How might the class‑action exposure affect the company’s cash flow and future drilling capital expenditures?

The pending securities‑fraud class action adds a material contingency to Sable Offshore’s balance sheet. Even if the lawsuit is still in the discovery stage, the company must now set aside a reserve for potential legal expenses, settlement costs and any judgment‑related penalties. In the short term this reduces operating cash flow because a portion of earnings will be redirected to legal counsel and to fund the escrow account that the company will likely be required to maintain. The uncertainty also depresses cash‑generation forecasts in analyst models, forcing a “worst‑case” drag on free‑cash‑flow estimates of roughly 5‑10 % until the matter is resolved or the reserve is released.

From a capital‑expenditure standpoint, the exposure will likely tighten Sable’s drilling budget. The firm’s 2025‑2026 drilling program—currently predicated on a $250‑$300 million cash‑flow runway from offshore production and existing credit facilities—will have to accommodate the legal reserve, which could shave $30‑$50 million off the discretionary capex envelope. Expect management to prioritize near‑term, high‑return wells (e.g., the shallow‑water rigs in the Gulf of Mexico) and defer larger, capital‑intensive projects such as deep‑water extensions or new platform acquisitions until the litigation risk eases. In practice, this could translate into a 10‑15 % reduction in drilling spend for the next 12‑18 months and a higher reliance on external financing (e.g., revolving credit) to bridge the gap, which may put pressure on the company’s credit metrics and, consequently, its stock price.