The SPA is for the purchase of LNG free on board at a price based on the Platts Japan Korea Marker. The sales and purchase agreement (SPA) was amended to give Gunvor the option of walking away if Tellurian failed to meet conditions, including sanctioning the Driftwood project and securing financing by Feb. 28. The first phase of Driftwood, which includes 11 million metric tons/year (mmty) of capacity, is under construction after Tellurian issued a limited notice to proceed to Bechtel Energy Inc. last year. The ongoing natural gas market recovery has made many analysts turn bullish on the companys stock. For good reason too. The timing of this stock issuance is suspicious, to say the least. Indeed, domestic natural gas prices fell by nearly 20% to $6 MMBtu. Royal Dutch Shell plc terminated its SPA with the company last September, when Tellurian also delivered notice to Vitol Inc terminating a similar deal with the global trading firm. My Marketplace highlights a portfolio of undervalued investment opportunities - stocks with rapid growth potential, driven by top quality management, while these stocks are cheaply valued. Zacks has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. ISSN 2577-9877 The difference between selling 150 million cubic feet domestically would bring in around $35 million in revenues per month. High upside energy, commodity, tech, and dividend stocks. Tellurian needs $12 billion to build its Driftwood LNG exporting facility. Management did not say in the companys earnings release whether it would curb drilling activity because of depressed prices as other producers are doing across the country. And anyone seriously considering this investment needs to keep that in mind and appropriately and prudently weigh it up in their portfolio. This would severely limit Tellurian's upside. Follow the topics you want and receive the daily emails. Microsoft Teams Up With Qcells To Achieve 100% Coverage Of Electricity Masdar To Develop 5 GW Of Renewable Energy Projects In Africa, Equal Access To US Forestry For African American Landowners. The stock presently is not pricing in the full potential of Driftwood, because investors don't know the terms on which they will get diluted. View Subscription Options | It's not just an out-of-the-money option. ISSN 1532-1231 A wealth of resources for individual investors is available at www.zacks.com. And the debt markets would not even consider $1 billion. If you have an ad-blocker enabled you may be blocked from proceeding. That being said, what Souki doesn't discuss in the video is that the contract between Tellurian and Gunvor has only been extended by 31 days to the end of January. Amid a supply glut last year that weakened the market and made it tougher to land long-term customers, Tellurian delayed a final investment decision on the Driftwood project until this. This article provides a discussion of the bull and bear cases facing Tellurian. On Nov. 29, the company and former President and CEO Meg. Click here to request a free trial. Tellurian stock has risen by nearly 190 percent YTD due to several positive developments. When the symbol you want to add appears, add it to My Quotes by selecting it and pressing Enter/Return. Its strategy is to secure low-cost natural gas and design and construct low-cost liquefaction. LNG read more. Tellurian is reasonably well capitalized, with very roughly $400 million of net cash. info@naturalgasintel.com Last years loss included a $81.1 million impairment of upstream properties. All Rights Reserved. Saudi Arabia to Use $110 Billion Gas Field for Blue Hydrogen July 12 (Reuters) - U.S. liquefied natural gas (LNG) developer Tellurian Inc (TELL.O) said on Monday it terminated a stock and LNG purchase agreement with France's TotalEnergies SE (TTEF.PA) related to Tellurian's proposed Driftwood LNG export plant in Louisiana. As an experienced professional, I highlight the best stocks to grow your savings: stocks that deliver strong gains. Experts agree were still in the early stages of this technology, and as it grows, it will create several investing opportunities. I wrote this article myself, and it expresses my own opinions. 2023 Natural Gas Intelligence. Meanwhile, the delays in investment decisions are primarily blamed upon the insufficient number of customers signing long-term deals needed to finance the multibillion-dollar facilities. Some call it the Internet of Money and predict it could change the way money works forever. Not signings. The partners were to receive LNG from the project. Tellurian has no signed Final Investment Decision. Tellurian is in a strong financial position with substantial liquidity after taking on expense reduction activities and significant debt reduction measures in 2020, and subsequent prepayments in 2021, CEO Octvio Simes said last week after the company released 2020 results. | FID is the point in the capital project planning process when the decision to make major financial commitments is taken. ISSN 2577-9877 Tellurian needs to raise $12 billion. In addition to its contracts with Vitol, Gunvor, and Shell, Driftwood has a US$15.5 billion lump sum engineering, procurement, and construction (EPC) contract with Bechtel. Looking for a portfolio of ideas like this one? Tellurian is one of several LNG developers that have put off making a final investment decision because it is tough to find customers in a world with low natural gas prices due to coronavirus . The company currently carries a Zack Rank #3 (Hold). Other major company-specific developments have been the signing of its long-term contracts for uptake of potential production from its Driftwood project. WARNING: Any stocks that you feel like buying after discussions with me are your responsibility. Great chart showing how coal prices should increase with LNG prices.$LNG $TELL $TGA $BTU $AR $CRK https://t.co/SazUOygfKk. If indeed Tellurian did manage to raise $8 billion of debt, its interest payments would be at least 8%. It's not just an out-of-the-money option. The LNG would come from Tellurian's proposed 27.6-MTPA Driftwood export project in Louisiana. JKM Headquartered in Houston, TX, Tellurian is a liquefied natural gas developer. (Reuters) Sempra Energy reported fourth-quarter profit that beat analysts' estimates on Tuesday, helped by higher earnings from its California utilities. Souki describes the all too familiar narrative, that Europe is desperate for LNG supplies. Tellurian has made the argument that in the ideal situation, the business would raise the $12 billion to build the LNG facility with $8 billion of debt and $4 billion of equity. Two-thirds debt to one-third equity. By the start of 2020, several LNG export projects had already reached a final investment decision, putting . Why? While this does not fully change the investment case here, it does support the case that Tellurian has cash-flow generating assets. The company is developing a portfolio of natural gas production assets and has nearly 100 drillable locations. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. I am not receiving compensation for it (other than from Seeking Alpha). I argue that this meaningfully improves the bull. The problem here is that, aside from. B.Riley initiated on TELL with a buy rating and a target price of $8 in July. Create your Watchlist to save your favorite quotes on Nasdaq.com. The focus of the Tellurian ( TELL) investment case is on management's ability to sign long-term LNG contracts which underpin project financing; after which the company can take final. Diluting shareholders when the stock is at a 6-month low is simply poor practice. Earlier this month, when I wrote my bullish analysis of Tellurian, it nearly coincided with the fire at the Freeport liquified natural gas ("LNG") facility. Written by Four of the analysts have a buy rating, while three have a sell rating on the stock. There simply were no takers. This clearly is super advantageous to Cheniere (LNG). The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Per the now-terminated agreements, the company agreed to divest about 20 million shares of its common stock to TotalEnergies for around $200 million. I am not receiving compensation for it (other than from Seeking Alpha). Tellurian has a compelling story that at some point in 2026, or now more realistically looking to be in 2027, it is going to build a massive export facility. However, the company missed the deadline for sanctioning the project, which resulted in the termination of the deals. Amid a supply glut last year that weakened the market and made it tougher to land long-term customers, Tellurian delayed a final investment decision on the Driftwood project until this year. Unlike other U.S. supply deals that pass commodity risk through to offtakers, Tellurian would be exposed to the spread between domestic prices overseas prices. Tellurian generated $30.4 million in revenues from natural gas sales, up from $28.8 million in 2019. I have no business relationship with any company whose stock is mentioned in this article. Finally, even if Driftwood was to be built at some point in the future, investors' prospects will be capped, as Tellurian's equity would need to be diluted approximately 7x. If you have an ad-blocker enabled you may be blocked from proceeding. Recall, this is Tellurian's vision. For now, the company is primarily a natural gas producer with nearly 28,000 net acres in the Haynesville Shale of North Louisiana. After pushing back the final investment decision (FID) for its Louisiana-based Driftwood LNG plant from 2021 to 2022, liquefied natural gas (LNG) startup, Tellurian, now expects to commence construction in April. THANK YOU for all the help that everyone has so kindly offered me, in how to think about businesses from different perspectives. Tellurian has a contract with Bechtel to build the liquefaction plant. People may receive compensation for some links to products and services on this website. Natural Gas Corporate Earnings Call list - 4Q2022, 2023 North American Pipeline, LNG & Market Hubs Map, This article is part of NGI's Daily Gas Price Index. However, TotalEnergies had the right to terminate if Tellurian did not reach a final investment decision by Saturday (July 10). Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. High-quality, actionable insightful stock picks. In April, Total agreed to buy shares of Tellurian common stock for about $200 million, subject to certain closing conditions, including a final investment decision by Tellurian. But common sense. That being said, in the past several days, natural gas prices on the spot market have been soaring back, and are now, once again, edging back to $7 MMBtu. So the core business is priced at 4x EBITDA. Tellurian Inc. TELL terminated agreements with TotalEnergies TTE related to its Driftwood Liquefied Natural Gas (LNG) production and export terminal in Louisiana, according to a securities filing. Souki calls Driftwood the holy grail of the business model (~3:42). Haynesville Shale Meaning that its equity would increase to around $12 billion ($2 billion right now + $10 billion in the raise). FIND OUT MORE Downstream capabilities View our downstream services Insights Offers may be subject to change without notice. The average target price for the stock is $6.34, which implies an upside of nearly 72 percent. I argue that this meaningfully improves the bull case. Those assets produced 16.9 Bcf of natural gas last year, up from 13.9 Bcf in 2019. I'll address this momentarily. Infrastructure The stock has jumped by nearly 190 percent YTD but is off 30 percent from the highs it reached in June. I follow countless companies and select for you the most attractive investments. Everyone knows the risks. Do Not Sell My Personal Information (CA Residents Only). Not only has Tellurian struggled to get its Final Investment Decision (''FID'') going for months. Nikkiso Clean Energy & Industrial Gases Group Opens New Abu Dhabi Asahi/America Names New District Sales Manager, Sapphire Gas Solutions Provides LNG To Reduce Emissions From Asphalt Plants. Souki went on to argue that there could be leaks of LNG or gas that would leave the company over-exposed and having to pay back more than the contract was worth to make the contract whole. Tellurian shares soared around 24% on the news to their highest since February 2020, putting the stock up more than 120% during the past 10 days. Please disable your ad-blocker and refresh. Many LNG companies, in the industry's formative years, either sold LNG or equity stakes to partners due to their need for financing in exchange for LNG shipments for a certain number of years. That those contracts are not what the business model is about. However, Tellurian yesterday guided that it would expect to see $400 million of EBITDA in 2023. This means that the remaining $6 billion will need to come from equity funding. Driftwood is categorically not getting built by 2026. Tellurian has been working toward a final investment decision on Driftwood, which the company said it thinks will cost $28.9 billion, for years. 3/1/2023. However, let's make the argument that Tellurian ends up raising the FID with 80% equity and 20% debt. Is this happening to you frequently? And that Tellurian could then further increase its total volume. Tellurian (NYSE:TELL) shareholders have been hit hard with bad news. Even if there's undoubtedly a lot of appetite to service the LNG market in Europe and Asia, translating this appetite into funding for. Phase 1 will consist of three plants with a combined capacity of 16.5 MTPA and an expected cost of US$16.8 billion. Now, the visitors are greeted to the sight of boats stuck in a sea of invasive green water hyacinth weed. All quotes delayed a minimum of 15 minutes. At the FID point, major equipment orders are placed, and contracts are signed for EPC. Since then, natural gas prices have been on a wild ride. We are all working together to compound returns. The Hartbeespoort dam in South Africa used to be brimming with people enjoying scenic landscapes and recreational water sports. WARNING: Any stocks that you feel like buying after discussions with me are your responsibility. Washington DC | New York | Houston | Pittsburgh | Mexico City Calgary | Chile. Is this happening to you frequently? "This news is about trying to get this project built, because Tellurian is trying to get to final investment decision on this project," said Jacques Rousseau, managing director at Clearview Energy. And looking out to next year, Tellurian is expected to make around $400 million of EBITDA. 2023 Natural Gas Intelligence. Gunvor Group Ltd. has the option to terminate its deal to buy supplies from the proposed Driftwood LNG terminal after a deadline passed Tuesday for Tellurian Inc. to meet certain conditions. Tellurian clearly has assets with some value. Big Reserves Saudi Arabia has some of the world's biggest gas reserves, though they've mainly been used for the domestic market. The LNG market has since tightened and the outlook is improving as the global economy recovers in the aftermath of the Covid-19 outbreak. U.S. LNG exporters . Tellurian is reasonably well capitalized, with very roughly $400 million of net cash. The Hartbeespoort dam in South Africa used to be brimming with people enjoying scenic landscapes and recreational water sports. [2023 Natural Gas Price Outlook: How will the energy industry continue to evolve in 2023? Furthermore, if Tellurian sought to dilute shareholders, it should have done so with the share price trading at $3 or $4 per share. Thats an increase from 14.3 Bcf in 2021 when the company held 11,060 net acres. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. 2023, Nasdaq, Inc. All Rights Reserved. So the core. I have no business relationship with any company whose stock is mentioned in this article. We are all working together to compound returns. I am not receiving compensation for it (other than from Seeking Alpha). High-quality, actionable insightful stock picks. Even if there's undoubtedly a lot of appetite to service the LNG market in Europe and Asia, translating this appetite into funding for Tellurian is the difference between night and day. I have no business relationship with any company whose stock is mentioned in this article. 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