Sable Offshore Corporation (SOC): A Comprehensive Overview
Acquisition of ExxonMobil’s Assets
In February 2024, Sable Offshore Corporation (SOC) finalized the acquisition of ExxonMobil’s Santa Ynez Unit (SYU). This asset includes three offshore oil platforms—Hondo, Harmony, and Heritage—and the onshore Las Flores Canyon processing facility in Santa Barbara County, California. Initially valued at $643 million, the transaction ultimately closed at $989 million, reflecting accrued interest and interim costs. The purchase was primarily financed through a $625 million loan from ExxonMobil.
The SYU was once a prolific oil-producing asset, responsible for 671 million barrels of oil from 1981 to 2015, when a pipeline rupture halted production. The remaining reserves are substantial, with 646 million barrels of oil equivalent (BOE) estimated, comprising 86% oil and 13% natural gas. Restarting operations, however, requires significant regulatory and logistical hurdles to be overcome before the January 2026 deadline, or the assets risk reverting to ExxonMobil.
Pre-Production Requirements
SOC must address the following key challenges before production can resume:
1. Regulatory Approvals : SOC needs federal and state permits, particularly from agencies like the Bureau of Land Management (BLM) and California’s Department of Conservation.
2. Environmental Assessments : California’s stringent regulations require comprehensive Environmental Impact Assessments (EIAs) to mitigate ecological risks.
3. Infrastructure Repairs : Repairing the ruptured pipeline and ensuring compliance with safety standards will require an estimated $197 million in additional investments.
4. Community Engagement : Addressing environmental and community concerns is critical to gaining public and local government support.
Challenges Under California Environmental Laws
SOC faces significant obstacles due to California’s regulatory framework, including:
- California Environmental Quality Act (CEQA) : Requires all projects to identify and mitigate significant environmental impacts.
- California Coastal Sanctuary Act of 1994 : Prevents new offshore oil leases in state waters but does not directly affect SOC’s federal leases.
- Recent Legislation : In 2024, Governor Gavin Newsom enacted laws granting local governments more power to restrict oil production and accelerate the decommissioning of idle wells.
The Game-Changer: Trump’s Executive Order
On January 20, 2025, President Trump issued a landmark executive order declaring a national energy emergency. This order drastically alters SOC’s prospects by overriding state-level regulatory obstacles. Key provisions include:
- Defense Production Act : SOC’s oil is classified as critical to national defense, granting the federal government the authority to expedite operations.
- Federal Preemption Powers : California’s environmental restrictions are deemed a threat to national security, allowing the federal government to override them.
- Military Construction Authority : SOC’s infrastructure is designated as a strategic defense asset, enabling accelerated repairs and upgrades under military authority.
Valuation Analysis: SOC’s Massive Upside Potential
Peer Valuation Comparison
Comparable mid-sized oil companies are valued at $20–$30 per barrel of oil equivalent (BOE) . SOC’s current valuation implies a mere $4.87 per BOE , significantly undervalued relative to its peers.
Stock Valuation Scenarios
Based on SOC’s reserves (646 million BOE) and the impact of the executive order, here are the potential valuations:
1. Optimistic Scenario :
- Assumptions : SOC restarts production by Q4 2025, oil prices remain at $80/barrel, and regulatory hurdles are eliminated.
- Enterprise Value (EV) : 646 million BOE × $30/BOE = $19.38 billion .
- Net Debt : $1 billion.
- Market Capitalization : $19.38 billion - $1 billion = $18.38 billion .
- Stock Price : $18.38 billion / 100 million shares = $183.80 per share .
2. Moderate Scenario :
- Assumptions : SOC faces minor delays, production restarts by mid-2025, and oil prices decline slightly to $70/barrel.
- Enterprise Value (EV) : 646 million BOE × $25/BOE = $16.15 billion .
- Net Debt : $1.2 billion.
- Market Capitalization : $16.15 billion - $1.2 billion = $14.95 billion .
- Stock Price : $14.95 billion / 100 million shares = $149.50 per share .
3. Pessimistic Scenario :
- Assumptions : Significant delays prevent production until late 2026, missing the deadline and risking asset reversion to Exxon. Oil prices drop to $50/barrel.
- Enterprise Value (EV) : 646 million BOE × $15/BOE = $9.69 billion .
- Net Debt : $1.5 billion.
- Market Capitalization : $9.69 billion - $1.5 billion = $8.19 billion .
- Stock Price : $8.19 billion / 100 million shares = $81.90 per share .
Conclusion
SOC’s acquisition of ExxonMobil’s Santa Ynez Unit presents a massive deep-value opportunity. With 646 million BOE of reserves , the company is undervalued at just $4.87 per BOE compared to peer valuations of $20–$30 per BOE. President Trump’s executive order drastically shifts the regulatory landscape, enabling SOC to potentially restart production before the January 2026 deadline.
SOC’s stock could reach $149–$183 per share in a successful scenario, representing significant upside from its current price of approximately $27 per share. However, risks remain tied to execution, oil prices, and potential regulatory challenges despite federal intervention. Investors should monitor SOC’s progress and federal actions closely.
