Sable Offshore Corp. (NYSE:SOC) still offers over 180% upside potential even after Jefferies slashed its price target from $24 to $11 on July 6. Analyst Lloyd Byrne maintained a Buy rating on the stock, citing the company's core business prospects despite recent dilution from a convertible notes offering. The stock currently trades around $3.90, well below the revised target.
Convertible Notes and Share Dilution
On July 1, Sable Offshore disclosed details of its recent public offerings, which included 32,467,533 common shares sold at $3.08 per share and $300 million in 6.5% convertible senior notes due in 2031. The company also granted underwriters a 30-day option to purchase up to an additional 4,870,129 shares and $45 million in notes to cover over-allotments. The notes are senior unsecured obligations with semi-annual interest payments and a conversion rate of 249.7502 shares per $1,000 face value, implying a conversion price of about $4 per share — a 30% premium to the offering price.
Business Operations and Outlook
Sable Offshore is an independent oil and gas producer engaged in exploration, production, and marketing, and it operates a subsea pipeline network for transporting oil, gas, and produced water. The company's failure to secure government support prompted the dilutive capital raise, but Jefferies believes the current valuation more than discounts these headwinds. With oil prices remaining elevated and the company's assets in the Gulf of Mexico, Sable could benefit from sustained demand for domestic energy production.