How are energy investors positioned?
On Friday, Benchmark analysts maintained a Buy rating for Sable Offshore Corp. (NYSE: SOC) with a steady price target of $37.00, representing a potential 106% upside from the current price of $17.92. According to InvestingPro analysis, the stock appears undervalued despite falling 24% year-to-date. The analysts' statement followed a significant public hearing with the California Coastal Commission ( CCC (WA:CCCP)). The hearing concluded with the anticipation of 126 public members yet to speak, which is expected to be less substantive and more emotional in nature.
The CCC is currently seeking $15 million in fines from Sable Offshore. More critical than the fines, however, is the CCC's pursuit of Coastal Development Permits (CDPs). The analysts believe that the CDP process will be strategically utilized to prevent the start-up of the company's operations. While the company maintains a healthy current ratio of 2.94, InvestingPro data shows it's quickly burning through cash, with negative free cash flow of $258 million in the last twelve months.
Benchmark's analyst highlighted the importance of the recent developments, stating, "The most substantive part of the most substantive public hearing to-date with the California Coastal Commission just concluded. On-deck are 126 members of the public confirmed to speak, which tends to be less substantive and emotional."
The CCC's actions indicate a regulatory challenge for Sable Offshore, with the fines and the CDP process potentially impacting the company's future operations. Despite these challenges, Benchmark's reiteration of the Buy rating and the $37.00 price target suggests confidence in the company's value and prospects.
Investors and market watchers will be closely monitoring the outcomes of the public commentary and the CCC's decisions regarding the fines and the issuance of CDPs, as they could significantly influence Sable Offshore's operational start-up timeline and financial position. Despite these challenges, the stock has shown resilience with a 59% gain over the past year. InvestingPro subscribers can access 8 additional key insights and detailed financial metrics to better evaluate the company's prospects.
In other recent news, Sable Offshore Corp. has released its latest financial updates, revealing a slight increase in its cash balance to $300 million from $288 million in the previous quarter. The company estimates that restarting production will cost $152 million, with operations expected to resume in the second quarter of 2025. Sable Offshore has received an extension to restart operations by March 1, 2026, delaying the previous deadline of January 1, 2026. This extension provides additional time for the company to prepare for production resumption.
The company also received clearance from the Santa Barbara County Planning and Development Department to proceed with repairs on the Las Flores Pipeline System. This clearance is seen as a crucial step for maintaining infrastructure integrity and operational safety. Additionally, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration has expressed no objections to enhanced integrity standards for the pipeline.
Analysts have responded to these developments with positive ratings. Roth/MKM initiated coverage with a Buy rating and a $30 target, while Benchmark maintained its Buy rating with a $37 target. These ratings reflect confidence in Sable Offshore's strategic plans and potential for future development.
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