How are energy investors positioned?
On Wednesday, TD Cowen reaffirmed its positive stance on Sable Offshore Corp. (NYSE: SOC), maintaining a Buy rating and a $40.00 price target. Currently trading at $32.09, the stock has significant upside potential according to analyst consensus, with targets ranging from $37 to $47. InvestingPro analysis indicates the stock is trading near its Fair Value. The endorsement follows Sable Offshore’s announcement of a successful hydrotest, a critical step in complying with the California Office of the Fire Marshal’s consent decree. This compliance is necessary for the restoration of onshore pipelines 324 and 325, which are used for transporting crude oil from Las Flores canyon to the Pentland oil terminal in southwestern Kern County.
Sable Offshore has completed the testing phase and is now awaiting the Fire Marshal’s office to review the accomplished requirements and authorize the pipelines for operation. This approval is expected to facilitate the company’s first revenue in the third quarter of 2025. InvestingPro data shows the company maintains a "FAIR" overall financial health score, with liquid assets exceeding short-term obligations at a current ratio of 1.67. Sable Offshore’s strategy includes filling storage tanks at Las Flores Canyon with 540 thousand barrels (MBbl) before commencing crude transportation through the pipelines to sales points.
The company has successfully flow-tested six wells from the Harmony (JO:HARJ) platform at a rate of 6 thousand barrels per day (MBD) and is currently filling the storage tanks in anticipation of the pipeline commissioning. TD Cowen analysts project a swift commissioning process, as Sable Offshore aims to produce between 40,000 and 45,000 barrels of oil equivalent per day (BOED) in the second half of 2025.
With the regulatory hurdles largely addressed, the focus is expected to shift toward the potential restart of operations, which could set the stage for the company to issue its first dividends in 2026. According to TD Cowen’s projections, with crude oil pricing at approximately $60 per barrel, Sable Offshore is poised to generate just over $275 million in free cash flow (FCF) in 2026. This would translate to an estimated 10% FCF yield, comfortably supporting the initiation of a fixed dividend for shareholders. The stock has shown strong momentum, with a 120% return over the past year and a 38% gain in the last six months. InvestingPro subscribers can access 11 additional insights about Sable Offshore’s financial health and growth prospects.
In other recent news, Sable Offshore Corp. has announced the successful completion of hydrotesting for its Onshore Pipeline, marking the final step needed to resume operations under the Consent Decree. This development is pivotal as it ensures the pipeline’s readiness for safe operation, confirmed by a recent SEC filing. Additionally, Sable Offshore has initiated a public offering of $200 million in common stock, with underwriters given a 30-day option to purchase an additional $30 million. The proceeds are intended for capital expenditures and general corporate purposes, although the offering’s completion is contingent on market conditions.
Benchmark analysts have raised their price target for Sable Offshore to $47, maintaining a Buy rating, citing the company’s increased production guidance and improved cost efficiency. TD Cowen also adjusted its price target to $40, reflecting confidence in the company’s operational advancements following the restart of production at the Harmony platform. The company has updated its production estimates for the second half of 2025, now expecting 40,000-50,000 barrels of oil equivalent per day, doubling previous forecasts. This increase in production is anticipated to reduce operational expenses significantly.
Sable Offshore’s recent restart of oil production at the Santa Ynez Unit, with six wells already producing, has been a key factor in these positive analyst outlooks. The company’s progress with pipeline repairs and recommissioning efforts has been highlighted as reducing operational risks. As Sable Offshore continues to ramp up production, these developments are seen as positioning the company for a promising phase of growth and profitability.
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