Sable Offshore's Big Bet: Can It Justify A 28% Rise?

Forbes

18-07-2025

CANADA - 2025/06/04: In this photo illustration, the Sable Offshore logo is seen displayed on a ... More smartphone screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images)
Sable Offshore (NYSE: SOC) has regained attention. The independent oil and gas operator from California, which manages offshore platforms and pipelines associated with its Santa Ynez Unit, witnessed its stock jump 28.4% on July 17, significantly surpassing the overall market performance. This surge follows the company's long-anticipated resumption of production in May 2025, alongside ambitious new guidance forecasting 40,000 to 50,000 barrels of oil equivalent per day (BOE/d) for the latter half of the year.
This optimism has led to a significant reassessment of the stock, which is now priced around $28, up from approximately $22 just days prior. However, even with strong momentum, the underlying fundamentals remain precarious. SOC continues to operate at a loss, has a considerable $873 million debt burden, and is particularly vulnerable to fluctuations in oil prices and operational risks offshore. Despite these challenges, a $295 million equity raise has provided the company with some leeway, and optimistic analysts view this ramp-up as a stepping stone towards profitability. However, if you seek potential growth with less volatility than individual stocks, consider the High Quality portfolio, which has outperformed the S&P and achieved >91% returns since its inception. Additionally, refer to RGTI stock: Path to 10x Growth.
Strong Revenue, Significant Losses
In Q1 2025, SOC reported a net loss of $109.5 million (–$1.05 per share), failing to meet analyst forecasts. Nevertheless, revenue came in impressively strong at $78 million, demonstrating the initial effects of resumed oil flows. The loss was primarily attributed to restart-related operational expenses, increased interest costs, and non-cash adjustments related to warrants and financing activities.
Motivated by robust early production from Platform Harmony, SOC elevated its output forecast for the second half of 2025 from 20,000–25,000 BOE/d to 40,000–50,000 BOE/d, nearly doubling previous estimates. Simultaneously, the company has moderated its expectations for per-barrel operational costs, indicating enhanced capital efficiency and potential margin improvements as production volumes increase.
Is Sable Offshore Financially Secure?
SOC's balance sheet reveals a mixed situation. On one side, the company possesses $189 million in cash, representing a healthy 12.1% of total assets, thereby offering a robust liquidity cushion. Conversely, its debt-to-equity ratio stands at 46.4%, more than double the S&P 500 average of 19.4%, indicating heightened financial risk in comparison to broader markets. While liquidity is manageable in the near term, the company's high leverage necessitates future profitability to maintain its capital structure, especially as production grows and interest obligations escalate.
Valuation: Too Much, Too Fast?
In spite of the operational advancements, SOC stock appears overvalued in relation to its fundamentals. It is trading at a premium compared to its peers, even while it continues to incur losses and relies on execution-focused production targets. Investors seem to be factoring in the best-case scenarios – a precarious position for a company with a limited recent operational track record and significant downside risks. The recent uptick may be hasty unless the company can consistently deliver production, manage expenses, and progress towards generating sustainable cash flow.
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