Don’t Fight City Hall

A Billion-Barrel Lesson In Political Risk

This is Porter’s Daily Journal, a free e-letter from Porter & Co. that provides unfiltered insights on markets, the economy, and life to help readers become better investors. It includes weekday editions and two weekend editions… and is free to all subscribers.

Today – taking a break from our normal publishing schedule – we are continuing our “12 Days Of Christmas” series.

Better than four calling birds and even five golden rings, Porter & Co.’s version of the “12 Days Of Christmas” brings you something actually useful: hard-earned investment lessons to guide you through 2026. For the remainder of the year – in place of our regular research and insights – we will dish out key lessons from 2025… some earned from pain and others from gain.

Over the past year, editors across all of our publications have recommended stocks, bonds, or other trades that have resulted in a mix of outsized performances and humbling underachievements. Having begun on Tuesday, December 23, and extending through January 2, we will reveal a pivotal lesson – about why a stock soared to double-digit returns, or why one languished. We will also explore the ones that got away – that we sold too soon or that we didn’t recommend at all.

Today, we share a lesson from one of our biggest losers of 2025: our recommendation of oil-focused exploration and production (“E&P”) firm Sable Offshore in Porter & Co.’s Asymmetry – a Partner-only service that does not follow a regular publishing schedule.

As its name implies, Asymmetry is our advisory dedicated to identifying asymmetric investment opportunities – those with massive upside potential and relatively limited and defined downside risk. While we have had some notable winners in Asymmetry so far – such as our recommendations of mortgage finance firms Fannie Mae and Freddie Mac, both up more than 60% to date – these ideas tend to be more speculative in nature and don’t always work out in our favor. This was certainly the case with Sable…

Sable Offshore (NYSE: SOC) appeared to be an ideal Asymmetry recommendation: A world-class asset… priced like a busted lottery ticket… with a massive near-term catalyst triggered by change in Washington, D.C.

The Santa Ynez Unit (“SYU”) – a once-prominent offshore oil field holding over 1 billion barrels of recoverable oil off the coast of Southern California – had been a cash machine in the 1990s. But a 2015 pipeline spill changed everything.

Production stopped. Regulators cracked down. And its owner, ExxonMobil (XOM), got stuck paying upkeep and fighting a maze of permits and hostile stakeholders for years. 

Eventually, Exxon had enough. In early 2024, it sold the entire SYU complex to Sable – even financing 97% of the $643 million purchase price itself. Exxon effectively said, “Please take this headache off our hands – we’ll even lend you the money to do it.”

Our thesis for adding Sable to the Asymmetry portfolio in late May was simple:

1. The asset was fantastic: Getting 1 billion barrels of oil for roughly $640 million is the kind of math oil investors dream about

2. The operator was legendary: Sable is led by James Flores, a 40-year, oil-and-gas veteran who has chaired or led five E&P companies, four of them public, and has deep experience in California offshore drilling

3. Regulatory risk had diminished: We believed that with a pro-business and pro-oil president in the White House, federal permits to restart the pipeline would legally supersede the obstructionist tactics of local California regulators

4. Oil was flowing again: Just days earlier, the company announced it had officially restarted oil production at SYU and expected sales to begin in July, with an updated production estimate of 40,000 to 50,000 barrels of energy/day (“BOE/D”) – double its prior guidance of 20,000 to 25,000 BOE/D – with significantly lower operating costs

5. The stock was still cheap: Though shares had rallied significantly off their 2024 low, investors were still were not pricing in the company’s tremendous production potential

In short, Sable appeared to have relatively limited downside risk and a clear path to 2x-3x returns or better over the next couple years. Unfortunately, our thesis was challenged almost immediately.