Sable Offshore Stock (SOC) Soars 37% as U.S. Weighs Drilling Rule Override — What’s Next?

Shares in Sable Offshore (SOC) rallied 37.26% on Thursday after the U.S. federal government confirmed it was deliberating on overriding California’s drilling restrictions on the offshore oil and gas producer. However, analysts are not completely bullish on what lies ahead for the Texas-based independent energy company.

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U.S. Considers DPA Order to Back Sable Offshore

On Thursday, U.S. Interior Secretary Doug Burgum told Bloomberg in an interview that President Donald Trump’s administration was “absolutely” looking to tap the Cold War-era Defense Production Act (DPA) to ease restrictions on Sable Offshore’s oil drilling off the coast of California. The DPA of 1950 grants the U.S. president authority to direct key parts of the domestic economy on national security grounds.

This followed a formal opinion issued earlier this week by the U.S. Department of Justice, which stressed that invoking the DPA is a lawful and effective method to override California law blocking offshore oil production and pipelines.

Why Does This Matter?

Sable Offshore was established in October 2020 to buy “distressed” oil production assets impacted by the 2015 Refugio oil spill near Santa Barbara in California.

In February 2024, the company acquired the Santa Ynez Unit (SYU) Pipeline System, including several offshore oil and gas drilling platforms that are part of the system, from Exxon Mobil (XOM) in a $989 million deal. Sable Offshore continues to pursue efforts to restart the system and resume oil production activities.

Jefferies Flags Lack of Definite Timeline for DPA Order

Jefferies analyst Lloyd Byrne has argued that while a DPA order would help Sable Offshore fend off state-level penalties, there appears to be no fixed timeline on when such an order would be issued, if at all.

Nonetheless, Byrne reaffirmed both his Buy rating on Sable Offshore’s shares and his price target of $28, implying 102.17% upside.

Benchmark Sees ‘Lengthy’ Court Battles Ahead

On the contrary, Benchmark analyst Subash Chandra is bearish and downgraded SOC from Buy to Hold, noting that court-imposed restrictions on its operations remain despite the classification of its pipelines last year.

The reclassification enabled the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration to issue an approval letter for Sable to restart certain segments of the Las Flores pipeline system, which is part of the larger SYU pipeline network. However, environmentalists are pushing back against the move.

Chandra believes that a resolution of the matter appears distant and the tussle in federal courts is only starting and could be a “lengthy and expensive process.”

Is Sable Offshore a Good Stock to Buy?

Across Wall Street, analysts remain bullish on Sable Offshore’s shares and have a Strong Buy consensus rating on the stock. This is based on three Buys and one Hold issued over the past three months.

In addition, the average SOC price target of $24.75 implies about 75% upside from current trading levels.

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