seeing some resolution on that this fall.

Appreciate that. Then also wanted to just touch base on this $500 million kind of no borrowing base working capital, I guess facility put in place for the hedging.

Do you see potential for there eventually to be some borrowing base and some ability for Sable to draw on that? Is that something that's restricted until perhaps you guys can refinance the existing term loan and or the convert?

Just trying to get a sense of when you might be able to get in more of a regular-way, sort of working capital facility.

Leo, this is Gregory. Great question.

I think the way to think about increasing the borrowing base would be post pay-down of the term loan, the new senior secured term loan B. We hope to delever as quickly as possible and then refinance and take that out, open up the borrowing capacity.

Then also once we bring Platform Hondo online, like I mentioned, we'll get additional PDP credit and our PUD credit as well with the development program that we have once the term loan B capital covenants are alleviated.

Appreciate that. I guess, just on the more fulsome refi in 2027, which you guys certainly spoke to post the reserve report here, can you maybe give us a little bit more color on kind of what the current thinking would be after that happens, if it's all successful, in terms of trying to return capital to shareholders?

Do you guys kind of try to get a buyback going first and then maybe a dividend comes down the road if you guys are able to reduce the share count? Just want to get kind of management's current thinking on how that could proceed.

All the above. The aspect, I think, initially be some type of dividend, and then depending on what oil prices are on the stock buyback, is where the board's thinking at this point in time.

Right now, it's getting our balance sheet in good shape, and that's why amortizing the debt with the cash flows is successful at this point in time. We've got the real capital-light program to keep our production maintained and so forth, and all the improvements are in our control.

I think next year or two is making sure that getting the balance sheet in a regular-way situation where we can have those options. Right now, there's obviously going to be no cash leaving the system until we get the balance sheet under control.

Thank you, guys.

Sure.

Yes, good morning, Jim and Gregory and to the rest of the Sable team there. Jim, I'd like to go back to Leo's question on the SPR.

If I heard you correctly, you said you're expecting some kind of resolution this fall on that, and that you've got some enthusiasm, not just from other producers, but also pipeline and refinery operators in California. What form is that going to take?

Has there been any evolution, either on your side or on the government side, of what the designation would look like in terms of assets for that SPR effort?

Charles, you were breaking up, but I think you were talking about what about the designation. First, it has to be designated SPR, and then you have the power of condemnation by the Department of Energy that can condemn whatever acreage or whatever assets they want for the purpose of supporting the SPR.

That gives a lot of flexibility, plus also be able to connect pipes that are right now inefficiently not connected, and be able to relieve a lot of marketing constraints for everybody. Because you want to have as much oil going into the SPR as you want to have much oil going out of the SPR into the refineries.

It'd give the federal government broad powers to make sure that the California energy sector will start being efficient and be able to maintain its current production levels, and also make more importantly for us, maintain the refineries. That's the big thing, is support the refiners that are there.

Now, will that restart Valero Benicia or not? I don't know.

There's a lot of entrepreneurs out here looking at it here in Houston and stuff. It could add refineries, but for sure, at least keep the ones that are there in business, and we've got broad support from everybody.

I think the Department of Energy does, hopefully we'll get that across the line sometime this fall.

Okay. Can you guys still hear me, or am I gone?

Yeah. You're good now.

You're

better now.

Thank you. Jim, a follow-up question on the declines you're seeing, or maybe the lack of declines you're seeing.

Are you seeing any change in the flowing pressure of the wells? I'm curious what impact you foresee this will have on your updated 3P report that's coming in.

I'm specifically wondering, how much history are the reserve engineers going to want to see before they give you credit for a lower decline, and are they going to give it to you just on the wells that you've been able to produce, or do you think they're going to give it to you more on a field-wide basis?

We've flowed all the wells, Charles, the aspect of that, and we'll have enough production history on everything to where they'll be able to do it on a field-wide basis. We're seeing no decline in the field, it's a massive field.

I'm sure we'll all coalesce around a 6% or 7% field-wide decline going forward, which has been this historical it's made 100 671 million barrels with a 7% decline. It will revert to that, and that's where the physics is going to be.

We certainly enjoy the production with no decline rate, but at some point in time, and when you get that pressure drop a little bit and the GOR goes up, we'll be making more gas, be able to run our compressors, we'll actually be able to effectively bring on more production from some wells that we then have high water cut that we can't bring on right now because of the lack of gas. The field actually run a little better, and probably we can see a 10% to 15% increase in production volumes, and also some gas sales at that point in time.

There's a pool whether it's going to be this year or next year is whether the field start decline, but it will at some point in time, you can use that 7% field-wide decline. That's what we've been steady in all of our projections.

I think the Netherland, Sewell pre-production decline rates on their report's 21% and 16% the first two years, which is just protection for everybody and themselves, investors, and so forth, and they fully recognize the way the field's performing and looking forward to make sure we all coalesce around that field-wide decline.

That's great detail. Thank you, Jim.

Sure.

Hi, good morning. I just wondered with Platform Hondo, you mentioned that it's in a process of restoration.

Could you just talk a bit more about what's entailed in that, and is any of it in addition to what you originally anticipated, the work that you'd have to do?

We originally anticipated a lot of work at Platform Hondo, like it's a 45-year-old platform. The amount of work did surprise us.

We've had probably about 50% more work than we expected. A lot of structural work that we didn't expect, and so forth, that the platform was in dire need.

It wasn't near in good a shape as Harmony and Heritage. It's just older and maybe less maintained from that standpoint.

We've taken upon ourselves to basically rebuild that platform in place, and we're going to have a first-class facility, probably be the most sought-after spot in the whole field. They'll have a new living quarters, new everything from a standpoint.

Also the controls had to be completely changed out, where the Harmony and Heritage controls just had to be updated and so forth. It's going to be a brand new platform when we finish with it, and we're looking forward to that.

Also our gas sales go through that platform as well, we had make sure that was in good shape. The guys again have done a masterful job there, and we've got so many people and contractors there.

We're moving logistics and people from other platforms, stay in other platforms to that platform to do work every day. Continue to be safe and really impressed with the work that Caldwell and Trent and those guys and their group has done.

Great, thanks. I was just thinking about in terms of geological work, sort of just what's, I guess, the first on the agenda for further testing of the Upper Siliceous?

Sort of, what's kind of the most economical way to go about that? I assume it's maybe recompletion, uphole, and what sort of cost would that be and what sort of data are you looking for next there?

The Upper Siliceous is going to be our main target for all of our reperfs, our perf adds, basically going uphole like we showed the illustration on page 17, and also talk about it 14 and 15 and 16. The big thing on Upper Siliceous is once we're out there and we have in a position to grow volumes with drilling rigs, that's going to be our main target.

That showed up on page 18, which is all of our locations. We have over 100, 125 locations just in the Upper Siliceous.

We've got another 50 locations, 50 to 75 in the massive chert that's been the main producer just in the up-depth locations, and then we've got to redrill the whole field again for the heavy oil. The Upper Siliceous over the next decade is going to be one of the key development deals.

As several of the most recent wells they drilled in 2015, I think two of them in the Upper Siliceous, some of the more prolific producers at this point in time. We're waiting to get our hands on it.

We're certainly not going to put rigs out there until we have our marketing, our pipeline debottlenecks, and all this stuff done and refiners all in good shape and want to take more oil, and then we can actually grow production with the two drilling rigs that we're going to put out there. We're looking forward to that time and then just taking these steps to get there very deliberately, and looking forward to achieving full cash flow and full production in '27.

We got some options.

Great, thanks a lot.

Thank you, everyone, for your participation in today's earnings call. We appreciate it.

Goodbye.