If you have an ad-blocker enabled you may be blocked from proceeding. Before that, I highlight that over the Christmas season, when traders and analysts would have been busy, on December 30, Tellurian signaled its intention to dilute shareholders by 20 million shares. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. I am not receiving compensation for it (other than from Seeking Alpha). To read this article on Zacks.com click here. Follow the topics you want and receive the daily emails. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Looking for more investing ideas like this one? Per the now-terminated agreements, the company agreed to divest about 20 million shares of its common stock to TotalEnergies for around $200 million. Tellurian has said the first phase of Driftwood would cost about $16.8 billion and produce about 16.5 MTPA of LNG. I do all the work of picking the most attractive stocks. Tellurian (NYSE:TELL) shareholders have been hit hard with bad news. (Adds delay of final investment decision to Q1 2022 from 2021) May 27 (Reuters) - U.S . | 1.800.427.5747 Get them exclusively at Deep Value Returns. $8 billion to come from debt. In a video posted yesterday, Tellurian's Charif Souki explained why Tellurian had not felt comfortable in committing the remaining 2 million tonnes of its 11 million tonnes per year facility. Driftwood Lng A wealth of resources for individual investors is available at www.zacks.com. Tellurian, email By the start of 2020, several LNG export. "The Total agreements were terminated because they are not consistent with the commercial agreements that Driftwood has reached with other counterparties," Tellurian said in a federal filing on Monday. I believe that anyone reading this knows the spiel well. Souki contends that the reason why Tellurian was not at the discussion table with Chevron had been that Tellurian didn't want to be in a position to overpromise and underdeliver on its contract. Tellurian is actively pursuing additional upstream acreage. So is there any hope left for Tellurian? 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. A story that's going to be a win-win for all parties. Looking for a helping hand in the market? 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. Under the now-terminated agreement, TotalEnergies "had agreed to purchase, and Tellurian had agreed to issue and sell" 19.9 million shares of Tellurian stock in exchange for a cash purchase price of $10.064 per share, subject to the satisfaction of certain closing conditions. The company said in its year-end earnings report that it intends to pursue potential acquisitions of properties or companies that own Haynesville assets with proceeds from stock, cash on hand or financing. ISSN 2577-9877 I follow countless companies and select for you the most attractive investments. . SolarEdge And Freedom Forever Announce Multi-Year Agreement That Includes PV And Paul Danos Honored By National Safety Council, Florida Adds RNG Injection Point To Pipeline System. ConocoPhillips (COP): Free Stock Analysis Report, Hess Corporation (HES): Free Stock Analysis Report, Magellan Petroleum Corporation (TELL): Free Stock Analysis Report, TotalEnergies SE Sponsored ADR (TTE): Free Stock Analysis Report. 3/1/2023. Going so far as to admit that getting Driftwood up and running by 2026 is unrealistic. 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. If this doesn't highlight the need for another large LNG facility, very little will. some value. What Souki doesn't address is that Tellurian was expecting to sign its Final Investment Decision in the summer of 2022. 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. Do Not Sell My Personal Information (CA Residents Only). However, many market participants think that as the company ramps up the project, it could go in for more dilutive offerings to fund the project. We are all working together to compound returns. Why? Currently the company is on pace to produce 90mmBtu of natural gas up. But investors crave FID details. I provide a hand-holding service. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. Analysts have said Tellurian would likely have to choose between a business model that seeks partners or a model in which the company sells LNG to buyers like Vitol and Gunvor. Tellurian reported a full-year net loss of $49.8 million. Driftwood is categorically not getting built by 2026. This is a simple case of arbitrage. Total also will purchase about 20 million additional. In sum, there are three items overhanging Tellurian. Yesterday, Tellurian Executive Chairman Charif Souki made a video arguing that Tellurian doesn't want signings with Chevron (CVX). Earnings I follow countless companies and select for you the most attractive investments. 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. Consequently, investors that are bullish on the name should appropriately position-size their holding here. All rights reserved. I have no business relationship with any company whose stock is mentioned in this article. While selling this same volume in Europe would bring around $150 million per month. Tellurian has a contract with Bechtel to build the liquefaction plant. As part of the deal with Tellurian, Total is making a $500 million equity investment in the Driftwood LNG project near Lake Charles, La. ISSN 1532-1231 The problem though is that Tellurian's vision is prohibitively expensive. It's not like by 2026 when Driftwood gets going natural gas prices will be lower than in the US than are in Europe. Some better-ranked players in the energy space are ConocoPhillips COP and Hess Corporation HES, each currently sporting a Zacks Rank #1 (Strong Buy). Please disable your ad-blocker and refresh. The company also reiterated that it is targeting a final investment decision for its LNG export facility in Texas before the end of the first quarter of 2023. Its stock has gained 80.3% compared with the industrys 10.8% growth. Tellurian clearly has assets with some value. 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. Per the terms of the deal, TotalEnergies had an option to purchase 1.5 million tons per year of LNG from Tellurian. Liquefied natural gas (LNG) developer Tellurian Inc. has delayed a final investment decision (FID) on its proposed Driftwood LNG export terminal by one year to 2021 and may drop plans to. The Hartbeespoort dam in South Africa used to be brimming with people enjoying scenic landscapes and recreational water sports. Tellurian reported a full-year net loss of $49.8 million (minus 9 cents/share), compared to a net loss of $114.7 million (28 cents) in 2021. Since then, natural gas prices have been on a wild ride. Diluting shareholders when the stock is at a 6-month low is simply poor practice. High-quality, actionable insightful stock picks. 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. Hess earnings for 2021 are expected to rise 116.2% year over year. 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. I wrote this article myself, and it expresses my own opinions. High upside energy, commodity, tech, and dividend stocks. 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. Yet another problem. View Subscription Options The average target price for the stock is $6.34, which implies an upside of nearly 72 percent. 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. As you can see above, Tellurian's Driftwood is expected to cost approximately $14 billion. Saudi Arabia to Use $110 Billion Gas Field for Blue Hydrogen Tellurian had 96 million outstanding shares at the end of 2016 compared to 470 million currently. Gunvor Going forward, a lot will depend on the FID. Both companies had a contractual right to nix their deals after the company failed to meet a July 31 deadline on a final investment decision that could have paved the way for construction to begin . DEEP VALUE RETURNS: The only Marketplace with real performance. Zacks->. Liquefied Natural Gas U.S. LNG exporters . Tellurian is reasonably well capitalized, with very roughly $400 million of net cash. It's not just an out-of-the-money option. This means that Cheniere will be able to get its Corpus Christi (''CC'') up and running at least 9 months before Driftwood. Haynesville Shale Until that moment arrives, particularly in the current investment environment where investors are noticeably worried about a whole range of macro considerations, such as inflation, interest rates, spikes in natural gas prices and more, investors will have no interest in substantially supporting Tellurian's vision. 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. It's not just an out-of-the-money option. When the symbol you want to add appears, add it to Watchlist by selecting it and pressing Enter/Return. Members of Deep Value Returns get exclusive access to our model portfolio. Tellurian Inc . 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. In June, TELL signed a long-term contract with Vitol for 3 mtpa. To build Driftwood, a large, fully integrated LNG facility. Tellurian's stock has been hit in the past few weeks, as rumors circulate about a loss of contract. esgreview.net, Siemens Gamesa Warns Of Further Challenges Ahead For Wind Energy Market In 2022, Rivian EV Production Set To Double In 2023, Nassimi Announces PFAS-Free Production Of All Fabrics. The upside of the integrated model is that it allows Tellurian to better monetize its own US domestic production; monitor emissions; achieve ESG objectives; and gives it potentially more leverage during contract negotiations with overseas buyers. Combined, the three SPAs are expected to generate annual revenue of US$1.8 billion and annual EBITDA of just under US$1 billion. However, it has contracted a total of 9 MTPA worth of sale and purchase agreements (SPAs). WARNING: Any stocks that you feel like buying after discussions with me are your responsibility. Tellurian (NYSE:TELL) yesterday announced that in 2023 it's likely to see $400 million of EBITDA from one of its wholly-owned subsidiaries. This clearly is super advantageous to Cheniere (LNG). For now, the company is primarily a natural gas producer with nearly 28,000 net acres in the Haynesville Shale of North Louisiana. Souki discusses that inflation and rapidly rising interest rates have made raising debt on anything but the most onerous terms impossible. The timing of this stock issuance is suspicious, to say the least. No gimmicks. 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. Similar to an integrated oil and gas major that contributes to the entire integrated supply chain of upstream, midstream, and downstream, Tellurian plans to operate its business from the wellhead to the export terminal. DEEP VALUE RETURNS: The only Marketplace with real performance. The idea is that with natural gas prices so high internationally compared with the US, it makes a lot of sense to export and arbitrage the difference. 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. | Some call it the Internet of Money and predict it could change the way money works forever. Market Realist is a registered trademark. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. Experts agree were still in the early stages of this technology, and as it grows, it will create several investing opportunities. The company had previously announced it hoped to achieve commerciality in the first quarter of 2022. And that Tellurian could then further increase its total volume. The SPA is for the purchase of LNG free on board at a price based on the Platts Japan Korea Marker. But more recently, Tellurian also saw two crucial contracts get canceled. Well, there's always hope. 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