On the other hand, if the stars aligned, and Driftwood gets built, investors could be very nicely rewarded. read more, Tellurian Executive Chairman Charif Souki said in a video this week that the company remained "highly confident we will start construction this summer and issue notice to proceed to Bechtel in the first quarter of next year." It also cut jobs, corporate spending and expenses related to the first phase of the project. 2023 Natural Gas Intelligence. FIND OUT MORE Downstream capabilities View our downstream services Insights Particularly noting that in this higher interest rate and inflationary environment, there are too many cross currents and this would not be prudent. Members of Deep Value Returns get exclusive ideas and guidance to navigate any climate. See here for a complete list of exchanges and delays. In sum, there are three items overhanging Tellurian. Therefore, it has been the companys historically preferred method of funding and is expected to remain so. The Shell, Vitol and Gunvor deals all were signed before Russias invasion of Ukraine at a time when sellers had a better advantage in negotiations as demand was slowly rebounding after the Covid-19 pandemic. I argue that this meaningfully improves the bull case. As per usual, Souki took to YT to argue his take. 3/1/2023. I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I have no business relationship with any company whose stock is mentioned in this article. Natural Gas Corporate Earnings Call list - 4Q2022, 2023 North American Pipeline, LNG & Market Hubs Map, This article is part of NGI's Shale Daily. Tellurian has an amazing story. The timing of this stock issuance is suspicious, to say the least. The industry leader for online information for tax, accounting and finance professionals. "They must feel the best way to get this project built is to by selling the offtake to traders, rather than [gas-producing] companies.". Souki remarks that the point of their game is not to get a contract signed at any cost, but to create shareholder value. Tellurians Driftwood LNG is arguably the single most ambitious US LNG project. Now, the visitors are greeted to the sight of boats stuck in a sea of invasive green water hyacinth weed. 1.800.427.5747 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. 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. Why? Since I wrote Pipe Dream, Tellurian's share price has taken a tumble. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Tellurian reported a full-year net loss of $49.8 million. Tellurian stock has risen by nearly 190 percent YTD due to several positive developments. The company, through its subsidiary Driftwood LNG LLC (Driftwood), is developing an LNG production and export terminal on the west bank of the Calcasieu River, south of Lake Charles, Louisiana. The company had previously announced it hoped to achieve commerciality in the first quarter of 2022. However, the company still needs to find gas feedstock and finances for the terminal. 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. The comments were part of an investor presentation that reaffirmed Tellurian's target for reaching a final investment decision on the $12 billion project in the first quarter of 2022 and that provided new insights about efforts to advance to construction. That would put its interest payments at close to $640 million. I provide a hand-holding service. That those contracts are not what the business model is about. And anyone seriously considering this investment needs to keep that in mind and appropriately and prudently weigh it up in their portfolio. Follow the topics you want and receive the daily emails. The Vitol and Gunvor deals were indexed to a combination of the Japan Korea Marker (JKM) , which is trading near $11 per million British thermal units (mmBtu), and the Dutch Title Transfer Facility (TTF) , which is trading close to its highest since September 2018. Looking for a helping hand in the market? For good reason too. Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. Since then, natural gas prices have been on a wild ride. Other major company-specific developments have been the signing of its long-term contracts for uptake of potential production from its Driftwood project. Tellurian, email One more deal of this size supports 2-plant FID (final investment decision)." Tellurian has said the first phase of Driftwood would cost about $16.8 billion and produce about 16.5 MTPA of LNG. Tellurian is a very volatile stock and not one for the faint-hearted. The concept is largely unproven in the U.S. export market, where deals have largely been tied to Henry Hub for terms of 20 years or more. Tellurian (NYSE:TELL) remains a highly speculative stock. 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. Not at less than $2 per share. The company has secured enough projects to support the first phase of the project. That would mean that for Tellurian to get hold of its much-needed $6 billion via equity, its shareholders would need to be diluted by approximately 7x. Tellurian inked a deal with Shell to supply 3 mtpa from Driftwood for 10 years. The company estimates that the 27.6 mmty facility would cost $25 billion to build. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Download now.]. Plus regular stock updates. Big Reserves Saudi Arabia has some of the world's biggest gas reserves, though they've mainly been used for the domestic market. Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. 1.800.427.5747 March 29, 2022 CNG/LNG, Exporting, Industrywide Issues Driftwood LNG plan (click for larger version) Driftwood LNG, a 27.6 million tonnes of LNG per year facility that will cost on the order of $16.8 billion to build, has not made an official final investment decision (FID) to proceed with building the FERC-approved project. Click here to request a trial. The signing of the Vitol and Gunvor deals helped push Tellurian stock up about 250% so far this year. | Tellurian is actively pursuing additional upstream acreage. DEEP VALUE RETURNS: The only Marketplace with real performance. The concept is largely unproven in the U.S. export market, where deals have largely been tied to Henry Hub for terms of 20 years or more. I am not receiving compensation for it (other than from Seeking Alpha). some value. Tellurian is based in Houston, Texas, and its common stock is listed on the Nasdaq Capital Market under the symbol "TELL." If you have an ad-blocker enabled you may be blocked from proceeding. The industry leader for online information for tax, accounting and finance professionals. Amid a record stretch of U.S. LNG contracting activity last year that moved many other projects closer to FID, Tellurian pivoted to searching for equity partners. Building its highly coveted Driftwood will cost $14 billion. At the FID point, major equipment orders are placed, and contracts are signed for EPC. Tellurian's LNG facility is clearly in high demand and can't possibly arrive quickly enough. Is this happening to you frequently? Bulls may disagree with this, but what bulls will agree with is that this stock is not for the faint-hearted. Zacks->. However, let's make the argument that Tellurian ends up raising the FID with 80% equity and 20% debt. On Nov. 29, the company and former President and CEO Meg. Copy and paste multiple symbols separated by spaces. | While this does not fully change the investment case here, it does support the case that Tellurian has cash-flow generating assets. So the core business is priced at 4x EBITDA. No gimmicks. Tellurian is being priced as an out-of-the-money option. Believing that transparent markets empower businesses, economies, and communities, Natural Gas Intelligence (NGI) provides natural gas price transparency and key news, insights and data for the North American energy markets. 2023 Natural Gas Intelligence. ISSN 2577-9877 That being said, nobody wants to hear of their stock being diluted, particularly with the stock down so significantly in the past year. 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. I wrote this article myself, and it expresses my own opinions. Further, subsequent to that article, Shell (SHEL) and Vitol (private) decided that it was best to cancel their contracts for Tellurian's Driftwood natural gas volumes. However, the company missed the deadline for sanctioning the project, which resulted in the termination of the deals. So, let's get to this story's next episode. However, TotalEnergies had the right to terminate if Tellurian did not reach a final investment decision by Saturday (July 10). It's not just an out-of-the-money option. Currently the company is on pace to produce 90mmBtu of natural gas up. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Altogether, Tellurian would need to dilute shareholders by approximately 7x. Thats an increase from 14.3 Bcf in 2021 when the company held 11,060 net acres. The SPA is for the purchase of LNG free on board at a price based on the Platts Japan Korea Marker. A wealth of resources for individual investors is available at www.zacks.com. A story that's going to be a win-win for all parties. I believe that the best way to describe Tellurian is as a very long-dated option, on a black swan event, that Driftwood one day actually gets built. B.Riley initiated on TELL with a buy rating and a target price of $8 in July. But in case those risks were forgotten, today everyone has been reminded. I believe that anyone reading this knows the spiel well. Phase 1 will consist of three plants with a combined capacity of 16.5 MTPA and an expected cost of US$16.8 billion. Tellurian dangles a carrot to investors, $400 million of EBITDA in 2023. Follow the topics you want and receive the daily emails. ISSN 1532-1231 Some call it the Internet of Money and predict it could change the way money works forever. I wrote this article myself, and it expresses my own opinions. Tellurian needs to raise $12 billion. Under its commercial framework, Driftwood Phase 1 is expected to generate around US$3.7 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) per year. Today, that discovery is still the heart of the Zacks Rank. If you have an ad-blocker enabled you may be blocked from proceeding. I do all the work of picking the most attractive stocks. Tellurian said in 2021 after it signed all three deals that the projects first phase had been commercialized and a final investment decision (FID) was expected in 1Q2022. info@naturalgasintel.com High upside energy, commodity, tech, and dividend stocks. Experts agree were still in the early stages of this technology, and as it grows, it will create several investing opportunities. I have no business relationship with any company whose stock is mentioned in this article. 2 min read. When the symbol you want to add appears, add it to Watchlist by selecting it and pressing Enter/Return. | Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Tellurian, email But does this mean it won't get built at all? 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. Please disable your ad-blocker and refresh. Infrastructure However, the company missed the. Souki calls Driftwood the holy grail of the business model (~3:42). Tellurian has a contract with Bechtel to build the liquefaction plant. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. I am not receiving compensation for it (other than from Seeking Alpha). Market Realist is a registered trademark. ISSN 2577-9877 And not only robust, but stable, and predictable! Its strategy is to secure low-cost natural gas and design and construct low-cost liquefaction. Sign In, Listen to the latest episode of our newest podcast, *Download Report Now* High Stakes for Natural Gas & The World Is All-In, N.A. Our Standards: The Thomson Reuters Trust Principles. 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. Shares of the company have outperformed the industry in the past six months. One of the major catalysts for the stock will be the final investment decision for Driftwood, which has been pushed back by the company from 2021 to 2022. Create your Watchlist to save your favorite quotes on Nasdaq.com. for the stock will be the final investment decision for Driftwood, which has been pushed back . Per Tellurian, the agreements have been canceled as they were not consistent with the commercial agreements that Driftwood signed with other companies. The agreements were subject to the relevant regulatory approvals and Tellurian had to make a final investment decision for the project by Jul 10, 2021. It also has already secured the purchase and lease of around 1000 acres (405 ha) of real estate that includes enough room for equipment and deep-water access for shipping. I argue that if Tellurian ends up funding Driftwood with 80% through equity, shareholders are paying approximately 3x its 2026 cash flows from operations. If Gunvor terminates the deal it would mark another setback for the Driftwood project, but Tellurian has again shifted its strategy for the terminal and is now looking to sell equity stakes to help it finance the project. I argue that this meaningfully improves the bull. This is a simple case of arbitrage. Furthermore, if Tellurian sought to dilute shareholders, it should have done so with the share price trading at $3 or $4 per share. These agreements cover more than 30 percent of the facilitys proposed 27.6 mtpa capacity. Tellurian ( NYSE: TELL) yesterday announced that in 2023 it's likely to see $400 million of EBITDA from one of its wholly-owned subsidiaries. Saturday ( July 10 ) receiving compensation for it ( other than Seeking! Also cut jobs, corporate spending and expenses related to the sight of boats stuck in a of. Is expected to remain so termination of the deals tellurian ends up raising the FID with 80 % equity 20! Natural gas prices have been the companys historically preferred method of funding and is to... Been canceled as they were not consistent with the commercial agreements that Driftwood signed with other.... Solution to manage all your complex and ever-expanding tax and compliance needs get to this story 's next.. 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Tech, and dividend stocks about 250 % so far this year if tellurian did reach! With other companies those risks were forgotten, today everyone has been pushed back this needs. Prices have been on a wild ride not for the stock will be final... Wrote this article agreements that Driftwood signed with other companies the Internet of Money and predict it could the. 10 ) speculative stock not one for the faint-hearted be very nicely.... As they were not consistent with the commercial agreements that Driftwood signed with other companies this investment to... And former President and CEO Meg only Marketplace with real performance full-year net loss of 8! But to create shareholder Value create shareholder Value what the business model ~3:42. Souki took to YT to argue his take funding and is expected remain... But what bulls will agree with is that this stock issuance is,... Water hyacinth weed carrot to investors, $ 400 million of EBITDA 2023... 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