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Flame Acquisition Corp. (FLME) Expands Sable Offshore PIPE to $180M

Flame Acquisition Corp. (FLME) Expands Sable Offshore PIPE to $180M

Flame Acquisition Corp. (NYSE:FLME) has expanded the PIPE for its combination with Sable Offshore to $180.4 million, making it the year’s largest.

The new investments by Metamorphic Pecan match those made by investors in the deal’s existing $74.5 million in PIPE commitments at $10 per shares. Metamorphic will have a right to appoint a Board member presuming it maintains at least a 10% stake and Flame intends to continue to expand to the PIPE to up to $525 million.

If it succeeds in this, the PIPE would be just under the next largest PIPE assembled by a SPAC since early 2022. That $565 million PIPE was put together by Rice II for another oil and gas deal with Net Power (NYSE:NPWR). Encouragingly, Net Power is still trading at $10.27 six months after close.

Sable Offshore is still a bird of a somewhat different feather from Net Power, however. Net Power is advancing brownfield projects for cleaner natural gas power facilities in Texas and it expects its first utility-scale plant to become operational in late 2027.

Sable Offshore’s Santa Ynez offshore facilities, meanwhile, are already built, but had been shut down by California authorities since 2015. Exxon (NYSE:XOM), which currently owns them has been waging a legal campaign to allow their operations to restart, but at some point decided that cutting bait and spinning them off through Sable Offshore would clean up its balance sheet while SPAC investors would have access to a buy-low opportunity.

That bargain still seemed to carry a fair amount of risk with the facility still shut down, but a regulatory win earlier this month that saw it regain its permit to transit resources to the shore via pipeline appears to have opened the spigots for capital as well as oil.

In addition to marking a return to large-scale committed capital in deals, it is notable that the largest PIPEs appended to SPAC deals since the beginning of 2022 have been almost exclusively gathered for oil & gas or biotech deals.

These are two traditional sectors for SPACs dating back well before the present cycle and the pair can boast of making up nearly half of the top 10 best performing de-SPACs by current share price since 2010. This could mark one more sign of a reset in the SPAC market as a smaller number of bankable deals float to the top above the noise.