PRER14A 1 d377586dprer14a.htm PRER14A PRER14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. 8)

 

 

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

FLAME ACQUISITION CORP.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

 

No fee required.

 

Fee paid previously with preliminary materials.

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 


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PRELIMINARY PROXY STATEMENT DATED JANUARY 25, 2024—SUBJECT TO COMPLETION

FLAME ACQUISITION CORP.

700 MILAM STREET, SUITE 3300

HOUSTON, TX 77002

Dear Flame Acquisition Corp. Stockholders,

On behalf of the board of directors (the “Flame Board”) of Flame Acquisition Corp., a Delaware corporation (“Flame”, “we” or “our”), we cordially invite you to a special meeting (the “special meeting”) of stockholders of Flame, to be held at              Central Time, on             , 2024, at the offices of Latham & Watkins LLP located at 811 Main Street, Suite 3700, Houston, TX 77002. In the interest of public health, and due to the impact of coronavirus (COVID-19), the special meeting may also be held through a “virtual” or online method.

The Flame Board has unanimously approved the transactions (collectively, the “Business Combination”) contemplated by that certain Agreement and Plan of Merger, dated November 2, 2022 (as it may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among Flame, Sable Offshore Holdings LLC, a Delaware limited liability company (“Holdco”), and Sable Offshore Corp., a Texas corporation and a wholly owned subsidiary of Holdco (“Sable”), a copy of which is attached to this proxy statement as Annex A. As described in this proxy statement, Flame’s stockholders are being asked to consider a vote upon the Business Combination, among other items. As used in this proxy statement, “New Sable” refers to Flame after giving effect to the Business Combination.

On the Closing Date, Holdco will merge with and into Flame (the “Holdco Merger”), with Flame as the surviving company in the Holdco Merger (the time that the Holdco Merger becomes effective being referred to as the “Holdco Merger Effective Time”), and immediately following the Holdco Merger Effective Time, Sable will merge with and into Flame (the “Sable Merger”), with Flame as the surviving company in the Sable Merger (the time that the Sable Merger becomes effective being referred to as the “Sable Merger Effective Time”). The Holdco Merger and the Sable Merger are referred to in this proxy statement, together, as the “Merger.

In accordance with the terms and subject to the conditions of the Merger Agreement, at the Holdco Merger Effective Time, (i) each Holdco Class A share (as defined herein) issued and outstanding immediately prior to the Holdco Merger Effective Time, other than Canceled Holdco Shares (as defined below), will be canceled and converted into the right to receive (a) an aggregate of 3,000,000 shares of Flame Class A common stock (as defined herein), divided by (b) the total number of Holdco Class A shares outstanding immediately prior to the Holdco Merger Effective Time (the “Per Share Merger Consideration”), and (ii) each Holdco Class A share issued and outstanding immediately prior to the Holdco Merger Effective Time that is held by Holdco in treasury or owned by Flame (the “Canceled Holdco Shares”) will be canceled and no consideration will be delivered in exchange therefor. In accordance with the terms and conditions of the Merger Agreement, at the Sable Merger Effective Time, each share of Sable common stock issued and outstanding immediately prior to the Sable Merger Effective Time will be canceled and no consideration will be delivered in exchange therefor. In addition, immediately prior to the Holdco Merger Effective Time, each founder share issued and outstanding immediately prior to the Holdco Merger Effective Time will be automatically converted into shares of Flame Class A common stock on a one-for-one basis (which ratio may be automatically adjusted pursuant to the terms of the Flame certificate of incorporation) (the “Founder Share Conversion”). For the avoidance of doubt, at and after the Holdco Merger Effective Time and the Sable Merger Effective Time, each share of Flame common stock (as defined herein) issued and outstanding immediately prior thereto, including the Flame Class A common stock issued in connection with the Founder Share Conversion, will not be affected by the Merger.

At the special meeting, Flame stockholders will be asked to consider and vote upon:

(1) Proposal No. 1—To consider and vote upon a proposal to approve, for purposes of complying with the General Corporation Law of the State of Delaware and the Flame certificate of incorporation, the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions


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contemplated by the Merger Agreement, including the Merger, and related agreements described in the accompanying proxy statement—we refer to this proposal as the “business combination proposal;”

(2) Proposal No. 2—To consider and vote upon a proposal to approve and adopt changes to the Flame certificate of incorporation reflected in the New Sable certificate of incorporation in the form attached to the accompanying proxy statement Annex B (the “New Sable certificate of incorporation”)—we refer to this proposal as the “Charter Proposal;”

(3) Proposal No. 3—To consider and vote upon, on a non-binding advisory basis, a separate proposal with respect to certain governance provisions in the New Sable certificate of incorporation in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements—we refer to this proposal as the “Governance Proposal;”

(4) Proposal No. 4—To consider and vote on a proposal to approve and adopt the New Sable 2023 Incentive Plan (the “Incentive Plan”)—we refer to this proposal as the “incentive plan proposal.” A copy of the Incentive Plan is attached to the accompanying proxy statement as Annex D;

(5) Proposal No. 5—To consider and vote upon a proposal to approve, for purposes of complying with Section 312.03(c) of the NYSE Listed Company Manual, the issuance of more than 20% of the issued and outstanding shares of Flame common stock in connection with the Business Combination and PIPE Investment (as described below)—we refer to this proposal as the “NYSE proposal;” and

(6) Proposal No. 6—To consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal or the NYSE proposal—we refer to this proposal as the “adjournment proposal.”

Each of these proposals is more fully described in the accompanying proxy statement, which we encourage you to read carefully and in its entirety before voting. Only holders of record of Flame common stock at the close of business on January 3, 2024 are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements thereof.

After careful consideration, the Flame Board has determined that the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal, the NYSE proposal and the adjournment proposal are fair to and in the best interests of Flame and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” the business combination proposal, “FOR” the Charter Proposal, “FOR” the Governance Proposal, “FOR” the incentive plan proposal, “FOR” the NYSE proposal and “FOR” the adjournment proposal, if presented. When you consider the Flame Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of Flame stockholders generally. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination” for additional information. The Flame Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and in recommending to the Flame stockholders that they vote in favor of the proposals presented at the special meeting.

Consummation of the Business Combination is conditioned on the approval of each of the business combination proposal, the Charter Proposal, the incentive plan proposal and the NYSE proposal. If any of those proposals is not approved, or to the extent permitted by applicable law, waived by the applicable parties, we will not consummate the Business Combination. The Governance Proposal and the adjournment proposal are not conditioned on approval of any other proposal set forth in this proxy statement.

As of the date of this proxy statement, Holdco has obtained commitments from PIPE Investors (as defined below) for $520,000,000 in PIPE Investment (as defined below). Substantially contemporaneously with entering into the Merger Agreement, Holdco entered into subscription agreements (as they may be amended,


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supplemented or otherwise modified from time to time, the “Initial PIPE Subscription Agreements”) with certain investors (such investors, the “Initial PIPE Investors”), pursuant to which the Initial PIPE Investors agreed to purchase, in the aggregate, 7,150,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $71,500,000 (the “Initial PIPE Investment”), to be consummated contemporaneously with the Closing and immediately following the Sable Merger Effective Time, on the terms and subject to the conditions set forth in the Initial PIPE Subscription Agreements and the Merger Agreement. The Initial PIPE Subscription Agreements provide that, in the event the Merger is consummated, the investors party thereto will be deemed to have subscribed for and will purchase Flame Class A common stock at the same price per share, and by operation of law pursuant to the Merger, Flame will have succeeded to Holdco’s obligations thereunder. Holdco entered into additional private placement subscriptions under substantially similar subscription agreements prior to the Closing (the Additional Holdco Class B PIPE Subscription Agreements”). As of the date of this proxy statement, pursuant to the Additional Holdco Class B PIPE Investment, Holdco has obtained commitments from the Additional Holdco Class B PIPE Investors to purchase, in the aggregate, 34,850,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $348,500,000. The Additional Holdco Class B PIPE Investors include James C. Flores, Flame’s Chairman and Chief Executive Officer, JCF Capital, LLC, which is managed by J. Caldwell Flores, Flame’s President, and Victorious Angel Group LTD., which is managed by Christopher B. Sarofim, a Director of Flame, who subscribed for $7,000,000, $3,000,000 and $30,000,000, respectively, of the Additional Holdco Class B PIPE Investment. The Additional Holdco Class B PIPE Subscription Agreements provide that, in the event the Merger is consummated, the investors party thereto will be deemed to have subscribed for and will purchase Flame Class A common stock at the same price per share, any by operation of law pursuant to the Merger, Flame will have succeeded to Holdco’s obligations thereunder. Holdco and Flame entered in additional private placement subscriptions prior to the Closing (the Flame Class A PIPE Subscription Agreements”), pursuant to which, as of the date of this proxy statement, Holdco and Flame have obtained a commitment from the Flame Class A PIPE Investors to purchase, in the aggregate, 10,000,000 shares of Flame Class A common stock at a price of $10.00 per share, for an aggregate subscription amount of $100,000,000. The Initial PIPE Investment, the Additional Holdco Class B PIPE Investment and the Flame Class A PIPE Investment will be consummated contemporaneously with the Closing and immediately following the Sable Merger Effective Time, on the terms and subject to the conditions set forth in the Initial PIPE Subscription Agreements, the Additional Holdco Class B PIPE Subscription Agreements or the Flame Class A PIPE Subscription Agreements, as applicable, and the Merger Agreement. Holdco and Flame do not intend to pursue additional subscriptions to purchase Holdco Class B shares or shares of Flame Class A common stock prior to the Closing. The Initial PIPE Subscription Agreements, the Additional Holdco Class B PIPE Subscription Agreements and the Flame Class A PIPE Subscription Agreements are referred to collectively as the PIPE Subscription Agreements,” and the Initial PIPE Investors, the Additional Holdco Class B PIPE Investors and the Flame Class A PIPE Investors are referred to collectively as the “PIPE Investors.

All Flame stockholders are cordially invited to attend the special meeting and we are providing the accompanying proxy statement and proxy card in connection with the solicitation of proxies to be voted at the special meeting (or any adjournment or postponement thereof). To ensure your representation at the special meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the special meeting and vote, obtain a proxy from your broker or bank.

Flame’s units, Class A common stock and public warrants are currently listed on the NYSE American stock exchange (the “NYSE”) under the symbols “FLME.U,” “FLME” and “FLME.WS,” respectively. Flame will apply for listing, to be effective at the time of the Business Combination, of New Sable common stock and public warrants on the NYSE under the proposed symbols “SOC” and “SOC.WS,” respectively. It is a condition of the consummation of the Business Combination that Flame receive confirmation from the NYSE that New Sable has been conditionally approved for listing on the NYSE, but there can be no assurance such listing condition will be met or that Flame will obtain such confirmation from the NYSE. If such listing condition is not met or if such confirmation is not obtained, the Business Combination will not be consummated unless the NYSE condition set forth in the Merger Agreement is waived by the applicable parties.


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Pursuant to the Flame certificate of incorporation, a holder of public shares may demand that Flame redeem such shares for cash if the Business Combination is consummated. Holders of public shares will be entitled to receive cash for these shares only if they demand that Flame redeem their shares for cash no later than the second business day prior to the originally scheduled vote on the business combination proposal by delivering their stock to Flame’s transfer agent prior to the vote at the meeting. If the Business Combination is not completed, these shares will not be redeemed. If a holder of public shares properly demands redemption, Flame will redeem each public share for a full pro rata portion of the trust account (as defined in the accompanying proxy statement), calculated as of two business days prior to the consummation of the Business Combination. As of the date of this proxy statement, and due to the redemption of 20,317,255 public shares in connection with the stockholder vote in February 2023 and the redemption of 2,328,063 public shares in connection with the stockholder vote in August 2023 to approve the extension of the date by which Flame must complete an initial business combination, the Insiders (as defined in the accompanying proxy statement) own approximately 54% of the issued and outstanding shares of Flame common stock, consisting of the founder shares (as defined in the accompanying proxy statement). Founder shares will be excluded from the pro rata calculation used to determine the per-public share redemption price. The Sponsor and Flame’s directors and officers have agreed to vote any shares of Flame common stock owned by them in favor of each of the proposals presented at the special meeting.

Flame is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to comply with certain reduced public company reporting requirements.

The accompanying proxy statement provides you with detailed information about the Business Combination and other matters to be considered at the special meeting of Flame’s stockholders. We encourage you to carefully read the entire document, including the Annexes attached thereto. You should also carefully consider the risk factors described in section entitled “Risk Factorsbeginning on page 71.

Your vote is important regardless of the number of shares you own. Whether you plan to attend the special meeting or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.

The transactions described in the accompanying proxy statement have not been approved or disapproved by the SEC or any state securities commission nor has the SEC or any state securities commission passed upon the merits or fairness of the Business Combination or related transactions, or passed upon the accuracy or adequacy of the disclosure in the accompanying proxy statement. Any representation to the contrary is a criminal offense.

Thank you for your participation. We look forward to your continued support.

 

By Order of the Board of Directors

 

James C. Flores

Chairman of the Board of Directors

            , 2024

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST TENDER YOUR SHARES TO FLAME’S TRANSFER AGENT AT LEAST TWO (2) BUSINESS DAYS PRIOR TO THE ORIGINALLY SCHEDULED VOTE ON THE BUSINESS COMBINATION PROPOSAL AT THE SPECIAL MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE


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CERTIFICATE TO FLAME’S TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT AND WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. PLEASE SEE THE SECTION ENTITLED “SPECIAL MEETING OF FLAME STOCKHOLDERS—REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.

The accompanying proxy statement is dated             , 2024 and is first being mailed to Flame stockholders on or about             , 2024.


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FLAME ACQUISITION CORP.

700 MILAM STREET, SUITE 3300

HOUSTON, TX 77002

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF FLAME ACQUISITION CORP.

TO BE HELD ON             , 2024

NOTICE IS HEREBY GIVEN that a special meeting (the “special meeting”) of stockholders of Flame Acquisition Corp., a Delaware corporation (“Flame”, “we” or “our”), will be held at              Central Time, on             , 2024, at the offices of Latham & Watkins LLP located at 811 Main Street, Suite 3700, Houston, TX 77002. In the interest of public health, and due to the impact of coronavirus (COVID-19), the special meeting may also be held through a “virtual” or online method.

On behalf of Flame’s board of directors (the “Flame Board”), you are cordially invited to attend the special meeting, to conduct the following business items:

(1) Proposal No. 1—To consider and vote upon a proposal to approve, for purposes of complying with the General Corporation Law of the State of Delaware and the Flame certificate of incorporation, the transactions (collectively, the “Business Combination”) contemplated by that certain Agreement and Plan of Merger, dated November 2, 2022 (as it may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among Flame, Sable Offshore Holdings LLC, a Delaware limited liability company (“Holdco”), and Sable Offshore Corp., a Texas corporation and a wholly owned subsidiary of Holdco (“Sable”), a copy of which is attached to this proxy statement as Annex A, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement, including the Merger, and related agreements described in this proxy statement—we refer to this proposal as the “business combination proposal”;

(2) Proposal No. 2—To consider and vote upon a proposal to approve and adopt changes to the Flame certificate of incorporation reflected in the New Sable certificate of incorporation in the form attached to the accompanying proxy statement as Annex B (the “New Sable certificate of incorporation”)—we refer to this proposal as the “Charter Proposal;”

(3) Proposal No. 3—To consider and vote upon, on a non-binding advisory basis, a separate proposal with respect to certain governance provisions in the New Sable certificate of incorporation in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements—we refer to this proposal as the “Governance Proposal;”

(4) Proposal No. 4—To consider and vote on a proposal to approve and adopt the New Sable 2023 Incentive Plan (the “Incentive Plan”)—we refer to this proposal as the “incentive plan proposal.” A copy of the Incentive Plan is attached to the accompanying proxy statement as Annex D;

(5) Proposal No. 5—To consider and vote upon a proposal to approve, for purposes of complying with Section 312.03(c) of the NYSE Listed Company Manual, the issuance of more than 20% of the issued and outstanding shares of Flame common stock in connection with the Business Combination and PIPE Investment (as described below)—we refer to this proposal as the “NYSE proposal;” and

(6) Proposal No. 6—To consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal or the NYSE proposal—we refer to this proposal as the “adjournment proposal.”

Each of these proposals is more fully described in the accompanying proxy statement, which we encourage you to read carefully and in its entirety before voting. Only holders of record of Flame common stock at the close


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of business on January 3, 2024 are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements thereof.

After careful consideration, the Flame Board has determined that the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal, the NYSE proposal and the adjournment proposal are fair to and in the best interests of Flame and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” the business combination proposal, “FOR” the Charter Proposal, “FOR” the Governance Proposal, “FOR” the incentive plan proposal, “FOR” the NYSE proposal, and “FOR” the adjournment proposal, if presented. When you consider the Flame Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of Flame stockholders generally. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination” for additional information. The Flame Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and in recommending to the Flame stockholders that they vote in favor of the proposals presented at the special meeting.

Consummation of the Business Combination is conditioned on the approval of each of the business combination proposal, the Charter Proposal, the incentive plan proposal and the NYSE proposal. If any of those proposals is not approved, or to the extent permitted by applicable law, waived by the applicable parties, we will not consummate the Business Combination. The Governance Proposal and the adjournment proposal are not conditioned on approval of any other proposal set forth in this proxy statement.

As of the date of this proxy statement, Holdco has obtained commitments from PIPE Investors for $520,000,000 in PIPE Investment. In connection with the Business Combination, Holdco entered into the Initial PIPE Subscription Agreements with the Initial PIPE Investors, pursuant to which the Initial PIPE Investors agreed to purchase, in the aggregate, 7,150,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $71,500,000, to be consummated contemporaneously with the Closing and immediately following the Sable Merger Effective Time, on the terms and subject to the conditions set forth in the Initial PIPE Subscription Agreements and the Merger Agreement. The Initial PIPE Subscription Agreements provide that, in the event the Merger is consummated, the investors party thereto will be deemed to have subscribed for and will purchase Flame Class A common stock at the same price per share, and by operation of law pursuant to the Merger, Flame will have succeeded to Holdco’s obligations thereunder. Pursuant to the Additional Holdco Class B PIPE Investment, Holdco has obtained commitments from the Additional Holdco Class B PIPE Investors to purchase, in the aggregate, 34,850,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $348,500,000. The Additional Holdco Class B PIPE Investors include James C. Flores, Flame’s Chairman and Chief Executive Officer, JCF Capital, LLC, which is managed by J. Caldwell Flores, Flame’s President, and Victorious Angel Group LTD., which is managed by Christopher B. Sarofim, a Director of Flame, who subscribed for $7,000,000, $3,000,000 and $30,000,000, respectively, of the Additional Holdco Class B PIPE Investment. The Additional Holdco Class B PIPE Subscription Agreements provide that, in the event the Merger is consummated, the investors party thereto will be deemed to have subscribed for and will purchase Flame Class A common stock at the same price per share, any by operation of law pursuant to the Merger, Flame will have succeeded to Holdco’s obligations thereunder. Pursuant to the Flame Class A PIPE Investment, Holdco and Flame have obtained commitments from the Flame Class A PIPE Investors to purchase 10,000,000 shares of Flame Class A common stock at a price of $10.00 per share, for an aggregate subscription amount of $100,000,000. The Initial PIPE Investment, the Additional Holdco Class B PIPE Investment and the Flame Class A PIPE Investment will be consummated contemporaneously with the Closing and immediately following the Sable Merger Effective Time, on the terms and subject to the conditions set forth in the Initial PIPE Subscription Agreements, the Additional Holdco Class B PIPE Subscription Agreements or the Flame Class A PIPE Subscription Agreements, as applicable, and the Merger Agreement. Holdco and Flame do not intend to pursue additional subscriptions to purchase Holdco Class B shares or shares of Flame Class A common stock prior to the Closing. Additionally, Sable believes that the committed PIPE Investment of $520,000,000 will provide New Sable with sufficient capital to pay for costs related to restarting production of the SYU Assets, including obtaining the necessary regulatory approvals and completing the pipeline repairs and bringing the shut-in assets back online.


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Flame’s units, Class A common stock and public warrants are currently listed on the NYSE American stock exchange (the “NYSE”) under the symbols “FLME.U,” “FLME” and “FLME.WS,” respectively. Flame will apply for listing, to be effective at the time of the Business Combination, of New Sable common stock and public warrants on the NYSE under the proposed symbols “SOC” and “SOC.WS,” respectively. It is a condition of the consummation of the Business Combination that Flame receive confirmation from the NYSE that New Sable has been conditionally approved for listing on the NYSE, but there can be no assurance such listing condition will be met or that Flame will obtain such confirmation from the NYSE. If such listing condition is not met or if such confirmation is not obtained, the Business Combination will not be consummated unless the NYSE condition set forth in the Merger Agreement is waived by the applicable parties.

Pursuant to the Flame certificate of incorporation, a holder of public shares may demand that Flame redeem such shares for cash if the Business Combination is consummated. Holders of public shares will be entitled to receive cash for these shares only if they demand that Flame redeem their shares for cash no later than the second business day prior to the originally scheduled vote on the business combination proposal by delivering their stock to Flame’s transfer agent prior to the vote at the meeting. If the Business Combination is not completed, these shares will not be redeemed. If a holder of public shares properly demands redemption, Flame will redeem each public share for a full pro rata portion of the trust account (as defined in the accompanying proxy statement), calculated as of two business days prior to the consummation of the Business Combination. As of the date of this proxy statement, and due to the redemption of 20,317,255 public shares in connection with the stockholder vote in February 2023 and the redemption of 2,328,063 public shares in connection with the stockholder vote in August 2023 to approve the extension of the date by which Flame must complete an initial business combination, the Insiders (as defined in the accompanying proxy statement) own approximately 54% of the issued and outstanding shares of Flame common stock, consisting of the founder shares (as defined in the accompanying proxy statement). Founder shares will be excluded from the pro rata calculation used to determine the per-public share redemption price. The Sponsor and Flame’s directors and officers have agreed to vote any shares of Flame common stock owned by them in favor of each of the proposals presented at the special meeting.

All Flame stockholders are cordially invited to attend the special meeting and we are providing the accompanying proxy statement and proxy card in connection with the solicitation of proxies to be voted at the special meeting (or any adjournment or postponement thereof). To ensure your representation at the special meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the special meeting and vote, obtain a proxy from your broker or bank.

Your vote is important regardless of the number of shares you own. Whether you plan to attend the special meeting or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.

Thank you for your participation. We look forward to your continued support.

 

By Order of the Board of Directors
 

 

James C. Flores
Chairman of the Board of Directors

            , 2024


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IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST ELECT TO HAVE FLAME REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO FLAME’S TRANSFER AGENT AT LEAST TWO (2) BUSINESS DAYS PRIOR TO THE ORIGINALLY SCHEDULED VOTE ON THE BUSINESS COMBINATION PROPOSAL AT THE SPECIAL MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO FLAME’S TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT AND WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. PLEASE SEE THE SECTION ENTITLED “SPECIAL MEETING OF FLAME STOCKHOLDERS—REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.


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TABLE OF CONTENTS

 

FREQUENTLY USED TERMS

     1  

GLOSSARY

     8  

SUMMARY OF THE MATERIAL TERMS OF THE TRANSACTIONS

     11  

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

     16  

SUMMARY OF THE PROXY STATEMENT

     36  

SUMMARY HISTORICAL FINANCIAL INFORMATION OF FLAME

     62  

SUMMARY HISTORICAL FINANCIAL INFORMATION OF SYU

     65  

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     66  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     69  

RISK FACTORS

     71  

SPECIAL MEETING OF FLAME STOCKHOLDERS

     128  

PROPOSAL NO. 1—THE BUSINESS COMBINATION PROPOSAL

     134  

PROPOSAL NO. 2—THE CHARTER PROPOSAL

     212  

PROPOSAL NO. 3—THE GOVERNANCE PROPOSAL

     218  

PROPOSAL NO. 4—THE INCENTIVE PLAN PROPOSAL

     220  

PROPOSAL NO. 5—THE NYSE PROPOSAL

     227  

PROPOSAL NO. 6—THE ADJOURNMENT PROPOSAL

     229  

OTHER INFORMATION RELATED TO FLAME

     230  

FLAME’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     241  

INFORMATION ABOUT SABLE

     253  

INFORMATION ABOUT SYU

     254  

MANAGEMENT OF NEW SABLE AFTER THE BUSINESS COMBINATION

     274  

EXECUTIVE COMPENSATION OF NEW SABLE

     279  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     281  

SYU MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     296  

DESCRIPTION OF SECURITIES

     305  

MARKET PRICE OF SECURITIES AND DIVIDEND INFORMATION

     314  

BENEFICIAL OWNERSHIP OF SECURITIES

     315  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     320  

SECURITIES ACT RESTRICTIONS ON RESALE OF FLAME’S SECURITIES

     327  

SUBMISSION OF STOCKHOLDER PROPOSALS

     328  

FUTURE STOCKHOLDER PROPOSALS

     328  

OTHER STOCKHOLDER COMMUNICATIONS

     328  

HOUSEHOLDING INFORMATION

     328  

WHERE YOU CAN FIND MORE INFORMATION

     328  

INDEX TO FINANCIAL STATEMENTS

     F-1  
ANNEXES   

Annex A—Agreement and Plan of Merger

     A-1  

Annex B—Form of Second Amended and Restated Certificate of Incorporation of New Sable

     B-1  

Annex C—Form of Bylaws of New Sable

     C-1  

Annex D—Form of Sable Offshore Corp. 2023 Equity Incentive Plan

     D-1  

Annex E-1—Form of Initial PIPE Subscription Agreement, as amended

     E1-1  

Annex E-2—Form of Additional Holdco Class B PIPE Subscription Agreement, as amended

     E2-19  

Annex E-3—Form of Flame Class A PIPE Subscription Agreement

     E3-42  

Annex F—Form of Registration Rights Agreement

     F-1  

Annex G—Purchase and Sale Agreement (Sable  & EM), as amended

     G-1  

Annex H—Purchase and Sale Agreement (EM & Plains)

     H-1  

Annex I—Form of Term Loan Agreement

     I-1  

Annex J—Opinion of Petrie Partners Securities, LLC

     J-1  


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FREQUENTLY USED TERMS

Unless otherwise stated in this proxy statement or the context otherwise requires, references to:

Additional Holdco Class B PIPE Investment” are to the Additional Holdco Class B PIPE Investors’ agreement to purchase, in the aggregate, 34,850,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $348,500,000;

Additional Holdco Class B PIPE Investors” are to any investors who enter into Additional Holdco Class B PIPE Subscription Agreements;

Additional Holdco Class B PIPE Subscription Agreements” are to the subscription agreements entered into among Holdco and the Additional Holdco Class B PIPE Investors named therein, in connection with the Additional Holdco Class B PIPE Investment, as amended, supplemented or otherwise modified from time to time prior to the Closing;

Business Combination” are to the Merger, together with the other transactions contemplated by the Merger Agreement (including the consummation of the PIPE Investment) and the related agreements;

Change in Control” are to any transaction, or series of transactions (a) resulting in any one person, or more than one person that are affiliates or that are acting as a “group” (as such term is used in sections 13(d) or 14(d) of the Exchange Act (as defined herein)), acquiring ownership of (i) equity securities of either Holdco or Sable which, together with the equity securities held by one or more such person, or such person and its affiliates or such group, constitutes more than 50% of the total voting power or economic rights of the equity securities of either Holdco or Sable; or (ii) at least 50% of the consolidated assets of Holdco and Sable; (b) that results in the stockholders or members, as applicable, of either Holdco or Sable as of immediately prior to such transaction holding, in the aggregate, directly or indirectly, less than 50% of the total voting power or economic rights of the equity securities of such entity immediately after the consummation of such transaction (in each case of clauses (a) and (b), whether by merger, consolidation, tender offer, recapitalization, purchase or issuance of equity securities, tender offer or otherwise); or (c) the result of which is a sale of all or substantially all of the assets of Holdco and Sable to any person;

Code” are to the Internal Revenue Code of 1986, as amended;

Class B Conversion” are to Flame’s issuance of an aggregate of 7,187,500 shares of Flame Class A common stock to Sponsor, FL Co-Investment, Intrepid Financial Partners, Flame’s independent directors and certain of Flame’s executive officers, upon the conversion of an equal number of shares of Flame Class B common stock.

Closing” are to the consummation of the Business Combination;

Closing Date” are to the date on which the Business Combination is consummated;

completion window” are to the period following the completion of the Flame IPO at the end of which, if Flame has not completed an initial business combination, it will redeem 100% of the public shares at a per share price, payable in cash, equal to (a) the aggregate amount then on deposit in the trust account, including interest earned and not previously released to us for Flame’s expenses related to administration of the trust account as well as to pay Flame’s taxes, divided by (b) the number of then-outstanding public shares, subject to applicable law and certain conditions. The completion window was extended from March 1, 2023 to September 1, 2023, and then again from September 1, 2023 to March 1, 2024, in connection with the extensions of the initial business combination deadline. The completion window ends on March 1, 2024;

Cowen” are to Cowen and Company, LLC, one of the underwriters of the Flame IPO who is also serving as a placement agent in the PIPE Investment, as a financial advisor to Sable in connection with the Sable-EM Purchase Agreement and as a financial advisor to Sable in connection with the Merger Agreement;

 

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DGCL” are to the General Corporation Law of the State of Delaware;

EM” are to EMC and MPPC as applicable;

EMC” are to Exxon Mobil Corporation, a New Jersey corporation and parent of MPPC;

EM-Plains Purchase Agreement” are to the Purchase and Sale Agreement, dated as of October 10, 2022, by and between MPPC and Plains;

Exchange Act” are to the Securities Exchange Act of 1934, as amended;

First Q2 2023 Promissory Note” are to the unsecured promissory note issued to the Sponsor in the principal amount of $395,000 dated May 12, 2023;

First Q3 2023 Promissory Note” are to the unsecured promissory note issued to the Sponsor in the principal amount of $635,000 dated August 30, 2023;

First Working Capital Loan” are to the unsecured promissory note provided as a working capital loan to the Sponsor in the principal amount of $365,000 to cover additional expenses related to the Flame IPO, dated March 1, 2021;

FL Co-Investment” are to FL Co-Investment LLC, an affiliate of one of the underwriters of the Flame IPO;

Flame” are to Flame Acquisition Corp., a Delaware corporation;

Flame Board” are to the Board of Directors of Flame;

Flame Class A common stock” are to Class A common stock, par value $0.0001 per share, of Flame;

Flame Class A PIPE Investment” are to the Flame Class A PIPE Investors’ agreement to purchase, in the aggregate, 10,000,000 shares of Flame Class A common stock at a price of $10.00 per share, for an aggregate subscription amount of $100,000,000;

Flame Class A PIPE Investors” are to the investors that entered into the Flame Class A PIPE Subscription Agreements;

Flame Class A PIPE Subscription Agreements” are to the subscription agreement entered into among Holdco, Flame and the Flame Class A PIPE Investors, in connection with the Flame Class A PIPE Investment, as amended, supplemented or otherwise modified from time to time;

Flame Class B common stock” are to Class B common stock, par value $0.0001 per share, of Flame;

Flame certificate of incorporation” are to Flame’s amended and restated certificate of incorporation in effect as of the date of this proxy statement;

Flame common stock” are to the Flame Class A common stock and the Flame Class B common stock, collectively;

Flame Independent Directors” are to Michael E. Dillard, Gregory P. Pipkin and Christopher B. Sarofim prior to the Closing;

Flame IPO” are to the initial public offering by Flame, which closed on March 1, 2021;

Flame Stockholder Approvals” are to, with respect to any proposal, the affirmative vote of the holders of the requisite number of shares of Flame common stock entitled to vote thereon, whether in person or by proxy at the special meeting (or any adjournment or postponement thereof), in accordance with Flame’s governing documents and applicable law or stock exchange rule;

 

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founder shares” are to (i) prior to the Class B Conversion, the shares of Flame Class B common stock initially purchased by the Sponsor, FL Co-Investment, Intrepid Financial Partners, the Flame Independent Directors, certain members of Flame’s management team, and the other initial stockholders in connection with the Flame IPO and (ii) after the Class B Conversion, the shares of Flame Class A common stock issued upon the Class B Conversion;

founders” are to the Sponsor, FL Co-Investment and Intrepid Financial Partners;

Fourth Q2 2023 Promissory Note” are to the unsecured promissory note issued to the Sponsor in the principal amount of $50,000 dated June 22, 2023;

Holdco” are to Sable Offshore Holdings LLC, a Delaware limited liability company;

Holdco Class A shares” are to limited liability company membership interests in Holdco designated as Class A shares;

Holdco Class B shares” are to limited liability company membership interests in Holdco designated as Class B shares;

Holdco Equityholders” are to holders of Holdco Class A shares;

Holdco Merger” are to the merger of Holdco with and into Flame with Flame being the surviving company in the merger;

Holdco Merger Effective Time” are to the effective time of the consummation of the Holdco Merger;

HSR Act” are to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder;

Incentive Plan” are to the Sable Offshore Corp. 2023 Equity Incentive Plan to be adopted by Flame prior to the Closing;

Initial PIPE Investment” are to the Initial PIPE Investors’ agreement to purchase, in the aggregate, 7,150,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $71,500,000;

Initial PIPE Investors” are to the investors who agreed to participate in the Initial PIPE Investment and entered into the Initial PIPE Subscription Agreements;

Initial PIPE Subscription Agreements” are to the subscription agreements entered into between Holdco and the Initial PIPE Investors named therein in connection with and substantially contemporaneously with the Merger Agreement in connection with the Initial PIPE Investment, as amended, supplemented or otherwise modified from time to time prior to the Closing;

initial stockholders” are to the founders and any other holders of the founder shares prior to the Flame IPO;

Insiders” are to Sponsor, FL Co-Investment, Intrepid Financial Partners, the Flame Independent Directors, and certain members of Flame’s management team;

Intrepid” are to Intrepid Partners, LLC, one of the underwriters of the Flame IPO who is also serving as a placement agent in the PIPE Investment, as a financial advisor to Sable in connection with the Sable-EM Purchase Agreement and as a financial advisor to Sable in connection with the Merger Agreement;

Intrepid Financial Partners” are to Intrepid Financial Partners, L.L.C., an affiliate of one of the underwriters of the Flame IPO;

Investment Company Act” are to the Investment Company Act of 1940;

 

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Letter Agreement” are to the letter agreement dated February 24, 2021, among Flame, the Sponsor, FL Co-Investment, Intrepid and certain security holders named therein, as amended on March 24, 2023;

Merger” are to, together, the Holdco Merger and the Sable Merger;

Merger Agreement” are to that certain Agreement and Plan of Merger, dated as of November 2, 2022, by and among Flame, Holdco and Sable, as amended on December 22, 2022 and June 30, 2023;

MPPC” are to Mobil Pacific Pipeline Company, a Delaware corporation and subsidiary of EMC;

New Sable” are to Flame after the Merger;

New Sable Board” are to the Board of Directors of New Sable;

New Sable bylaws” are to New Sable’s amended and restated bylaws;

New Sable certificate of incorporation” are to the second amended and restated certificate of incorporation of New Sable;

New Sable common stock” are to the Flame Class A common stock following the consummation of the Business Combination;

New Sable Independent Directors” are to Michael E. Dillard, Gregory P. Pipkin and Christopher B. Sarofim after the Closing;

New Sable private placement warrants” are to the private placement warrants following the consummation of the Business Combination;

New Sable public warrants” are to the public warrants following the consummation of the Business Combination;

New Sable warrants” are to the New Sable public warrants and the New Sable private placement warrants;

NSAI” are to Netherland, Sewell & Associates, Inc., independent petroleum consultants;

NSAI Report” are to the independent engineering evaluation by NSAI of the contingent resources in certain oil and gas properties located in the Santa Ynez Unit as of September 30, 2021, utilizing constant price and cost parameters specified by Sable;

our common stock” are, prior to consummation of the Business Combination, to Flame Class A common stock and Flame Class B common stock, and, following consummation of the Business Combination, to New Sable common stock;

Pacific Offshore Pipeline Company” or “POPCO” are to Pacific Offshore Pipeline Company, a corporation formed under the laws of California and a subsidiary of EMC prior to the Closing;

Pacific Pipeline Company” or “PPC” are to Pacific Pipeline Company, a corporation formed under the laws of Delaware, the owner of the Pipelines and a subsidiary of MPPC prior to the Closing;

Petrie Partners” are to Petrie Partners Securities, LLC, financial advisors to the Flame Board;

PIPE Investment” are to the issuance and sale to the (i) Initial PIPE Investors and the Additional Holdco Class B PIPE Investors in a private placement of 42,000,000 Holdco Class B shares, at a price of $10.00 per share, for an aggregate subscription amount of $420,000,000 (the “Holdco Class B Shares Subscription

 

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Amount”), provided that in the event the Business Combination is consummated, all such shares to be issued and sold to the Initial PIPE Investors and the Additional Holdco Class B PIPE Investors shall be shares of Flame Class A common stock, and (ii) Flame Class A PIPE Investors in a private placement of 10,000,000 shares of Flame Class A common stock, at a price of $10.00 per share, for an aggregate subscription amount of $100,000,000 (the “Flame Class A Subscription Amount” and, together with the Holdco Class B Shares Subscription Amount, the “Aggregate Subscription Amount”). As of the date of this proxy statement, Holdco has obtained commitments from PIPE Investors for $520,000,000 in PIPE Investment;

PIPE Investors” are to the Initial PIPE Investors, the Additional Holdco Class B PIPE Investors and the Flame Class A PIPE Investors;

PIPE Subscription Agreements” are to the Initial PIPE Subscription Agreements, the Additional Holdco Class B PIPE Subscription Agreements and the Flame Class A PIPE Subscription Agreements;

Pipelines” are to Pipeline Segments 901/903 and the other “901/903 Assets” (as defined in the Sable-EM Purchase Agreement);

Plains” are to Plains Pipeline L.P., the owner of the Pipelines prior to EM;

private placement warrants” are to Flame’s warrants issued to the Sponsor and other initial stockholders in a private placement simultaneously with the closing of the Flame IPO;

Promissory Note Loans” are to the Second Q2 2023 Promissory Note, Third Q2 2023 Promissory Note, Second Q3 2023 Promissory Note and $178,630 of the Q1 2023 Promissory Note;

proxy statement” are to this proxy statement;

public shares” are to shares of Flame Class A common stock sold as part of the units in the Flame IPO (whether they were purchased in the Flame IPO or thereafter in the open market);

public stockholders” are to the holders of Flame’s public shares, including the Sponsor and Flame’s officers and directors to the extent the Sponsor and Flame’s officers or directors purchase public shares, provided that each of their status as a “public stockholder” shall only exist with respect to such public shares;

public warrants” are to Flame’s warrants sold as part of the units in the Flame IPO (whether they were purchased in the Flame IPO or thereafter in the open market);

Q1 2023 Promissory Note” are to the unsecured promissory note issued to the Sponsor in the principal amount of $535,000, dated February 6, 2023;

Q3 2022 Promissory Note” are to the unsecured promissory note issued to the Sponsor in the principal amount of $170,000 to cover additional expenses related to our search for an initial business combination, dated September 30, 2022;

Q4 2022 Promissory Note” are to the unsecured promissory note issued to the Sponsor in the principal amount of $200,000, dated October 31, 2022;

Registration Rights Agreement” are to the Registration Rights Agreement, to be dated the Closing Date, by and among New Sable and James C. Flores;

Sable” are to Sable Offshore Corp., a Texas corporation and a wholly owned subsidiary of Holdco;

Sable common stock” are to common stock, par value $0.01 per share, of Sable;

Sable-EM Minimum Cash Threshold” are to the requirement under the Sable-EM Purchase Agreement that we have no less than $150.0 million of available cash (as defined in the Sable-EM Purchase Agreement) after giving effect to the Business Combination;

 

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Sable-EM Purchase Agreement” are to the Purchase and Sale Agreement, dated as of November 1, 2022, by and among EMC, MPPC and Sable, as amended by the first and second amendments thereto, dated as of June 13, 2023, and December 15, 2023, respectively;

Sable Merger” are to the merger of Sable with and into Flame with Flame being the surviving company in the merger;

Sable Merger Effective Time” are to the effective time of the consummation of the Sable Merger;

Second Q2 2023 Promissory Note” are to the unsecured promissory note issued to the Sponsor in the principal amount of $355,000, dated June 22, 2023;

Second Q3 2023 Promissory Note” are to the unsecured promissory note issued to the Sponsor in the principal amount of $495,000, dated August 30, 2023;

Second Working Capital Loan” are to the unsecured promissory note provided as a working capital loan to the Sponsor in the principal amount of $800,000 to cover additional expenses related to our search for an initial business combination, dated December 27, 2021;

Sponsor” are to Flame Acquisition Sponsor LLC, a Delaware limited liability company;

Sponsor Loans” are to the Working Capital Loans and the Promissory Note Loans;

SYU” are to (i) the SYU Assets and (ii) unless the context requires otherwise, the Pipelines; provided that the combined financial statements of SYU do not include the Pipelines;

SYU Assets” are to the “Assets” (as defined in the Sable-EM Purchase Agreement), including 100% of the equity interests in each of Pacific Offshore Pipeline Company and Pacific Pipeline Company;

Term Loan Agreement” are to the Senior Secured Term Loan Agreement, dated as of the Closing Date, by and between New Sable and EMC;

“Third Q2 2023 Promissory Note” are to the unsecured promissory note issued to the Sponsor in the principal amount of $100,000, dated June 22, 2023;

Third Working Capital Loan” are to the unsecured promissory note provided as a working capital loan to the Sponsor in the principal amount of $335,000 to cover additional expenses related to our search for an initial business combination, dated March 29, 2022;

Trading Day” are to any day on which shares of Flame Class A common stock are actually traded on the principal securities exchange or securities market on which shares of Flame Class A common stock are then traded;

Transactions” are to (a) the Business Combination, (b) the completion of the PIPE Investment, (c) the conversion of the founder shares into shares of Flame Class A common stock in connection with the Business Combination pursuant to the Flame certificate of incorporation and (d) the redemption, if any, by Flame of public shares held by any public stockholders in connection with the Business Combination;

trust account” are to the trust account of Flame that holds the proceeds from the Flame IPO;

underwriters” are to Cowen and Intrepid in their capacity as underwriters of the Flame IPO;

unit” are to units issued by Flame;

Warrant Agreement” are to the Warrant Agreement, dated as of February 24, 2021, by and between Flame and American Stock Transfer & Trust Company, LLC;

 

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warrants” are to the public warrants and the private placement warrants issued by Flame; and

Working Capital Loans” are to the First Working Capital Loan, the Second Working Capital Loan, the Third Working Capital Loan, the Q3 2022 Promissory Note, Q4 2022 Promissory Note, First Q2 2023 Promissory Note, Fourth Q2 2023 Promissory Note, First Q3 2023 Promissory Note and $356,370 of the Q1 2023 Promissory Note.

 

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GLOSSARY

Basin: A large depression in the earth’s surface in which sediments accumulate.

Bbl: One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil or other liquid hydrocarbons.

Bbl/d: One Bbl per day.

Bcfe: One billion cubic feet of natural gas equivalent.

BLM: U.S. Bureau of Land Management.

Boe: One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil.

Boe/d: One Boe per day.

BOEM: U.S. Bureau of Ocean Energy Management.

Brent: A light, sweet North Sea crude oil, characterized by an American Petroleum Institute gravity of 38 degrees and a sulfur content of approximately 0.4% by weight, the pricing of which is used as a benchmark for other crude oils.

Btu: One British thermal unit, the quantity of heat required to raise the temperature of a one-pound mass of water by one-degree Fahrenheit.

Contingent resources: As defined in the PRMS and as described under “Proposal No. 1—The Business Combination Proposal—Background of the Business Combination.”

Developed acreage: The number of acres which are allocated or assignable to producing wells or wells capable of production.

Field: An area consisting of a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

Formation: A layer of rock which has distinct characteristics that differ from those of nearby rock.

Gas or natural gas: The lighter hydrocarbons and associated non-hydrocarbon substances occurring naturally in an underground reservoir, which under atmospheric conditions are essentially gases but which may contain liquids.

GHG or GHGs: Greenhouse gases.

Gross acres or gross wells: The total acres or wells, as the case may be, in which we have a working interest.

Horizontal drilling: A wellbore that is drilled laterally.

MBbl: One thousand Bbls.

MBbls/d: One thousand Bbls per day.

 

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MBoe: One thousand barrels of oil equivalent.

MBoe/d: One thousand barrels of oil equivalent per day.

MBop/d: One thousand barrels of oil per day.

MBwp/d: One thousand barrels of water per day.

Mcf: One thousand cubic feet of natural gas.

MMBoe: One million barrels of oil equivalent.

MMBtu: One million British thermal units.

MMcf: One million cubic feet of natural gas.

MMcfe: One million cubic feet of natural gas equivalent.

MMcfe/d: One MMcfe per day.

MW: One megawatt.

Net acres or net wells: Gross acres or wells, as the case may be, multiplied by the working interest ownership percentage.

Net production: Production that is owned by us less royalties and production due others.

Net revenue interest or NRI: A working interest owner’s gross working interest in production less the royalty, overriding royalty, production payment and net profits interests.

NGL or NGLs: The combination of ethane, propane, butane and natural gasolines that, when removed from natural gas become liquid under various levels of higher pressure and lower temperature.

Oil: Oil and condensate.

Operator: The individual or company responsible for the exploration and/or production of an oil or natural gas well or lease.

Plugging and abandonment: Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another stratum or to the surface. Regulations of all states require plugging of abandoned wells.

PRMS: The Petroleum Resources Management System approved by the Society of Petroleum Engineers Board of Directors, June 2018.

Productive well: A well that produces commercial quantities of hydrocarbons, exclusive of its capacity to produce at a reasonable rate of return.

Reserves: Estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project.

 

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Royalty: The share paid to the owner of mineral rights, expressed as a percentage of gross income from oil and natural gas produced and sold unencumbered by expenses relating to the drilling, completing and operating of the affected well.

Royalty interest: An interest in an oil and natural gas property entitling the owner to shares of oil and natural gas production, free of costs of exploration, development and production operations.

Spacing: The distance between wells producing from the same reservoir. Spacing is often expressed in terms of acres (e.g., 40-acre spacing) and is often established by regulatory agencies.

Undeveloped acreage: Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.

Unit: The joining of all or substantially all interests in a reservoir or field, rather than a single tract, to provide for development and operation without regard to separate property interests. Also, the area covered by a unitization agreement.

Wellbore: The hole drilled by the bit that is equipped for oil or natural gas production on a completed well. Also called well or borehole.

Working interest: An interest in an oil and natural gas lease that gives the owner of the interest the right to drill for and produce oil and natural gas on the leased acreage and generally requires the owner to pay a share of the costs of drilling and production operations.

Workover: Operations on a producing well to restore or increase production.

WTI or West Texas Intermediate: A light crude oil produced in the United States with an American Petroleum Institute gravity of approximately 38 to 40 degrees and the sulfur content is approximately 0.3% by weight.

 

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SUMMARY OF THE MATERIAL TERMS OF THE TRANSACTIONS

This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement, but does not contain all of the information that is important to you. You should carefully read this entire proxy statement, including the attached Annexes, for a more complete understanding of the matters to be considered at the special meeting. In addition, for definitions used commonly throughout this proxy statement, including this summary term sheet, please see the section entitled “Frequently Used Terms.”

 

   

Flame Acquisition Corp., a Delaware corporation, which we refer to as “Flame,” “we,” “us” or “our,” is a special purpose acquisition company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

 

   

On March 1, 2021, Flame consummated its initial public offering of 28,750,000 units, including 3,750,000 units sold pursuant to the full exercise of the underwriters’ option to purchase additional units to cover over-allotments, with each unit consisting of one share of Flame Class A common stock and one warrant to purchase one-half share of Flame Class A common stock. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $287,500,000. Simultaneously with the consummation of the Flame IPO, Flame consummated the private placement of 7,750,000 warrants at a price of $1.00 per private placement warrant, generating total proceeds of $7,750,000.

 

   

Following the consummation of the Flame IPO, $287,500,000 was deposited into a U.S.-based trust account with American Stock Transfer & Trust Company, LLC (“AST”) acting as trustee. Except as described in the prospectus for the Flame IPO, these proceeds will not be released until the earlier of the completion of an initial business combination and Flame’s redemption of 100% of the outstanding public shares upon its failure to consummate a business combination within the completion window.

 

   

Sable Offshore Holdings LLC is a Delaware limited liability company, which we refer to as “Holdco.” Sable Offshore Corp. is a Texas corporation and direct wholly-owned subsidiary of Holdco, which we refer to as “Sable.” Sable and Holdco are special purpose entities formed for the purpose of evaluating the opportunity to acquire SYU and negotiating the terms thereof. See the sections entitled “Information About SYU,” “SYU Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management of New Sable After the Business Combination.”

 

   

EM has agreed to sell the SYU Assets (including 100% of the equity interests in each of Pacific Offshore Pipeline Company and Pacific Pipeline Company) to Sable for $625,000,000 (the “Purchase Price”), payable in cash and seller-financed indebtedness, subject to certain adjustments, as follows:

 

   

an $18,750,000 down payment in cash at the Closing (i.e., 3% of the Purchase Price);

 

   

a secured term loan in the principal amount of $606,250,000 adjusted upward as follows:

 

  (i)

plus the value of certain unsold inventory as of the Closing; and

 

  (ii)

plus an additional $75.0 million if certain governmental approvals for the Pipelines have been obtained on or prior to the Closing Date and such approvals are not subject, in material part, to further appeal or reconsideration, or have been materially affirmed on appeal or reconsideration, or the time periods for further appeal or reconsideration, as to the material part of the decision, have expired;

 

   

plus or minus certain other upward or downward adjustments as described in the Sable-EM Purchase Agreement, which adjustments are payable in cash at the Closing; and

 

   

plus approximately $8.5 million in cash, which represents an amount paid by EM to Plains under the EM-Plains Purchase Agreement and in respect of which Sable is obligated to reimburse EM.

 

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For more information, please see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Sable-EM Purchase Agreement” and “Proposal No. 1—The Business Combination Proposal—Related Agreements—Term Loan Agreement.”

 

   

On November 2, 2022, Flame entered into an Agreement and Plan of Merger with Holdco and Sable, which, among other things, provides for each of Holdco and Sable to be merged with and into Flame, with Flame being the surviving company in the Merger.

 

   

Subject to the terms of the Merger Agreement, the aggregate consideration to be received by holders of Holdco Class A shares immediately prior to the Holdco Merger Effective Time will be 3,000,000 shares of Flame Class A common stock. See “Proposal No. 1The Business Combination ProposalThe Merger AgreementConsideration to Holdco Equityholders.

 

   

As of the date of this proxy statement, Holdco has obtained commitments from PIPE Investors for $520,000,000 in PIPE Investment. Pursuant to the Initial PIPE Investment, Holdco has agreed to issue and sell to the Initial PIPE Investors, and the Initial PIPE Investors have agreed to buy from Holdco, 7,150,000 Holdco Class B shares at a purchase price of $10.00 per share for an aggregate commitment of $71,500,000; provided, that in the event the Merger is consummated, such issuance and sale shall be of Flame Class A common stock at the same price per share. Pursuant to the Additional Holdco Class B PIPE Investment, Holdco has obtained commitments from the Additional Holdco Class B PIPE Investors to purchase, in the aggregate, 34,850,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $348,500,000. The Additional Holdco Class B PIPE Investors include James C. Flores, Flame’s Chairman and Chief Executive Officer, JCF Capital, LLC, which is managed by J. Caldwell Flores, Flame’s President, and Victorious Angel Group LTD., which is managed by Christopher B. Sarofim, a Director of Flame, who subscribed for $7,000,000, $3,000,000 and $30,000,000, respectively, of the Additional Holdco Class B PIPE Investment. The Additional Holdco Class B PIPE Subscription Agreements provide that, in the event the Merger is consummated, the investors party thereto will be deemed to have subscribed for and will purchase Flame Class A common stock at the same price per share, any by operation of law pursuant to the Merger, Flame will have succeeded to Holdco’s obligations thereunder. Pursuant to the Flame Class A PIPE Investment, Holdco and Flame have obtained commitments from the Flame Class A PIPE Investors to purchase 10,000,000 shares of Flame Class A common stock at a price of $10.00 per share, for an aggregate subscription amount of $100,000,000. The Initial PIPE Investment, the Additional Holdco Class B PIPE Investment and the Flame Class A PIPE Investment will be consummated contemporaneously with the Closing and immediately following the Sable Merger Effective Time, on the terms and subject to the conditions set forth in the Initial PIPE Subscription Agreements, the Additional Holdco Class B PIPE Subscription Agreements or the Flame Class A PIPE Subscription Agreements, as applicable, and the Merger Agreement. Holdco and Flame do not intend to pursue additional subscriptions to purchase Holdco Class B shares or shares of Flame Class A common stock prior to the Closing. Additionally, Sable believes that the committed PIPE Investment of $520,000,000 will provide New Sable with sufficient capital to pay for costs related to restarting production of the SYU Assets, including obtaining the necessary regulatory approvals and completing the pipeline repairs and bringing the shut-in assets back online.

 

   

On February 27, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve an amendment (the “Extension Amendment Proposal”) to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination (the “Extension”) from March 1, 2023 to September 1, 2023 (the “Extended Date”). In connection with the Extension, stockholders holding 20,317,255 shares of Flame Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 70.67%of the issued and outstanding Flame Class A common stock. After the redemption in connection with the Extension, 8,432,745 shares of Flame Class A common stock remained outstanding.

 

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On August 22, 2023, Flame issued an aggregate of 7,187,500 shares of Flame Class A common stock to Sponsor, FL Co-Investment, Intrepid Financial Partners, Flame’s independent directors and certain of Flame’s executive officers, upon the conversion of an equal number of shares of Flame Class B common stock (the “Class B Conversion”). The 7,187,500 shares of Flame Class A common stock issued in connection with the Class B Conversion are subject to the same restrictions as applied to the shares of Flame Class B common stock before the Class B Conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial business combination, as described in the prospectus for the Flame IPO. After the Class B Conversion, no shares of Flame Class B common stock remained outstanding.

 

   

On August 29, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve an amendment (the “Second Extension Amendment Proposal”) to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination (the “Second Extension”) from September 1, 2023 to March 1, 2024 (the “Second Extended Date”). In connection with the Second Extension, stockholders holding 2,328,063 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 27.61% of the issued and outstanding public shares. After the redemption in connection with the Second Extension, 6,104,682 public shares remained outstanding.

 

   

The following table illustrates varying ownership levels in New Sable immediately following the Closing, assuming (i) no additional public shares are redeemed, (ii) 50% of the remaining public shares outstanding are redeemed and (iii) 6,104,682 public shares (or 100% of the remaining public shares outstanding) are redeemed, resulting in an aggregate payment of approximately $63,124,000 from the trust account, which even with maximum redemptions Flame believes it would be able to satisfy the $150,000,000 Sable-EM Minimum Cash Threshold and have sufficient capital for operations, each on a “shares outstanding” and “fully diluted” basis. The numbers of shares and percentage interests set forth below are based on a number of assumptions. If the actual facts differ from our assumptions, the number of shares and percentage interests set forth below will be different. For more information, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

 

    No Additional Redemption Scenario(1)     50% Redemption Scenario(2)     Max Redemption Scenario(3)  
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
 

Current Flame public stockholders

    6,104,682       8.94     20,479,682       21.05     3,052,341       4.68     17,427,341       18.49     —         —         14,375,000       15.76

Insiders

    7,187,500       10.52     18,243,870       18.75     7,187,500       11.02     18,243,870       19.36     7,187,500       11.56     18,243,870       20.01

Merger Consideration

    3,000,000       4.39     3,000,000       3.08     3,000,000       4.60     3,000,000       3.18     3,000,000       4.82     3,000,000       3.29

PIPE Stockholders(5)

    52,000,000       76.14     52,000,000       53.44     52,000,000       79.71     52,000,000       55.17     52,000,000       83.62     52,000,000       57.02

Incentive Plan(6)

    —         —         3,575,000       3.67     —         —         3,575,000       3.79     —         —         3,575,000       3.29
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    68,292,182       100.00     97,298,552       100.00     65,239,841       100.00     94,246,211       100.00     62,187,500       100.00     91,193,870       100.00
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note: Figures may not sum due to rounding.

 

(1)

This presentation assumes that no additional public stockholders exercise their right to have their public shares converted into their pro rata share of the trust account.

(2)

This presentation assumes that (i) public stockholders exercise their rights to have 50% of all remaining outstanding public shares converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(3)

This presentation assumes that (i) public stockholders exercise their rights to have 6,104,682 public shares (or 100% of the remaining public shares outstanding) converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(4) (a)

This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current

 

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  unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.
     (b)

This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

(5)

Assumes 52,000,000 shares of New Sable common stock are issued to PIPE Investors at Closing in connection with the PIPE Investment.

(6)

Reflects shares expected to be reserved for issuance under the Incentive Plan (assuming the incentive plan proposal is approved).

The following table further illustrates the impact on relative fully diluted ownership levels of New Sable for each source of dilution, namely the issuance of common stock under (i) the 14,375,000 public warrants, (ii) the 7,750,000 private placement warrants, (iii) the 3,306,370 private placement warrants issuable in connection with the Working Capital Loans, and (iv) the Incentive Plan.

 

    No Additional Redemption
Scenario(1)
    50% Redemption
Scenario(2)
    Max Redemption
Scenario(3)
 
    Number of
Shares
    Fully
Diluted
Ownership(4)
    Number of
Shares
    Fully
Diluted
Ownership(4)
    Number of
Shares
    Fully
Diluted
Ownership(4)
 

Current Stockholders

           

Current Flame public stockholders

    6,104,682       6.27     3,052,341       3.24     —         0.00

Insiders

    7,187,500       7.39     7,187,500       7.63     7,187,500       7.88

PIPE Shares(5)

    52,000,000       53.44     52,000,000       55.17     52,000,000       57.02

Merger Consideration

    3,000,000       3.08     3,000,000       3.18     3,000,000       3.29

Total Current Stockholders

    68,292,182       70.19     65,239,841       69.22     62,187,500       68.19

Shares Issuable Upon Exercise of Warrants

           

Flame Public Warrants

    14,375,000       14.77     14,375,000       15.25     14,375,000       15.76

Flame Private Warrants

    7,750,000       7.97     7,750,000       8.22     7,750,000       8.50

Working Capital Warrants

    3,306,370       3.40     3,306,370       3.51     3,306,370       3.63

Total Shares Issuable Upon Exercise of Warrants

    25,431,370       26.14     25,431,370       26.98     25,431,370       27.89

Incentive Plan(6)

    3,575,000       3.67     3,575,000       3.79     3,575,000       3.92

Pro Forma Flame Common Stock

    97,298,552       100.00     94,246,211       100.00     91,193,870       100.00

Note: Figures may not sum due to rounding.

(1)

This presentation assumes that no additional public stockholders exercise their right to have their public shares converted into their pro rata share of the trust account.

(2)

This presentation assumes that (i) public stockholders exercise their rights to have 50% of all remaining outstanding public shares converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(3)

This presentation assumes that (i) public stockholders exercise their rights to have 6,104,682 public shares (or 100% of the remaining public shares outstanding) converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(4) (a)

This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.

 

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     (b)

This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

(5)

Assumes 52,000,000 shares of New Sable common stock are issued to PIPE Investors at Closing in connection with the PIPE Investment.

(6)

Reflects 3,575,000 shares of New Sable common stock that are expected to be granted as equity incentive awards to officers and employees of New Sable under the Incentive Plan after the consummation of the Business Combination and for more information about the Incentive Plan, including the expected number of shares that will be reserved for future compensatory grants, please see the section entitled “Proposal No. 4—Incentive Plan Proposal.”

 

   

Flame management and the Flame Board considered various factors in determining whether to approve the Merger Agreement and the Business Combination contemplated thereby, including the Merger. For more information about the reasons that the Flame Board considered in determining its recommendation, please see the section entitled “Proposal No. 1—The Business Combination Proposal—The Flame Board’s Reasons for the Approval of the Business Combination.” When you consider the Flame Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of Flame stockholders generally. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination” for additional information. The Flame Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and in recommending to the Flame stockholders that they vote “FOR” the proposals presented at the special meeting.

 

   

At the special meeting, Flame’s stockholders will be asked to consider and vote on the following proposals:

 

   

a proposal to approve, for purposes of complying with the DGCL and the Flame certificate of incorporation, the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement, including the Merger, and related agreements described in this proxy statement. Please see the section entitled “Proposal No. 1— The Business Combination Proposal;”

 

   

a proposal to approve and adopt the New Sable certificate of incorporation of Flame in the form attached hereto as Annex B. Please see the section entitled “Proposal No. 2—The Charter Proposal;”

 

   

a proposal with respect to certain governance provisions in the New Sable certificate of incorporation, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis. See the section entitled “Proposal No. 3—The Governance Proposal;

 

   

a proposal to approve and adopt the Incentive Plan. Please see the section entitled “Proposal No. 4The Incentive Plan Proposal;”

 

   

a proposal to approve, for purposes of complying with Section 312.03(c) of the NYSE Listed Company Manual, the issuance of more than 20% of the issued and outstanding shares of Flame common stock in connection with the Business Combination and PIPE Investment. Please see the section entitled “Proposal No. 5—The NYSE Proposal;” and

 

   

a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal or the NYSE proposal. Please see the section entitled “Proposal No. 6—The Adjournment Proposal.”

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

The questions and answers below highlight only selected information from this proxy statement and only briefly address some commonly asked questions about the special meeting and the proposals to be presented at the special meeting, including with respect to the proposed business combination. The following questions and answers do not include all the information that is important to Flame stockholders. Stockholders are urged to carefully read this entire proxy statement, including the Annexes and the other documents referred to herein, to fully understand the proposed business combination and the voting procedures for the special meeting.

 

Q.

Why am I receiving this proxy statement?

 

A.

Flame, Holdco and Sable have agreed to the Business Combination under the terms of the Merger Agreement that is described in this proxy statement. A copy of the Merger Agreement is attached to this proxy statement as Annex A, and Flame encourages its stockholders to read it in its entirety. Flame’s stockholders are being asked to consider and vote upon a proposal to adopt the Merger Agreement and approve the transactions contemplated thereby, which, among other things, includes provisions for each of Holdco and Sable to be merged with and into Flame with Flame being the surviving company in the Merger. Please see the section entitled “Proposal No. 1—The Business Combination Proposal.”

This proxy statement and its Annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the special meeting. You should read this proxy statement and its Annexes carefully and in their entirety.

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement and its Annexes.

 

Q.

When and where is the special meeting?

 

A.

The special meeting will be held on             , 2024 at              Central Time at the offices of Latham & Watkins LLP located at 811 Main Street, Suite 3700, Houston, TX 77002. In the interest of public health, and due to the impact of coronavirus (COVID-19), the special meeting may also be held through a “virtual” or online method.

 

Q.

What are the proposals on which I am being asked to vote at the special meeting?

 

A.

The stockholders of Flame will be asked to consider and vote on the following proposals at the special meeting:

 

  1.

a proposal to approve, for purposes of complying with the DGCL and the Flame certificate of incorporation, the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement, including the Merger, and related agreements described in this proxy statement. Please see the section entitled “Proposal No. 1—The Business Combination Proposal;”

 

  2.

a proposal to approve and adopt changes to the Flame certificate of incorporation reflected in the New Sable certificate of incorporation in the form attached hereto as Annex B. Please see the section entitled “Proposal No. 2—The Charter Proposal;”

 

  3.

a proposal with respect to certain governance provisions in the New Sable certificate of incorporation, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis. See the section entitled “Proposal No. 3—The Governance Proposal;

 

  4.

a proposal to approve and adopt the Incentive Plan. Please see the section entitled “Proposal No. 4—The Incentive Plan Proposal;”

 

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  5.

a proposal to approve, for purposes of complying with Section 312.03(c) of the NYSE Listed Company Manual, the issuance of more than 20% of the issued and outstanding shares of Flame common stock in connection with the Business Combination and PIPE Investment. Please see the section entitled “Proposal No. 5—The NYSE Proposal;” and

 

  6.

a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal or the NYSE proposal. Please see the section entitled “Proposal No. 6—The Adjournment Proposal.”

Flame will hold the special meeting of its stockholders to consider and vote upon these proposals. This proxy statement contains important information about the proposed business combination and the other matters to be acted upon at the special meeting. Stockholders should read it carefully.

Consummation of the Business Combination is conditioned on the approval of each of the business combination proposal, the Charter Proposal, the incentive plan proposal and the NYSE proposal. If any of those proposals is not approved, or to the extent permitted by applicable law, waived by the applicable parties, we will not consummate the Business Combination. The Governance Proposal and the adjournment proposal are not conditioned on the approval of any other proposal set forth in this proxy statement.

The vote of stockholders is important. Stockholders are encouraged to vote as soon as possible after carefully reviewing this proxy statement.

 

Q:

How will the COVID-19 pandemic impact in-person voting at the special meeting?

 

A:

We intend to hold the special meeting in person. However, we are sensitive to the public health and travel concerns our stockholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (COVID-19) situation. As a result, we may impose additional procedures or limitations on meeting attendees or may decide to hold the meeting in a different location or solely by means of remote communication (i.e., a virtual-only meeting). We plan to announce any such updates on our proxy website http://www.astproxyportal.com/ast/24075, and we encourage you to check this website prior to the meeting if you plan to attend.

 

Q.

Why is Flame proposing the Business Combination?

 

A.

Flame was organized to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses or entities.

On March 1, 2021, Flame completed its initial public offering of units, with each unit consisting of one share of its Flame Class A common stock and one warrant to purchase one-half of one share of Flame Class A common stock at a price of $11.50 per whole share. The units were sold at an offering price of $10.00 per unit, raising total gross proceeds of approximately $287,500,000. Since the Flame IPO, Flame’s activity has been limited to the evaluation of business combination candidates.

On February 27, 2023, Flame’s stockholders approved an amendment to the Flame certificate of incorporation (the “Extension Amendment”) that extended the date by which Flame must consummate its initial business combination from March 1, 2023 to September 1, 2023. In connection with the Extension Amendment, stockholders holding 20,317,255 shares of Flame Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As a result, approximately $85.6 million remained in the trust account after paying such redeeming holders.

On August 29, 2023, Flame’s stockholders approved an amendment to the Flame certificate of incorporation (the “Second Extension Amendment”) that extended the date by which Flame must consummate its initial business combination from September 1, 2023 to March 1, 2024. In connection with the Second Extension

 

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Amendment, stockholders holding 2,328,063 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As a result, approximately $63.0 million remained in the trust account after paying such redeeming holders.

Holdco is a Delaware limited liability company, and Sable is a Texas corporation and direct wholly-owned subsidiary of Holdco. Sable and Holdco are special purpose entities formed for the purpose of evaluating the opportunity to acquire SYU and negotiating the terms thereof. See the sections entitled “Information About SYU,” “SYU Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management of New Sable After the Business Combination.”

The Flame Board considered the results of the due diligence review of Sable’s current and proposed business, including its current prospects for growth in executing upon and achieving its business plan. As a result, Flame believes that a business combination with each of Holdco and Sable will provide Flame’s stockholders with an opportunity to participate in the ownership of a company with significant growth potential. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—The Flame Board’s Reasons for Approval of the Business Combination.”

 

Q.

Why is Flame providing stockholders with the opportunity to vote on the Business Combination?

 

A.

Under the Flame certificate of incorporation, we must provide all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of our initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, we have elected to provide our stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote rather than a tender offer. Therefore, we are seeking to obtain the approval of our stockholders of the business combination proposal in order to allow our public stockholders to effectuate redemptions of their public shares in connection with the Closing.

 

Q.

Why is Flame proposing the NYSE proposal?

 

A.

In connection with the Business Combination and PIPE Investment, we will issue an aggregate of 55,000,000 shares of Flame Class A common stock ((i) 52,000,000 shares of Flame Class A common stock will be issued at Closing in connection with the PIPE Subscription Agreements and (ii) 3,000,000 shares of Flame Class A common stock will be issued to Holdco Equityholders pursuant to the terms of the Merger Agreement), representing up to approximately 414% of the shares of Flame Class A common stock outstanding on the date of this proxy statement. Section 312.03(c) of the NYSE Listed Company Manual requires stockholder approval of certain transactions that result in the issuance of 20% or more of a company’s outstanding voting power or shares of common stock outstanding before the issuance of stock or securities. Because we may issue 20% or more of our outstanding voting power and outstanding common stock in connection with the Business Combination and PIPE Investment, we are required to obtain stockholder approval of such issuances pursuant to the NYSE Listed Company Manual. The Closing is conditioned on the approval of the business combination proposal, the Charter Proposal, the incentive plan proposal and the NYSE proposal at the special meeting.

 

Q.

What will happen in the Business Combination?

 

A.

Pursuant to the Merger Agreement, and upon the terms and subject to the conditions set forth therein, Flame will acquire the assets and liabilities of each of Holdco and Sable in a transaction we refer to as the Business Combination. At the Closing, subject to the terms and conditions set forth in the Merger Agreement, among other things, (i) Holdco will merge with and into Flame, with Flame being the surviving company in the merger, and (ii) immediately thereafter, Sable will merge with and into Flame, with Flame being the surviving company in the merger. In addition, at the Closing, subject to the terms and conditions set forth in the Sable-EM Purchase Agreement, the transactions consummated by the Sable-EM Purchase Agreement will be consummated, such that

 

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  following the Merger, Flame and/or its subsidiaries will own the SYU Assets, including 100% of the equity interests in Pacific Offshore Pipeline Company and Pacific Pipeline Company, which owns the Pipelines. Under the terms of the Sable-EM Purchase Agreement, EM has agreed to sell the SYU Assets to Sable for the Purchase Price, payable in cash and seller-financed indebtedness, subject to certain adjustments, as follows:

 

   

an $18,750,000 down payment in cash at the Closing (i.e., 3% of the Purchase Price);

 

   

a secured term loan in the principal amount of $606,250,000 adjusted upward as follows:

 

  (i)

plus the value of certain unsold inventory as of the Closing; and

 

  (ii)

plus an additional $75.0 million if certain governmental approvals for the Pipelines have been obtained on or prior to the Closing Date and such approvals are not subject, in material part, to further appeal or reconsideration, or have been materially affirmed on appeal or reconsideration, or the time periods for further appeal or reconsideration, as to the material part of the decision, have expired;

 

   

plus or minus certain other upward or downward adjustments as described in the Sable-EM Purchase Agreement, which adjustments are payable in cash payable at the Closing; and

 

   

plus approximately $8.5 million in cash, which represents an amount paid by EM to Plains under the EM-Plains Purchase Agreement and in respect of which Sable is obligated to reimburse EM.

 

Q.

Following the Business Combination, will Flame’s securities continue to trade on a stock exchange?

 

A.

Yes. We intend to apply to continue the listing of Flame Class A common stock and public warrants on NYSE. In connection with the Business Combination, Flame will change its name to Sable Offshore Corp. and its common stock and warrants will begin trading on the NYSE under the symbols “SOC” and “SOC.WS”, respectively. As a result, our publicly traded units will separate into the component securities upon consummation of the Business Combination and will no longer trade as a separate security.

 

Q.

How will the holders of Flame’s units be impacted by the Business Combination?

 

A.

As part of the Flame IPO and the underwriters’ full exercise of their over-allotment option, Flame issued 28,750,000 units, each consisting of one share of Flame Class A common stock and one warrant to purchase one-half of one share of Flame Class A common stock, which currently trade on the NYSE under the symbol “FLME.U.” As of the consummation of the Business Combination, Flame’s outstanding units will be mandatorily separated into their component parts—one share of Flame Class A common stock and one warrant to purchase one-half of one share of Flame Class A common stock—and the units will cease trading. As a result, following the Business Combination each unitholder’s account, in lieu of units, will reflect ownership of the number of shares of common stock and warrants underlying such holder’s units. If any unitholder would, upon such separation, be entitled to receive a fractional interest in a warrant, the number of warrants the holder will be entitled to receive will be rounded down to the nearest whole number of warrants.

 

Q.

How will the Business Combination impact the shares of Flame common stock outstanding after the Business Combination?

 

A.

As a result of the Business Combination and the consummation of the transactions contemplated by the Merger Agreement and the related agreements, including, without limitation, the PIPE Investment, the amount of common stock outstanding will increase to 68,292,182 shares of New Sable common stock (assuming that no additional shares of Flame Class A common stock are elected to be redeemed by Flame stockholders and we issue 52,000,000 shares of New Sable common stock to PIPE Investors at Closing). Additional shares of New Sable common stock may be issuable in the future as a result of the issuance of additional shares that are not currently outstanding, including issuance of shares of New Sable common stock upon exercise of the warrants from time to time after the Business Combination. The issuance and sale

 

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  of such shares in the public market could adversely impact the market price of New Sable common stock, even if its business is doing well. Pursuant to the Incentive Plan, a copy of which is attached to this proxy statement as Annex D, following the Closing and subject to the approval of the applicable award agreements by the board of directors of the post-combination entity, Flame may grant stock-based compensation awards covering a number of shares of New Sable common stock equal to 18.25% of the number of shares of New Sable common stock outstanding following the Business Combination and the PIPE Investment, calculated on a fully diluted basis. This includes awards with respect to up to 3,575,000 shares of New Sable common stock in the aggregate that are expected to be granted to New Sable’s executive officers and other key employees as soon as practicable after the consummation of the Business Combination. The number of shares of New Sable common stock authorized for issuance under the Incentive Plan will also be subject to increase each year for ten years. For additional information, please see the sections entitled “Proposal No. 4—The Incentive Plan Proposal” and “Executive Compensation of New Sable.”

 

Q.

Will the management of Flame change in the Business Combination?

 

A.

Upon completion of the Business Combination, James C. Flores will continue to serve as the Chief Executive Officer of New Sable and the New Sable Board will be composed of four members. New Sable expects that three of its directors will meet the independence requirements under the NYSE Listed Company Manual. Please see the section entitled “Management of New Sable After the Business Combination” for additional information.

 

Q.

Will EM or Plains receive any cash consideration?

 

A.

Under the terms of the Sable-EM Purchase Agreement, EM has agreed to sell the SYU Assets (including 100% of the equity interests in each of Pacific Offshore Pipeline Company and Pacific Pipeline Company) to Sable for the Purchase Price, payable in cash and indebtedness, subject to certain adjustments. Upon the consummation of the Merger, the rights and obligations of Sable under the Sable-EM Purchase Agreement will be vested in New Sable, and at the Closing we will be required to pay $18,750,000 in cash to EM (i.e., three percent (3%) of the Purchase Price). That cash payment is considered a down payment and the balance of the Purchase Price is being seller-financed by EM. We will also pay additional cash amounts to EM at the Closing based on the adjustments specified in the Sable-EM Purchase Agreement. We will enter into the Term Loan Agreement and incur indebtedness in an initial principal amount of approximately $606,250,000, subject to certain adjustments. At the Closing, the indebtedness will be deemed to have been funded.

 

Q.

What will be the approximate pro forma ownership of New Sable after the Closing?

 

A.

On February 27, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Extension Amendment to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from March 1, 2023 to September 1, 2023. In connection with the Extension, stockholders holding 20,317,255 shares of Flame Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 70.67% of the issued and outstanding Flame Class A common stock. After this redemption, 8,432,745 shares of Flame Class A common stock remained outstanding. On August 29, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Second Extension Amendment Proposal to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from September 1, 2023 to March 1, 2024. In connection with the Second Extension, stockholders holding 2,328,063 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 27.61% of Flame’s issued and outstanding public shares. After the redemption in connection with the Second Extension, 6,104,682 public shares remained outstanding. The following table illustrates varying ownership levels in New Sable immediately following the Closing, assuming (i) no additional public shares are redeemed, (ii) 50% of the remaining public shares outstanding

 

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  are redeemed and (iii) 6,104,682 public shares (or 100% of the remaining public shares outstanding) are redeemed, resulting in an aggregate payment of approximately $63,124,000 from the trust account, which even with maximum redemptions Flame believes it would be able to satisfy the $150 million Sable-EM Minimum Cash Threshold and have sufficient capital for operations, each on a “shares outstanding” and “fully diluted” basis. The numbers of shares and percentage interests set forth below are based on a number of assumptions. If the actual facts differ from our assumptions, the number of shares and percentage interests set forth below will be different. For more information, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

 

    No Additional Redemption Scenario(1)     50% Redemption Scenario(2)     Max Redemption Scenario(3)  
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
 

Current Flame public stockholders

    6,104,682       8.94     20,479,682       21.05     3,052,341       4.68     17,427,341       18.49     —         —         14,375,000       15.76

Insiders

    7,187,500       10.52     18,243,870       18.75     7,187,500       11.02     18,243,870       19.36     7,187,500       11.56     18,243,870       20.01

Merger Consideration

    3,000,000       4.39     3,000,000       3.08     3,000,000       4.60     3,000,000       3.18     3,000,000       4.82     3,000,000       3.29

PIPE Stockholders(5)

    52,000,000       76.14     52,000,000       53.44     52,000,000       79.71     52,000,000       55.17     52,000,000       83.62     52,000,000       57.02

Incentive Plan(6)

    —         —         3,575,000       3.67     —         —         3,575,000       3.79     —         —         3,575,000       3.29
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    68,292,182       100.00     97,298,552       100.00     65,239,841       100.00     94,246,211       100.00     62,187,500       100.00     91,193,870       100.00
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note: Figures may not sum due to rounding.

 

(1)

This presentation assumes that no additional public stockholders exercise their right to have their public shares converted into their pro rata share of the trust account.

(2)

This presentation assumes that (i) public stockholders exercise their rights to have 50% of all remaining outstanding public shares converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(3)

This presentation assumes that (i) public stockholders exercise their rights to have 6,104,682 public shares (or 100% of the remaining public shares outstanding) converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(4)

(a) This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.

(b) This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

(5)

Assumes 52,000,000 shares of New Sable common stock are issued to PIPE Investors at Closing in connection with the PIPE Investment.

(6)

Reflects shares expected to be reserved for issuance under the Incentive Plan (assuming the incentive plan proposal is approved).

The following table further illustrates the impact on relative fully diluted ownership levels of New Sable for each source of dilution, namely the issuance of common stock under (i) the 14,375,000 public warrants, (ii) the 7,750,000 private placement warrants, (iii) the 3,306,370 private placement warrants issuable in connection with the Working Capital Loans, and (iv) the Incentive Plan.

 

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    No Additional Redemption
Scenario(1)
    50% Redemption
Scenario(2)
    Max Redemption
Scenario(3)
 
    Number of
Shares
    Fully
Diluted
Ownership(4)
    Number of
Shares
    Fully
Diluted
Ownership(4)
    Number of
Shares
    Fully
Diluted
Ownership(4)
 

Current Stockholders

           

Current Flame public stockholders

    6,104,682       6.27     3,052,341       3.24     —         0.00

Insiders

    7,187,500       7.39     7,187,500       7.63     7,187,500       7.88

PIPE Shares(5)

    52,000,000       53.44     52,000,000       55.17     52,000,000       57.02

Merger Consideration

    3,000,000       3.08     3,000,000       3.18     3,000,000       3.29

Total Current Stockholders

    68,292,182       70.19     65,239,841       69.22     62,187,500       68.19

Shares Issuable Upon Exercise of Warrants

           

Flame Public Warrants

    14,375,000       14.77     14,375,000       15.25     14,375,000       15.76

Flame Private Warrants

    7,750,000       7.97     7,750,000       8.22     7,750,000       8.50

Working Capital Warrants

    3,306,370       3.40     3,306,370       3.51     3,306,370       3.63

Total Shares Issuable Upon Exercise of Warrants

    25,431,370       26.14     25,431,370       26.98     25,431,370       27.89

Incentive Plan(6)

    3,575,000       3.67     3,575,000       3.79     3,575,000       3.92

Pro Forma Flame Common Stock

    97,298,552       100.00     94,246,211       100.00     91,193,870       100.00

Note: Figures may not sum due to rounding.

(1)

This presentation assumes that no additional public stockholders exercise their right to have their public shares converted into their pro rata share of the trust account.

(2)

This presentation assumes that (i) public stockholders exercise their rights to have 50% of all remaining outstanding public shares converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(3)

This presentation assumes that (i) public stockholders exercise their rights to have 6,104,682 public shares (or 100% of the remaining public shares outstanding) converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(4)

(a) This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.

(b) This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

(5)

Assumes 52,000,000 shares of New Sable common stock are issued to PIPE Investors at Closing in connection with the PIPE Investment.

(6)

Reflects 3,575,000 shares of New Sable common stock that are expected to be granted as equity incentive awards to officers and employees of New Sable under the Incentive Plan after the consummation of the Business Combination and for more information about the Incentive Plan, including the expected number of shares that will be reserved for future compensatory grants, please see the section entitled “Proposal No. 4—Incentive Plan Proposal.

 

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In addition to the changes in percentage ownerships depicted above, variations in redemptions and dilutive equity issuances will also affect the per share value as illustrated in the table below.

 

     No Additional
Redemption Scenario(1)
     50% Redemption
Scenario(2)
     Max Redemption
Scenario(3)
 
     Number of
Shares
     Value per
Share(4)
     Number of
Shares
     Value per
Share(4)
     Number of
Shares
     Value per
Share(4)
 

Base Scenario(5)

     68,292,182      $ 8.55        65,239,841      $ 8.48        62,187,500      $ 8.40  

Fully Diluted Scenario(6)

     97,298,552      $ 9.00        94,246,211      $ 8.97        91,193,870      $ 8.94  

 

(1)

This presentation assumes that no additional public stockholders exercise their right to have their public shares converted into their pro rata share of the trust account.

(2)

This presentation assumes that (i) public stockholders exercise their rights to have 50% of all remaining outstanding public shares converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(3)

This presentation assumes that (i) public stockholders exercise their rights to have 6,104,682 public shares (or 100% of the remaining public shares outstanding) converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(4)

Based on the New Sable equity values set forth below.

(5)

Reflects current public shares and founder shares outstanding, plus shares to be issued as Aggregate Merger Consideration and 52,000,000 shares of New Sable common stock issuable to PIPE Investors at Closing in connection with the PIPE Investment upon the consummation of the Business Combination.

(6)

(a) This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.

(b) This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

Post-Combination Company Equity Value (in millions):

 

     No Additional
Redemption
Scenario
     50% Redemption
Scenario
     Max Redemption
Scenario
 

Base Scenario(7)

   $ 583.58      $ 553.06      $ 522.53  

Fully Diluted Scenario(8)

   $ 876.04      $ 845.52      $ 814.99  

 

(7)

Assumes a deemed equity value of $10 per share for the common stock issued as Aggregate Merger Consideration and 52,000,000 shares of New Sable common stock issuable to PIPE Investors at Closing in connection with the PIPE Investment, plus the amount remaining in the trust account after deductions for payments to redeeming stockholders.

(8)

(a) This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.

    

(b) This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

 

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If a public stockholder exercises its redemption rights, such exercise will not result in the loss of any warrants that it may hold. We cannot predict the ultimate value of the public warrants following the consummation of the Business Combination, but assuming 6,104,682 public shares (or 100% of the remaining public shares outstanding) are redeemed, resulting in an aggregate payment of approximately $63,124,000 from the trust account, which even with maximum redemptions Flame believes it would be able to satisfy the $150 million Sable-EM Minimum Cash Threshold, the 14,375,000 retained outstanding Flame public warrants would have an aggregate value of $             based on a price per Flame public warrant of $             on                 , 2024, the most recent practicable date prior to the date of this proxy statement.

 

Q.

Will Flame obtain new financing in connection with the Business Combination?

 

A.

Yes. As of the date of this proxy statement, Holdco has obtained commitments from PIPE Investors for $520,000,000 in PIPE Investment. Pursuant to the Initial PIPE Subscription Agreements, Holdco has obtained commitments from the Initial PIPE Investors to purchase, in the aggregate, 7,150,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $71,500,000. Pursuant to the Additional Holdco Class B PIPE Investment, Holdco has obtained commitments from the Additional Holdco Class B PIPE Investors to purchase, in the aggregate, 34,850,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $348,500,000. The Additional Holdco Class B PIPE Investors include James C. Flores, Flame’s Chairman and Chief Executive Officer, JCF Capital, LLC, which is managed by J. Caldwell Flores, Flame’s President, and Victorious Angel Group LTD., which is managed by Christopher B. Sarofim, a Director of Flame, who subscribed for $7,000,000, $3,000,000 and $30,000,000, respectively, of the Additional Holdco Class B PIPE Investment. The Additional Holdco Class B PIPE Subscription Agreements provide that, in the event the Merger is consummated, the investors party thereto will be deemed to have subscribed for and will purchase Flame Class A common stock at the same price per share, any by operation of law pursuant to the Merger, Flame will have succeeded to Holdco’s obligations thereunder. Pursuant to the Flame Class A PIPE Investment, Holdco and Flame have obtained commitments from the Flame Class A PIPE Investors to purchase 10,000,000 shares of Flame Class A common stock at a price of $10.00 per share, for an aggregate subscription amount of $100,000,000. The Initial PIPE Investment, the Additional Holdco Class B PIPE Investment and the Flame Class A PIPE Investment will be consummated contemporaneously with the Closing and immediately following the Sable Merger Effective Time, on the terms and subject to the conditions set forth in the Initial PIPE Subscription Agreements, the Additional Holdco Class B PIPE Subscription Agreements or the Flame Class A PIPE Subscription Agreements, as applicable, and the Merger Agreement. Holdco and Flame do not intend to pursue additional subscriptions to purchase Holdco Class B or shares of Flame Class A common stock shares prior to the Closing. Additionally, Sable believes that the committed PIPE Investment of $520,000,000 will provide New Sable with sufficient capital to pay for costs related to restarting production of the SYU Assets, including obtaining the necessary regulatory approvals and completing the pipeline repairs and bringing the shut-in assets back online. Additionally, EM has agreed to seller-finance most of the Purchase Price of SYU, as discussed above.

 

Q.

What conditions must be satisfied to complete the Business Combination?

 

A.

There are a number of closing conditions in the Merger Agreement, including the approval by the Flame stockholders of the business combination proposal, the NYSE proposal, the Charter Proposal and the incentive plan proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, please see the section entitled “Proposal No. 1—The Business Combination Proposal—Certain Agreements Related to the Business Combination—Merger Agreement.”

 

Q.

What happens if I sell my shares of Flame common stock before the special meeting?

 

A.

The record date for the special meeting is earlier than the date that the Business Combination is expected to be completed. If you transfer your shares of Flame common stock after the record date, but before the special meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your

 

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  right to vote at the special meeting. However, you will not be able to seek redemption of your shares of Flame common stock because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination. If you transfer your shares of Flame common stock prior to the record date, you will have no right to vote those shares at the special meeting or redeem those shares for a pro rata portion of the proceeds held in our trust account.

 

Q.

What constitutes a quorum at the special meeting?

 

A.

A majority of the voting power of all issued and outstanding shares of Flame common stock entitled to vote as of the record date at the special meeting must be present in person, via the virtual meeting platform, or represented by proxy, at the special meeting to constitute a quorum and in order to conduct business at the special meeting. Abstentions will be counted as present for the purpose of determining a quorum. As of the record date for the special meeting, 6,646,092 shares of Flame common stock, which constitutes a majority of the Flame common stock outstanding, would be required to be present at the special meeting to achieve a quorum.

 

Q.

What vote is required to approve the proposals presented at the special meeting?

 

A.

The approval of each of the incentive plan proposal, the Governance Proposal, the NYSE proposal and the adjournment proposal requires the affirmative vote of a majority of the votes cast by holders of Flame’s outstanding shares of common stock represented at the special meeting by attendance in person, via the virtual meeting website or by proxy and entitled to vote at the special meeting. Accordingly, if a valid quorum is established, a Flame stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the Governance Proposal, the incentive plan proposal, the NYSE proposal and the adjournment proposal will have no effect on such proposals.

The approval of each of the business combination proposal and the Charter Proposal requires the affirmative vote of holders of a majority of Flame’s outstanding shares of common stock entitled to vote thereon at the special meeting. Accordingly, if a valid quorum is established, a Flame stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the business combination proposal or the Charter Proposal will have the same effect as a vote “AGAINST” such proposals.

 

Q.

How many votes do I have at the special meeting?

 

A.

Our stockholders are entitled to one vote on each proposal presented at the special meeting for each share of Flame common stock held of record as of January 3, 2024, the record date for the special meeting. As of the close of business on the record date, there were 13,292,182 outstanding shares of Flame common stock.

 

Q.

Did the Flame Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A.

Yes. The Flame Board engaged Petrie Partners to provide an opinion (i) as to fairness, from a financial point of view, to Flame of the proposed Business Combination pursuant to the Merger Agreement and (ii) as to whether Sable and Holdco have a Fair Market Value (as defined herein) equal to at least 80% of the net assets held in the trust account (net of amounts disbursed to Flame’s management for working capital purposes and excluding the deferred underwriting commissions held in the trust account). On November 2, 2022, at a meeting of the Flame Independent Directors, Petrie Partners rendered its oral opinion, subsequently confirmed by delivery of a written opinion, that, as of November 2, 2022 and based upon and subject to the factors, procedures, assumptions, qualifications and limitations set forth in its opinion, (i) the Business Combination pursuant to the Merger Agreement was fair, from a financial point of view, to Flame and (ii) Sable and Holdco have a Fair Market Value equal to at least 80% of the net assets held in the trust account (net of amounts disbursed to Flame’s management for working capital purposes and excluding the deferred underwriting commissions held in the trust account). For additional information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Opinion of the Flame Board of Directors’ Financial Advisor.”

 

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Q.

Do I have redemption rights?

 

A.

If you are a holder of public shares, you may redeem your public shares for cash equal to a pro rata share of the aggregate amount on deposit in the trust account as of two business days prior to the consummation of the Business Combination (including any portion of the interest earned thereon which was not previously used or distributed to us to pay taxes), upon the consummation of the Business Combination. We sometimes refer to these rights to demand redemption of the public shares as “redemption rights.”

Notwithstanding the foregoing, a holder of public shares, together with any of its affiliates or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking redemption with respect to more than 15% of the public shares. Accordingly, all public shares in excess of 15% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed.

Pursuant to the Letter Agreement, the Insiders agreed to waive their redemption rights with respect to founder shares and any public securities they may acquire during or after the Flame IPO in connection with the consummation of a Business Combination. No additional consideration was provided in exchange for the Letter Agreement. All such shares held by the Insiders will be excluded from the pro rata calculation used to determine the per share redemption price. For illustrative purposes, based on funds in the Flame trust account of approximately $63.6 million as of the record date, stockholders would have received a redemption price of approximately $10.41 per share of Flame common stock. Additionally, shares properly tendered for redemption will only be redeemed if the Business Combination is consummated; otherwise, holders of such shares will only be entitled to a pro rata portion of the Flame trust account (including any portion of the interest earned thereon which was not previously used or distributed to us to pay taxes) upon our liquidation.

Our public stockholders will retain their public warrants even if they redeem their public shares. If any of our public stockholders redeem their public shares at closing in accordance with the Flame certificate of incorporation but continue to hold public warrants after the Closing, the aggregate value of the public warrants that may be retained by them, based on the closing trading price per public warrant of $1.96 as of January 3, 2024, would be $28.2 million, regardless of the number of shares redeemed by public stockholders. Following the Business Combination, New Sable may redeem outstanding New Sable warrants prior to their expiration at a time that is disadvantageous to the holder thereof, or the New Sable warrants may never be in the money and may expire worthless. Please see “Risk Factors—Even if Flame consummates the Business Combination, there is no guarantee that the public warrants will ever be “in the money,” and they may expire worthless and the terms of our warrants may be amended” and “Risk Factors—We may redeem your unexpired public warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless” for more information.

Under the Flame certificate of incorporation and the Merger Agreement, the Business Combination may be consummated only if Flame has at least $5,000,001 of net tangible assets after giving effect to all holders of public shares that properly demand redemption of their shares for cash and after receipt of the proceeds under the PIPE Subscription Agreements. However, pursuant to the Sable-EM Purchase Agreement, we are required to satisfy the Sable-EM Minimum Cash Threshold after giving effect to the Business Combination (including the PIPE Investment). Based on the amount of $63.6 million in the trust account as of January 3, 2024, and taking into account the anticipated proceeds of $520,000,000 from the PIPE Investment, even if 6,104,682 shares of Flame Class A common stock (or 100% of the Flame Class A common stock outstanding) are redeemed, the Sable-EM Minimum Cash Threshold will still be satisfied.

 

Q.

How do I exercise my redemption rights?

 

A.

If you are a holder of public shares and wish to exercise your redemption rights, you must demand that Flame redeem your shares in cash no later than the second business day preceding the vote on the business

 

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  combination proposal by delivering your stock to Flame’s transfer agent physically or electronically using the Depository Trust Company’s DWAC (Deposit and Withdrawal at Custodian) system prior to the vote at the special meeting. Any holder of public shares will be entitled to demand that such holder’s shares be redeemed for a full pro rata portion of the amount then in the trust account (which, for illustrative purposes, was approximately $63.6 million, or $10.41 per share, as of January 3, 2024, the record date for meeting). Such amount, less any owed but unpaid taxes on the funds in the trust account, will be paid promptly upon consummation of the Business Combination. However, under Delaware law, the proceeds held in the trust account could be subject to claims which could take priority over those of Flame’s public stockholders exercising redemption rights, regardless of whether such holders vote for or against the business combination proposal. Therefore, the per-share distribution from the trust account in such a situation may be less than originally anticipated due to such claims. Your vote on any proposal other than the business combination proposal will have no impact on the amount you will receive upon exercise of your redemption rights.

Any request for redemption, once made by a holder of public shares, may be withdrawn at any time up to the time the vote is taken with respect to the business combination proposal at the special meeting. If you deliver your shares for redemption to Flame’s transfer agent and later decide prior to the special meeting not to elect redemption, you may request that Flame’s transfer agent return the shares (physically or electronically). You may make such request by contacting Flame’s transfer agent at the address listed at the end of this section.

Any corrected or changed proxy card or written demand of redemption rights must be received by Flame’s transfer agent prior to the vote taken on the business combination proposal at the special meeting. No demand for redemption will be honored unless the holder’s stock has been delivered (either physically or electronically) to the transfer agent prior to the vote at the special meeting.

If a holder of public shares properly demands their shares be redeemed as described above, then, if the Business Combination is consummated, Flame will redeem these shares for a pro rata portion of funds deposited in the trust account. If you exercise your redemption rights, then you will be exchanging your shares of Flame common stock for cash.

 

Q:

How do the public warrants differ from the private placement warrants and what are the related risks for any public warrant holders post-Business Combination?

 

A.

The public warrants have terms and provisions that are identical to those of the private placement warrants, including as to the exercise price, exercisability and exercise period, except that, so long as they are held by the initial stockholders or their respective permitted transferees, (i) they will not be redeemable by Flame for cash, (ii) pursuant to the Letter Agreement, subject to certain exceptions, the initial stockholders have agreed not to transfer, assign or sell any private placement warrant (including the Flame Class A common stock issuable upon exercise of the private placement warrants) until 30 days after the completion of the initial business combination and (iii) the private placement warrants may be exercised by the holders on a cashless basis (as described under “Description of Securities—Warrants—Public Stockholders’ Warrants—Redemption of warrants for shares of Class A common stock”). Additionally, the warrants that are issuable in connection with the Working Capital Loans are identical to those of the private placement warrants.

In addition, following the consummation of the Business Combination, New Sable has the ability to redeem the outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sale price of the New Sable common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which New Sable sends the notice of redemption to the warrant holders equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) and provided certain other conditions are met. If and when the warrants become redeemable by New Sable, New Sable may exercise its redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could

 

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force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. In addition, New Sable may redeem your warrants after they become exercisable for a number of shares of New Sable common stock determined based on the redemption date and the fair market value of the New Sable common stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of the New Sable common stock had your warrants remained outstanding.

In each case, New Sable may only call the New Sable warrants for redemption upon a minimum of 30 days’ prior written notice of redemption to each holder, provided that holders will be able to exercise their New Sable warrants prior to the time of redemption and, at New Sable’s election, any such exercise may be required to be on a cashless basis.

 

Q:

What are the material differences, if any, in the terms and price of securities issued at the time of the Flame IPO as compared to those of the securities that will be issued as part of the PIPE Investment at closing? Will the Insiders or their affiliates participate in the PIPE Investment?

 

A.

Flame issued the units in the Flame IPO at an offering price of $10.00 per unit, with each unit consisting of one share of Flame Class A common stock and one-half of one redeemable warrant. In connection with the consummation of the Business Combination, the PIPE Investors will purchase Holdco Class B shares or shares of Flame Class A common stock, as applicable, at $10.00 per share as part of the PIPE Investment. The Initial PIPE Subscription Agreements and the Additional Holdco Class B PIPE Subscription Agreements provide that, in the event the Merger is consummated, the investors party thereto will be deemed to have subscribed for and will purchase Flame Class A common stock at the same price per share, and by operation of law pursuant to the Merger, Flame will have succeeded to Holdco’s obligations thereunder. Thus, the Initial PIPE Investors and the Additional Holdco Class B PIPE Investors will hold the same security as the Flame Class A PIPE Investors and the holders of Flame Class A common stock immediately after the Business Combination. Certain affiliates of the Insiders are participating in the PIPE Investment and have agreed to invest up to an aggregate of approximately $90 million on the same terms as other PIPE Investors in the PIPE Investment.

 

Q.

What are the U.S. federal income tax consequences of exercising my redemption rights?

 

A.

The U.S. federal income tax consequences of exercising redemption rights that may be relevant to holders of shares of Flame Class A common stock are discussed in more detail in the section entitled “—Certain Material U.S. Federal Income Tax Consequences of the Exercise of Redemption Rights to Flame Stockholders.” The discussion of the U.S. federal income tax consequences contained in this proxy statement is intended to provide only a general discussion and is not a complete analysis or description of all of the U.S. federal income tax considerations that are applicable to holders of shares of Flame Class A common stock in respect of the exercise of their redemption rights, nor does it address any tax considerations arising under state or local or non-U.S. tax laws. All holders considering exercising their redemption rights are urged to consult their tax advisor on the tax consequences to them of such an exercise of redemption rights, including the applicability and effect of U.S. federal, state, local and non-U.S. tax laws.

 

Q.

Do I have appraisal rights if I object to the proposed business combination?

 

A.

Neither Flame stockholders nor its unit or warrant holders, solely in their capacity as unit or warrant holders, have appraisal rights in connection with the Business Combination under the DGCL.

 

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Q.

What happens to the funds deposited in the trust account after consummation of the Business Combination?

 

A.

The net proceeds of the Flame IPO and its related transactions (including the full exercise of the underwriters’ overallotment option and the sale of private placement warrants to the Sponsor), a total of $287,500,000, were placed in the trust account immediately following the Flame IPO and such related transactions. A portion of the funds in the trust account may be used to pay holders of the public shares who exercise redemption rights prior to the consummation of the Business Combination.

Prior to February 2023, the funds in the trust account were comprised entirely of U.S. government treasury obligations with a maturity of 185 days or less or of money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. These funds will remain in the trust account, except for the withdrawal of interest to pay taxes, if any, until the earlier of (1) the completion of a business combination (including the Closing) and (2) the redemption of all of the public shares if Flame is unable to complete a business combination by March 1, 2024, subject to applicable law.

With respect to the regulation of special purpose acquisition companies (“SPACs”) like Flame, on March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”) relating to, among other items, disclosures in business combination transactions involving SPACs and private operating companies; the condensed financial statement requirements applicable to transactions involving shell companies; the use of projections by SPACs in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities.

With regard to the SEC’s investment company proposals included in the SPAC Rule Proposals, while the funds in the trust account have, since the Flame IPO, been held only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries, to mitigate the risk of being viewed as operating an unregistered investment company (including pursuant to the subjective test of Section 3(a)(1)(A) of the Investment Company Act), on February 21, 2023, Flame instructed the trustee managing the trust account to hold all funds in the trust account in cash (which may include an interest bearing demand deposition account at a national bank) until the earlier of the consummation of the Business Combination or the liquidation of Flame.

In connection with the stockholder approval of the Extension Amendment in February 2023, certain stockholders elected to redeem an aggregate of 20,317,255 public shares, or approximately 70.67% of the then-outstanding public shares. Such redemption demands have been completed and such shares have been redeemed and, in relation thereto, we paid cash from the trust account in the aggregate amount of approximately $206,121,060, or approximately $10.15 per share, to redeeming stockholders. As a result, approximately $85.6 million remained in the trust account after paying such redeeming holders. In connection with the stockholder approval of the Second Extension Amendment in August 2023, certain stockholders elected to redeem an aggregate of 2,328,063 public shares, or approximately 27.61% of the then-outstanding public shares. Such redemption demands have been completed and such shares have been redeemed and, in relation thereto, we paid cash from the trust account in the aggregate amount of approximately $24,008,096, or approximately $10.31 per share, to redeeming stockholders. As of the date of this proxy statement, there is approximately $63.7 million remaining in the trust account.

After the consummation of the Business Combination, the funds in the trust account will be released to us and used to pay fees and expenses incurred in connection with the Business Combination (including aggregate fees of approximately $10,062,500 (the “Marketing Fee”) to Cowen and Intrepid as a fee payable pursuant to that certain business combination marketing agreement related to the Flame IPO (the “Business Combination Marketing Agreement”)) and for working capital purposes of New Sable. We will pay each of Cowen and Intrepid 50% of the Marketing Fee, which is equal to 3.5% of the gross proceeds of the Flame

 

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IPO including proceeds from the full exercise of the underwriters’ overallotment option. The Marketing Fee will be payable solely upon the consummation of the Business Combination.

 

Q.

What happens if a substantial number of public stockholders vote in favor of the business combination proposal and exercise their redemption rights?

 

A.

Flame’s public stockholders may vote in favor of the business combination proposal and still exercise their redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the trust account and the number of public stockholders are substantially reduced as a result of redemptions by public stockholders.

If a public stockholder exercises its redemption rights, such exercise will not result in the loss of any warrants that it may hold. Assuming that 6,104,682 public shares held by public stockholders (or 100% of the public shares outstanding) were redeemed, each of the retained outstanding public warrants (which will be New Sable warrants following the Closing) would each have a value of approximately $1.96 per warrant based on the closing price of the public warrants on the NYSE on January 3, 2024. If a substantial number of, but not all, public stockholders exercise their redemption rights, but choose to exercise their retained warrants, any non-redeeming stockholders would experience dilution to the extent such warrants are exercised and additional shares of New Sable common stock are issued.

The Sable-EM Purchase Agreement provides Flame is required to satisfy the Sable-EM Minimum Cash Threshold after giving effect to the Business Combination (including the PIPE Investment). Based on the amount of $63.6 million in the trust account as of January 3, 2024, and taking into account the anticipated proceeds of $520,000,000 from the PIPE Investment, even if 6,104,682 shares of Flame Class A common stock (or 100% of the public shares outstanding) are redeemed, the Sable-EM Minimum Cash Threshold will still be satisfied. In the event that the public stockholders exercise their redemption rights with respect to a number of our shares such that the Sable-EM Minimum Cash Threshold is not met, and the cash proceeds from the PIPE Investment are insufficient to make up the shortfall caused by such redemptions, we may need to seek to arrange for additional third-party financing to be able to satisfy the Sable-EM Minimum Cash Threshold (or such lower amount designated by EM if EM waives the condition), or for New Sable to operate its business and execute its plans post-Closing of the Business Combination. In addition, under the Flame certificate of incorporation and the Merger Agreement, the Business Combination may be consummated only if Flame has at least $5,000,001 of net tangible assets after giving effect to all redemptions by holders of public shares that properly demand redemption of their shares for cash and after receipt of the proceeds under the PIPE Subscription Agreements.

Additionally, as a result of redemptions, the trading market for shares of New Sable common stock may be less liquid than the market for the Flame common stock was prior to consummation of the Business Combination and we may not be able to meet the listing standards for NYSE or another national securities exchange.

On February 27, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Extension Amendment to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from March 1, 2023 to September 1, 2023. In connection with the Extension, stockholders holding 20,317,255 shares of Flame Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 70.67% of the issued and outstanding Flame Class A common stock. After this redemption, 8,432,745 shares of Flame Class A common stock remained outstanding. On August 29, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Second Extension Amendment Proposal to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from September 1, 2023 to March 1, 2024. In connection with the Second Extension, stockholders holding 2,328,063 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 27.61% of Flame’s issued and outstanding public shares. After the redemption in connection with the Second Extension, 6,104,682 public shares remained outstanding. The following table illustrates the impact on relative fully diluted ownership levels of New Sable for each source

 

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of dilution, namely the issuance of common stock under (i) the 14,375,000 public warrants, (ii) the 7,750,000 private placement warrants, (iii) the 3,306,370 private placement warrants issuable in connection with the Working Capital Loans, and (iv) the Incentive Plan.

 

    No Additional Redemption Scenario(1)     50% Redemption Scenario(2)     Max Redemption Scenario(3)  
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
 

Current Flame public stockholders

    6,104,682       8.94     20,479,682       21.05     3,052,341       4.68     17,427,341       18.49     —         —         14,375,000       15.76

Insiders

    7,187,500       10.52     18,243,870       18.75     7,187,500       11.02     18,243,870       19.36     7,187,500       11.56     18,243,870       20.01

Merger Consideration

    3,000,000       4.39     3,000,000       3.08     3,000,000       4.60     3,000,000       3.18     3,000,000       4.82     3,000,000       3.29

PIPE Stockholders(5)

    52,000,000       76.14     52,000,000       53.44     52,000,000       79.71     52,000,000       55.17     52,000,000       83.62     52,000,000       57.02

Incentive Plan(6)

    —         —         3,575,000       3.67     —         —         3,575,000       3.79     —         —         3,575,000       3.29
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    68,292,182       100.00     97,298,552       100.00     65,239,841       100.00     94,246,211       100.00     62,187,500       100.00     91,193,870       100.00
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note: Figures may not sum due to rounding.

(1)

This presentation assumes that no additional public stockholders exercise their right to have their public shares converted into their pro rata share of the trust account.

(2)

This presentation assumes that (i) public stockholders exercise their rights to have 50% of all remaining outstanding public shares converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(3)

This presentation assumes that (i) public stockholders exercise their rights to have 6,104,682 public shares (or 100% of the remaining public shares outstanding) converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(4)

(a) This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.

(b) This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

(5)

Assumes 52,000,000 shares of New Sable common stock are issued to PIPE Investors at Closing in connection with the PIPE Investment.

(6)

Reflects shares expected to be reserved for issuance under the Incentive Plan (assuming the incentive plan proposal is approved).

 

Q.

What happens if the Business Combination is not consummated?

 

A.

If Flame does not complete the Business Combination with Holdco and Sable for whatever reason, Flame would search for another target business with which to complete an initial business combination. Under the terms of the Flame certificate of incorporation, Flame must complete an initial business combination by March 1, 2024. If Flame does not complete a business combination with Holdco and Sable or another target business by March 1, 2024, then Flame must redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to (a) the aggregate amount then on deposit in the trust account, including interest earned and not previously released to us for Flame’s expenses related to administration of the trust account as well as to pay Flame’s taxes, divided by (b) the number of then-outstanding public shares, subject to applicable law and certain conditions. Pursuant to the Letter Agreement, the Insiders agreed to waive their redemption rights with respect to founder shares and any public securities they may acquire during or after the Flame IPO in connection with the consummation of a Business Combination. No additional consideration was provided in exchange for the Letter Agreement. As such, the Insiders have no redemption rights with respect to their founder shares in the event an initial business combination is not effected in the completion window and,

 

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  accordingly, their founder shares will be worthless (public shares acquired by Insiders will have redemption rights in event of a liquidation). Additionally, in the event of such liquidation, there will be no distribution with respect to Flame’s outstanding warrants. Accordingly, the warrants will be worthless.

 

Q.

Will Flame seek to amend the Flame certificate of incorporation to extend the business combination deadline if the proposed Business Combination or an alternative business combination is not completed by the completion window ending on March 1, 2024?

 

A.

On August 9, 2023, Flame filed with the SEC a definitive proxy statement on Schedule 14A in connection with a special meeting of stockholders to be held on August 29, 2023 for the purpose of soliciting stockholder approval of a proposal (the “Second Extension Amendment Proposal”) to approve the Second Extension Amendment, which extended the date by which Flame must consummate a business combination from September 1, 2023 to March 1, 2024 (the “Second Extended Date”). On August 29, 2023, Flame’s stockholders approved the Second Extension Amendment. In connection with the Second Extension Amendment, stockholders holding 2,328,063 public shares, or approximately 27.61% of the then-outstanding public shares, exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. Such redemption demands have been completed and such shares have been redeemed and, in relation thereto, we paid cash from the trust account in the aggregate amount of approximately $24,008,096, or approximately $10.31 per share, to redeeming stockholders. As a result, approximately $63.0 million remained in the trust account after paying such redeeming holders.

While Flame is using its best efforts to complete the Business Combination on or before the Second Extended Date, the Flame Board cannot guarantee that an additional extension will not be necessary. However, at this time, the Flame Board does not believe that an additional extension beyond the Second Extended Date will be necessary to complete the Business Combination.

 

Q.

How do the Insiders intend to vote on the proposals?

 

A.

As of the date of this proxy statement, and due to the redemption of 20,317,255 public shares in connection with the stockholder vote in February 2023 and the redemption of 2,328,063 public shares in connection with the stockholder vote in August 2023 to approve the extension of the date by which Flame must complete an initial business combination, the Insiders (including Flame’s directors, officers and initial stockholders and their permitted transferees) own approximately 54% of the issued and outstanding shares of Flame common stock. The Insiders have agreed to vote any founder shares and any public shares held by them as of the record date in favor of the Business Combination. The Sponsor and Insiders may have interests in the Business Combination that may conflict with your interests as a stockholder. See the sections entitled “Summary of the Proxy Statement—Interests of Certain Persons in the Business Combination” and “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination” for additional information.

 

Q:

May the Sponsor and other Insiders purchase Flame Class A common stock or public warrants prior to the special meeting?

 

A:

Neither the Sponsor, the other Insiders nor any of their respective affiliates currently have an intention to purchase Flame Class A common stock or public warrants prior to the special meeting. However, subject to Rule 14e-5 under the Exchange Act, at any time prior to the special meeting, during a period when they are not then aware of any material nonpublic information regarding Flame or its securities, the Insiders and/or their respective affiliates may purchase shares and/or warrants from investors, or they may enter into transactions with such investors and others to provide them with incentives to acquire shares of Flame Class A common stock. In such transactions, the purchase price for the Flame Class A common stock will not exceed the redemption price. In addition, the persons described above will waive redemption rights, if any, with respect to the Flame Class A common stock they acquire in such transactions. However, any Flame Class A common stock acquired by the persons described above would not be voted in connection with the business combination proposal.

 

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The purpose of such share purchases and other transactions would be to increase the likelihood that the conditions to the consummation of the Business Combination are satisfied or to provide additional equity financing. This may result in the completion of our Business Combination that may not otherwise have been possible. While the exact nature of any such incentives has not been determined as of the date of this proxy statement, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options.

Entering into any such incentive arrangements may have a depressive effect on the Flame Class A common stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than the prevailing market price and may therefore be more likely to sell the shares he owns, either prior to or immediately after the special meeting.

As of the date of this proxy statement, there have been no such discussions and no agreements to such effect have been entered into with any such investor or holder. Flame will file a Current Report on Form 8-K prior to the special meeting to disclose any arrangements entered into or significant purchases made by any of the aforementioned persons. Any such report will include (i) the amount of Flame Class A common stock purchased and the purchase price; (ii) the purpose of such purchases; (iii) the impact of such purchases on the likelihood that the Business Combination transaction will be approved; (iv) the identities or characteristics of security holders who sold shares if not purchased in the open market, or the nature of the sellers; and (v) the number of shares Flame Class A common stock for which Flame has received redemption requests.

 

Q.

When do you expect the Business Combination to be completed?

 

A.

It is currently anticipated that the Business Combination will be consummated promptly following the special meeting which is set for             , 2024, subject to the satisfaction of the applicable closing conditions; however, such meeting could be postponed or adjourned, as described above. For a description of the conditions to the completion of the Business Combination, please see the section entitled “Proposal No. 1—The Business Combination Proposal—The Merger Agreement—Conditions to the Closing of the Business Combination.”

 

Q.

What do I need to do now?

 

A.

Flame urges you to read carefully and consider the information contained in this proxy statement, including the Annexes, and to consider how the Business Combination will affect you as a stockholder, unit holder and/or warrant holder of Flame. Stockholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement and on the enclosed proxy card, or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or other nominee.

 

Q.

How do I vote?

 

A.

The special meeting will be held at              Central Time, on             , 2024, at the offices of Latham & Watkins LLP located at 811 Main Street, Suite 3700, Houston, TX 77002. If you are a holder of record of Flame common stock on January 3, 2024, the record date for the meeting, you may vote at the special meeting in person or by submitting a proxy for the special meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed, postage paid envelope. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or nominee, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or, if you wish to attend the meeting and vote, obtain a proxy from your broker, bank or nominee.

 

Q:

If I am not going to attend the special meeting virtually, should I submit my proxy card instead?

 

A:

Yes. Whether you plan to attend the special meeting or not, please read the enclosed proxy statement carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

 

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Q.

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A.

No. Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-routine matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. We believe the proposals presented to the stockholders at the special meeting will be considered non-routine and, therefore, your broker, bank or nominee cannot vote your shares without your instruction on any of the proposals presented at the special meeting. If you do not provide instructions with your proxy, your broker, bank or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the special meeting. Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

 

Q.

How will a broker non-vote impact the results of each proposal?

 

A.

Broker non-votes will count as a vote “AGAINST” the business combination proposal and the Charter Proposal but will not have any effect on the outcome of any other proposals.

 

Q.

May I change my vote after I have mailed my signed proxy card?

 

A.

Yes. Stockholders of record may send a later-dated, signed proxy card to Flame’s transfer agent at the address set forth at the end of this section so that it is received prior to the vote at the special meeting or attend the special meeting and vote. Stockholders also may revoke their proxy by sending a notice of revocation to Flame’s transfer agent, which must be received prior to the vote at the special meeting.

 

Q.

What happens if I fail to take any action with respect to the special meeting?

 

A.

If you fail to take any action with respect to the special meeting and the Business Combination is approved by stockholders, the Business Combination will be consummated in accordance with the terms of the Merger Agreement. If you fail to take any action with respect to the special meeting and the Business Combination is not approved, we will not consummate the Business Combination.

 

Q.

What will happen if I sign and return my proxy card without indicating how I wish to vote?

 

A.

Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders. The proxyholders may use their discretion to vote on any other matters which properly come before the special meeting.

 

Q.

What should I do if I receive more than one set of voting materials?

 

A.

Stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your Flame common stock.

 

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Q.

Who can help answer my questions?

 

A.

If you have questions about the Business Combination or if you need additional copies of the proxy statement or the enclosed proxy card you should contact:

Flame Acquisition Corp.

700 Milam Street, Suite 3300

Houston, TX 77002

Tel: (713) 579-6106

You may also contact the proxy solicitor for Flame at:     

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Call Toll Free: (800) 769-7666

Banks and brokers call: (212) 269-5550

Email: FLME@dfking.com

To obtain timely delivery, our stockholders must request any additional materials no later than five business days prior to the special meeting. You may also obtain additional information about Flame from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.” If you are a holder of public shares and you intend to seek redemption of your public shares, you will need to deliver your stock (either physically or electronically) to Flame’s transfer agent at the address below no later than the second business day prior to the originally scheduled date of the special meeting. See the section entitled “Proposal No. 1—The Business Combination Proposal—Redemption.”

If you have questions regarding the certification of your position or delivery of your stock, please contact:

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Attention: Client Support

Email:     

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

The Flame Board is soliciting your proxy to vote your shares of Flame common stock on all matters scheduled to come before the special meeting. We will pay the cost of soliciting proxies for the special meeting. We have engaged D.F. King & Co., Inc. to assist in the solicitation of proxies for the special meeting. We will pay D.F. King & Co., Inc. a fee of $18,000. We will reimburse D.F. King & Co., Inc. for reasonable out-of-pocket expenses and will indemnify D.F. King & Co., Inc. and its affiliates against certain claims, liabilities, losses, damages and expenses. We will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Flame common stock for their expenses in forwarding soliciting materials to beneficial owners of Flame common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

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SUMMARY OF THE PROXY STATEMENT

This summary highlights selected information from this proxy statement and does not contain all of the information that is important to you. To better understand the proposals to be submitted for a vote at the special meeting, including the business combination proposal, you should read this entire document carefully, including the Annexes and other documents referred to herein. The Merger Agreement is the legal document that governs the Business Combination. It is also described in detail in this proxy statement in the section entitled “Proposal No. 1—The Business Combination Proposal—Certain Agreements Related to the Business Combination—Merger Agreement.”

Unless otherwise specified, all share calculations (a) exclude the impact of the shares of Flame common stock underlying warrants, (b) assume that no Flame public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Flame’s trust account and (c) assume that no shares are issued pursuant to the Incentive Plan.

The Parties

Flame

Flame Acquisition Corp. is a blank check company formed under the laws of Delaware on October 16, 2020. Flame was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

On March 1, 2021, Flame closed its initial public offering of 28,750,000 units, including 3,750,000 Units sold pursuant to the full exercise of the underwriters’ option to purchase additional units to cover over-allotments, with each unit consisting of one share of Flame Class A common stock and one warrant to purchase one-half of one share of Flame Class A common stock at a purchase price of $11.50 per share, subject to adjustment as provided in Flame’s final prospectus filed with the SEC on February 26, 2021 (File No. 333-252805). The units from the Flame IPO were sold at an offering price of $10.00 per unit, generating total gross proceeds of $287,500,000.

Simultaneously with the consummation of the Flame IPO, Flame consummated the private sale of 7,750,000 warrants at $1.00 per private placement warrant for an aggregate purchase price of $7,750,000. A total of $287,500,000 was deposited into the trust account and the remaining net proceeds became available to be used as working capital to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. The Flame IPO was conducted pursuant to a registration statement on Form S-1 that became effective on February 24, 2021.

On February 27, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Extension Amendment to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from March 1, 2023, to September 1, 2023. In connection with the Extension, stockholders holding 20,317,255 shares of Flame Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 70.67% of the issued and outstanding Flame Class A common stock. As a result, $206,121,060 (approximately $10.15 per share) was removed from the trust account to pay such redeeming holders on March 2, 2023.

On August 29, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Second Extension Amendment Proposal to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from September 1, 2023 to March 1, 2024. In connection with the Second Extension, stockholders holding 2,328,063 public shares exercised their right to redeem such shares for a

 

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pro rata portion of the funds in the trust account, representing approximately 27.61% of Flame’s issued and outstanding public shares. As a result, $24,008,096 (approximately $10.31 per share) was removed from the trust account to pay such redeeming holders on August 31, 2023.

As of January 3, 2024, the record date for the meeting, there was approximately $63.6 million held in the trust account.

Flame’s units, Flame’s Class A common stock and Flame’s warrants are listed on the NYSE under the symbols “FLME.U,” “FLME” and “FLME.WS,” respectively.

The mailing address of Flame’s principal executive office is 700 Milam Street, Suite 3300, Houston, TX 77002. Its telephone number is (713) 579-6106. After the consummation of the Business Combination, its principal executive office will be that of New Sable.

Sable

Sable Offshore Holdings LLC is a Delaware limited liability company, which we refer to as “Holdco.” Sable Offshore Corp. is a Texas corporation and direct wholly-owned subsidiary of Holdco, which we refer to as “Sable.” Sable and Holdco are special purpose entities formed for the purpose of evaluating the opportunity to acquire SYU and negotiating the terms thereof. See the sections entitled “Information About Sable,” “SYU Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management of New Sable After the Business Combination.”

SYU

Beginning in 1968 and over the course of 14 years, EM consolidated more than a dozen offshore federal oil leases and organized them into a streamlined production unit known as the Santa Ynez Unit (“SYU”). SYU consists of three offshore platforms and a wholly owned onshore processing facility located along the Gaviota Coast at Las Flores Canyon in Santa Barbara County, California. In addition to SYU, we will also acquire in the Business Combination Pipeline Segments 901 and 903 (the “Pipelines”), which were owned and operated by Plains and were recently acquired by EM. The Pipelines were used to deliver oil to local refinery markets. Following the crude oil release described further in this proxy statement, SYU and the Pipelines were shut down and subsequently emptied and placed in a safe state.

See the sections entitled “Information About SYU,” “SYU Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management of New Sable After the Business Combination” for additional information.

Emerging Growth Company

Flame is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, it is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find Flame’s securities less attractive as a result, there may be a less active trading market for Flame’s securities and the prices of its securities may be more volatile or otherwise impacted.

 

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New Sable could remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of the Flame IPO. However, if (a) New Sable’s total annual gross revenue exceeds $1.235 billion, (b) New Sable is deemed to be a large accelerated filer, which means the market value of New Sable common stock that is held by non-affiliates exceeds $700.0 million as of the end of the prior fiscal year’s second fiscal quarter, or (c) New Sable’s non-convertible debt issued within a three-year period exceeds $1.0 billion, New Sable would cease to be an emerging growth company as of the following fiscal year. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.

The Business Combination Proposal

As discussed in this proxy statement, Flame is asking its stockholders to approve the Merger Agreement, pursuant to which, on the Closing Date and contemporaneously with the completion of the transactions contemplated under the Sable-EM Purchase Agreement (including certain transactions contemplated by the Term Loan Agreement), Holdco will merge with and into Flame (the “Holdco Merger”), with Flame as the surviving company in the Holdco Merger (the time that the Holdco Merger becomes effective being referred to as the “Holdco Merger Effective Time”), and immediately following the Holdco Merger Effective Time, Sable will merge with and into Flame (the “Sable Merger”), with Flame as the surviving company in the Sable Merger (the time that the Sable Merger becomes effective being referred to as the “Sable Merger Effective Time”). The Holdco Merger and the Sable Merger are referred to in this proxy statement, together, as the “Merger.” The aggregate consideration to be received by holders of Holdco Class A shares immediately prior to the Holdco Merger Effective Time will be 3,000,000 shares of Flame Class A common stock. For further details, see “Proposal No. 1—The Business Combination Proposal.”

In accordance with the terms and subject to the conditions of the Merger Agreement, at the Holdco Merger Effective Time:

 

   

each Holdco Class A share issued and outstanding immediately prior to the Holdco Merger Effective Time, other than Canceled Holdco Shares (as such term is defined below), will be converted into the right to receive (a) the Aggregate Merger Consideration (as defined below) divided by (b) the total number of Holdco Class A shares outstanding immediately prior to the Holdco Merger Effective Time (the “Per Share Merger Consideration”). The “Aggregate Merger Consideration” to be received by holders of Holdco Class A shares immediately prior to the Holdco Merger Effective Time will be an aggregate of 3,000,000 shares of Flame Class A common stock; and

 

   

each Holdco Class A share issued and outstanding immediately prior to the Holdco Merger Effective Time that is held by Holdco in treasury or owned by Flame (the “Canceled Holdco Shares”) will be canceled and no consideration will be delivered in exchange therefor.

In accordance with the terms and subject to the conditions of the Merger Agreement, at the Sable Merger Effective Time, each share of Sable common stock issued and outstanding immediately prior to the Sable Merger Effective Time will be canceled and no consideration will be delivered in exchange therefor.

For the avoidance of doubt, at and after each of the Holdco Merger Effective Time and the Sable Merger Effective Time, each share of Flame common stock issued and outstanding immediately prior thereto will not be affected by the Merger.

In addition, immediately prior to the Holdco Merger Effective Time, each founder share issued and outstanding immediately prior to the Holdco Merger Effective Time will be automatically converted into shares of Flame Class A common stock on a one-for-one basis (which ratio may be automatically adjusted pursuant to the terms of the Flame certificate of incorporation) (the “Founder Share Conversion”).

 

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Set forth below is an organizational chart depicting Flame and Holdco’s current structure:

 

LOGO

 

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Set forth below is an organizational chart depicting New Sable’s expected structure:

 

LOGO

After consideration of the factors identified and discussed in the section entitled “Proposal No. 1—Business Combination Proposal—The Flame Board’s Reasons for the Business Combination,” the Flame Board concluded (i) that the terms and conditions of the Merger Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Flame and its stockholders and (ii) that it would recommend that its stockholders adopt the Merger Agreement and approve the Business Combination. For more information about the transactions contemplated by the Merger Agreement, see “Proposal No. 1—Business Combination Proposal.”

The consummation of the Merger is conditioned upon, among other things, (i) the completion, contemporaneously with the Closing, of the transactions contemplated under the Sable-EM Purchase Agreement (including certain transactions contemplated by the Term Loan Agreement); (ii) the approval by our stockholders of the business combination proposal, the Charter Proposal, the incentive plan proposal and the NYSE proposal; and (iii) the approval by NYSE of our initial listing application in connection with the Merger. Therefore, unless these conditions are waived by the applicable parties to the Merger Agreement (to the extent permitted by applicable law), the Merger Agreement could terminate and the Business Combination may not be consummated. For further details, see “Proposal No. 1–Business Combination Proposal—The Merger Agreement—Conditions to Closing of the Business Combination.”

 

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Matters Being Voted On

The stockholders of Flame will be asked to consider and vote on the following proposals at the special meeting:

(1) a proposal to approve, for purposes of complying with the DGCL and the Flame certificate of incorporation, the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement, including the Merger, and related agreements described in this proxy statement. Please see the section entitled “Proposal No. 1—The Business Combination Proposal” for additional information;

(2) a proposal to approve and adopt changes to the Flame certificate of incorporation reflected in the New Sable restated certificate of incorporation in the form attached hereto as Annex B. Please see the section entitled “Proposal No. 2—The Charter Proposal” for additional information;

(3) a proposal with respect to certain governance provisions in the New Sable certificate of incorporation, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis. See the section entitled “Proposal No. 3—The Governance Proposal” for additional information;

(4) a proposal to approve and adopt the Incentive Plan. Please see the section entitled “Proposal No. 4—The Incentive Plan Proposal” for additional information;

(5) a proposal to approve, for purposes of complying with Section 312.03(c) of the NYSE Listed Company Manual, the issuance of more than 20% of the issued and outstanding shares of Flame common stock in connection with the Business Combination and PIPE Investment. Please see the section entitled “Proposal No. 5—The NYSE Proposal” for additional information; and

(6) a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal or the NYSE proposal. Please see the section entitled “Proposal No. 6—The Adjournment Proposal” for additional information.

Date, Time and Place of Special Meeting of Flame’s Stockholders

The special meeting of stockholders of Flame will be held at              Central Time, on             , 2024, at the offices of Latham & Watkins LLP located at 811 Main Street, Suite 3700, Houston, TX 77002, and via a virtual meeting.

We are sensitive to the public health and travel concerns our stockholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (COVID-19) situation. As a result, we may impose additional procedures or limitations on meeting attendees or may decide to hold the meeting in a different location or solely by means of remote communication (i.e., a virtual-only meeting). We plan to announce any such updates on our proxy website at http://www.astproxyportal.com/ast/24075, and we encourage you to check this website prior to the meeting if you plan to attend.

At the special meeting, stockholders will be asked to consider and vote upon the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal, the NYSE proposal and, if necessary, the adjournment proposal to permit further solicitation and vote of proxies if Flame is not able to consummate the Business Combination.

 

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Voting Power; Record Date

Stockholders will be entitled to vote or direct votes to be cast at the special meeting if they owned shares of Flame common stock at the close of business on January 3, 2024, which is the record date for the special meeting. Stockholders will have one vote for each share of Flame common owned at the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. Flame warrants do not have voting rights. On the record date, there were 13,292,182 shares of Flame common stock outstanding, of which 6,104,682 were public shares, with the rest being held by the Sponsor and certain Insiders.

Quorum and Vote of Flame Stockholders

A quorum of Flame stockholders is necessary to hold a valid meeting. A quorum will be present at the Flame special meeting if a majority of the outstanding shares entitled to vote at the meeting are represented in person or by proxy. Proxies that are marked “ABSTAIN” will be treated as shares present for purposes of determining the presence of a quorum on all matters. Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the special meeting.

The Sponsor and certain Insiders own of record and are entitled to vote approximately 54% of the outstanding shares of Flame common stock as of the record date. Such shares, as well as any shares of Flame common stock acquired in the aftermarket by the Sponsor or such Insiders, will be voted in favor of the proposals presented at the special meeting.

The proposals presented at the special meeting will require the following votes:

 

   

the approval of each of the Governance Proposal, incentive plan proposal, the NYSE proposal and the adjournment proposal require the affirmative vote of a majority of the votes cast by holders of Flame’s outstanding shares of common stock represented at the special meeting by attendance in person, via the virtual meeting platform or by proxy and entitled to vote thereon at the special meeting. Accordingly, if a valid quorum is established, a Flame stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the Governance Proposal, the incentive plan proposal, the NYSE proposal and the adjournment proposal will have no effect on such proposals; and

 

   

the approval of each of the business combination proposal and the Charter Proposal requires the affirmative vote of holders of a majority of Flame’s outstanding shares of common stock entitled to vote thereon at the special meeting. Accordingly, if a valid quorum is established, a Flame stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the business combination proposal or the Charter Proposal will have the same effect as a vote “AGAINST” such proposal.

Abstentions will have the same effect as a vote “AGAINST” the business combination proposal and the Charter Proposal, but will have no effect on the other proposals.

Consummation of the Business Combination is conditioned on the approval of each of the business combination proposal, the Charter Proposal, the incentive plan proposal and the NYSE proposal. If any of those proposals is not approved or, to the extent permitted by applicable law, waived by the applicable parties, we will not consummate the Business Combination.

Redemption Rights

Pursuant to the Flame certificate of incorporation, a holder of public shares may demand that Flame redeem such shares for cash if the Business Combination is consummated. Holders of public shares will be entitled to

 

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receive cash for these shares only if they demand that Flame redeem their shares for cash no later than the second business day prior to the originally scheduled vote on the business combination proposal by delivering their stock to Flame’s transfer agent prior to the vote at the meeting. If the Business Combination is not completed, these shares will not be redeemed. If a holder of public shares properly demands redemption, Flame will redeem each public share for a full pro rata portion of the trust account, calculated as of two business days prior to the consummation of the Business Combination. As of January 3, 2024, the record date for the meeting, this would amount to approximately $10.41 per share. As of the date of this proxy statement, and due to the redemption of 20,317,255 public shares in connection with the stockholder vote in February 2023 and the redemption of 2,328,063 public shares in connection with the stockholder vote in August 2023 to approve the extension of the date by which Flame must complete an initial business combination, the Insiders own approximately 54% of the issued and outstanding shares of Flame common stock, consisting of the founder shares. Founder shares will be excluded from the pro rata calculation used to determine the per-public share redemption price. The Sponsor and Flame’s directors and officers have agreed to vote any shares of Flame common stock owned by them in favor of each of the proposals presented at the special meeting. If a holder of public shares exercises its redemption rights, then it will be exchanging its shares of Flame common stock for cash and will no longer own the shares. Please see the section entitled “Special Meeting of Flame Stockholders—Redemption Rights” for a detailed description of the procedures to be followed if you wish to redeem your shares for cash.

Notwithstanding the foregoing, a holder of public shares, together with any of its affiliates or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than 15% of the public shares. Accordingly, all public shares in excess of 15% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or was a “group,” will not be redeemed for cash.

Under the Flame certificate of incorporation and the Merger Agreement, the Business Combination may be consummated only if Flame has at least $5,000,001 of net tangible assets after giving effect to all holders of public shares that properly demand redemption of their shares for cash and after receipt of the proceeds under the PIPE Subscription Agreements. However, pursuant to the Sable-EM Purchase Agreement, we are required to satisfy the Sable-EM Minimum Cash Threshold after giving effect to the Business Combination (including the PIPE Investment). Assuming a redemption value of $10.34 per share, 6,104,682 public shares (or 100% of the public shares outstanding) may be redeemed for aggregate redemption proceeds of $63,124,000 in order for the Sable-EM Minimum Cash Threshold to be satisfied. Based on the amount of $63.6 million in the trust account as of January 3, 2024 and taking into account the anticipated proceeds of $520,000,000 from the PIPE Investment, even if 6,104,682 public shares (or 100% of the public shares outstanding) are redeemed, the Sable-EM Minimum Cash Threshold will still be satisfied.

Holders of Flame warrants will not have redemption rights with respect to such securities.

Appraisal Rights

Flame stockholders, Flame unitholders and Flame warrant holders do not have appraisal rights in connection with the Business Combination under the DGCL.

Proxy Solicitation

Proxies may be solicited by mail, telephone or in person. Flame has engaged D.F. King & Co., Inc. to assist in the solicitation of proxies. If a stockholder grants a proxy, it may still vote its shares during the meeting if it revokes its proxy before the special meeting. A stockholder may also change its vote by submitting a later-dated proxy as described in the section entitled “Special Meeting of Flame Stockholders—Revoking Your Proxy.”

 

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Interests of Certain Persons in the Business Combination

In considering the recommendation of the Flame Board to vote in favor of approval of the business combination proposal and the other proposals, Flame stockholders should keep in mind that the Insiders have interests in such proposals that are different from, or in addition to, those of Flame stockholders generally. In particular:

 

   

If the Business Combination or another business combination are not consummated by March 1, 2024, Flame will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and the Flame Board, dissolving and liquidating. In such event, the founder shares and the private placement warrants held by the Insiders would be worthless because the holders thereof are not entitled to participate in any redemption or distribution with respect to such shares.

 

   

The Insiders and other initial stockholders purchased an aggregate of 7,187,500 founder shares from us for an aggregate purchase price of $25,000 in November 2020. The Sponsor purchased 4,671,875 founder shares, FL Co-Investment purchased 1,257,813 founder shares and Intrepid Financial Partners purchased 1,257,812 founder shares. Also in November 2020, the Sponsor transferred 434,375 founder shares to Flame’s independent director nominees and certain individuals, including Gregory D. Patrinely, Flame’s Executive Vice President and Chief Financial Officer, at their original purchase price. The founder shares included an aggregate of up to 937,500 shares subject to forfeiture by Flame’s founders to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the initial stockholders would own 20% of our issued and outstanding shares after the Flame IPO (assuming the initial stockholders did not purchase any public shares in the Flame IPO). As a result of the underwriters’ election to fully exercise their over-allotment option, no founder shares were forfeited and 7,187,500 founder shares are outstanding. In connection with the Extension and the Second Extension, stockholders holding 20,317,255 and 2,328,063 public shares, respectively, exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As a result of such redemptions, the Insiders beneficially own approximately 54% of the issued outstanding shares of Flame Class A common stock on January 3, 2024, the record date for the special meeting. Such shares had an aggregate market value of $85.5 million based upon the closing price of $11.89 per share on the NYSE on January 3, 2024, the record date for the special meeting.

 

   

The Insiders and other initial stockholders purchased an aggregate of 7,750,000 private placement warrants from Flame for an aggregate purchase price of $7,750,000 (or $1.00 per private placement warrant). These purchases took place on a private placement basis simultaneously with the consummation of the Flame IPO. Among the private placement warrants, 3,875,000 warrants were purchased by our Sponsor, 1,743,750 warrants were purchased by each of FL Co-Investment and Intrepid Financial Partners, respectively, and 387,500 warrants were purchased by our independent director nominees and certain individuals, including Gregory D. Patrinely, our Executive Vice President and Chief Financial Officer. A portion of the proceeds Flame received from these purchases were placed in the trust account. Such warrants had an aggregate market value of $15.2 million based upon the closing price of $1.96 per warrant on the NYSE on January 3, 2024, the record date for the special meeting. In addition, certain Insiders have provided Working Capital Loans to Flame (aggregate of $1,870,000 and $3,306,370 outstanding as of December 31, 2022 and January 25, 2024, respectively) and initially up to $1,500,000, which was increased to $3,500,000 on March 24, 2023, of such loans are, at the option of the lender, convertible into private placement warrants at a price of $1.00 per warrant. The private placement warrants will become worthless if Flame does not consummate a business combination by March 1, 2024.

 

   

Certain Insiders are PIPE Investors. Pursuant to the Additional Holdco Class B PIPE Investment, Holdco has obtained commitments from James C. Flores, Flame’s Chairman and Chief Executive Officer, JCF Capital, LLC, which is managed by J. Caldwell Flores, Flame’s President, and Victorious

 

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Angel Group LTD., which is managed by Mr. Sarofim, to purchase 700,000, 300,000 and 3,000,000 Holdco Class B shares, respectively, at a price of $10.00 per share, for the respective subscription amounts of $7,000,000, $3,000,000 and $30,000,000.

 

   

James C. Flores and the Flame Independent Directors, each a current director of Flame, will each be a director of New Sable after the Closing. As such, in the future each may receive any cash fees, stock options or stock awards that the post-combination board of directors determines to pay to its executive and non-executive directors.

 

   

James C. Flores, Flame’s Chairman and Chief Executive Officer, and a director of Flame, is also the sole owner of Holdco (which is the sole owner of Sable) and the Chairman of the Board and Chief Executive Officer of Sable. The original business combination proposal presented by Sable management to Flame included business combination consideration of $150 million, payable to Sable in shares of Flame common stock, to be subject to lock-up restrictions until the restart of production from the SYU Assets. In light of Mr. Flores’s participation in the proposed business combination opportunity on behalf of Sable as its sole owner, the Flame Board formed a special committee comprised of Michael Dillard, Gregory Pipkin and Christopher Sarofim, the independent directors serving on the Flame Board (the “Flame Independent Directors”), to analyze, negotiate and make recommendations to the Flame Board and Flame stockholders regarding the business combination opportunity involving Sable and the SYU Assets. The special committee reviewed the initial business combination proposal presented by Sable management and provided feedback to Sable regarding a number of aspects of the initial business combination proposal, including the proposed business combination consideration payable to Sable under Sable’s proposed transaction terms. In response to the special committee’s feedback, Sable presented a revised set of transaction terms to Flame. Under Sable’s revised business combination proposal, Sable would not receive share- or cash-based consideration pursuant to the business combination, other than Flame’s assumption of the EM-financed seller’s note. In lieu of any such share- or cash-based business combination consideration, Sable proposed that Flame and Sable would agree to a post-business combination management compensation plan for the Sable management team who would lead the public company. Because the revised transaction terms no longer contemplated the receipt by Mr. Flores of share- or cash-based consideration in respect of his ownership interest in Sable, the special committee determined that the conflict of interest previously presented by the business combination opportunity had ceased to exist, and the Flame Independent Directors ceased to act in the capacity of a special committee. The Flame Independent Directors, acting in their capacity as the compensation committee of the Flame Board, analyzed and negotiated the compensation-related aspects of the business combination opportunity on behalf of the Flame Board and in that connection engaged in periodic consultation with Pearl Meyer & Partners, LLC (“Pearl Meyer”), who had been engaged as a compensation consultant to Flame.

However, in order to avoid any potential conflict of interest resulting from Mr. Flores’ dual roles as Flame’s Chairman, Chief Executive Officer and President, and a director of Flame, and the Chairman of the Board and Chief Executive Officer of Sable, Mr. Flores recused himself from certain Flame Board meetings, discussions and votes regarding the Merger and alternatives thereto, including the meetings of the Flame Board held October 26, 2022 and October 31, 2022, at which Latham presented its due diligence findings and Petrie Partners presented its analysis regarding the fairness of the Business Combination to Flame. Mr. Flores also recused himself from the meeting of the Flame Board held on November 2, 2022 at which Petrie Partners delivered its oral opinion as to the fairness, from a financial point of view, of the Business Combination to Flame, and at which the Flame Independent Directors approved the Business Combination and recommended that the Flame Board approve the Business Combination. Following the Flame Independent Directors’ approval, Mr. Flores returned to the meeting to participate in discussion of the Business Combination and the Flame Board’s unanimous approval of the Business Combination. As noted above, Mr. Flores also did not participate in meetings,

 

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discussions and votes regarding compensation-related aspects of the business combination opportunity on behalf of Flame, which were analyzed and negotiated by the Flame Independent Directors, acting in their capacity as the compensation committee of the Flame Board. See “-Background of the Business Combination.

 

   

Intrepid and Cowen, affiliates of certain holders of founder shares, will each receive 50% of the Marketing Fee pursuant to the business combination marketing agreement entered into in connection with the Flame IPO, which fee is payable upon completion of the Business Combination and represents 3.5% of the gross proceeds of the Flame IPO, including proceeds from the full exercise of the underwriters’ overallotment option. Cowen and Intrepid are also serving as placement agents in the PIPE Investment for which they will receive an aggregate fee of $6 million payable solely upon the closing of the PIPE Investment. In addition, Intrepid and Cowen are serving as financial advisors to Sable in connection with the Sable-EM Purchase Agreement and as financial advisors to Sable in connection with the Merger Agreement, for which they will receive an aggregate fee of $2 million payable solely upon the closing of the Business Combination.

 

   

If Flame is unable to complete an initial business combination within the completion window, the Sponsor will be personally liable under certain circumstances to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Flame for services rendered or contracted for or products sold to Flame. If Flame consummates an initial business combination, on the other hand, Flame will be liable for all such claims.

 

   

Flame’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on Flame’s behalf, such as identifying and investigating possible business targets and business combinations. However, if Flame fails to consummate an initial business combination within the completion window, they will not have any claim against the trust account for reimbursement. Accordingly, Flame may not be able to reimburse these expenses if the Business Combination or another initial business combination is not completed within the completion window. As of January 25, 2024, $0 was outstanding in out-of-pocket expense reimbursements.

 

   

Article X of the Flame certificate of incorporation provides for the limited waiver, to the extent allowed by law and subject to certain exceptions, of the doctrine of corporate opportunity with respect to Flame or any of its officers, directors or their respective affiliates. While this may result in a potential conflict of interest as between the fiduciary duties or contractual obligations of our officers or directors and the interests of Flame and its stockholders, it did not impact our search for an initial business combination target, including Sable.

 

   

Given the interests described above, the Insiders and other initial stockholders may earn a positive rate of return on their investment even if the New Sable common stock trades below the price initially paid for the Flame units in the Flame IPO and the public stockholders experience a negative rate of return following the completion of the Business Combination. Thus, the Insiders and other initial stockholders may have more of an economic incentive for Flame to, rather than liquidate if Flame fails to complete its initial business combination by the completion window, enter into an initial business combination on potentially less favorable terms with a potentially less favorable, riskier, weaker-performing or financially unstable business, or an entity lacking an established record of revenues or earnings, than would be the case if such parties had paid the full offering price for their founder shares.

 

   

James C. Flores, Flame’s Chairman of the Board and Chief Executive Officer, is also the Chairman of the Board and Chief Executive Officer of Sable and owns all of the outstanding Holdco Class A shares. Pursuant to the Holdco Merger, the Holdco Class A shares owned by Mr. Flores will convert into the Aggregate Merger Consideration, which, as described above, will be an aggregate of 3,000,000 shares

 

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of Flame Class A common stock. Under the terms of the Merger Agreement, Mr. Flores is also entitled to reimbursement by Flame, on the Closing Date, of all of his reasonable, documented and out-of-pocket fees and expenses for any agents, advisors, consultants, experts, independent contractors and financial advisors engaged on behalf of Holdco or Sable and incurred in connection with the transactions contemplated by the Merger Agreement and the Sable-EM Purchase Agreement, in each case, that are paid as of the Closing, subject to a cap equal to $3.0 million, which Flame agreed to increase from $1.5 million on March 3, 2023, absent the prior written consent of Flame. In addition, Sable entered into employment agreements with Mr. Flores, Gregory D. Patrinely, Doss R. Bourgeois, Anthony C. Duenner and J. Caldwell Flores, each of which is contingent and becomes effective upon the Closing. The employment agreements entitle the executive officers to certain compensation and benefits described in the section entitled “Executive Compensation of New Sable,” which benefits include cash-based signing incentives and equity incentive awards that will be paid or granted, as applicable, upon or shortly following the consummation of the Business Combination. The following table sets forth, for each of Sable’s executive officers, the total aggregate dollar amount of merger consideration, equity incentive awards, cash-based signing incentives, and expense reimbursements that will be payable to each of the executive officers in connection with the consummation of the Business Combination:

 

Name

   Dollar Value
of Equity
Awards
($)(1)
    Cash-Based
Signing
Incentive
($)
     Dollar Value
of Merger
Consideration
($)(1)
     Expense
Reimbursement
($)(2)
     Total
($)
 

James C. Flores

     —         —          30,000,000        3,000,000        33,000,000  

Gregory D. Patrinely

     6,500,000 (3)      750,000        —          —          7,250,000  

Doss R. Bourgeois

     6,500,000 (3)      750,000        —          —          7,250,000  

Anthony C. Duenner

     6,500,000 (3)      750,000        —          —          7,250,000  

J. Caldwell Flores

     6,500,000 (3)      750,000        —          —          7,250,000  

 

  (1)

Calculated assuming a per-share value of $10.00.

  (2)

Amount represents expenses reimbursed to Mr. Flores as described above. The expense reimbursement amount may be less than, but not greater than, the amount in the table.

  (3)

A total of 3,575,000 shares of New Sable common stock are expected to be granted as equity incentive awards to officers and employees of New Sable under New Sable’s equity incentive plan after the consummation of the Business Combination. Each of the executive officers of New Sable (other than Mr. Flores) is entitled to receive an award of 650,000 shares of New Sable common stock out of such 3,575,000 shares, subject to the vesting and forfeiture terms of such plan, provided that such awards shall vest no later than the third anniversary of the Closing Date. However, such awards to officers and employees of New Sable, when combined with the 3,000,000 shares received by Mr. Flores as consideration in the Holdco Merger, may not exceed 15% of the outstanding number of shares of New Sable common stock immediately after Closing. The equity incentive awards, including the amounts shown in this column, will be adjusted to a lesser number of shares on a proportionate basis such that to the extent that the equity incentive awards would otherwise cause such ownership threshold to be exceeded.

 

   

The continued indemnification of current directors and officers and the continuation of directors’ and officers’ liability insurance.

As described under “Management of New Sable After the Business Combination,” each of the members of the Flame Board will become a member of the New Sable Board, and each of the executive officers of Flame will become an executive officer of New Sable. Accordingly, Flame stockholders should also keep in mind that certain officers and directors of New Sable have interests in the Business Combination that are different from, or in addition to, those of Flame stockholders generally.

 

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Ownership of New Sable Following the Business Combination

On February 27, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Extension Amendment to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from March 1, 2023 to September 1, 2023. In connection with the Extension, stockholders holding 20,317,255 shares of Flame Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 70.67% of the issued and outstanding Flame Class A common stock. After this redemption, 8,432,745 shares of Flame Class A common stock remained outstanding. On August 29, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Second Extension Amendment Proposal to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from September 1, 2023 to March 1, 2024. In connection with the Second Extension, stockholders holding 2,328,063 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 27.61% of Flame’s issued and outstanding public shares. As a result, $24,008,096 (approximately $10.31 per share) was removed from the trust account to pay such redeeming holders on August 31, 2023. The following table illustrates varying ownership levels in New Sable immediately following the Closing, assuming (i) no additional public shares are redeemed, (ii) 50% of the remaining public shares outstanding are redeemed and (iii) 6,104,682 public shares (or 100% of the remaining public shares outstanding) are redeemed, resulting in an aggregate payment of approximately $63,124,000 from the trust account, which even with maximum redemptions Flame believes it would be able to satisfy the $150,000,000 Sable-EM Minimum Cash Threshold and have sufficient capital for operations, each on a “shares outstanding” and “fully diluted” basis. The numbers of shares and percentage interests set forth below are based on a number of assumptions. If the actual facts differ from our assumptions, the number of shares and percentage interests set forth below will be different. For more information, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

Base Ownership Table

 

    No Additional Redemption Scenario(1)     50% Redemption Scenario(2)     Max Redemption Scenario(3)  
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
    Outstanding
Shares
    Outstanding
Ownership
    Fully
Diluted
Shares(4)
    Fully
Diluted
Ownership
 

Current Flame public stockholders

    6,104,682       8.94     20,479,682       21.05     3,052,341       4.68     17,427,341       18.49     —         —         14,375,000       15.76

Insiders

    7,187,500       10.52     18,243,870       18.75     7,187,500       11.02     18,243,870       19.36     7,187,500       11.56     18,243,870       20.01

Merger Consideration

    3,000,000       4.39     3,000,000       3.08     3,000,000       4.60     3,000,000       3.18     3,000,000       4.82     3,000,000       3.29

PIPE Stockholders(5)

    52,000,000       76.14     52,000,000       53.44     52,000,000       79.71     52,000,000       55.17     52,000,000       83.62     52,000,000       57.02

Incentive Plan(6)

    —         —         3,575,000       3.67     —         —         3,575,000       3.79     —         —         3,575,000       3.29
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    68,292,182       100.00     97,298,552       100.00     65,239,841       100.00     94,246,211       100.00     62,187,500       100.00     91,193,870       100.00
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Note: Figures may not sum due to rounding.

 

(1)

This presentation assumes that no additional public stockholders exercise their right to have their public shares converted into their pro rata share of the trust account.

(2)

This presentation assumes that (i) public stockholders exercise their rights to have 50% of all remaining outstanding public shares converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(3)

This presentation assumes that (i) public stockholders exercise their rights to have 6,104,682 public shares (or 100% of the remaining public shares outstanding) converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(4)

(a) This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current

 

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  unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.
 

(b) This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

(5)

Assumes 52,000,000 shares of New Sable common stock are issued to PIPE Investors at Closing in connection with the PIPE Investment.

(6)

Reflects shares expected to be reserved for issuance under the Incentive Plan (assuming the incentive plan proposal is approved).

The following table further illustrates the impact on relative fully diluted ownership levels of New Sable for each source of dilution, namely the issuance of common stock under (i) the 14,375,000 public warrants, (ii) the 7,750,000 private placement warrants, (iii) the 3,306,370 private placement warrants issuable in connection with the Working Capital Loans, and (iv) the Incentive Plan.

Fully Diluted Ownership By Each Source of Redemption

 

    No Additional Redemption
Scenario(1)
    50% Redemption Scenario(2)     Max Redemption Scenario(3)  
    Number of
Shares
    Fully
Diluted
Ownership(4)
    Number of
Shares
    Fully
Diluted
Ownership(4)
    Number of
Shares
    Fully
Diluted
Ownership(4)
 

Current Stockholders

           

Current Flame public stockholders

    6,104,682       6.27     3,052,341       3.24     —         0.00

Insiders

    7,187,500       7.39     7,187,500       7.63     7,187,500       7.88

PIPE Shares(5)

    52,000,000       53.44     52,000,000       55.17     52,000,000       57.02

Merger Consideration

    3,000,000       3.08     3,000,000       3.18     3,000,000       3.29

Total Current Stockholders

   
68,292,182
 
    70.19     65,239,841       69.22     62,187,500       68.19

Shares Issuable Upon Exercise of Warrants

           

Flame Public Warrants

    14,375,000       14.77     14,375,000       15.25     14,375,000       15.76

Flame Private Warrants

    7,750,000       7.97     7,750,000       8.22     7,750,000       8.50

Working Capital Warrants

    3,306,370       3.40     3,306,370       3.51     3,306,370       3.63

Total Shares Issuable Upon Exercise of Warrants

    25,431,370       26.14     25,431,370       26.98     25,431,370       27.89

Incentive Plan(6)

    3,575,000       3.67     3,575,000       3.79     3,575,000       3.92

Pro Forma Flame Common Stock

    97,298,552       100.00    
94,246,211
 
    100.00     91,193,870       100.00

 

Note: Figures may not sum due to rounding.

(1)

This presentation assumes that no additional public stockholders exercise their right to have their public shares converted into their pro rata share of the trust account.

(2)

This presentation assumes that (i) public stockholders exercise their rights to have 50% of all remaining outstanding public shares converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(3)

This presentation assumes that (i) public stockholders exercise their rights to have 6,104,682 public shares (or 100% of the remaining public shares outstanding) converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

 

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(4)

(a) This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.

(b) This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

(5)

Assumes 52,000,000 shares of New Sable common stock are issued to PIPE Investors at Closing in connection with the PIPE Investment.

(6)

Reflects 3,575,000 shares of New Sable common stock that are expected to be granted as equity incentive awards to officers and employees of New Sable under the Incentive Plan after the consummation of the Business Combination and for more information about the Incentive Plan, including the expected number of shares that will be reserved for future compensatory grants, please see the section entitled “Proposal No. 4—Incentive Plan Proposal.

In addition to the changes in percentage ownerships depicted above, variations in redemptions and dilutive equity issuances will also affect the per share value as illustrated in the table below.

Per Share Value Sensitivity Analysis

 

     No Additional Redemption
Scenario(1)
     50% Redemption
Scenario(2)
     Max Redemption
Scenario(3)
 
     Number of
Shares
     Value
per
Share(4)
     Number of
Shares
     Value
per
Share(4)
     Number of
Shares
     Value
per
Share(4)
 

Base Scenario(5)

     68,292,182      $ 8.55        65,239,841      $ 8.48        62,187,500      $ 8.40  

Fully Diluted Scenario(6)

     97,298,552      $ 9.00        94,246,211      $ 8.97        91,193,870      $ 8.94  

 

(1)

This presentation assumes that no additional public stockholders exercise their right to have their public shares converted into their pro rata share of the trust account.

(2)

This presentation assumes that (i) public stockholders exercise their rights to have 50% of all remaining outstanding public shares converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(3)

This presentation assumes that (i) public stockholders exercise their rights to have 6,104,682 public shares (or 100% of the remaining public shares outstanding) converted into their pro rata share of the trust account and (ii) such redeeming public stockholders continue to hold public warrants following exercise of their redemption rights.

(4)

Based on the New Sable equity values set forth below.

(5)

Reflects current public shares and founder shares outstanding, plus shares to be issued as Aggregate Merger Consideration and 52,000,000 shares of New Sable common stock issuable to PIPE Investors at Closing in connection with the PIPE Investment upon the consummation of the Business Combination.

(6)

(a) This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.

(b) This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

 

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Post-Combination Company Equity Value (in millions):

 

     No
Additional
Redemption
Scenario
     50%
Redemption
Scenario
     Max
Redemption
Scenario
 

Base Scenario(7)

   $ 583.58      $ 553.06      $ 522.53  

Fully Diluted Scenario(8)

   $ 876.04      $ 845.52      $ 814.99  

 

(7)

Assumes a deemed equity value of $10 per share for the common stock issued as Aggregate Merger Consideration and 52,000,000 shares of New Sable common stock issuable to PIPE Investors at Closing in connection with the PIPE Investment, plus the amount remaining in the trust account after deductions for payments to redeeming stockholders.

(8)

(a) This presentation assumes that (i) public stockholders exercise the 14,375,000 public warrants, (ii) the initial stockholders exercise the 7,750,000 private placement warrants, (iii) each of the Sponsor, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner exercises their respective option to convert the current unpaid principal balance of the Working Capital Loans into 3,306,370 private placement warrants and exercises such warrants, and (iv) all shares underlying the Incentive Plan are issued.

(b) This presentation includes shares that may be issued but are not presently outstanding and, as such, differ from the share counts shown or assumed in the sections entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information,” and “Unaudited Pro Forma Condensed Combined Financial Statements,” which sections are limited to shares that are presently issued and outstanding.

If a public stockholder exercises its redemption rights, such exercise will not result in the loss of any warrants that it may hold. We cannot predict the ultimate value of the public warrants following the consummation of the Business Combination, but assuming 6,104,682 public shares (or 100% of the remaining public shares outstanding) are redeemed, resulting in an aggregate payment of approximately $63,124,000 from the trust account, which even with maximum redemptions Flame believes it would be able to satisfy the $150,000,000 Sable-EM Minimum Cash Threshold, the 14,375,000 retained outstanding Flame public warrants would have an aggregate value of $                     based on a price per Flame public warrant of $             on                                          , 2024, the most recent practicable date prior to the date of this proxy statement.

Board of Directors Following the Business Combination

Upon completion of the Business Combination, the New Sable Board will be composed of four members. New Sable expects that three of its directors will meet the independence requirements under the NYSE Listed Company Manual. Please see the section entitled “Management of New Sable After the Business Combination” for additional information.

Other Agreements Relating to the Business Combination

PIPE Subscription Agreements

As of the date of this proxy statement, Holdco has obtained commitments from PIPE Investors for $520,000,000 in PIPE Investment. In connection with the Business Combination, Holdco entered into the Initial PIPE Subscription Agreements with the Initial PIPE Investors, pursuant to which the Initial PIPE Investors agreed to purchase, in the aggregate, 7,150,000 Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $71,500,000, to be consummated contemporaneously with the Closing and immediately following the Sable Merger Effective Time, on the terms and subject to the conditions set forth in the Initial PIPE Subscription Agreements and the Merger Agreement. The Initial PIPE Subscription Agreements provide that, in the event the Merger is consummated, the investors party thereto will be deemed to have subscribed for and will purchase Flame Class A common stock at the same price per share, and by operation of

 

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law pursuant to the Merger, Flame will have succeeded to Holdco’s obligations thereunder. Pursuant to the Additional Holdco Class B PIPE Investment, Holdco has obtained commitments from the Additional Holdco Class B PIPE Investors to purchase, in the aggregate, 34,850,000, Holdco Class B shares at a price of $10.00 per share, for an aggregate subscription amount of $348,500,000. The Additional Holdco Class B PIPE Investors include James C. Flores, Flame’s Chairman and Chief Executive Officer, JCF Capital, LLC, which is managed by J. Caldwell Flores, Flame’s President, and Victorious Angel Group LTD., which is managed by Christopher B. Sarofim, a Director of Flame, who subscribed for $7,000,000, $3,000,000 and $30,000,000, respectively, of the Additional Holdco Class B PIPE Investment. The Additional Holdco Class B PIPE Subscription Agreements provide that, in the event the Merger is consummated, the investors party thereto will be deemed to have subscribed for and will purchase Flame Class A common stock at the same price per share, any by operation of law pursuant to the Merger, Flame will have succeeded to Holdco’s obligations thereunder. Pursuant to the Flame Class A PIPE Investment, Holdco and Flame have obtained commitments from the Flame Class A PIPE Investors to purchase 10,000,000 shares of Flame Class A common stock at a price of $10.00 per share, for an aggregate subscription amount of $100,000,000. The Initial PIPE Investment, the Additional Holdco Class B PIPE Investment and the Flame Class A PIPE Investment will be consummated contemporaneously with the Closing and immediately following the Sable Merger Effective Time, on the terms and subject to the conditions set forth in the Initial PIPE Subscription Agreements, the Additional Holdco Class B PIPE Subscription Agreements or the Flame Class A PIPE Subscription Agreements, as applicable, and the Merger Agreement. Holdco and Flame do not intend to pursue additional subscriptions to purchase Holdco Class B shares or shares of Flame Class A common stock prior to the Closing. Additionally, Sable believes that the committed PIPE Investment of $520,000,000 will provide New Sable with sufficient capital to pay for costs related to restarting production of the SYU Assets, including obtaining the necessary regulatory approvals and completing the pipeline repairs and bringing the shut-in assets back online.

The shares of Flame Class A common stock to be issued pursuant to the PIPE Subscription Agreements have not been registered under the Securities Act in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. Holdco has granted the PIPE Investors certain registration rights in connection with the PIPE Investment, to which Flame will succeed by operation of law pursuant to the Holdco Merger. The registration rights would, among other things and subject to customary terms and conditions, require Flame to file a registration statement registering the resale of the shares of Flame Class A common stock to be issued pursuant to the PIPE Subscription Agreements within 30 calendar days after consummation of the Transactions.

In addition, the PIPE Subscription Agreement with Metamorphic Pecan, LLC provides that after the Closing, as long as the subscriber holds Flame Class A common stock representing not less than 10% of the total issued and outstanding shares of Flame Class A common stock, Metamorphic Pecan, LLC will have the right to nominate one Class II director to the Flame Board; and Flame will take all necessary action to cause the individual so nominated by Metamorphic Pecan, LLC to be included in the slate of nominees recommended by the Flame Board (or any authorized committee thereof) to Flame’s stockholders for election as a director at each annual meeting of the stockholders of Flame during which Class II directors are being elected and shall use commercially reasonable efforts to cause the election of such nominee.

In connection with the extension of the termination date under the Merger Agreement, in July 2023, Holdco entered into amendments to each of the Initial PIPE Subscription Agreements with each of the Initial PIPE Investors, pursuant to which the parties agreed, for no consideration, to extend the date by which they must consummate the subscription contemplated by such Initial PIPE Subscription Agreements, or terminate such Initial PIPE Subscription Agreements, from July 31, 2023 to March 1, 2024.

On January 12, 2024, Holdco entered into amendments to certain Initial PIPE Subscription Agreements and Additional Holdco Class B PIPE Subscription Agreements representing an aggregate commitment amount of

 

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$71,950,000, pursuant to which Holdco and the parties to such PIPE Subscription Agreements agreed to increase the maximum number of Holdco Class B shares to be sold by Holdco pursuant to the PIPE Subscription Agreements from 40,000,000 to 52,500,000.

The closing under the PIPE Subscription Agreements will occur substantially concurrently with the closing of the Business Combination and immediately following the Sable Merger Effective Time, and are conditioned on the satisfaction or waiver of all conditions to the consummation of the transactions contemplated by the Sable-EM Purchase Agreement, as well as on other customary closing conditions. The PIPE Subscription Agreements will be terminated, and be of no further force and effect, upon the earlier to occur of (i) the termination of the Sable-EM Purchase Agreement in accordance with its terms, (ii) if the closing under the PIPE Subscription Agreements has not occurred by March 1, 2024 and (iii) the mutual agreement of Holdco or Flame, as applicable, and the PIPE Investors to terminate the applicable PIPE Subscription Agreement. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—PIPE Subscription Agreement” for additional information.

Registration Rights Agreement

The Merger Agreement provides that, at the Closing, the holders of Holdco Class A shares immediately prior to the effective time of the Holdco Merger will enter into a registration rights agreement with Flame (the “Registration Rights Agreement”) pursuant to such holders will be granted certain registration rights with respect to the Flame Class A common stock to be received as consideration in the Merger.

Pursuant to the Registration Rights Agreement, Flame will agree to file a registration statement within 30 calendar days after the consummation of the Merger registering the resale of 3,000,000 shares of Flame common stock under the Registration Rights Agreement, and Flame must use its commercially reasonable efforts to have the registration statement declared effective by the SEC by the earlier of (i) the 90th calendar day (or 120th calendar day if the SEC notifies Flame that it will review the registration statement) following the closing of the Merger and (ii) the 10th business day after the date Flame is notified (orally or in writing, whichever is earlier) by the SEC that the registration statement will not be reviewed or will not be subject to further review. Flame thereafter will be required to maintain a registration statement that is continuously effective and to cause the registration statement to regain effectiveness in the event that it ceases to be effective. At any time the registration statement is effective, any holder signatory to the Registration Rights Agreement may request, one time in any 12-month period, to sell all or a portion of its securities that are registrable in an underwritten offering pursuant to the registration statement for a total offering price reasonably expected to exceed, in the aggregate, $25 million. In addition, the holders will have certain “piggyback” registration rights with respect to registrations initiated by Flame and other Flame stockholders. Flame will bear the expenses incurred in connection with the filing of any registration statements pursuant to the Registration Rights Agreement, subject to limited exceptions.

Pursuant to the Registration Rights Agreement, the holders of Holdco Class A shares immediately prior to the effective time of the Holdco Merger, subject to limited exceptions, will agree to a lock-up on their shares of Flame Class A common stock, pursuant to which such parties will agree to not transfer shares of Flame Class A common stock held by such parties for a period of three years following the Closing. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Registration Rights Agreement” for additional information.

Transition Services Agreement

Sable will enter into a Transition Services Agreement (the “Transition Services Agreement”) with EMC on the Closing Date relating to certain services after the Closing. These support services will include certain operational, accounting, cash management, information technology and other general transition services. Please

 

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see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Transition Services Agreement” for additional information.

Sable-EM Purchase Agreement

Sable entered into a Purchase and Sale Agreement (the “Sable-EM Purchase Agreement”) on November 1, 2022 with EMC and MPPC relating to the purchase of SYU and the Pipelines. The Sable-EM Purchase Agreement was amended on June 13, 2023 and December 15, 2023. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Sable-EM Purchase Agreement” for additional information.

EM-Plains Purchase Agreement

EM and Plains entered into a Purchase and Sale Agreement (the “EM-Plains Purchase Agreement”) on October 10, 2022, pursuant to which EM purchased the Pipelines from Plains on October 13, 2022. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—EM-Plains Purchase Agreement” for additional information.

Term Loan Agreement

New Sable will enter into a Senior Secured Term Loan Agreement (the “Term Loan Agreement”) on the Closing Date with EMC, as lender, and Alter Domus Products Corp., as the administrative agent for the benefit of the lender, which provides for a $606,250,000 term loan before certain specified purchase price adjustments. The proceeds of the Term Loan Agreement will be deemed funded on the Closing Date in connection with consummation of the Sable-EM Purchase Agreement. The term loan will bear interest at ten percent (10.0%) per annum (computed on a 360-day year). Unless New Sable elects in writing prior to an applicable interest payment date to pay accrued but unpaid interest in cash, all such accrued and unpaid interest shall be compounded annually on January 1st of each year by adding the relevant amount to the then outstanding principal amount of the term loan. The Term Loan Agreement matures on the earliest to occur of (i) the fifth anniversary of the applicable effective time (such effective time, 12:00:01 a.m. (Houston Time) on January 1, 2022), (ii) ninety days after Restart Production (i.e., one hundred eighty (180) days after resumption of actual production from the wells) under and as defined in the Sable-EM Purchase Agreement or (iii) acceleration of the term loan in accordance with the terms of the Term Loan Agreement. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Term Loan Agreement” for additional information.

Recommendation to Stockholders

The Flame Board believes that the business combination proposal and the other proposals to be presented at the special meeting are fair to and in the best interest of Flame’s stockholders and unanimously recommends that its stockholders vote “FOR” the business combination proposal, “FOR” the Charter Proposal, “FOR” the Governance Proposal, “FOR” the incentive plan proposal, “FOR” the NYSE proposal and “FOR” the adjournment proposal, if presented.

When you consider the Flame Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of Flame stockholders generally. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination” for additional information. The Flame Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and in recommending to the Flame stockholders that they vote “FOR” the proposals presented at the special meeting.

 

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Conditions to the Closing of the Business Combination

Conditions to Each Party’s Obligations

The respective obligations of each party to the Merger Agreement to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction of the following conditions, any one or more of which may be waived (if legally permitted) in writing by all parties to the Merger Agreement:

 

   

all waiting periods (and any extensions thereof) applicable to the transactions under the HSR Act, and any commitments or agreements (including timing agreements) with any governmental authority not to consummate the transactions before a certain date, shall have expired or been terminated;

 

   

no governmental authority shall have enacted, issued, promulgated, enforced or entered any law, judgment, decree, executive order or award which is then in effect and has the effect of making the transactions contemplated by the Merger Agreement, including the Merger, illegal or otherwise prohibiting, preventing or enjoining consummation of the transactions contemplated by the Merger Agreement, including the Merger;

 

   

the offer by Flame to redeem shares of Flame common stock pursuant to the redemption rights of Flame public stockholders shall have been completed in accordance with the terms of the Merger Agreement and this proxy statement;

 

   

this proxy statement shall have received SEC clearance;

 

   

the Flame Stockholder Approvals with respect to the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal and the NYSE proposal shall have been obtained in accordance with this proxy statement, the DGCL and other applicable law, the Flame certificate of incorporation and Flame bylaws and the rules and regulations of the NYSE;

 

   

the transactions contemplated under the Sable-EM Purchase Agreement (including certain transactions contemplated by the Term Loan Agreement) shall be completed contemporaneously with the Closing in accordance with, and pursuant to, the terms of the Merger Agreement and the Sable-EM Purchase Agreement (except as previously consented to in writing by Flame, without waiver, modification or amendment to the Sable-EM Purchase Agreement); and

 

   

Flame shall have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) remaining after giving effect to the redemption of shares of Flame common stock pursuant to the redemption rights of Flame public stockholders and after receipt of the proceeds under the PIPE Subscription Agreements.

Other Conditions to the Obligations of Flame

The obligations of Flame to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction of the following additional conditions, any one or more of which may be waived (if legally permitted) in writing by Flame:

 

   

the representations and warranties of each of Holdco and Sable regarding: (i) their organization and qualification; (ii) their authority and approvals to, among other things, execute and deliver the Merger Agreement, and each of the ancillary documents attached thereto to which they are or will be a party and to consummate the transactions contemplated thereby; (iii) their capitalization; (iv) their subsidiaries; (v) their brokers fees and (vi) their operations shall be true and correct in all material respects as of the Closing as if made at the Closing (or, if given as of an earlier date, as of such earlier date);

 

   

the other representations and warranties of each of Holdco and Sable shall be true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” or any similar limitation set forth in the Merger Agreement) as of the Closing as if made at the Closing (or, if given as of an earlier date, as of such earlier date), except where the failure of such representations and warranties to

 

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be true and correct (whether as of the Closing or such earlier date), taken as a whole, does not result in Material Adverse Effect (as defined in the Merger Agreement);

 

   

each of Holdco and Sable shall have performed and complied in all material respects with the covenants and agreements required to be performed or complied with by them under the Merger Agreement as of or prior to the Closing;

 

   

no Material Adverse Effect shall have occurred since the date of the Merger Agreement;

 

   

Flame shall have received a certificate signed by an officer of each of Holdco and Sable, dated as of the Closing Date, confirming that the conditions set forth in the first four bullet points in this section and the condition set forth in the sixth bullet of the previous section, in each case, have been satisfied;

 

   

each of Holdco and Sable shall have received the executed counterparts to all of the ancillary agreements to which either Holdco or Sable, or any Holdco Equityholder, is party, each of which shall be in full force and effect as of the Closing and shall not have been repudiated or rescinded in any respect;

 

   

Flame shall have received evidence reasonably satisfactory to it of the receipt of certain documents and consents;

 

   

Flame shall have received evidence reasonably satisfactory to it of the satisfaction of the conditions precedent under Section 9.9 of the Sable-EM Purchase Agreement and Article IV items (i) and (p) of the Term Loan Agreement; and

 

   

Flame shall have obtained certification from BOEM that Flame is qualified to hold offshore oil and gas leases and rights-of-way pursuant to the Outer Continental Shelf Lands Act and BOEM’s regulations promulgated thereunder.

Other Conditions to the Obligations of Holdco and Sable

The obligations of Holdco and Sable to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction of the following additional conditions, any one or more of which may be waived (if legally permitted) in writing by Holdco and Sable:

 

   

the representations and warranties of Flame regarding: (i) its organization and qualification; (ii) its authority to execute and deliver the Merger Agreement, and each of the ancillary documents thereto to which it is or will be a party and to consummate the transactions contemplated thereby; (iii) its capitalization and (iv) its brokers fees shall be true and correct in all material respects as of the Closing as though made at the Closing (or, if given as of an earlier date, as of such earlier date);

 

   

the other representations and warranties of Flame shall be true and correct (without giving effect to any limitation of “materiality” or “material adverse effect” or any similar limitation set forth in the Merger Agreement) as of the Closing as though made at the Closing, except where the failure of such representations and warranties to be true and correct, taken as a whole, does not result in a material adverse effect on Flame;

 

   

Flame shall have performed and complied in all material respects with the covenants and agreements required to be performed or complied with by it under the Merger Agreement;

 

   

each of Holdco and Sable shall have received a certificate signed by an officer of Flame confirming that the conditions set forth in the first three bullet points of this section have been satisfied;

 

   

the Flame Class A common stock to be issued in connection with the transactions shall have been approved for listing on NYSE, subject only to official notice of issuance thereof and the requirement to have a sufficient number of round lot holders; and

 

   

Each of Holdco and Sable shall have received the executed counterparts to all of the ancillary agreements to which Flame or Sponsor is a party, each of which shall be in full force and effect as of the Closing and shall not have been repudiated or rescinded in any respect.

 

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Tax Consequences of the Exercise of Redemption Rights

For a description of certain U.S. federal income tax consequences of the exercise of redemption rights, please see the information set forth in “Proposal No. 1—The Business Combination Proposal—Certain Material U.S. Federal Income Tax Consequences of the Exercise of Redemption Rights to Flame Stockholders.”

Anticipated Accounting Treatment

The Business Combination is accounted for under the scope of Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Pursuant to ASC 805, Flame has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

   

Flame is transferring cash via funds from its trust account and proceeds from equity issuances and will be incurring liabilities to execute the Business Combination;

 

   

Flame will make cash payments to SYU to acquire 100% of the equity of SYU;

 

   

Flame will obtain direct control and 100% ownership of Holdco;

 

   

Flame certificate of incorporation is amended to include a name change to New Sable;

 

   

Flame management will remain at Flame after the Merger (or “New Sable”) and the members of the Flame Board will remain and become members of the New Sable Board to oversee all operations going forward.

The preponderance of the evidence discussed above supports the conclusion that Flame is the accounting acquirer in the Business Combination. SYU constitutes a business in accordance with ASC 805 and the Business Combination constitutes a change in control. Accordingly, the Business Combination will be accounted for using the acquisition method of accounting. Upon consummation of the Business Combination, SYU will be the predecessor entity and its historical operations will be presented as that of New Sable on a go forward basis.

Information About SYU

Beginning in 1968 and over the course of 14 years, EM consolidated more than a dozen offshore federal oil leases and organized them into a streamlined production unit known as the Santa Ynez Unit (“SYU”). SYU consists of three offshore platforms and a wholly owned onshore processing facility located along the Gaviota Coast at Las Flores Canyon in Santa Barbara County, California. SYU’s onshore facilities and the three offshore platforms remained in continuous operation until 2015. In May 2015, a Plains Pipeline that transported produced oil from SYU experienced a leak, as further described below under “—Pipeline 901 Incident.” The SYU platforms and facilities suspended production after the Line 901 incident, the SYU Assets were shut in and the facilities were placed in a safe state. The facilities are not currently producing oil and gas; however, all equipment remains in place in an operation-ready state, requiring ongoing inspections, maintenance and surveillance. As part of these suspension efforts, all SYU equipment was drained, flushed and purged in 2016. All hydrocarbon pipelines within SYU have been placed in a safe state and remain under regular monitoring. In 2020, Plains entered into a Consent Decree, described further below under “—Pipeline 901 Incident,” that provides a path for a potential restart of Lines 901 and 903.

In addition to SYU, we will also acquire in the Business Combination Pipeline Segments 901 and 903 (the “Pipelines”), which were owned and operated by Plains and were recently acquired by EM. The Pipelines were used to deliver oil to local refinery markets. Following the crude oil release described further below, Plains indicated it shut down the pipeline, initiated its emergency response plan, and the Pipelines were subsequently emptied and placed in a safe state.

See the sections entitled “Information About SYU,” “SYU Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management of New Sable After the Business Combination” for additional information.

 

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Risk Factor Summary

In evaluating the proposals to be presented at the special meeting, you should carefully read this proxy statement and especially consider the factors discussed in the section entitled “Risk Factors.” The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of Flame, Holdco and Sable to complete the Business Combination, and (ii) the business, cash flows, financial condition and results of operations of the company following consummation of the Business Combination. These risks include:

Risks Related to SYU’s Business and New Sable Following the Business Combination

 

   

We need to satisfy a number of permitting obligations and other requirements before we can restart production of the SYU Assets. The requirements to restart Lines 901 and 903 include those set forth in a Consent Decree with federal and state agencies. While the operator of the lines has satisfied most of the conditions to restart including under the Consent Decree, there is no assurance that we will be successful in satisfying the remainder of the requirements and restarting production of the SYU Assets in a timely manner.

 

   

Our assumptions and estimates regarding the total costs associated with restarting production may be inaccurate.

 

   

There is no guarantee that New Sable will have sufficient cash to restart production of the SYU Assets after the completion of the Business Combination.

 

   

Oil, natural gas and natural gas liquids, or “NGL(s)”, prices are volatile, due to factors beyond our control, and greatly affect SYU’s business, results of operations and financial condition. Any decline in, or sustained low levels of, oil, natural gas and NGL prices will cause a decline in SYU’s cash flow from operations, which could materially and adversely affect its business, results of operations and financial condition.

 

   

If commodity prices decline and remain depressed for a prolonged period, SYU’s business may become uneconomic and result in write downs of the value of our properties, which may adversely affect our financial condition and our ability to fund operations.

 

   

An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we expect to receive for our future production could significantly reduce our cash flow and adversely affect our financial condition.

 

   

The estimated quantities of petroleum contained in the SYU Assets are classified as “contingent resources” rather than “reserves” because they are subject to numerous contingencies. There is no assurance that any of the petroleum contained in the SYU Assets will ever be recovered or reclassified as “reserves.”

 

   

The NSAI Report does not account for any costs required to resolve the contingencies, and the cash flow estimates in the NSAI Report assume these contingencies have been resolved.

 

   

Even if all the contingencies are resolved and all the facilities are restarted, the amounts recovered may be substantially less than estimated.

 

   

The cash flow estimates are based on numerous assumptions from NSAI, Sable and EM. The cash flow ultimately generated, if any, may be substantially less than estimated if any of these assumptions were inaccurate.

 

   

The contingent resources shown in the NSAI Report are only estimates and should not be construed as exact quantities. The contingent resource estimates are based on a limited analysis, and NSAI did not seek to investigate every risk or every aspect of the properties.

 

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Our hedging strategy in the future may not effectively mitigate the impact of commodity price volatility from our cash flows, and our hedging activities could result in cash losses and may limit potential gains.

 

   

Developing and producing oil, natural gas and NGLs are costly and high-risk activities with many uncertainties that may result in a total loss of investment or otherwise adversely affect our business, financial condition, results of operations and cash flows. Many of these risks are heightened for us due to the fact that most of our equipment has been shut-in for more than seven years.

 

   

The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business.

 

   

Development and production of oil, natural gas and NGLs in offshore waters have inherent and historically higher risk than similar activities onshore.

 

   

Oil and natural gas producers’ operations are substantially dependent on the availability of water and the disposal of waste, including produced water and drilling fluids. Restrictions on the ability to obtain water or dispose of waste may impact our operations.

 

   

The unavailability or high cost of rigs, equipment, supplies and crews could delay our operations, increase our costs and delay forecasted revenue.

 

   

The third parties on whom we rely for transportation services are subject to complex federal, state and other laws that could adversely affect the cost, manner or feasibility of conducting our business.

 

   

Our business depends in part on pipelines, gathering systems and processing facilities owned by us or others. Any limitation in the availability of those facilities could interfere with our ability to market our oil, natural gas and NGL production.

 

   

Loss of our key executive officers or other key personnel, or an inability to attract and retain such officers and personnel, could negatively affect our business and in one instance could cause a default under the agreement governing our existing indebtedness.

 

   

We may incur losses as a result of title defects or deficiencies in our properties.

 

   

We will not own all of the land on which the assets are located or all of the land that we must traverse in order to conduct our operations. There are disputes with respect to certain of the rights-of-way or other interests and any unfavorable outcomes of such disputes could require us to incur additional costs.

 

   

We may be unable to restart production by January 1, 2026, which would permit EM to exercise a reassignment option and take ownership of SYU without any compensation or reimbursement other than the deemed repayment in full of the principal and accrued interest outstanding under the Term Loan Agreement.

 

   

Restrictive covenants in the Term Loan Agreement or any future agreements governing our indebtedness could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests.

 

   

Under the terms of the Term Loan Agreement, restarting production leads will trigger a springing maturity date following a specified grace period, and the terms on which we will be able to refinance the Term Loan Agreement, if necessary, will depend on then-prevalent market conditions.

 

   

We may in the future refinance our existing indebtedness or incur new indebtedness at variable rates and without the option to pay interest in-kind, which would subject us to interest rate risk and could cause our debt service obligations to increase significantly.

 

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Our business plans require a significant amount of capital. In addition, our future capital needs may require us to issue additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or ability to pay dividends.

 

   

We are exposed to trade credit risk in the ordinary course of our business activities.

 

   

We may incur substantial losses and be subject to substantial liability claims as a result of catastrophic events. We may not be insured for, or our insurance may be inadequate to protect us against, these risks. Expenses not covered by our insurance could have a material adverse effect on our financial position and results of operations.

 

   

We may be unable to compete effectively with larger companies.

 

   

We are subject to complex federal, state, local and other laws, regulations and permits that could adversely affect the cost, manner, ability or feasibility of conducting our operations.

 

   

The listing of a species as either “threatened” or “endangered” under the U.S. Endangered Species Act and/or the California Endangered Species Act could result in increased costs, new operating restrictions, or delays in our operations, which could adversely affect our results of operations and financial condition.

 

   

Conservation measures, technological advances and increasing public attention and activism with respect to climate change and environmental matters could reduce demand for oil, natural gas and NGLs and have an adverse effect on our business, financial condition and reputation.

 

   

Climate change legislation or regulations restricting emissions of “greenhouse gases,” or GHGs, could result in increased operating costs and reduced demand for the oil, natural gas and NGLs we expect to produce.

 

   

Our financial results with respect to the Pipelines will primarily depend on the outcomes of ratemaking proceedings with the California Public Utilities Commission and we may not be able to earn an adequate rate of return in a timely manner or at all.

 

   

Attempts by the California state government to restrict the production of oil and gas could negatively impact our operations and result in decreased demand for fossil fuels in California.

 

   

Our assets are located exclusively onshore and offshore California, making us vulnerable to risks associated with having operations concentrated in this geographic area.

 

   

All of our operations are conducted in areas that may be at risk of damage from fire, mudslides, earthquakes or other natural disasters.

 

   

Increasing attention to environmental, social and governance (“ESG”) matters may impact our business.

 

   

Environmental groups may initiate litigation and take other actions to delay or prevent us from obtaining required approvals to restart and continue production.

 

   

The Inflation Reduction Act of 2022 could accelerate the transition to a low carbon economy and will impose new costs on our operations.

 

   

The cost of decommissioning and the cost of financial assurance to satisfy decommissioning obligations are uncertain.

 

   

We may be required to post cash collateral pursuant to our agreements with sureties, letter of credit providers or regulators under our existing or future bonding or other arrangements, which may have a material adverse effect on our liquidity and our ability to execute our capital expenditure plan and our asset retirement obligation plan and comply with the agreements governing our existing or future indebtedness.

 

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Our business could be negatively affected by security threats, including cybersecurity threats, destructive forms of protest and opposition by activists and other disruptions.

Risks Related to Redemption

 

   

There is uncertainty regarding the federal income tax consequences of the redemption to the holders of Flame Class A common stock.

 

   

A 1% U.S. federal excise tax may be imposed upon us in connection with the redemptions by us of our Class A common stock.

Risks Related to the Business Combination and Flame

 

   

The Sponsor and the Insiders have agreed to vote in favor of the Business Combination, regardless of how Flame’s public stockholders vote.

 

   

Public stockholders who redeem their public shares and/or previously redeemed their public shares in connection with the Extension Amendment or the Second Extension Amendment may continue to hold any public warrants that they own, which will result in additional dilution to non-redeeming public stockholders upon exercise of such public warrants or private placement warrants, as applicable.

 

   

The reduced size of our trust account may make it more difficult for us to complete an initial business combination.

 

   

There are no assurances that the Extension Amendment or the Second Extension Amendment will enable us to complete an initial business combination.

 

   

The Sponsor, certain members of the Flame Board and certain other Flame officers have interests in the Business Combination that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the business combination proposal and approval of the other proposals described in this proxy statement.

 

   

Our warrants are currently accounted for as liabilities and the changes in value of our private placement warrants could have a material effect on our financial results.

 

   

We have identified material weaknesses in our internal control over financial reporting. These material weaknesses could continue to adversely affect investor confidence in us and materially adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

 

   

Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”

 

   

The Sponsor and the PIPE Investors will beneficially own a significant equity interest in New Sable and may take actions that conflict with your interests.

 

   

Insiders will continue to have substantial influence over New Sable after the Business Combination, which could limit your ability to affect the outcome of key transactions, including a change of control.

 

   

The future exercise of registration rights may adversely affect the market price of New Sable common stock.

 

   

Because there are no current plans to pay cash dividends on the New Sable common stock, you may not receive any return on investment unless or you sell your New Sable common stock at a price greater than what you paid for it.

 

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SUMMARY HISTORICAL FINANCIAL INFORMATION OF FLAME

The information presented below is derived from Flame’s unaudited condensed interim financial statements as of September 30, 2023, and for the nine months ended September 30, 2023 and 2022, and the audited financial statements as of and for the years ended December 31, 2022 and 2021, included elsewhere in this proxy statement.

Flame’s historical results are not necessarily indicative of the results that may be expected for any other period in the future. You should read the summary historical financial data set forth below together with Flame’s financial statements and the accompanying notes included elsewhere in this proxy statement, the information in the section entitled “Flame’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information contained elsewhere in this proxy statement.

 

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Flame is providing the following summary historical financial information to assist you in your analysis of the financial aspects of the Business Combination.

 

     As of
September 30, 2023
     As of December 31,  
     2022      2021  
     (unaudited)                

Balance Sheet Data:

        

Cash

   $ 709,450      $ 100,256      $ 322,768  

Investments held in Trust Account

   $ 63,939,672      $ 290,718,297      $ 287,516,153  

Total assets

   $ 64,895,514      $ 290,906,765      $ 288,439,429  

Total liabilities

   $ 28,175,380      $ 18,885,023      $ 13,878,865  

Class A Common Stock subject to possible redemption

   $ 63,123,555      $ 290,347,008      $ 287,500,000  

Total stockholders’ deficit

   $ (26,403,421    $ (18,325,266    $ (12,939,436

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding

   $ —        $ —        $ —    

Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 7,187,500 and no shares issued and outstanding, excluding 6,104,682 and 28,750,000 shares subject to possible redemption at September 30, 2023 and December 31, 2022 and 2021, respectively

   $ 719      $ —        $ —    

Class B common stock, $0.0001 par value; 20,000,000 shares authorized; no shares issued and outstanding at September 30, 2023 and 7,187,500 shares issued and outstanding at December 31, 2022 and 2021

   $ —        $ 719      $ 719  

 

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     Nine months ended September 30,     Year Ended
December 31,
    Year Ended
December 31,
 
     2023     2022     2022     2021  
     (unaudited)              

Statement of Operations Data:

        

Loss from operations

   $ (3,485,342   $ (2,012,339   $ (6,150,199   $ (1,682,816

Interest income from trust account

   $ 3,840,682     $ 1,615,323     $ 3,989,061     $ 16,153  

Offering costs allocated to warrants

   $ —       $ —       $ —       $ (280,829

Initial fair value of promissory note

   $ —       $ —       $ —       $ (18,323

Change in fair value of warrant liabilities

   $ (3,004,875   $ 10,003,125     $ 498,000     $ 6,155,125  

Change in fair value of convertible promissory note - related parties

   $ 37,804     $ (21,011   $ (170,741   $ 83,768  

Income tax expense

   $ (785,543   $ (530,156   $ (757,069   $ —    

Net income (loss)

   $ (3,397,274   $ 9,054,942     $ (2,590,948   $ 4,273,078  

Weighted average shares outstanding, redeemable Class A common stock

     12,660,640       28,750,000       28,750,000       24,417,808  

Basic and diluted net income (loss) per share, Redeemable Class A common stock

   $ (0.17   $ 0.25     $ (0.07   $ 0.14  

Weighted average shares outstanding, non-redeemable Class B common
stock

     7,187,500       7,187,500       7,187,500       7,187,500  

Basic and diluted net (loss) income per share, non-redeemable Class B common stock

   $ (0.17   $ 0.25     $ (0.07   $ 0.14  

Statement of Cash Flows Data:

        

Net cash used in operating activities

   $ (2,445,957   $ (837,530   $ (1,714,430   $ (2,007,824

Net cash provided by (used in) investing activities

   $ 230,619,307     $ 320,000     $ 786,918     $ (287,500,000

Net cash (used in) provided by financing activities

   $ (227,564,156   $ 335,000     $ 705,000     $ 289,821,578  

 

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SUMMARY HISTORICAL FINANCIAL INFORMATION OF SYU

The information presented below is derived from the SYU unaudited condensed combined financial statements and audited combined financial statements included elsewhere in this proxy statement for the nine months ended September 30, 2023, and 2022, and the years ended December 31, 2022 and 2021 and the balance sheet data as of September 30, 2023, and December 31, 2022 and 2021.

SYU’s historical results are not necessarily indicative of the results that may be expected for any other period in the future. You should read the summary historical financial data set forth below together with SYU’s financial statements and the accompanying notes included elsewhere in this proxy statement, the information in the section entitled “SYU Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information contained elsewhere in this proxy statement.

SYU is providing the following summary historical consolidated financial information to assist you in your analysis of the financial aspects of the Business Combination.

 

    As of September 30,     As of December 31,  
    2023     2022      2021  
    (unaudited)               

Balance Sheet Data:

      

In thousands

      

Materials and supplies

  $ 17,374     $ 17,211      $ 15,043  

Total oil and gas properties, net

  $ 689,277     $ 690,217      $ 2,106,019  

Total assets

  $ 713,340     $ 715,032      $ 2,129,044  

Total liabilities

  $ 364,698     $ 352,436      $ 348,166  

Parent net investment

  $ 348,642     $ 362,596      $ 1,780,878  

 

    Nine Months Ended
September 30,
   

Year Ended December 31,

 
         2023               2022          2022     2021  
    (unaudited)              

Statement of Operations Data:

       

In thousands

       

Revenues:

       

Oil and gas sales

  $     $     $     $  

Operating expenses:

       

Operations and maintenance

  $ 43,167     $ 45,888     $ 62,585     $ 72,827  

Depletion, depreciation, amortization, and accretion

  $ 15,764     $ 15,371     $ 20,852     $ 19,384  

Impairment of oil and gas properties

  $     $ 1,404,307     $ 1,404,307     $  

General and administrative

  $ 9,107     $ 9,394     $ 12,807     $ 17,777  

Other income (expense)

  $ (533   $ 635     $ 1,855     $ 278  

Net loss

  $ (68,571   $ (1,474,325   $ (1,498,696   $ (109,710

Statement of Cash Flows Data:

       

Net cash used in operating activities

  $ (54,617   $ (60,870   $ (80,414   $ (78,212

Net cash provided by financing activities

  $ 54,617     $ 60,870     $ 80,414     $ 78,212  

 

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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed combined financial data is derived from the unaudited pro forma combined balance sheet and unaudited pro forma combined statements of operations included elsewhere in this proxy statement.

The unaudited pro forma condensed combined financial information is prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

The unaudited pro forma condensed combined financial information gives effect to the Merger and the transactions (together referred to as the “Transactions” herein), summarized below:

 

   

the Merger, together with the other transactions contemplated by the Merger Agreement (including the consummation of the PIPE Investment) and related agreements, collectively referred to as the “Business Combination”;

 

   

the conversion of the 7,187,500 shares of Flame Class B common stock held by our Sponsor and other initial stockholders on August 22, 2023 into 7,187,500 shares of New Sable common stock, in connection with the closing of the Business Combination; and

 

   

the illustrative redemption by Flame of shares of Flame Class A common stock held by public stockholders in connection with the Transactions.

The unaudited pro forma condensed combined financial statements present two redemption scenarios as follows:

 

   

Assuming No Additional Redemptions: In connection with the Extension Amendment and the Second Extension Amendment, an aggregate of 22,645,318 public shares were redeemed in February 2023 and August 2023, and an aggregate of $230,129,156 was withdrawn from the trust account for such redemptions. After the redemptions, 6,104,682 public shares remained outstanding. This scenario assumes that no additional public shares are redeemed; and

 

   

Assuming Maximum Redemption: This scenario assumes that stockholders representing the 6,104,682 public shares, which represents 100% of remaining public shares outstanding, exercise their redemption rights, resulting in an aggregate payment of approximately $63,124,000 from the trust account.

The unaudited pro forma combined statement of operations for the nine months ended September 30, 2023 and the year ended December 31, 2022, combines the historical statements of operations of Flame and the historical combined statements of SYU, the predecessor entity, (including the Assets, as defined by the Sable-EM Purchase Agreement, excluding the Pipelines) for such periods on a pro forma basis, as if the Transactions had been consummated on January 1, 2022, the beginning of the earliest period presented. The successor entity will be New Sable and its combined statements of operations and positions will reflect Sable’s purchase of the Assets (as defined in the Sable-EM Purchase Agreement), including the Pipelines.

The unaudited pro forma combined balance sheet as of September 30, 2023 combines the historical balance sheet of Flame and the historical combined balance sheet of SYU on such date on a pro forma basis, as if the Transactions had been consummated on September 30, 2023.

 

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The summary unaudited pro forma condensed combined financial information has been developed from and should be read in conjunction with:

 

   

information in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information,” including the accompanying notes to the unaudited pro forma condensed combined financial information, included elsewhere in this proxy statement;

 

   

the (i) historical condensed unaudited financial statements of Flame as of and for the nine months ended September 30, 2023 and 2022, included elsewhere in this proxy statement, and (ii) historical audited financial statements of Flame as of and for the years ended December 31, 2022 and 2021, included elsewhere in this proxy statement;

 

   

the (i) historical condensed unaudited financial statements of SYU as of and for the nine months ended September 30, 2023 and 2022, included else where in this proxy statement, and (ii) historical audited combined financial statements of SYU as of and for the years ended December 31, 2022 and 2021, included elsewhere in this proxy statement; and

 

   

other information relating to Flame and SYU contained in this proxy statement, including information in the sections titled “Flame’s Management’s Discussion and Analysis of Financial Conditions and Results of Operations and “SYU’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Summary Unaudited Pro Forma Combined Balance Sheet as of September 30, 2023

 

(in thousands)    Assuming No
Additional
Redemptions
     Assuming Maximum
Redemption
 

Total assets

   $ 1,373,745      $ 1,310,621  
  

 

 

    

 

 

 

Total liabilities

   $ 948,755      $ 948,755  
  

 

 

    

 

 

 

Total stockholders’ equity

   $ 424,990      $ 361,866  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 1,373,745      $ 1,310,621  
  

 

 

    

 

 

 

Summary Unaudited Pro Forma Combined Statement of Operations—Nine Months Ended September 30, 2023

 

(in thousands, except share and per share data)   Assuming No
Additional
Redemptions
    Assuming Maximum
Redemption
 

Total revenue

  $ —       $ —    
 

 

 

   

 

 

 

Total operating expenses

  $ 78,671     $ 78,671  

Total other expenses

  $ 66,310     $ 66,310  

Loss before provision for income taxes

  $ (144,981   $ (144,981

Net loss

  $ (145,767   $ (145,767

Basic and diluted net loss per share:

   

Class A

  $ (2.13   $ (2.34

Class B

    NA       NA  

Weighted average shares for basic and diluted:

   

Class A

    68,292,182       62,187,500  

Class B

    NA       NA  

 

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Summary Unaudited Pro Forma Combined Statement of Operations—Year Ended December 31, 2022

 

(in thousands, except share and per share data)   Assuming No
Additional
Redemptions
    Assuming Maximum
Redemption
 

Total revenue

  $ —       $ —    
 

 

 

   

 

 

 

Impairment of oil and gas properties

  $ 1,404,307     $ 1,404,307  

Total operating expenses

  $ 1,654,170     $ 1,654,170  

Total other expenses

  $ 73,734     $ 73,734  

Loss before provision for income taxes

  $ (1,727,904   $ (1,727,904

Net loss

  $ (1,728,661   $ (1,728,661

Basic and diluted net loss per share:

   

Class A

  $ (25.31   $ (27.80

Class B

    NA       NA  

Weighted average shares for basic and diluted:

   

Class A

    68,292,182       62,187,500  

Class B

    NA       NA  

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement includes statements that express Flame’s, Holdco’s and Sable’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this proxy statement and include statements regarding our intentions, beliefs or current expectations concerning, among other things, the Business Combination and the benefits of the Business Combination, including results of operations, financial condition, liquidity, prospects, growth, strategies and the markets in which New Sable will operate. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting Flame, Holdco and Sable.

Factors that may impact such forward-looking statements include:

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

   

the outcome of any legal proceedings that may be instituted against Flame, Holdco, Sable or others following announcement of the Business Combination and the transactions contemplated in the Merger Agreement;

 

   

the inability to complete the transactions contemplated by the Merger Agreement due to the failure to obtain approval of the stockholders of Flame, to obtain financing to complete the Business Combination or to satisfy other conditions to closing in the Merger Agreement;

 

   

the ability to obtain or maintain the listing of New Sable common stock on the NYSE following the Business Combination;

 

   

the ability to recommence production of the SYU and the cost and time required therefor, and production levels once recommenced;

 

   

commodity price volatility, low prices for oil and/or natural gas, global economic conditions, inflation, increased operating costs, lack of availability of drilling and production equipment, supplies, services and qualified personnel, processing volumes and pipeline throughput;

 

   

uncertainties related to new technologies, geographical concentration of operations, environmental risks, weather risks, security risks, drilling and other operating risks, regulatory changes and regulatory risks;

 

   

the uncertainty inherent in estimating oil and natural gas resources and in projecting future rates of production;

 

   

reductions in cash flow and lack of access to capital;

 

   

Flame’s ability to satisfy future cash obligations;

 

   

restrictions in existing or future debt agreements or structured or other financing arrangements;

 

   

the timing of development expenditures, managing growth and integration of acquisitions, and failure to realize expected value creation from acquisitions;

 

   

the risk that the proposed transaction disrupts current plans and operations as a result of the announcement and consummation of the Business Combination;

 

   

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, the ability of New Sable to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees;

 

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costs related to the proposed Business Combination;

 

   

changes in applicable laws or regulations;

 

   

the accuracy of New Sable’s projections and estimates regarding its expenses, capital requirements, cash utilization, and need for additional financing;

 

   

the expected uses of the net proceeds from the Business Combination;

 

   

New Sable’s ability to recruit and retain key members of management and other key personnel;

 

   

our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving the Business Combination;

 

   

developments relating to New Sable’s competitors and its industry;

 

   

the possibility that Flame, Holdco or Sable may be adversely impacted by other economic, business, and/or competitive factors; and

 

   

other risks and uncertainties indicated in this proxy statement, including those under the heading “Risk Factors” in this proxy statement, and other filings that have been made or will be made with the SEC by Flame and New Sable, as applicable.

The forward-looking statements contained in this proxy statement are based on Flame’s, Holdco’s and Sable’s current expectations and beliefs concerning future developments and their potential effects on the Business Combination, Flame, Holdco and Sable. There can be no assurance that future developments affecting Flame. Holdco and/or Sable will be those that Flame, Holdco or Sable has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond Flame’s, Holdco’s and/or Sable’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Flame, Holdco and Sable will not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Before a stockholder grants its proxy or instructs how its vote should be cast or votes on the business combination proposal, the Charter Proposal, the Governance Proposal, the incentive plan proposal, the NYSE proposal or the adjournment proposal, it should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement may adversely affect Flame, Holdco and Sable.

 

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RISK FACTORS

Stockholders should carefully consider the following risk factors, together with all of the other information included in this proxy statement, before they decide whether to vote or instruct their vote to be cast to approve the proposals described in this proxy statement. The following risk factors apply to the business and operations of Flame, Sable and the business and operations of New Sable following the completion of the Business Combination. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have an adverse effect on the business, cash flows, financial condition and results of operations of Flame, Sable and the post-combination company. You should also carefully consider the following risk factors in addition to the other information included in this proxy statement, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Flame, Sable and New Sable may also face additional risks and uncertainties that are not presently known to Flame or Sable, or that Flame or Sable currently deem immaterial, which may also impair our or Flame’s, Sable’s and New Sable’s business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

Risks Related to Restart of Production

Except where noted or the context otherwise requires, as used in this subsection, the terms “we,” “us,” “our,” “our company,” “our business” and similar terms refer to New Sable.

We need to satisfy a number of permitting obligations and other requirements before we can restart production of the SYU Assets. The requirements to restart Lines 901 and 903 include those set forth in a Consent Decree with federal and state agencies. While the operator of the lines has satisfied most of the conditions to restart including under the Consent Decree, there is no assurance that we will be successful in satisfying the remainder of the requirements and restarting production of the SYU Assets in a timely manner.

SYU suspended production as a result of the Line 901 incident and consequent suspension of service, and SYU’s business depends on its production restarting. We need to satisfy a number of requirements related to SYU and Lines 901 and 903 before we can restart production. Such requirements include conditions set forth in a U.S. federal district court Consent Decree executed by Plains and relevant U.S. and State of California government agencies. For further information, see “Information About SYU—Pipeline 901 Incident.” While the current operator of Lines 901 and 903 has satisfied most of the conditions to restart including under the Consent Decree, there is no assurance that we will be successful in satisfying the remaining requirements and restarting production in a timely manner. If we fail to restart production by January 1, 2026, the prior owner of SYU may exercise its right to cause us to reassign the SYU Assets. See “Risks Related to the Business of SYU—We may be unable to restart production of SYU by January 1, 2026, which would permit EM to exercise a reassignment option and take ownership of SYU without any compensation or reimbursement other than the deemed repayment in full of the principal and accrued interest outstanding under the Term Loan Agreement.”

Our assumptions and estimates regarding the total costs associated with restarting production may be inaccurate.

We currently estimate the total costs we will incur in order to restart production to be approximately $197,000,000. The expenditures will primarily be directed toward obtaining the necessary regulatory approvals and completing the pipeline repairs and bringing the shut-in assets back online during the third quarter of 2024. This estimate of costs to restart production considers currently available facts and presently enacted laws and regulations, but it is subject to uncertainties associated with the assumptions that we have made. For example, the costs of equipment, repairs and maintenance, the costs of operating personnel, the costs to obtain governmental approvals, and legal, consulting and other professional expenses could turn out to be higher than we have estimated. Accordingly, our assumptions and estimates may change in future periods based on future events and

 

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total costs may materially increase; therefore, we can provide no assurance that we will not have to incur additional costs in future periods significantly higher than our estimated costs for the restart of production.

There is no guarantee that New Sable will have sufficient cash to restart production of the SYU Assets after the completion of the Business Combination.

Until New Sable restarts production of the SYU Assets, it will not generate any revenue or cash flows from operations. New Sable will rely on cash on hand, which will consist of the aggregate cash proceeds on the balance sheet after giving effect to the Business Combination, any redemptions of Flame common stock in connection therewith and the PIPE Investment, to fund the operations necessary to restart production of the SYU Assets. While New Sable believes it will have sufficient cash on hand after the completion of the Business Combination to restart production of the SYU Assets, there is no guarantee it will. If New Sable does not have sufficient cash on hand after the completion of the Business Combination to restart production of SYU, New Sable may need to raise additional capital to continue its operations, and this capital may not be available on acceptable terms or at all. If New Sable does not have sufficient cash on hand or is unable to obtain additional funding on a timely basis, it may be unable to restart production of SYU, which could materially affect its business, financial condition and results of operations. See “Risk Factors—Risks Related to the Business of SYU—We may be unable to restart production of SYU by January 1, 2026, which would permit EM to exercise a reassignment option and take ownership of SYU without any compensation or reimbursement other than the deemed repayment in full of the principal and accrued interest outstanding under the Term Loan Agreement.

Risks Related to the Business of SYU

Except where noted or the context otherwise requires, as used in this subsection, the terms “we,” “us,” “our,” “our company,” “our business” and similar terms refer to New Sable.

Oil, natural gas and natural gas liquids, or “NGL(s)”, prices are volatile, due to factors beyond our control, and greatly affect SYU’s business, results of operations and financial condition. Any decline in, or sustained low levels of, oil, natural gas and NGL prices will cause a decline in SYU’s cash flow from operations, which could materially and adversely affect its business, results of operations and financial condition.

SYU’s revenues, operating results, profitability, liquidity, future growth and the value of our assets depend primarily on prevailing commodity prices. Historically, oil and natural gas prices have been volatile and fluctuate in response to changes in supply and demand, market uncertainty, and other factors that are beyond our control, including:

 

   

the regional, domestic and foreign supply of oil, natural gas and NGLs;

 

   

the level of commodity prices and expectations about future commodity prices;

 

   

the level of global oil and natural gas exploration and production;

 

   

localized supply and demand fundamentals, including the proximity and capacity of pipelines and other transportation facilities, and other factors that result in differentials to benchmark prices from time to time;

 

   

the cost of exploring for, developing, producing and transporting oil, natural gas and NGLs;

 

   

the price and quantity of foreign imports;

 

   

political and economic conditions in oil producing countries, including conflicts in or among the Middle East, Africa, South America and Russia;

 

   

the ability of members of the Organization of Petroleum Exporting Countries (“OPEC”) to agree to and maintain oil price and production controls;

 

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speculative trading in crude oil and natural gas derivative contracts;

 

   

the level of consumer product demand;

 

   

weather conditions and other natural disasters;

 

   

risks associated with operating drilling rigs;

 

   

technological advances affecting exploration and production operations and overall energy consumption;

 

   

domestic and foreign governmental regulations and taxes;

 

   

the impact of energy conservation efforts;

 

   

the continued threat of terrorism and the impact of military and other action, including the Russia-Ukraine war and its destabilizing effect on the European continent and the global oil and natural gas markets;

 

   

the price and availability of competitors’ supplies of oil and natural gas and alternative fuels; and

 

   

overall domestic and global economic conditions.

These factors and the volatility of the energy markets make it extremely difficult to predict future oil, natural gas and NGL price movements with any certainty. For example, for the five years ended December 31, 2022, the NYMEX-WTI oil futures price ranged from a high of $123.70 per Bbl to a low of $(37.63) per Bbl, while the NYMEX-Henry Hub natural gas futures price ranged from a high of $9.68 per MMBtu to a low of $1.48 per MMBtu. For the year ended December 31, 2022, the NYMEX-WTI oil futures price ranged from a high of $123.70 per Bbl on March 8, 2022 to a low of $71.02 per Bbl on December 9, 2022 and the NYMEX-Henry Hub natural gas futures price ranged from a high of $9.68 per MMBtu on August 22, 2022 to a low of $3.72 per MMBtu on January 4, 2022. Likewise, NGLs, which are made up of ethane, propane, isobutane, normal butane and natural gasoline, each of which has different uses and different pricing characteristics, have sustained depressed realized prices during this period and are generally correlated with the price of oil. While recent events have led to elevated oil, natural gas and NGL prices, an extended decline in commodity prices could materially and adversely affect our business, results of operations and financial condition.

If commodity prices decline and remain depressed for a prolonged period, SYU’s business may become uneconomic and result in write downs of the value of our properties, which may adversely affect our financial condition and our ability to fund operations.

Oil, natural gas and NGL prices have experienced significant volatility over the past few years. An extended decline in commodity prices could render SYU’s business uneconomical and result in a downward adjustment of its assets, which would reduce our ability to fund our operations. An extended decline, or sustained marked uncertainty, in commodity prices may cause us to write down, as a non-cash charge to earnings, the carrying value of our oil and natural gas properties for impairments. We may in the future incur impairment charges that could have a material adverse effect on our results of operations in the period taken. Sustained declines or uncertainty in commodities prices may adversely affect SYU’s financial condition, results of operations, ability to reduce debt, ability to pay dividends and the timing of SYU’s capital projects.

An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we expect to receive for our future production could significantly reduce our cash flow and adversely affect our financial condition.

The prices that we expect to receive for our future oil and natural gas production will often reflect a regional discount, based on the location of production, to the relevant benchmark prices, such as NYMEX or ICE, that are used for calculating hedge positions. The prices we expect to receive for our future production are also affected

 

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by the specific characteristics of the production relative to production sold at benchmark prices. For example, California oil typically has a lower gravity, and a portion typically has higher sulfur content, than oil sold at certain benchmark prices. Therefore, because our oil will likely require more complex refining equipment to convert it into high value products, it may sell at a discount to those prices. These discounts, if significant, could reduce our cash flows and adversely affect our results of operations and financial condition.

The estimated quantities of petroleum contained in the SYU Assets are classified as “contingent resources” rather than “reserves” because they are subject to numerous contingencies. There is no assurance that any of the petroleum contained in the SYU Assets will ever be recovered or reclassified as “reserves.”

The resources are contingent upon (1) approval from federal, state and local regulators to restart production, (2) reestablishment of oil transportation systems to deliver production to market and (3) commitment to restart the wells and facilities. Some or all of the contingent resources may be reclassified as “reserves” if all of the contingencies are successfully resolved but there is no assurance that the contingencies will be resolved or resolved in a timely manner or that any of the petroleum in the SYU Assets will be recovered.

The NSAI Report does not account for any costs required to resolve the contingencies, and the cash flow estimates in the NSAI Report assume these contingencies have been resolved.

The NSAI Report includes cash flow estimates related to the SYU Assets oil and gas properties but these cash flow estimates do not provide for the costs of resolving the existing contingencies. The cash flow estimates assume all contingencies have been resolved and such estimates have not been risked to account for the possibility that the contingencies are not successfully addressed.

Even if all the contingencies are resolved and all the facilities are restarted, the amounts recovered may be substantially less than estimated.

The approximate probability that the quantities of contingent resources actually recovered will equal or exceed the estimated amounts is generally inferred to be 90 percent for the low estimate, which is the estimate provided in the NSAI Report. Even if all contingencies have been successfully addressed and all the facilities restarted, and assuming NSAI correctly assessed the likelihood and magnitude of contingent resources recovery, there remains some risk that the amounts recovered may be substantially less than estimated.

The cash flow estimates are based on numerous assumptions from NSAI, Sable and EM. The cash flow ultimately generated, if any, may be substantially less than estimated if any of these assumptions were inaccurate.

The NSAI report incorporates numerous assumptions about future operating costs and oil, NGLs and gas prices. The oil price adjustment of $(4.50) per barrel used in the NSAI Report is based on Sable’s anticipated marketing agreements, although NSAI’s analysis of historical records of the SYU Assets prior to the Line 901 incident indicated the adjustment should be approximately $(20.00) per barrel. Operating costs used in the NSAI Report are based on EM’s records and include only direct field- and lease-level costs; they do not include any headquarters general and administrative expenses, nor do they include any expenses for maintenance prior to the restart of production, which is expected to occur in the third quarter of 2024. Additionally, the operating costs and abandonment costs are not escalated for inflation. The cash flow estimates may increase or decrease due to market conditions, future operations, actual reservoir performance, changes in regulations or if any of the other assumptions are incorrect. Accordingly, the cash flow ultimately generated, if any, may be substantially less than estimated if any of these assumptions were inaccurate.

 

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The contingent resources shown in the NSAI Report are only estimates and should not be construed as exact quantities. The contingent resource estimates are based on a limited analysis, and NSAI did not seek to investigate every risk or every aspect of the properties.

NSAI did not perform a field inspection of the properties or examine the mechanical operation or condition of the wells and facilities. NSAI did not investigate possible environmental liability or examine the titles to the properties or the interest owned. The estimates assume that the properties will be operated in a prudent manner and that no governmental regulations or controls will be put in place that would impact our ability to recover the contingent resources. In addition to the primary economic and operational assumptions, there are uncertainties inherent in the interpretation of engineering and geoscience data. Accordingly, the cash flow ultimately generated, if any, may be substantially less than NSAI estimates.

Our hedging strategy in the future may not effectively mitigate the impact of commodity price volatility from our cash flows, and our hedging activities could result in cash losses and may limit potential gains.

We expect that we will develop and maintain a portfolio of commodity derivative contracts covering a specified percentage or range of our estimated production from proved developed producing reserves over a one-to-three-year period at any given point in time. These commodity derivative contracts will likely include natural gas, oil and NGL financial swaps. The prices and quantities at which we enter into commodity derivative contracts covering our production in the future will be dependent upon oil and natural gas prices and price expectations at the time we enter into these transactions, which may be substantially higher or lower than current or future oil and natural gas prices. Accordingly, our price hedging strategy may not protect us from significant declines in oil, natural gas and NGL prices received for our future production. Many of the derivative contracts to which we will be a party will require us to make cash payments to the extent the applicable index exceeds a predetermined price, thereby limiting our ability to realize the benefit of increases in oil, natural gas and NGL prices. If our actual production and sales for any period are less than our hedged production and sales for that period (including reductions in production due to operational delays) or if we are unable to perform our drilling activities as planned, we might be forced to satisfy all or a portion of our hedging obligations without the benefit of the cash flow from our sale of the underlying physical commodity, which may materially impact our liquidity.

Developing and producing oil, natural gas and NGLs are costly and high-risk activities with many uncertainties that may result in a total loss of investment or otherwise adversely affect our business, financial condition, results of operations and cash flows. Many of these risks are heightened for us due to the fact that most of our equipment has been shut-in for more than seven years.

Our development and production operations may be curtailed, delayed, canceled or otherwise negatively impacted as a result of many factors, including:

 

   

high costs, shortages or delivery delays of rigs, equipment, labor, electrical power or other services;

 

   

unusual or unexpected geological formations;

 

   

composition of sour natural gas, including sulfur, carbon dioxide and other diluent content;

 

   

unexpected operational events and conditions;

 

   

failure of down hole equipment and tubulars;

 

   

loss of wellbore mechanical integrity;

 

   

failure, unavailability or shortage of capacity of gathering and transportation pipelines, or other transportation facilities;

 

   

human errors, facility or equipment malfunctions and equipment failures or accidents, including acceleration of deterioration of our facilities and equipment due to the highly corrosive nature of sour natural gas;

 

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excessive wall loss or other loss of pipeline integrity;

 

   

title problems;

 

   

litigation, including landowner lawsuits;

 

   

loss of drilling fluid circulation;

 

   

hydrocarbon or oilfield chemical spills;

 

   

fires, blowouts, surface craterings and explosions;

 

   

surface spills or underground migration due to uncontrollable flows of oil, natural gas, formation water or well fluids;

 

   

delays imposed by or resulting from compliance with environmental and other governmental or regulatory requirements;

 

   

delays due to operations in environmentally sensitive areas; and

 

   

adverse weather conditions and natural disasters.

Many of these risks are heightened for us due to the fact that most of our equipment has been shut-in for more than seven years. Any of these risks can cause substantial losses, including personal injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution, environmental contamination or loss of wells and other regulatory penalties. In the event that planned operations are delayed or canceled, or existing wells or development wells have lower than anticipated production due to one or more of the factors above or for any other reason, our financial condition and results of operations may be adversely affected. If any of these factors were to occur with respect to a particular field, we could lose all or a part of our investment in the field or we could fail to realize the expected benefits from the field, either of which could materially and adversely affect our business, financial condition, results of operations and cash flows.

The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), enacted in 2010, establishes federal oversight and regulation of, among other things, the over-the-counter derivatives market and certain participants in that market, including us. Rules and regulations applicable to over-the-counter derivatives transactions may affect both the size of positions that we may hold and the ability or willingness of counterparties to trade opposite us, potentially increasing costs for transactions. Moreover, such changes could materially reduce our hedging opportunities which could adversely affect our revenues and cash flow during periods of low commodity prices. While many Dodd-Frank Act regulations are already in effect, the rulemaking and implementation process is ongoing, and the ultimate effect of the adopted rules and regulations and any future rules and regulations on our business remains uncertain. See “Information About SYU—Other Regulation of the Oil and Natural Gas Industry—Derivatives Regulation” for additional information.

Development and production of oil, natural gas and NGLs in offshore waters have inherent and historically higher risk than similar activities onshore.

Our offshore operations are subject to a variety of operating risks specific to the marine environment, such as a dependence on a limited number of electrical transmission lines, as well as capsizing, collisions and damage or loss from adverse weather conditions. Offshore activities are subject to more extensive governmental regulation than onshore oil and natural gas activities. We are vulnerable to the risks associated with operating offshore California, including risks relating to:

 

   

impacts of climate change and natural disasters such as earthquakes, tidal waves, mudslides, fires and floods;

 

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oil field service costs and availability;

 

   

compliance with environmental and other laws and regulations;

 

   

third-party marine vessels;

 

   

response capabilities for personnel, equipment and environmental incidents;

 

   

remediation and other costs resulting from oil spills, releases of hazardous materials and other environmental and natural resource damages; and

 

   

failure of equipment or facilities.

In addition to lost production and increased costs, these hazards could cause serious injuries, fatalities, contamination or property damage for which we could be held responsible. The potential consequences of these hazards are particularly severe for us because significant portions of our offshore operations are conducted in environmentally sensitive areas, including areas with significant residential populations and public and commercial infrastructure. An accidental oil spill or release on or related to offshore properties and operations could expose us to joint and several strict liability, without regard to fault, under applicable law for all containment and oil removal costs and a variety of public and private damages including, but not limited to, the costs of remediating a release of oil, natural resource damages, and economic damages suffered by persons adversely affected by an oil spill. If an oil discharge or substantial threat of discharge were to occur, we may be subject to regulatory scrutiny and liable for costs and damages, which costs and damages could be material to our business, financial condition or results of operations and could subject us to criminal and civil penalties. Finally, maintenance activities undertaken to reduce operational risks can be costly and can require exploration, exploitation and development operations to be curtailed while those activities are being completed.

Oil and natural gas producers’ operations are substantially dependent on the availability of water and the disposal of waste, including produced water and drilling fluids. Restrictions on the ability to obtain water or dispose of waste may impact our operations.

Water is an essential component of oil and natural gas production during the drilling and production process. Our inability to locate sufficient amounts of water, or dispose of or recycle water used in our development and production operations, could adversely impact our operations. Moreover, the imposition of new environmental initiatives and regulations could include restrictions on our ability to conduct certain operations such as disposal of waste, including, but not limited to, produced water, drilling fluids and other wastes associated with the exploration, development or production of natural gas. The Clean Water Act imposes restrictions and strict controls regarding the discharge of produced waters and other natural gas and oil waste into “waters of the United States.” Permits must be obtained to discharge pollutants to such waters and to conduct construction activities in such waters, which include certain wetlands. The Clean Water Act and similar state laws provide for civil, criminal and administrative penalties for any unauthorized discharges of pollutants and unauthorized discharges of reportable quantities of oil and other hazardous substances. State and federal discharge regulations prohibit the discharge of produced water and sand, drilling fluids, drill cuttings and certain other substances related to the natural gas and oil industry into coastal waters. Compliance with current and future environmental regulations and permit requirements governing the withdrawal, storage and use of surface water or groundwater necessary for the disposal and recycling of produced water, drilling fluids and other wastes may increase our operating costs and cause delays, interruptions or termination of our operations, the extent of which cannot be predicted. In addition, in some instances, the operation of underground injection wells for the disposal of waste has been alleged to cause earthquakes. In some jurisdictions, such issues have led to orders prohibiting continued injection or the suspension of drilling in certain wells identified as possible sources of seismic activity or resulted in stricter regulatory requirements relating to the location and operation of underground injection wells. Any orders or regulations addressing concerns about seismic activity from well injection in jurisdictions where we operate could affect our operations. See “Information About SYU—Environmental, Occupational Safety and Health Matters and Regulations—Water Discharges” for an additional description of the laws and regulations relating to the discharge of water and other wastes that affect us.

 

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The unavailability or high cost of rigs, equipment, supplies and crews could delay our operations, increase our costs and delay forecasted revenue.

Our industry is cyclical, and historically there have been periodic shortages of rigs, equipment, supplies and crew. Sustained declines in oil and natural gas prices may reduce the number of service providers for such rigs, equipment, supplies and crews, contributing to or resulting in shortages. Alternatively, during periods of higher oil and natural gas prices, the demand for rigs, equipment, supplies and crews is increased and can lead to shortages of, and increasing costs for, development equipment, supplies, services and personnel. While we have mitigated some of these issues with dedicated rigs, shortages of, or increasing costs for, experienced development crews and oil field equipment and services could restrict SYU’s ability to drill the wells and conduct the operations that it currently has planned relating to the fields where our properties are located. In addition, some of our operations require supply materials for production, such as CO2, which could become subject to shortages and increased costs. Any delay in the development of new wells or a significant increase in development costs could reduce our revenues and impact our development plan, which would thus affect our financial conduction, results of operations and our cash flows.

The third parties on whom we rely for transportation services are subject to complex federal, state and other laws that could adversely affect the cost, manner or feasibility of conducting our business.

The operations of the third parties on whom we rely for transportation services are subject to complex and stringent laws and regulations that require obtaining and maintaining numerous permits, approvals and certifications from various federal, state and local government authorities. These third parties may incur substantial costs in order to comply with existing laws and regulations. If existing laws and regulations governing such third-party services are revised or reinterpreted, or if new laws and regulations become applicable to their operations, these changes may affect the costs that we pay for such services. Similarly, a failure to comply with such laws and regulations by the third parties on whom we rely for transportation services could impact the availability of those services. Any potential impact to the availability of transportation services could impact our ability to market and sell our production, which could have a material adverse effect on our business, financial condition and results of operations. See “Information About SYU—Environmental, Occupational Safety and Health Matters and Regulations” and “Information About SYU—Other Regulation of the Oil and Natural Gas Industry” for a description of the laws and regulations that affect the third parties on whom we rely for transportation services.

Our business depends in part on pipelines, gathering systems and processing facilities owned by us or others. Any limitation in the availability of those facilities could interfere with our ability to market our oil, natural gas and NGL production.

The marketability of our oil, natural gas and NGL production depends in part on the availability, proximity and capacity of pipelines and other transportation methods, gathering systems and processing facilities owned by us or third parties. The amount of oil, natural gas and NGLs that can be produced and sold is subject to curtailment in certain circumstances, such as pipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage or lack of contracted capacity on such systems. For example, our ability to produce and sell oil from SYU will depend on the continued availability of the pipeline infrastructure between platforms, for delivery of that oil to shore, and for further delivery to market, and any unavailability of that pipeline infrastructure could cause us to shut in all or a portion of the production from the SYU properties for the length of such unavailability. Our access to transportation options can also be affected by U.S. federal and state regulation of oil and natural gas production and transportation, general economic conditions and changes in supply and demand. The curtailments arising from these and similar circumstances may last from a few days to several months or more. In many cases, we are provided with only limited, if any, notice as to when these circumstances will arise and their duration. Any significant curtailment in gathering system or transportation or processing facility capacity could reduce our ability to market our oil and natural gas production and harm our business, financial condition, results of operations and cash flows.

 

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Loss of our key executive officers or other key personnel, or an inability to attract and retain such officers and personnel, could negatively affect our business and, in one instance, could cause a default under the primary agreement governing our existing indebtedness.

Our future success depends on the skills, experience and efforts of our executive officers. The sudden loss of any of these executives’ services or our failure to appropriately plan for any expected executive succession could materially and adversely affect our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all. Additionally, we also depend on our ability to attract and retain qualified personnel to operate and expand our business. If we fail to attract or retain talented new employees, our business and results of operations could be negatively affected. Workers may choose to pursue employment with our competitors or in other fields; this competition has become exacerbated by the increase in employee resignations currently taking place throughout the United States as a result of the COVID-19 pandemic, which is commonly referred to as the “great resignation.” Additionally, the Term Loan Agreement requires that James Flores, our Chairman and Chief Executive Officer, remains directly and actively involved in the day-to-day management of our business, subject to the right of the holder of such indebtedness to approve his replacement, such approval not to be unreasonably withheld.

We may incur losses as a result of title defects or deficiencies in our properties.

The existence of a material title deficiency can render a lease worthless and can adversely affect our results of operations and financial condition. While we have done extensive title diligence in advance of the Business Combination and typically obtain title opinions prior to commencing drilling operations on a lease or in a unit, the failure of title or other defects or deficiencies may not be discovered until after a well is drilled, in which case we may lose the lease and the right to produce all or a portion of the minerals under the property.

We will not own all of the land on which the assets are located or all of the land that we must traverse in order to conduct our operations. There are disputes with respect to certain of the rights-of-way or other interests and any unfavorable outcomes of such disputes could require us to incur additional costs.

We will not own in fee all of the land on which our assets are located or all of the land that we must traverse in order to conduct our operations. Rather, many of the properties or rights are derived from surface use agreements, rights-of-way or other easement rights and, therefore, we will be subject to the possibility of more onerous terms or increased costs to retain necessary land access if we do not have valid rights-of-way or if such rights-of-way lapse or terminate. Some of the rights to land owned by third parties and governmental agencies are obtained for a specific period of time and under certain conditions. We believe that we will have obtained sufficient right-of-way grants from public authorities (subject to receipt of certain governmental permits and consents) and private parties for us to operate our business. However, certain private landowners along sectors of Pipeline Segment 901 have made claims that the easement agreements with them are no longer effective because the pipeline is not transporting oil. If these landowners are successful with their claims, we may be required to make further easement payments. Our loss of any of these surface use agreements, rights-of-way or other easement rights through lapse or failure to satisfy or maintain certain conditions could require us to cease operations on the affected land or find alternative locations for our operations at increased costs, any of which could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to restart production by January 1, 2026, which would permit EM to exercise a reassignment option and take ownership of SYU without any compensation or reimbursement other than the deemed repayment in full of the principal and accrued interest outstanding under the Term Loan Agreement.

If we fail to restart production of the SYU Assets by January 1, 2026 (the “Restart Failure Date”), then pursuant to the Sable-EM Purchase Agreement, for 180 days thereafter, EM will have the exclusive right, but not the obligation, to require us to reassign the Assets and rights to EM or its designated representative, without reimbursing us for any of our costs or expenditures (the “Reassignment Option”). If we have acquired any

 

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additional rights or assets or have developed additional improvements related to the SYU Assets, records or benefits subsequent to the Closing, on EM’s request we also would be required to assign and deliver those additional rights, assets, improvements, records or benefits to EM without being reimbursed for any of our additional costs or expenses. If we are unable to restart production of the SYU Assets by the Restart Failure Date and EM exercises its Reassignment Option, EM will become the owner of substantially all of our business and we may be forced to wind-down our operations. For additional information, see “Proposal No. 1—The Business Combination Proposal—Related Agreements—Sable-EM Purchase Agreement.” Our ability to restart production of the SYU Assets is subject to several risks, and there is no assurance that we will be able to restart production of the SYU Assets by the Restart Failure Date. See “Risk Factors—Risks Related to the Restart of Production.”

Restrictive covenants in the Term Loan Agreement or any future agreements governing our indebtedness could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests.

Restrictive covenants in the Senior Secured Term Loan Agreement (the “Term Loan Agreement”) impose significant operating and financial restrictions on us and our subsidiaries and we may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by the Term Loan Agreement unless we gain EM’s consent. These restrictions limit our ability to, among other things:

 

   

engage in mergers, consolidations, liquidations, or dissolutions;

 

   

create or incur debt or liens;

 

   

make certain debt prepayments;

 

   

pay dividends, distributions, management fees or certain other restricted payments;

 

   

make investments, acquisitions, loans, or purchase oil and gas properties;

 

   

sell, assign, farm-out or dispose of any property;

 

   

enter into transactions with affiliates;

 

   

enter into, subject to certain exceptions, any agreement that prohibits or restricts liens securing the Term Loan Agreement, payments of dividends to us, or payment of debt owed to us and our subsidiaries; and

 

   

change the nature of our business.

The Term Loan Agreement also contains representations and warranties, affirmative covenants, additional negative covenants and events of default (including a change of control). During the pendency of the Term Loan Agreement and in case of an event of default thereunder, EM may exercise all remedies at law or equity, and may foreclose upon substantially all of our assets and the assets of our subsidiaries, including, in the event of a deficiency, cash and any other assets not acquired from EM in the Business Combination to the extent constituting collateral under the applicable financing documents. We may not be able to obtain amendments, waivers or consents for potential or actual breaches of such representations and warranties or covenants, or we may be unable to obtain such amendments waivers or consents on acceptable terms, all of which could limit management’s flexibility to operate the business. For additional information, see “Proposal No. 1—The Business Combination Proposal—Related Agreements—Senior Secured Term Loan Agreement.”

Under the terms of the Term Loan Agreement, restarting production will trigger a springing maturity date following a specified grace period, and the terms on which we will be able to refinance the Term Loan Agreement, if necessary, will depend on then-prevalent market conditions.

The Term Loan Agreement includes a springing maturity date of ninety (90) days after Restart Production (as defined in the Sable-EM Purchase Agreement) (i.e., one hundred eighty (180) days after resumption of actual

 

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production from the wells), which could require a future refinancing of the indebtedness under the Term Loan Agreement or the incurrence of new indebtedness. The terms on which we would be able to obtain any refinancing of the Term Loan Agreement will depend on market conditions at the time of any such refinancing.

We may in the future refinance our existing indebtedness or incur new indebtedness at variable rates and without the option to pay interest in-kind, which would subject us to interest rate risk and could cause our debt service obligations to increase significantly.

The outstanding principal amount under our Term Loan Agreement bears interest at a fixed rate and we have the option of capitalizing the interest onto the principal rather than paying cash interest, but we may in the future refinance our existing indebtedness or incur new indebtedness with variable rates and mandatory cash interest payments, which would expose us to interest rate risk and additional liquidity burdens. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even if the principal amount remained the same, and our net income and cash available for servicing our indebtedness would decrease.

Our business plans require a significant amount of capital. In addition, our future capital needs may require us to issue additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or ability to pay dividends.

Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance of new equity or debt securities, or a combination thereof. Additional financing may not be available on favorable terms or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our capital requirements. If we issue new debt, the debt holders would have rights senior to holders of New Sable common stock to make claims on our assets and the terms of any debt could restrict our operations, including our ability to pay dividends on New Sable common stock. If we issue additional equity securities or securities convertible into equity securities, existing stockholders will experience dilution and the new equity securities could have rights senior to those of New Sable common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and their impact on the market price of New Sable common stock.

We are exposed to trade credit risk in the ordinary course of our business activities.

We are exposed to risks of loss in the event of nonperformance by our vendors and other counterparties. Some of our vendors and other counterparties may be highly leveraged and subject to their own operating and regulatory risks. Many of our vendors and other counterparties finance their activities through cash flow from operations, the incurrence of debt or the issuance of equity. The combination of reduction of cash flow resulting from declines in commodity prices and the lack of availability of debt or equity financing may result in a significant reduction in our vendors’ and other counterparties’ liquidity and ability to make payments or perform on their obligations to us. Even if our credit review and analysis mechanisms work properly, we may experience financial losses in our dealings with other parties. Any increase in the nonpayment or nonperformance by our vendors or other counterparties could adversely affect our business, financial condition, results of operations and cash flows.

We may incur substantial losses and be subject to substantial liability claims as a result of catastrophic events. We may not be insured for, or our insurance may be inadequate to protect us against, these risks. Expenses not covered by our insurance could have a material adverse effect on our financial position and results of operations.

Our operations are subject to all of the hazards and operating risks associated with drilling for and production of oil and natural gas, including natural disasters, the risk of fire, explosions, blowouts, surface

 

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cratering, uncontrollable flows of natural gas, oil and formation water, pipe or pipeline failures, abnormally pressured formations, casing collapses and environmental hazards such as oil spills, natural gas leaks, ruptures or discharges of toxic gases, all of which could cause substantial financial losses. The location of any properties and other assets near environmentally sensitive areas or near populated areas, including residential areas, commercial business centers and industrial sites, could significantly increase the level of potential damages resulting from these risks. Other catastrophic events such as earthquakes, floods, mudslides, fires, droughts, contagious diseases, terrorist attacks and other events that cause operations to cease or be curtailed may adversely affect our business and the communities in which we operate. For example, utilities have begun to suspend electric services to avoid wildfires during windy periods in California, a business disruption risk that is not insured. We may be unable to obtain, or may elect not to obtain, insurance for certain risks if we believe that the cost of available insurance is excessive relative to the risks presented. The occurrence of any of these or other similar events could result in substantial losses to us due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties, suspension or disruption of operations, substantial revenue losses and repairs to resume operations.

SYU maintains insurance coverage against potential losses that we believe is customary in the industry. However, insurance against all operational risk is not available to us. These insurance policies may not cover all liabilities, claims, fines, penalties or costs and expenses that we may incur in connection with our business and operations, including those related to environmental claims. Pollution and environmental risks generally are not fully insurable. In addition, we cannot assure you that we will be able to maintain adequate insurance at rates we consider reasonable. We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. A liability, claim or other loss not fully covered by insurance could have a material adverse effect on our business, financial position, results of operations and cash flows.

We may be unable to compete effectively with larger companies.

The oil and natural gas industry is intensely competitive with respect to marketing oil and natural gas and securing equipment and trained personnel. Many of our larger competitors not only drill for and produce oil and natural gas but also carry on refining operations and market petroleum and other products on a regional, national or worldwide basis, which offers them greater access and economies of scale. In addition, there is substantial competition for investment capital in the oil and natural gas industry and many of our competitors have access to capital at a lower cost than that available to us. These larger companies may have a greater ability to continue development activities during periods of low oil and natural gas prices and to absorb the burden of present and future federal, state, local and other laws and regulations. Furthermore, we may not be able to aggregate sufficient quantities of production to compete with larger companies that are able to sell greater volumes of production to intermediaries, thereby reducing the realized prices attributable to our production. Any inability to compete effectively with larger companies could have a material adverse impact on our business activities, financial condition, results of operations and cash flows.

We are subject to complex federal, state, local and other laws, regulations and permits that could adversely affect the cost, manner, ability or feasibility of conducting our operations.

Our oil and natural gas development and production operations are subject to complex and stringent laws and regulations administered by governmental authorities vested with broad authority relating to the exploration for and the development, production and transportation of oil, natural gas, and NGLs. To conduct our operations in compliance with these laws and regulations, we must obtain and maintain numerous permits, approvals and certificates from various federal, state and local governmental authorities. We may incur substantial costs in order to maintain compliance with these existing laws and regulations. Failure to comply with laws and regulations applicable to our operations, including any evolving interpretation and enforcement by governmental authorities, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

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Our oil, natural gas, and NGLs development and production operations are also subject to stringent and complex federal, state and local laws and regulations governing the release or discharge of materials into or through the environment, worker health and safety aspects of our operations, or otherwise relating to environmental protection, resource protection, and damage to natural resources. These laws and regulations may impose numerous obligations applicable to our operations, including the ability to obtain a permit before conducting our operations, including regulated drilling activities; the restriction of types, quantities and concentrations of materials that can be released or discharged into or through the environment; the limitation or prohibition of drilling, production and transportation activities on certain lands lying within wilderness, wetlands, seismically active areas and other protected or preserved areas; the application of specific health and safety criteria addressing worker protection; and the imposition of substantial liabilities for pollution and natural resources damages potentially resulting from our operations. The EPA, BOEM, BSEE, CPUC, California Department of Forestry and Fire Protection’s Office of the State Fire Marshal (the “OSFM”), California Department of Conservation’s Geologic Energy Management Division (“CalGEM”), and numerous other governmental authorities have the authority to enforce compliance with these laws and regulations and the permits issued by them, often requiring difficult and costly compliance measures or corrective actions. Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil or criminal penalties, the imposition of investigatory or remedial obligations, injunctive and mitigation relief, the suspension or revocation of necessary permits, licenses and authorizations, the requirement that additional pollution controls be installed and, in some instances, the issuance of orders limiting or prohibiting some or all of our operations. We may also experience delays in obtaining or be unable to obtain required permits, including authorizations necessary to restart or replace the Pipelines, which may delay or interrupt our operations and limit our growth and revenue, or may result in a failure to restart production by the Restart Failure Date.

Under certain environmental laws that impose strict as well as joint and several liability, we may be required to remediate or conduct other response actions at or in relation to contaminated properties currently owned or operated by us or facilities of third parties that received waste generated by our operations regardless of whether such contamination resulted from the conduct of others or from the consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of our operations. Moreover, public interest in the protection of the environment has increased in recent years. New laws and regulations continue to be enacted, particularly at the state level, and, under the Biden Administration, the long-term trend of more expansive and stringent environmental legislation and regulations applied to the crude oil and natural gas industry could continue, resulting in increased costs of doing business and consequently affecting profitability. To the extent laws are enacted, or other governmental action is taken that restricts drilling, production and transportation activities, or imposes more stringent and costly operating, waste handling, disposal and cleanup requirements, our business, prospects, financial condition or results of operations could be materially adversely affected.

See “Information About SYU—Environmental, Occupational Safety and Health Matters and Regulations” and “Information About SYU—Other Regulation of the Oil and Natural Gas Industry” for a description of the more significant laws and regulations that affect us.

The listing of a species as either “threatened” or “endangered” under the U.S. Endangered Species Act and/or the California Endangered Species Act could result in increased costs, new operating restrictions, or delays in our operations, which could adversely affect our results of operations and financial condition.

The U.S. Endangered Species Act (the “ESA”) and analogous state laws regulate activities that could have an adverse effect on threatened and endangered species. Operations in areas where threatened or endangered species or their habitat are known to exist may require us to incur increased costs to implement mitigation or protective measures and also may restrict or preclude our activities in those areas or during certain seasons, such as breeding and nesting seasons. The listing of species in areas where we operate or, alternatively, entry into certain range-wide conservation planning agreements could result in increased costs to us from species protection

 

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measures, time delays or limitations on our activities, which costs, delays or limitations may be significant and could adversely affect our results of operations and financial position.

Conservation measures, technological advances and increasing public attention and activism with respect to climate change and environmental matters could reduce demand for oil, natural gas and NGLs and have an adverse effect on our business, financial condition and reputation.

Fuel conservation measures, alternative fuel requirements, incentives to conserve energy or use alternative energy sources, increasing consumer demand for alternatives to oil, natural gas and NGLs, and technological advances in fuel economy and energy generation devices could reduce demand for oil, natural gas and NGLs. Such initiatives or related activism aimed at limiting climate change and reducing air pollution, as well as negative investor sentiment toward our industry and the impact of the changing demand for oil and natural gas services and products may have a material adverse effect on our business, financial condition, results of operations, cash flows, and ability to access capital. Negative public perception regarding us and/or our industry resulting from, among other things, concerns raised by advocacy groups about climate change, may also lead to increased litigation risk, and regulatory, legislative and judicial scrutiny, which may, in turn, lead to new state and federal safety and environmental laws, regulations, guidelines and enforcement interpretations. Governmental authorities exercise considerable discretion in the timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the courts. Negative public perception could cause the permits we need to conduct our operations to be withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct our business. In addition, claims have been made against certain energy companies alleging that GHG emissions from oil and natural gas operations constitute a public nuisance or have caused other redressable injuries under federal and/or state common law. While our business is not a party to any such litigation, we could be named in actions making similar allegations. An unfavorable ruling in any such case could adversely impact our business, financial condition and results of operations. Moreover, parties concerned about the potential effects of climate change have directed their attention at sources of funding for energy companies, which has resulted in certain financial institutions, funds and other sources of capital, restricting or eliminating their investment in oil and natural gas activities.

Climate change legislation or regulations restricting emissions of “greenhouse gases,” or GHGs, could result in increased operating costs and reduced demand for the oil, natural gas and NGLs we expect to produce.

In December 2009, the EPA published its findings that emissions of GHGs present a danger to public health and the environment because emissions of such gases are contributing to the warming of the Earth’s atmosphere and other climatic changes. Based on these findings, the EPA has adopted and implemented regulations to restrict emissions of GHGs under existing provisions of the Clean Air Act. In addition, the EPA has also adopted rules requiring the monitoring and reporting of GHG emissions from specified sources on an annual basis in the United States, including, among others, certain oil and natural gas production facilities, which includes certain of our operations. The adoption or revision and implementation of any regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment and operations could require us to incur costs to reduce emissions of GHGs associated with our operations or could adversely affect demand for the oil, natural gas and NGLs we produce. Such climate change regulatory and legislative initiatives could have a material adverse effect on our business, financial condition and results of operations.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act (the “IRA”), which targets methane from oil and gas sources by imposing an applicable “waste emissions charge” on petroleum and natural gas production facilities that exceed a specified waste emissions threshold and requiring the reporting of emissions that exceed 25,000 metric tons of carbon dioxide equivalent per year. In addition to the IRA, almost one-half of the states have taken legal measures to reduce emissions of GHGs, including through the planned development of GHG emission inventories and/or regional GHGs cap and trade programs. On an international level, the United States was one of nearly 200 countries to sign an international climate change agreement in Paris, France that requires member countries to set their own GHG emissions reduction goals beginning in 2020.

 

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However, the United States formally announced its intent to withdraw from the Paris Agreement in November 2019, which became effective in November 2020. On January 20, 2021, President Biden issued written notification to the United Nations of the United States’ intention to rejoin the Paris Agreement, which became effective on February 19, 2021. In addition, various states and local governments have vowed to continue to enact regulations to achieve the goals of the Paris Agreement.

Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions would impact our business, any such future laws and regulations that require additional reporting of GHGs or otherwise limit emissions of GHGs from our equipment and operations could require us to incur costs to monitor and report on GHG emissions or reduce emissions of GHGs associated with our operations, and such requirements also could adversely affect demand for the oil, natural gas and NGL that we produce. Finally, it should be noted that numerous scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts and floods and other climatic events. If any such effects were to occur in sufficient proximity to SYU facilities, they could have an adverse effect on our financial condition and results of operations. For example, such effects could adversely affect or delay demand for the oil or natural gas produced or cause us to incur significant costs in preparing for or responding to the effects of climatic events themselves. Potential adverse effects could include disruption of our production activities, increases in our costs of operation or reductions in the efficiency of our operations, impacts on our personnel, supply chain, or distribution chain, as well as potentially increased costs for insurance coverages in the aftermath of such effects. Our ability to mitigate the adverse physical impacts of climate change depends in part upon our disaster preparedness and response and business continuity planning. See “Information About SYU—Environmental, Occupational Safety and Health Matters and Regulations—Regulation of ‘Greenhouse Gas’ Emissions” for a description of the climate change laws and regulations that affect us. Also see “—Attempts by the California state government to restrict the production of oil and gas could negatively impact our operations and result in decreased demand for fossil fuels in California.”

Our financial results with respect to the Pipelines will primarily depend on the outcomes of ratemaking proceedings with the California Public Utilities Commission and we may not be able to earn an adequate rate of return in a timely manner or at all.

As a regulated intrastate common carrier in California, the Pipelines’ tariffs will be set by the CPUC on a prospective basis and will generally be designed to allow us to collect sufficient revenues to recover reasonable costs of providing service on the basis of revenues, expenses and a return on our capital investments. Our financial results with respect to the Pipelines could be materially affected if the CPUC does not authorize sufficient revenues for us to safely and reliably serve our pipeline customers and earn an adequate return of equity. The outcome of the ratemaking proceedings can be affected by many factors, including the level of opposition by intervening parties; potential rate impacts; increasing levels of regulatory review; changes in the political, regulatory, or legislative environments; and the opinions of our regulators, consumer and other stakeholder organizations, and customers, about our ability to provide safe and reliable oil transportation pipeline transportation.

In addition to the amount of authorized revenues, our financial results with respect to the Pipelines could be materially affected if our actual costs to safely and reliably serve our pipeline customers differ from authorized or forecast costs. We may incur additional costs for many reasons including changing market circumstances, unanticipated events (such as wildfires, storms, earthquakes, accidents, or catastrophic or other events affecting our pipeline operations), or compliance with new state laws or policies. Although we may be allowed to recover some or all of the additional costs, there may be a substantial delay between when we incur the costs and when we are authorized to collect revenues to recover such costs. Alternatively, the CPUC may disallow certain costs that they determine were not reasonably or prudently incurred.

 

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Attempts by the California state government to restrict the production of oil and gas could negatively impact our operations and result in decreased demand for fossil fuels in California.

California, where our operations and assets are located, is heavily regulated with respect to oil and gas operations. Federal, state and local laws and regulations govern most aspects of exploration and production in California. Collectively, the effect of the existing laws and regulations is to potentially limit the number and location of our wells through restrictions on the use of our properties, limit our ability to develop certain assets and conduct certain operations, and reduce the amount of oil and natural gas that we can produce from our wells below levels that would otherwise be possible. The regulatory burden on the industry increases our costs and consequently may have an adverse effect upon capital expenditures, earnings or competitive position. Violations and liabilities with respect to these laws and regulations could result in significant administrative, civil, or criminal penalties, remedial clean-ups, natural resource damages, permit modifications or revocations, operational interruptions or shutdowns and other liabilities. The costs of remedying such conditions may be significant, and remediation obligations could adversely affect our financial condition, results of operations and prospects.

Additionally, the California state government recently has taken several actions that could adversely impact future oil and gas production and other activities in the state. For example:

 

   

In September 2020, the California Governor issued an executive order that seeks to reduce both the supply of and demand for fossil fuels in the state. The executive order established several goals and directed several state agencies to take certain actions with respect to reducing emissions of greenhouse gases, including, but not limited to: (1) phasing out the sale of emissions-producing vehicles; (2) developing strategies for the closure and repurposing of oil and gas facilities in California; and (3) calling on the California State Legislature to enact new laws prohibiting hydraulic fracturing in the state by 2024. The executive order also directed CalGEM to finish its review of public health and safety concerns from the impacts of oil extraction activities and propose significantly strengthened regulations.

 

   

In October 2020, the California Governor issued an executive order that established a state goal to conserve at least 30% of California’s land and coastal waters by 2030 and directed state agencies to implement other measures to mitigate climate change and strengthen biodiversity.

At this time, we cannot predict the potential future actions that may result from these orders or how such actions might potentially impact our operations.

In February 2021, California State Senators Scott Wiener and Monique Limón introduced Senate Bill 467, which proposes to halt the issuance or renewal of permits for hydraulic fracturing, acid well stimulation treatments, cyclic steaming, and water and steam flooding starting January 1, 2022, and then prohibit these extraction methods entirely starting January 1, 2027. SB 467 also would have prohibited all new or renewed permits for oil and gas extraction within 2,500 feet of any homes, schools, healthcare facilities or long-term care institutions such as dormitories or prisons, by January 1, 2022. However, SB 467 never made it out of committee and other bills to limit well stimulation treatments have also previously been introduced and failed to pass through the California legislature. Although these legislative efforts have failed, it is possible that SB 467 or similar legislation could be reintroduced in the future and we cannot predict the results of such future efforts.

On June 3, 2022, the U.S. Court of Appeals for the Ninth Circuit prohibited the federal government from issuing new permits for hydraulic fracturing and acidizing of oil wells in federal waters off the coast of California until a full environmental review is completed by federal agencies. The injunction was the result of lawsuits filed by the State of California, the California Coastal Commission and environmental groups alleging that federal agencies violated environmental laws when they authorized unconventional drilling methods on offshore California platforms before the unconventional drilling methods had been fully reviewed. The court also found that the California Coastal Commission must determine if hydraulic fracturing and acidizing are consistent with California’s coastal management program.

 

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While currently none of our California operations rely on hydraulic fracturing stimulation or acidizing of wells as discussed in the Ninth Circuit decision, any restrictions on the future use of those well stimulation treatments or other forms of injection may adversely impact our operations, including causing operational delays, increased costs, and reduced production, which could adversely affect our revenues, results of operations and net cash provided by operating activities.

Our assets are located exclusively onshore and offshore in California, making us vulnerable to risks associated with having operations concentrated in this geographic area.

We operate exclusively in California and in the waters off the coast of California. This geographic concentration disproportionately affects the success and profitability of our operations, exposing us to local price fluctuations, changes in state or regional laws and regulations, political risks, limited acquisition opportunities where we have the most operating experience and infrastructure, limited storage options, drought conditions, and other regional supply and demand factors, including gathering, pipeline and transportation capacity constraints, limited potential customers, infrastructure capacity and availability of rigs, equipment, oil field services, supplies and labor. We discuss such specific risks to our operations in more detail elsewhere in this section. In addition, we may not have the resources to effectively diversify our operations or benefit from the possible spreading of risks or offsetting of losses.

All of our operations are conducted in areas that may be at risk of damage from fire, mudslides, earthquakes or other natural disasters.

We currently conduct operations in California and adjacent offshore areas near known wildfire and mudslide areas and earthquake fault zones. A future natural disaster, such as a fire, mudslide or an earthquake, could cause substantial interruption and delays in our operations, damage or destroy equipment, prevent or delay transport of our products and cause us to incur additional expenses, which would adversely affect our business, financial condition and results of operations. In addition, our facilities would be difficult to replace and would require substantial lead time to repair or replace. These events could occur with greater frequency as a result of the potential impacts from climate change. The insurance we maintain against earthquakes, mudslides, fires and other natural disasters would not be adequate to cover a total loss of our facilities, may not be adequate to cover our losses in any particular case and may not continue to be available to us on acceptable terms, or at all.

Increasing attention to environmental, social and governance (“ESG”) matters may impact our business.

Increasing attention to, and social expectations on companies to address, climate change and other environmental and social impacts, investor and societal explanations regarding voluntary ESG disclosures, and increased consumer demand for alternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation, and negative impacts on our stock price and access to capital markets. Increasing attention to climate change and environmental conservation, for example, may result in demand shifts for oil and natural gas products and additional governmental investigations and private litigation against us. To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to our causation of or contribution to the asserted damage, or to other mitigating factors. While we may participate in various voluntary frameworks and certification programs to improve the ESG profile of our operations and products, we cannot guarantee that such participation or certification will have the intended results on our or our products’ ESG profile.

Moreover, while we may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures will be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith. Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring, and reporting on many ESG matters. Additionally,

 

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while we may also announce various voluntary ESG targets in the future, such targets are aspirational. We may not be able to meet such targets in the manner or on such a timeline as initially contemplated, including, but not limited to as a result of unforeseen costs or technical difficulties associated with achieving such results. To the extent we do meet such targets through operational changes, they may be achieved through various contractual arrangements, including the purchase of various credits or offsets that may be deemed to mitigate our ESG impact. Also, despite these aspirational goals, we may receive pressure from investors, lenders, or other groups to adopt more aggressive climate or other ESG-related goals, but we cannot guarantee that we will be able to implement such goals because of potential costs or technical or operational obstacles.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable ESG ratings may lead to increased negative investor sentiment toward us or our customers and to the diversion of investment to other industries which could have a negative impact on our stock price and/or our access to and costs of capital. Moreover, to the extent ESG matters negatively impact our reputation, we may not be able to compete as effectively or recruit or retain employees, which may adversely affect our operations.

Such ESG matters may also impact our customers or suppliers, which may adversely impact our business, financial condition, or results of operations.

Environmental groups may initiate litigation and take other actions to delay or prevent us from obtaining required approvals to restart and continue production.

Environmental groups have had increasing success in limiting oil and gas production by appealing to regulatory agencies, filing lawsuits and applying political pressure. In order to restart production we are required to obtain a series of permits or regulatory approvals from, among other agencies, OSFM and the Santa Barbara County Board of Supervisors. The laws and procedures governing these and other permits and regulatory approvals often allow third parties, including environmental groups, to challenge the draft permits and/or permit approvals through the relevant agencies and other administrative appeal processes. These groups may also file lawsuits that delay or prevent the issuance of the approvals through an injunction and/or prevailing on the legal merits. In addition, these groups may leverage the increased public attention and concern with respect to climate change and other environmental and social impacts in order to encourage government officials to withhold or delay the necessary approvals. There is no assurance that these groups will not be successful in delaying or preventing us from obtaining the required approvals through litigation or other actions.

The Inflation Reduction Act of 2022 could accelerate the transition to a low carbon economy and will impose new costs on our operations.

On August 16, 2022, President Biden signed into law the IRA. The IRA contains hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions. These incentives could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could decrease demand for the oil and gas we produce and consequently materially and adversely affect our business and results of operations. In addition, the IRA imposes the first ever federal fee on the emission of GHGs through a methane emissions charge. The IRA amends the Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the petroleum and natural gas production category. The methane emissions charge will start in calendar year 2024 at $900 per ton of methane, increase to $1,200 in 2025, and be set at $1,500 for 2026 and each year thereafter. Calculation of the fee is based on certain thresholds established in the IRA. The methane emissions charge could increase our capital expenditures to limit methane releases and further increase our costs to the extent we exceed the limits, which may adversely affect our business and results of operations.

 

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The cost of decommissioning and the cost of financial assurance to satisfy decommissioning obligations are uncertain.

We are required to maintain reserve funds to provide for the payment of decommissioning costs associated with our properties. The estimates of decommissioning costs are inherently imprecise and subject to change due to changing cost estimates, oil and natural gas prices and other factors. If actual decommissioning costs exceed such estimates, or we are required to provide a significant amount of collateral in cash or other security as a result of a revision to such estimates, our financial condition, results of operations and cash flows may be materially adversely affected.

We may be required to post cash collateral pursuant to our agreements with sureties, letter of credit providers or regulators under our existing or future bonding or other arrangements, which may have a material adverse effect on our liquidity and our ability to execute our capital expenditure plan and our asset retirement obligation plan and comply with the agreements governing our existing or future indebtedness.

Pursuant to the terms of SYU’s existing bonding arrangements with various sureties in connection with the decommissioning obligations and government-mandated financial assurance obligations related to our properties, or under any future bonding arrangements we may enter into, we may be required to post collateral at any time, on demand, at the sureties’ sole discretion. If additional collateral is required to support surety bond obligations, this collateral would probably be in the form of cash or letters of credit, certificates of deposit or other similar forms of liquid collateral. Letter of credit providers would also in turn likely expect collateral to support such obligations, primarily in the form of cash or other liquid collateral.

If sureties become unwilling to enter into or continue bonding arrangements with us, regulators would likely require us to post additional collateral or fully fund our obligations with cash or other forms of liquid collateral. We cannot provide any assurance that we will be able to satisfy collateral demands for current or future bonds or letters of credit, or that we will be able to satisfy funding requirements for other arrangements with regulators. If we are required to provide additional collateral or fully fund these obligations and we cannot obtain alternative financing, our liquidity position may be negatively impacted and we may be forced to reduce our capital expenditures in the current year or future years, may be unable to execute our asset retirement obligation plan or may be unable to comply with the agreements governing our existing or future indebtedness.

Our business could be negatively affected by security threats, including cybersecurity threats, destructive forms of protest and opposition by activists and other disruptions.

As an oil and natural gas producer, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information, to misappropriate financial assets or to render data or systems unusable; threats to the security of our facilities and infrastructure or third-party facilities and infrastructure, such as processing plants and pipelines; and threats from terrorist acts. The potential for such security threats has subjected our operations to increased risks that could have a material adverse effect on our business. In particular, our implementation of various procedures and controls to monitor and mitigate security threats and to increase security for our information, facilities and infrastructure may result in increased capital and operating costs. Moreover, there can be no assurance that such procedures and controls will be sufficient to prevent security breaches from occurring. If any of these security breaches were to occur, they could lead to losses of financial assets, sensitive information, critical infrastructure or capabilities essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations or cash flows. Cybersecurity attacks in particular are becoming more sophisticated and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and systems, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data. These events could lead to financial losses from remedial actions, loss of business or potential liability. In addition, destructive forms of protest and opposition by activists and other disruptions, including acts of sabotage or eco-terrorism, against oil and gas production and activities could

 

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potentially result in damage or injury to people, property or the environment or lead to extended interruptions of our operations, adversely affecting our financial condition and results of operations.

Risks Related to Ownership of Flame Securities and the Business Combination

Except where noted or the context otherwise requires, as used in this subsection, the terms “we,” “us,” “our,” “our company,” “our business” and similar terms refer to Flame.

The Sponsor and the Insiders have agreed to vote in favor of the Business Combination, regardless of how Flame’s public stockholders vote.

Unlike many other blank check companies in which the initial stockholders agree to vote their founder shares in accordance with the majority of the votes cast by the public stockholders in connection with an initial business combination, the Sponsor and the Insiders have agreed to vote any shares of Flame common stock owned by them in favor of the business combination proposal. The Sponsor and the Insiders collectively have the right to vote approximately 54% of the Flame common stock, and are expected to vote all of their shares in favor of each proposal. Accordingly, it is expected that the Flame common stock held by the Sponsor and the Insiders will be sufficient to establish a quorum and to approve the proposals. Therefore, assuming Sponsor and the Insiders all vote in favor of the Business Combination and all outstanding shares of Flame common stock held by the Sponsor and the Insiders are represented at the special meeting in person or by proxy, the affirmative vote of holders of additional public shares is not required to approve the Business Combination.

Public stockholders who redeem their public shares and/or previously redeemed their public shares in connection with the Extension Amendment or the Second Extension Amendment may continue to hold any public warrants that they own, which will result in additional dilution to non-redeeming public stockholders upon exercise of such public warrants or private placement warrants, as applicable.

Public stockholders who redeem their public shares and/or previously redeemed their public shares in connection with the Extension Amendment or the Second Extension Amendment may continue to hold any public warrants they owned prior to redemption, which will result in additional dilution to non-redeeming holders upon exercise of such public warrants. Assuming (i) all redeeming public stockholders acquired Flame units in the Flame IPO and continue to hold the public warrants that were included in the units, and (ii) maximum redemption of public shares held by the redeeming public stockholders, 14,375,000 public warrants would be retained by redeeming public stockholders with a value of approximately $28.2 million based on the closing price of the public warrants on NYSE on January 3, 2024. As a result of exercising their redemption rights, the redeeming public stockholders would receive their pro rata portion of the trust account and continue to hold public warrants with an aggregate market value of approximately $28.2 million while non-redeeming public stockholders would experience additional dilution in their percentage ownership and voting interest of New Sable upon the exercise of the public warrants held by redeeming public stockholders or upon the exercise of the private placement warrants.

The reduced size of our trust account may make it more difficult for us to complete an initial business combination.

On February 27, 2023, we held a special meeting of stockholders to vote on the Extension Amendment Proposal. In connection with the Extension Amendment Proposal, stockholders elected to redeem 20,317,255 shares of Flame Class A common stock, which represents approximately 70.67% of the shares of Flame Class A common stock that were part of the units sold in our initial public offering. After giving effect to such redemptions, approximately $85.6 million remained in the trust account. On August 29 2023, we held a special meeting of stockholders to vote on the Second Extension Amendment Proposal. In connection with the Second Extension Amendment Proposal, stockholders elected to redeem 2,328,063 public shares, which represents approximately 27.61% of Flame’s then-issued and outstanding public shares. After giving effect to such

 

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redemptions, approximately $63.0 million remained in the trust account. The resulting reduction of the amount available to us in the trust account may make us a less attractive partner for a target and also may make it more difficult for us to complete an initial business combination on commercially acceptable terms or at all.

There are no assurances that the Second Extension Amendment will enable us to complete an initial business combination.

Even though the Second Extension was approved, we can provide no assurances that our initial business combination will be consummated prior to the end of the completion window. Our ability to consummate any business combination is dependent on a variety of factors, many of which are beyond our control.

In connection with the Second Extension, stockholders elected to redeem an aggregate of 2,328,063 public shares representing approximately 27.61% of Flame’s then-issued and outstanding public shares, for an aggregate of $24,008,096 in cash. As of January 25, 2024, we had cash in the trust account of approximately $63.7 million.

The Sponsor, certain members of the Flame Board and certain other Flame officers have interests in the Business Combination that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the business combination proposal and approval of the other proposals described in this proxy statement.

When considering the Flame Independent Directors’ recommendation that our stockholders vote in favor of the approval of the business combination proposal and the other proposals described in this proxy statement, our stockholders should be aware that the Sponsor and certain directors and officers of Flame have interests in the Business Combination that may be different from, or in addition to, the interests of our stockholders generally. These interests include:

 

   

the fact that the Sponsor and the Insiders have agreed not to redeem any of the founder shares in connection with a stockholder vote to approve a proposed initial business combination and their founder shares will be worthless if a business combination is not consummated within the completion window;

 

   

the fact that the Sponsor paid an aggregate of $25,000 for the 7,187,500 founder shares currently owned by the Sponsor, in which certain of Flame’s officers and directors hold a direct and indirect interest, and the Flame Independent Directors. The founder shares would be worthless if the Business Combination or another business combination is not consummated within the completion window because the holders are not entitled to participate in any redemption or distribution with respect to such shares. Such securities may have a significantly higher value at the time of the Business Combination and, if unrestricted and freely tradable, would be valued at approximately $            , based upon the closing price of $             per Flame common stock on the NYSE on             , 2024;

 

   

the continued right of the Sponsor and Insiders to hold Flame common stock and the shares of Flame common stock to be issued to the Sponsor and Insiders upon exercise of their private placement warrants following the Business Combination, subject to certain lock-up periods;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that the officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated within the completion window (as of January 25, 2024, $0 was outstanding in out-of-pocket expense reimbursements);

 

   

the fact that the Sponsor and the Insiders have agreed to waive their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete an initial business combination within the completion window;

 

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the fact that Sable entered into employment agreements with James C. Flores, Gregory D. Patrinely, Doss R. Bourgeois, Anthony C. Duenner and J. Caldwell Flores, each of which is contingent and becomes effective upon the Closing;

 

   

the fact that James C. Flores and the Flame Independent Directors, each a current director of Flame, will each be a director of New Sable after the Closing. As such, in the future each may receive any cash fees, stock options or stock awards that the post-combination board of directors determines to pay to its executive and non-executive directors. Mr. Flores, the Chief Executive Officer of Flame, is also the Chairman and Chief Executive Officer of Sable and owns all of the outstanding Holdco Class A shares. Pursuant to the Holdco Merger, the Holdco Class A shares owned by Mr. Flores will convert into the Aggregate Merger Consideration, which, as described above, will be an aggregate of 3,000,000 shares of Flame Class A common stock. Under the terms of the Merger Agreement, Mr. Flores is also entitled to reimbursement by Flame, on the Closing Date, of all of his reasonable, documented and out-of-pocket fees and expenses for any agents, advisors, consultants, experts, independent contractors and financial advisors engaged on behalf of Holdco or Sable and incurred in connection with the transactions contemplated by the Merger Agreement and the Sable-EM Purchase Agreement, in each case, that are paid as of the Closing, subject to a cap equal to $3 million, which Flame agreed to increase from $1.5 million on March 3, 2023, absent the prior written consent of Flame; and

 

   

the fact that the Sponsor paid an aggregate of approximately $3,875,000 for its 3,875,000 private placement warrants and certain officers and directors collectively paid approximately $387,500 for their 387,500 private placement warrants to purchase shares of Flame common stock and that such private placement warrants will expire and be worthless if an initial business combination is not consummated within the completion window. Such securities may have a significantly higher value at the time of the Business Combination and, if unrestricted and freely tradable, would be valued at approximately $             based upon the closing price of $             per public warrant on the NYSE on             , 2024.

The personal and financial interests of our officers and directors may have influenced their motivation in identifying and selecting Sable, completing an initial business combination with Sable and may influence their operation of the post-combination company following the Business Combination. This risk may become more acute as the deadline of March 1, 2024 for completing an initial business combination nears. See the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination” for additional information.

In addition, Flame’s Chief Executive Officer, James C. Flores, is also the President, Chairman and Chief Executive Officer of Sable, and Gregory D. Patrinely is the Executive Vice President and Chief Financial Officer of Flame and the Chief Financial Officer of Sable, and their duties as a director and/or officer of Sable, as applicable, may conflict with their duties as a director and/or officer of Flame, as applicable, and the resolution of these conflicts may not always be in Flame’s or your best interests. See the sections entitled “Summary of the Proxy Statement—Interests of Certain Persons in the Business Combination” and “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination” for additional information.

The Flame Independent Directors were aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination, the Term Loan Agreement and in recommending to the Flame stockholders that they vote “FOR” the proposals presented at the special meeting.

The Insiders may have interests in the Business Combination different from the interests of Flame’s public stockholders.

The Insiders have financial interests in the Business Combination that are different from, or in addition to, those of other Flame stockholders generally. See the section entitled “Proposal No. 1—The Business

 

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Combination Proposal—Interests of Certain Persons in the Business Combination” for additional information. In addition, the Insiders may be incentivized to complete the Business Combination, or an alternative initial business combination with a less favorable company or on terms less favorable to stockholders, rather than to liquidate, in which case the Insiders would lose their entire investment. As a result, the Insiders may have a conflict of interest in determining whether Sable is an appropriate business with which to effectuate a business combination and/or in evaluating the terms of the Business Combination. See the sections entitled “Summary of the Proxy Statement—Interests of Certain Persons in the Business Combination” and “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination” for additional information. The Flame Independent Directors were aware of and considered these interests, among other matters, in evaluating and unanimously approving the Business Combination and in recommending to Flame stockholders that they approve the Business Combination.

To the extent permitted by applicable law, the Sponsor or the Insiders and/or their affiliates may elect to purchase Flame Class A common stock or public warrants from Flame stockholders, which may influence the vote on the Business Combination and reduce the public “float” of Flame Class A common stock.

Neither the Sponsor, the other Insiders nor any of their respective affiliates currently have an intention to purchase Flame Class A common stock or public warrants prior to the special meeting. However, subject to Rule 14e-5 under the Exchange Act, at any time prior to the special meeting, during a period when they are not then aware of any material nonpublic information regarding Flame or its securities, the Insiders and/or their respective affiliates may purchase shares and/or warrants from investors, or they may enter into transactions with such investors and others to provide them with incentives to acquire shares of Flame Class A common stock. In such transactions, the purchase price for the Flame Class A common stock will not exceed the redemption price. In addition, the persons described above will waive redemption rights, if any, with respect to the Flame Class A common stock they acquire in such transactions. However, any Flame Class A common stock acquired by the persons described above would not be voted in connection with the business combination proposal.

The purpose of such share purchases and other transactions would be to increase the likelihood that the conditions to the consummation of the Business Combination are satisfied or to provide additional equity financing. This may result in the completion of our Business Combination that may not otherwise have been possible. While the exact nature of any such incentives has not been determined as of the date of this proxy statement, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options.

Entering into any such incentive arrangements may have a depressive effect on the Flame Class A common stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than the prevailing market price and may therefore be more likely to sell the shares he owns, either prior to or immediately after the special meeting.

As of the date of this proxy statement, there have been no such discussions and no agreements to such effect have been entered into with any such investor or holder. Flame will file a Current Report on Form 8-K prior to the special meeting to disclose any arrangements entered into or significant purchases made by any of the aforementioned persons. Any such report will include (i) the amount of Flame Class A common stock purchased and the purchase price; (ii) the purpose of such purchases; (iii) the impact of such purchases on the likelihood that the Business Combination transaction will be approved; (iv) the identities or characteristics of security holders who sold shares if such shares were not purchased in the open market, or the nature of the sellers; and (v) the number of shares of Flame Class A common stock for which Flame has received redemption requests.

 

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The Sponsor, Flame’s directors and affiliates of Flame’s management team may receive a positive return on the 7,187,500 founder shares and 7,750,000 private placement warrants even if Flame’s public stockholders experience a negative return on their investment after consummation of the Business Combination.

In November 2020, our founders acquired 7,187,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.0035 per share. Our Sponsor purchased 4,671,875 founder shares, FL Co-Investment purchased 1,257,813 founder shares and Intrepid Financial Partners purchased 1,257,812 founder shares. Also in November 2020, our Sponsor transferred 434,375 founder shares to the Flame Independent Director nominees and certain individuals, including Gregory D. Patrinely, our Executive Vice President and Chief Financial Officer, at their original purchase price. Simultaneously with such transfer, each of FL Co-Investment and Intrepid Financial Partners transferred 13,125 founder shares to our Sponsor, respectively, at their original purchase price. In addition, simultaneously with the closing of the Flame IPO, our Sponsor, Intrepid Financial Partners and FL Co-Investment collectively purchased an aggregate of 7,750,000 private placement warrants at a price of $1.00 per warrant (for an aggregate purchase price of $7,750,000).

If Flame is able to complete a business combination within the required time period, the Sponsor, the Insiders and certain of Flame’s directors and officers may receive a positive return on the founder shares and the private placement warrants, even if Flame’s public stockholders experience a negative return on their investment in Flame common stock and public warrants after consummation of the Business Combination.

Deferred underwriting fees incurred in connection with the Flame IPO and payable at the consummation of the Business Combination will not be adjusted to account for redemptions by Flame’s public stockholders; if Flame’s public stockholders exercise their redemption rights, the amount of effective total underwriting commissions as a percentage of the aggregate proceeds from the Flame IPO will increase.

The underwriters in the Flame IPO are entitled to deferred underwriting commissions totaling $10,062,500 upon the consummation of the Business Combination, such amounts being held in the trust account until the consummation of the Business Combination. Such amounts will not be adjusted to account for redemptions of Flame Class A common stock by the public stockholders. Accordingly, the amount of effective total underwriting commissions as a percentage of the aggregate proceeds from the Flame IPO will increase as the number of shares of Flame Class A common stock redeemed increases. On February 27, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Extension Amendment to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from March 1, 2023 to September 1, 2023. In connection with the Extension, stockholders holding 20,317,255 shares of Flame Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 70.67% of Flame’s issued and outstanding Flame Class A common stock. After this redemption, 8,432,745 shares of Flame Class A common stock remained outstanding. On August 29, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve the Second Extension Amendment Proposal to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination from September 1, 2023 to March 1, 2024. In connection with the Second Extension, stockholders holding 2,328,063 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 27.61% of Flame’s issued and outstanding public shares. As a result, $24,008,096 (approximately $10.31 per share) was removed from the trust account to pay such redeeming holders on August 31, 2023. If no additional public stockholders exercise redemption rights with respect to their shares of Flame Class A common stock, the amount of effective underwriting commissions due to the underwriters upon the consummation of the Business Combination will represent approximately 15.8% of the aggregate proceeds from the Flame IPO retained by Flame. If public stockholders exercise redemption rights with respect to 3,052,341 shares of Flame Class A common stock, the 50% redemption scenario, the amount of effective underwriting commissions due to the underwriters upon the consummation of the Business Combination will represent approximately 31.7% of the aggregate proceeds from the Flame IPO retained by Flame taking into account such redemptions. If public stockholders exercise redemption rights with respect to 6,104,682 shares of Flame Class A common stock (100% of the public shares outstanding), the maximum redemption scenario under which Flame believes it would be able to satisfy the $150,000,000 Sable-EM Minimum Cash Threshold and have sufficient capital for operations, the amount of effective underwriting

 

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commissions due to the underwriters upon the consummation of the Business Combination will exceed aggregate proceeds from the Flame IPO retained by Flame taking into account such redemptions, as there was no cash estimated to be remaining in the trust account after such maximum redemptions and related taxes.

Our warrants are currently accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.

On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing Flame’s warrants. As a result of the SEC Statement, Flame reevaluated the accounting treatment of its warrants and determined to classify its warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings. As a result, included on Flame’s balance sheet as of September 30, 2023 and December 31, 2022 are derivative liabilities related to embedded features contained within the warrants. Accounting Standards Codification 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.

We and SYU will be subject to business uncertainties and contractual restrictions while the Business Combination is pending.

Uncertainty about the effect of the Business Combination on employees and third parties may have an adverse effect on us or SYU. These uncertainties may impair the ability of SYU to retain and motivate key personnel and could cause third parties that deal with SYU, including vendors and customers, to defer entering into contracts or making other decisions or seek to change existing business relationships. If employees depart because of uncertainty about their future roles and the potential complexities of the Business Combination, our business following the Business Combination could be harmed.

We have identified material weaknesses in our internal control over financial reporting. These material weaknesses could continue to adversely affect investor confidence in us and materially adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management also evaluates the effectiveness of our internal controls and we will disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or surrounding interim financial statements will not be prevented or detected on a timely basis.

We identified a material weakness in our internal control over financial reporting related to the accounting for the warrants we issued in connection with the Flame IPO. As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of December 31, 2022. This material weakness resulted in a material misstatement of our warrant liabilities, change in fair value of warrant liabilities and related financial disclosures for the fiscal year ended December 31, 2021.

 

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We have identified a material weakness in our internal control over financial reporting of complex financial instruments related to our classification of redeemable shares of Flame Class A common stock. As a result of this material weakness, our management has concluded that our internal control over financial reporting was not effective as of September 30, 2023. Historically, a portion of the Flame Class A common stock was classified as permanent equity. Following our re-evaluation of the accounting classification of the Flame Class A common stock, our management has determined that the Flame Class A common stock requires classification as temporary equity.

If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses. To respond to these material weaknesses, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which New Sable common stock is listed, the SEC or other regulatory authorities. In either case, this could in result a material adverse effect on our business. Failure to timely file will cause us to be ineligible to utilize short-form registration statements on Form S-3, which may impair our ability to obtain capital in a timely fashion to execute our business strategies or issue shares to effect an acquisition. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

Flame and, following the Business Combination, New Sable, may face litigation and other risks as a result of the material weaknesses in Flame’s internal control over financial reporting.

Following the issuance of the SEC Statement, Flame’s management and audit committee concluded that it was appropriate to revise its previously issued financial statements as of March 1, 2021 and for each of the quarters ended March 31, 2021 and June 30, 2021, on Form 10-Q filed with the SEC on May 28, 2021 and August 16, 2021, respectively. See above under the heading “—Our warrants are currently accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.” As part of the restatement, Flame identified a material weakness in its internal controls over financial reporting.

 

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As a result of such material weakness, the restatement, the change in accounting for the warrants and other matters raised or that may in the future be raised by the SEC, Flame and, following the Business Combination, New Sable, face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weaknesses in Flame’s internal control over financial reporting and the preparation of its financial statements. As of the date of this proxy statement, Flame has no knowledge of any such litigation or dispute. However, Flame can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on Flame’s business, results of operations and financial condition or its ability to complete the Business Combination and related transactions.

For the year ended December 31, 2022, our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a “going concern” in its report on our audited financial statements included in our annual report.

As of December 31, 2022, we had cash outside the trust account of $100,256 available for working capital needs and a working capital deficit of $6,547,305. We are also subject to a mandatory liquidation and subsequent dissolution requirement if we do not complete our initial business combination by March 1, 2024. Further, we have incurred and expect to continue to incur significant costs in pursuit of an initial business combination. Management’s plans to address this need for capital are discussed in the section entitled “Flame’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We cannot assure you that our plans to raise capital or to consummate an initial business combination before March 1, 2024 will be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere herein do not include any adjustments that might result from our inability to continue as a going concern.

The NYSE may not continue to list our securities, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

We cannot assure you that our securities will continue to be listed on the NYSE in the future or prior to our initial business combination. In order for our securities to remain listed on the NYSE prior to our initial business combination, we must maintain certain financial, distribution and stock price levels.

Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements, in order to continue to maintain the listing of our securities on the NYSE. For instance, our stock price would generally be required to be at least $4.00 per share, the aggregate market value of publicly-held shares would be required to be at least $40,000,000 and we would be required to have at least 400 round lot holders. We cannot assure you that we will be able to meet the NYSE’s initial listing requirements at that time. Because public stockholders elected to redeem an aggregate of 2,328,063 public shares, representing approximately 27.61% of Flame’s issued and outstanding public shares, in connection with Second Extension Amendment, there is an increased likelihood that we may fail to satisfy the minimum public stockholders’ equity and round lot holders thresholds imposed by the NYSE.

If the NYSE delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for New Sable securities;

 

   

reduced liquidity for New Sable securities;

 

   

a determination that New Sable common stock is a “penny stock,” which would require brokers trading in such securities to adhere to more stringent rules, could adversely impact the value of our securities and/or possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

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a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

Stockholders litigation could prevent or delay the closing of the Business Combination or otherwise negatively impact our business, operating results and financial condition.

We may incur additional costs in connection with the defense or settlement of existing and any future stockholders litigation in connection with the proposed Business Combination. Litigation may adversely affect our ability to complete the proposed Business Combination. We could incur significant costs in connection with any such litigation lawsuits, including costs associated with the indemnification of obligations to our directors. Furthermore, one of the conditions to the closing of the proposed Transactions is the absence of any governmental order or law preventing the Business Combination or making the consummation of the proposed transactions illegal. Consequently, if a plaintiff were to secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our ability to complete the proposed Business Combination, then such injunctive or other relief may prevent the proposed Business Combination from becoming effective within the expected time frame or at all.

The future exercise of registration rights may adversely affect the market price of New Sable common stock.

Certain of New Sable’s stockholders will have registration rights for certain securities. Pursuant to the PIPE Subscription Agreements, we are obligated to register a substantial number of shares of New Sable common stock within specified periods shortly after the Closing. We are obligated to file one or more resale “shelf” registration statements to register such securities, use commercially reasonable efforts to cause such registration statements to be declared effective by the SEC within specified periods, and keep such registration statements effective for up to three years thereafter. We are also obligated to file other registration statements, including for underwritten offerings of New Sable common stock, in specified circumstances. Sales of a substantial number of shares of New Sable common stock pursuant to these registration statements in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of New Sable common stock. For more information relating to the registration rights under the PIPE Subscription Agreements, see the section entitled “Business Combination Proposal—Related Agreements—PIPE Subscription Agreements.”

Future resales of our outstanding shares, including the registration of sales for resale under the Registration Rights Agreement, may cause the market price of our securities to drop significantly, even if our business is doing well.

New Sable will have 68,292,182 shares of New Sable common stock outstanding immediately following the consummation of the Business Combination (assuming that no additional shares of Flame common stock are redeemed by Flame stockholders and 52,000,000 shares of New Sable common stock are issued to PIPE Investors at Closing), and there may be a large number of shares of New Sable common stock sold in the market following the consummation of the Business Combination, or shortly thereafter.

At the closing of the Business Combination, New Sable will enter into the Registration Rights Agreement with certain stockholders party thereto, pursuant to which, among other things, such stockholders will be entitled to customary registration rights for 3,000,000 shares of Flame common stock following their respective lock-up periods. The sale or possibility of sale of these securities could have the effect of increasing the volatility in our share price or putting significant downward pressure on the price of New Sable common stock. For more information relating to the registration rights under the Registration Rights Agreement, see the section entitled “Business Combination Proposal—Related Agreements—Registration Rights Agreement.”

 

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The Sponsor is liable to ensure that proceeds of the trust are not reduced by vendor claims in the event an initial business combination is not consummated. It has also agreed to pay for any liquidation expenses if an initial business combination is not consummated. Such liability may have influenced the Sponsor’s decision to approve the Business Combination.

If the Business Combination or another initial business combination are not consummated by Flame within the completion window, the Sponsor will be liable under certain circumstances to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Flame for services rendered or contracted for or products sold to Flame. If Flame consummates an initial business combination, including the Business Combination, on the other hand, Flame will instead be liable for all such claims. Please see the section entitled “Other Information Related to Flame—Liquidation if No Business Combination” for further information. If Flame is required to be liquidated and there are no funds remaining to pay the costs associated with the implementation and completion of such liquidation, the Sponsor has also agreed to pay the funds necessary to complete such liquidation and not to seek repayment for such expense. We currently do not anticipate that such funds will be insufficient.

These obligations of the Sponsor may have influenced the Sponsor’s decision to approve the Business Combination and to continue to pursue the Business Combination. In considering the recommendations of the Flame Board to vote for the business combination proposal and the other proposals described in this proxy statement, Flame’s stockholders should consider these interests.

The exercise of Flame’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in Flame’s stockholders’ best interest.

In the period leading up to the Closing, events may occur that, pursuant to the Merger Agreement, would require Flame to agree to amend the Merger Agreement, to consent to certain actions to be taken by Sable or to waive rights that Flame is entitled to under the Merger Agreement. Such events could arise because of changes in the course of Sable’s business, a request by Sable to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on Sable’s business and would entitle Flame to terminate the Merger Agreement. In any such circumstances, it would be at Flame’s discretion, acting through the Flame Independent Directors, to grant its consent or waive those rights. The existence of the financial and personal interests of the directors described in these risk factors may result in a conflict of interest on the part of one or more of the directors between what such directors believe is best for Flame and what he or they may believe is best for themselves in determining whether or not to take the requested action. As of the date of this proxy statement, Flame does not believe there will be any material changes or waivers that Flame’s directors and officers would be likely to make after the mailing of this proxy statement. To the extent required by law, Flame will circulate a new or amended proxy statement or supplement thereto in the event there are any changes to the terms of the Merger Agreement or the Business Combination that would have a material impact on its stockholders are required prior to the vote on the business combination proposal.

Past performance by Flame and by our management team may not be indicative of future performance of an investment in Flame or New Sable.

Past performance by Flame and by our management team is not a guarantee of success with respect to the Business Combination. You should not rely on the historical record of Flame or our management team’s performance as indicative of the future performance of an investment in Flame or New Sable or the returns Flame or New Sable will, or is likely to, generate going forward.

 

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Flame’s stockholders may be held liable for claims by third parties against Flame to the extent of distributions received by them.

If Flame is unable to complete the Business Combination or another initial business combination within the completion window, Flame will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably practicable following such redemption, subject to the approval of its remaining stockholders and the Flame Board, proceed to commence a voluntary liquidation and thereby a formal dissolution of the company, subject (in the case of (ii) and (iii) above) to its obligations to provide for claims of creditors and the requirements of applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by the end of the completion window. Flame cannot assure you that it will properly assess all claims that may be potentially brought against Flame. As such, Flame’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of its stockholders may extend well beyond the third anniversary of the date of distribution. Accordingly, Flame cannot assure you that third parties will not seek to recover from its stockholders amounts owed to them by Flame.

If Flame is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by Flame’s stockholders. Furthermore, because Flame intends to distribute the proceeds held in the trust account to its public stockholders promptly after the expiration of the time period to complete an initial business combination, this may be viewed or interpreted as giving preference to its public stockholders over any potential creditors with respect to access to or distributions from its assets. Furthermore, the Flame Board may be viewed as having breached their fiduciary duties to Flame’s creditors and/or may have acted in bad faith, and thereby exposing itself and Flame to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. Flame cannot assure you that claims will not be brought against it for these reasons.

The Flame Independent Directors may decide not to enforce the indemnification obligations of the Sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to the public stockholders.

In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.00 per share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes and trust administrative expenses, and the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, the Flame Independent Directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations.

While Flame currently expects that the Flame Independent Directors would take legal action on its behalf against the Sponsor to enforce its indemnification obligations to Flame, it is possible that the Flame Independent Directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the Flame Independent Directors to be too high relative to the amount recoverable or if the Flame Independent Directors determine that a favorable outcome is not likely. If the Flame Independent Directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to the public stockholders may be reduced below $10.00 per share.

 

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We may not have sufficient funds to satisfy indemnification claims of our directors and officers.

We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed, and any persons who may become officers or directors prior to an initial business combination will agree, to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (a) we have sufficient funds outside of the trust account or (b) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.

The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares and the Sable-EM Minimum Cash Threshold in the Sable-EM Purchase Agreement could increase the probability that the Business Combination will be unsuccessful and that you will have to wait for liquidation in order to redeem your shares.

Because the Sable-EM Purchase Agreement requires that the aggregate cash available after the Closing (after giving effect to the Business Combination (including the PIPE Investment)) shall be equal to or greater than $150,000,000, there is increased probability that the Business Combination would be unsuccessful. We do not know how many stockholders will ultimately exercise their redemption rights in connection with the Business Combination. As such, the Business Combination is structured based on our expectations (and those of the other parties to the Merger Agreement) as to the number of shares that will be submitted for redemption. In the event that the public stockholders exercise their redemption rights with respect to a number of our shares such that the Sable-EM Minimum Cash Threshold is not met, and the cash proceeds from the PIPE Investment are insufficient to make up the shortfall caused by such redemptions, we may need to seek to arrange for additional third-party financing to be able to satisfy the Sable-EM Minimum Cash Threshold (or such lower amount designated by EM if EM waives the condition), or for New Sable to operate its business and execute its plans post-Closing of the Business Combination. Furthermore, raising such additional financing may involve dilutive equity issuances or the incurrence of indebtedness at higher-than-desirable levels. In general, if we (or, after the Business Combination, New Sable) are unable to obtain sufficient funding on a timely basis, we may be unable to expand our operations or otherwise capitalize on business opportunities, and defend against and prosecute litigation, which could materially affect our business, financial condition and results of operations. If we are ultimately unable to continue as a going concern, we may have to seek the protection of bankruptcy laws or liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that our securityholders will lose all or a part of their investment.

If we determine that additional third-party financing is necessary but is not available to us, there is an increased probability that the Business Combination would be unsuccessful. If the Business Combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in need of immediate liquidity, you could attempt to sell your shares in the open market; however, at such time our shares may trade at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your shares in the open market.

Prior to the Closing of the Business Combination, if third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share.

Prior to the Closing of the Business Combination, our placing of funds in the trust account may not protect those funds from third-party claims against us. Prior to the Closing of the Business Combination, we will seek to

 

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have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders; however, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be signific