Sable Offshore Corp. (SOC) stock intrinsic value fair value estimate & owner earnings analysis

Sable Offshore (formerly Flame Acquisition Corp.) owns one asset: the Santa Ynez Unit. That is the Hondo, Heritage and Harmony platforms on 16 federal leases five to nine miles off Santa Barbara County, California, plus an onshore processing plant in Goleta and the Santa Ynez Pipeline System, which carries crude inland to Pentland Station in Kern County. The field produced over 671 million barrels of oil equivalent between 1981 and 2014, averaging about 29,000 barrels of oil a day in 2014. It was shut after the May 2015 oil release from the pipeline, then called Line 901 and operated by Plains. Sable took ownership in February 2024 and spent 2024 and 2025 repairing the facilities and seeking approvals. It began selling oil on March 29, 2026, after the U.S. Secretary of Energy issued an order on March 13, 2026 under the Defense Production Act directing that the pipeline carry the unit's oil. With only a few months of sales, there is no earnings record to anchor a value. Cash flow after stock compensation and capital spending (excluding working-capital swings) was about -$378 million for February to December 2024 and -$808 million in 2025, all before production. The first producing quarter (April to June 2026) brought $137.1 million of revenue on about 21,000 barrels a day, roughly $72 a barrel by our arithmetic. But operations and maintenance cost $113.5 million and general and administrative cost $58.5 million, so the business still lost money at the operating level. Management reports about 38,000 gross barrels a day in July and 42,000 through August 9, and targets second-half field operating costs of $17 to $21 a barrel. The filed second-quarter costs work out far higher per barrel, and the filings do not say how much was one-time restart spending. We could not reconcile that gap, so we start from filed costs and move them partway lower in the base case and further in the bull case. At the end of 2025 the company reported no proved reserves: its oil is classified as contingent resources, so there is no audited estimate of how long the field can produce. Debt: on July 2, 2026 Sable repaid its Exxon Mobil loan in full. It used a $675 million term loan at a 15% coupon due December 15, 2028, $345 million of 6.5% convertible notes due 2031, and $115 million from selling 37.3 million new shares. The term loan amortizes 2.5% of principal per quarter in the second half of 2026 and 5% per quarter after that. This refinancing is why the substantial doubt about the company's ability to continue, disclosed with its 2025 annual report, no longer applies. We estimate about $394 million of cash after the refinancing, before transaction fees the filing does not quantify, leaving net debt near $626 million. The term loan costs 15% against our 6% discount rate, so we add about $117 million for its excess interest to maturity and about $7 million for the notes. We also count the $119.8 million booked for eventually removing the platforms. Total claims ahead of shareholders come to about $870 million, or about $4.54 a share on 191.9 million shares. Interest alone runs about $123 million a year. Base case (-$3.32 a share): sales average 33,000 barrels a day in the first year, below the July and August pace to allow for early decline. They ease to about 29,000, the 2014 level, then fall 5% a year. Price stays at about $72. Operations and maintenance cost about $400 million a year, below the second quarter's $454 million annualized pace. Overhead including stock pay is about $200 million, and capital spending is $120 million. Because the costs are largely fixed, cash flow before interest falls from about $144 million in year one to breakeven in year four, when we assume the field stops being economic. The business is worth about $234 million against about $870 million of claims, so the company appears to owe roughly $640 million more than it is worth. Even year one barely covers interest, before any principal repayments. Bull case (+$3.06 a share): volumes hold near 38,000 barrels a day in year one and then decline slowly. Costs fall toward management's targets: operations and maintenance about $350 million, overhead about $170 million and capital spending $100 million. Cash flow before interest starts near $375 million and fades over about ten years. The business is worth about $1.46 billion, leaving about $590 million for shareholders after the $870 million of claims. Bear case (-$4.54 a share): the pipeline is halted again. The State of California sued on March 30, 2026 to overturn the federal order. The court denied a preliminary injunction, and a motion to dismiss is set for hearing on September 28, 2026. Separately, in its 2025 10-K the company disclosed that the Santa Barbara County District Attorney filed a 21-count criminal complaint against it on September 16, 2025; the counts are allegations and have not been adjudicated. A halt would leave the business worth roughly nothing against about $870 million of claims. No growth is credited. That excludes further well restarts, the offshore storage-and-tanker alternative the company announced in September 2025, and any change in oil prices. Because the median outcome leaves nothing for shareholders, the margin-of-safety price is zero. This view would be wrong if two or three quarters of filed results show operating costs near management's targets at 35,000 to 40,000 barrels a day, and a reserve report establishes the field's life.