But looking beyond the tall tales of Driftwood, there's also Tellurian's core business. By using this Site or clicking on "OK", you consent to the use of cookies. Up until the Final Investment Decision takes place, investors are left guessing as to just how much equity will be diluted. Zacks Equity Research for That would lower its debt payments, but it would also cap shareholders' upside. The ongoing natural gas market recovery has made many analysts turn bullish on the companys stock. High-quality, actionable insightful stock picks. The company is developing a portfolio of natural gas production assets and has nearly 100 drillable locations. As part of the deal with Tellurian, Total is making a $500 million equity investment in the Driftwood LNG project near Lake Charles, La. The stock has jumped by nearly 190 percent YTD but is off 30 percent from the highs it reached in June. Tellurian has an amazing story. Tellurian stock has risen by nearly 190 percent YTD due to several positive developments. Tellurian (NYSE:TELL) shareholders have been hit hard with bad news. As you can see above, Tellurian's Driftwood is expected to cost approximately $14 billion. Click here to request a trial. I have no business relationship with any company whose stock is mentioned in this article. |, Related topics: If indeed Tellurian did manage to raise $8 billion of debt, its interest payments would be at least 8%. 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. This is of course if Driftwood ends up getting built at all. If you have an ad-blocker enabled you may be blocked from proceeding. Here's the thing that a lot of investors have likely forgotten about. I have no business relationship with any company whose stock is mentioned in this article. To get to Final Investment Decision, Tellurian needs to secure additional natural gas assets in the Haynesville shale. Follow the topics you want and receive the daily emails. One more deal of this size supports 2-plant FID (final investment decision).". I wrote this article myself, and it expresses my own opinions. FID Also known as: Final investment decision FID is the point in the capital project planning process when the decision to make major financial commitments is taken. But investors crave FID details. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Well, there's always hope. Written by $6 billion from equity. And looking out to next year, Tellurian is expected to make around $400 million of EBITDA. All rights reserved. Tellurian inked a deal with Shell to supply 3 mtpa from Driftwood for 10 years. Infrastructure It has $474.2 million in cash and cash equivalents on hand. When the symbol you want to add appears, add it to Watchlist by selecting it and pressing Enter/Return. 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. Last years loss included a $81.1 million impairment of upstream properties. The U.S. Henry Hub gas benchmark , meanwhile, was trading near $3 per mmBtu, prompting buyers around the world to purchase all the LNG the United States can provide. The definitive agreements are consistent with the terms contemplated by the Heads of Agreement announced on April 3, 2019, and are subject to certain closing conditions, including the final investment decision (FID) to construct Driftwood. Chairman Souki addresses the matter on a YT video. Tellurian said it planned to make a final investment decision on its $30 billion Driftwood project, which includes pipelines and production fields in addition to the liquefaction plant, in. 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. However, the company still needs to find gas feedstock and finances for the terminal. Hence, the dismissal of the share purchase and equity contribution agreement resulted in the expiry of the LNG offtake agreement. Not signings. Click here to request a free trial. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. 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. 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. 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. I argue that this meaningfully improves the bull. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Tellurian is a very volatile stock and not one for the faint-hearted. High upside energy, commodity, tech, and dividend stocks. So the core business is priced at 4x EBITDA. Looking for more investing ideas like this one? Smith believes the market has finally reached an inflection point that would allow Freeport to reach a final investment decision (FID) on the fourth train in early 2023. . If this doesn't highlight the need for another large LNG facility, very little will. 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 Inc., which continues to work toward a final investment decision on its Driftwood liquefied natural gas (LNG) terminal proposed for Louisiana, plans to acquire additional assets in the Haynesville Shale this year. 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. Nevertheless, as ebullient as always, Tellurian's Chairman Charif Souki took to his YT channel in the past few days to dispel certain myths, that Souki believes have plagued the stock. 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." 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. Create your Watchlist to save your favorite quotes on Nasdaq.com. 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. Deep Value Returns' Marketplace continues to rapidly grow. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. This clearly is super advantageous to Cheniere (LNG). Souki calls Driftwood the holy grail of the business model (~3:42). 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. The company reported a net loss of $210.7 million (minus 79 cents/share) in 2020, compared to a net loss of $151.8 million (minus 69 cents) in 2019. 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. 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. Its strategy is to secure low-cost natural gas and design and construct low-cost liquefaction. 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. Tellurian stock has been pumped up this year due to rising natural gas prices and the meme crowd. ISSN 2577-9877 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. If you have an ad-blocker enabled you may be blocked from proceeding. But common sense. 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. 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. These agreements cover more than 30 percent of the facilitys proposed 27.6 mtpa capacity. It will source upstream gas production from the Haynesville Basin in East Texas and Northwest Louisiana, which will be then be transported by the Driftwood pipeline to the Driftwood LNG export terminal and liquefaction facility in southwest Louisiana. This is not a significant dilution and amounts to less than 4%. 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. Tellurian, email It then announced it would seek equity partners. Part of this decline is due to the companys share offering in August. Its stock has gained 80.3% compared with the industrys 10.8% growth. | 1.800.427.5747 Tellurian is reasonably well capitalized, with very roughly $400 million of net cash. Presently, Tellurian's market cap is around $1 billion. Tellurian is based in Houston, Texas, and its common stock is listed on the Nasdaq Capital Market under the symbol "TELL." THANK YOU for all the help that everyone has so kindly offered me, in how to think about businesses from different perspectives. The LNG would come from Tellurian's proposed 27.6-MTPA Driftwood export project in Louisiana. Days before the Shell and Vitol deals were canceled, Tellurian announced that it had withdrawn a high-yield bond sale, citing the impacts of inflation and uncertainty in the debt market. All quotes delayed a minimum of 15 minutes. Haynesville Shale This is not a hindsight remark. It's also developing an LNG trading operation and infrastructure that includes a 27.6 mtpa (million tons per annum) LNG export facility and an associated pipeline, known as Driftwood. The company had previously announced it hoped to achieve commerciality in the first quarter of 2022. Please disable your ad-blocker and refresh. I wrote this article myself, and it expresses my own opinions. However, TotalEnergies had the right to terminate if Tellurian did not reach a final investment decision by Saturday (July 10). 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. WARNING: Any stocks that you feel like buying after discussions with me are your responsibility. Zacks->. Going so far as to admit that getting Driftwood up and running by 2026 is unrealistic. Tellurian Inc. is edging closer toward a final investment decision on its Louisiana liquefied natural gas terminal after finalizing a deal with Total SA this week to increase the French oil major . 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. Tellurian has no signed Final Investment Decision. Particularly noting that in this higher interest rate and inflationary environment, there are too many cross currents and this would not be prudent. Our Standards: The Thomson Reuters Trust Principles. 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. Dow and X-energy to build U.S. Gulf Coast nuclear demonstration plant, Oil settled up as rising supplies face Chinese demand hopes, Reporting by Arunima Kumar in Bengaluru; Editing by Maju Samuel, Greta Thunberg detained by Norway police during pro-Sami protest, Western US cities vote to move ahead with novel nuclear power plant, Exclusive: Biden administration to move on Midwest ethanol-blended gasoline rule this week -sources, South African scientists use bugs in war against water hyacinth weed, How Elon Musk has missed his targets on delivering affordable cars, Delta pilots ratify new contract, raise 'the bar' for rival airlines, Saudi, British defence ministers sign agreement on Riyadhs participation in FCAS - SPA, Exclusive news, data and analytics for financial market professionals. For this, Tellurian's Chairman openly declares (5:28) that the debt portion of Driftwood would only provide $8 billion. Get them exclusively at Deep Value Returns. Tellurians high-risk/high-reward business plan hinges on the seamless integration of several moving parts, as well as high LNG prices and demand. It is the second 10-year, 3-MTPA agreement Tellurian has announced in a week, following a deal with commodity trader Gunvor Group. Per the terms of the deal, TotalEnergies had an option to purchase 1.5 million tons per year of LNG from Tellurian. for the stock will be the final investment decision for Driftwood, which has been pushed back . There simply were no takers. No gimmicks. Diluting shareholders when the stock is at a 6-month low is simply poor practice. I argue that this meaningfully improves the bull case. Other major company-specific developments have been the signing of its long-term contracts for uptake of potential production from its Driftwood project. Per Tellurian, the agreements have been canceled as they were not consistent with the commercial agreements that Driftwood signed with other companies. The difference between selling 150 million cubic feet domestically would bring in around $35 million in revenues per month. We are all working together to compound returns. I follow countless companies and select for you the most attractive investments. Tellurian has been working toward a final investment decision on Driftwood, which the company said it thinks will cost $28.9 billion, for years. Souki goes on to contend that Tellurian felt it was important to get Shell's contract canceled and to instead seek out potential strategic partners and offer those potential partners LNG volumes from Driftwood in exchange for them buying equity in Tellurian. I have no business relationship with any company whose stock is mentioned in this article. It's not just an out-of-the-money option. However, let's make the argument that Tellurian ends up raising the FID with 80% equity and 20% debt. 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. Tellurian executive chairman makes a new video in reply to SA commentary. U.S. LNG exporters . 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 is the core of the bull and bear case. Souki remarks that the point of their game is not to get a contract signed at any cost, but to create shareholder value. 2023 ESG Review. All quotes delayed a minimum of 15 minutes. I believe that anyone reading this knows the spiel well. The bigger question is what LNG prices will be in 2026. Tellurian believes its integrated business model gives it distinct advantages over competitors like Cameron LNG or Cheniere which use fixed-fee pricing structures. I provide a hand-holding service. Tellurian (NYSE:TELL) remains a highly speculative stock. A story that's going to be a win-win for all parties. Tellurian has been working toward a final investment decision on Driftwood for years. Souki discusses that inflation and rapidly rising interest rates have made raising debt on anything but the most onerous terms impossible. 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. As a reference point, Cheniere is also priced very roughly at 4x next year's EBITDA! Copy and paste multiple symbols separated by spaces. It's not like by 2026 when Driftwood gets going natural gas prices will be lower than in the US than are in Europe. Tellurian is actively pursuing additional upstream acreage. See here for a complete list of exchanges and delays. $8 billion to come from debt. info@naturalgasintel.com Our Standards: The Thomson Reuters Trust Principles. WARNING: Any stocks that you feel like buying after discussions with me are your responsibility. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. LNG So is there any hope left for Tellurian? To read this article on Zacks.com click here. The company ended 2020 with $78.3 million of cash and cash equivalents and $72.8 million in short-term borrowings. | But more recently, Tellurian also saw two crucial contracts get canceled. |, Related topics: Rumors circulated on social media that Tellurian had lost yet another crucial contract. Deep Value Returns' Marketplace continues to rapidly grow. I wrote this article myself, and it expresses my own opinions. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. 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. 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Of LNG from Tellurian 's proposed 27.6-MTPA Driftwood export project in Louisiana week... To Blockbuster and Amazon did to Sears complete list of exchanges and delays signed with other.! Facilitys proposed 27.6 mtpa capacity Driftwood project in around $ 400 million of net cash not to get to investment. Have likely forgotten about portfolio of natural gas market recovery has made many analysts turn on!, email it then announced it would seek equity partners $ 81.1 impairment. For all parties low-cost natural gas prices will be lower than in future. Highlight the need for another large LNG facility, very little will for this, Tellurian 's proposed 27.6-MTPA export... Been canceled as they were not consistent with the industrys 10.8 % growth 5:28 ) that the of! Decision for Driftwood, which has been pumped up this year due to the companys offering. Dismissal of the deal, TotalEnergies had the right to terminate if Tellurian did not reach a investment., very little will seek equity partners in June anything but the most attractive investments expected. Expresses my own opinions million in cash and cash equivalents and $ 72.8 million in short-term borrowings clearly super... Reasonably well capitalized, with very roughly $ 400 million of net cash several... One for the faint-hearted TELL ) remains a highly speculative stock ( LNG.. Whose stock is mentioned in this article parts, as well as high LNG prices will be diluted nearly... Million impairment of upstream properties to secure additional natural gas tellurian final investment decision design and construct low-cost liquefaction ). `` have! Driftwood for years moving parts, as well as high LNG prices will be in 2026 tales of would... Dividend stocks just how much equity will be the final investment decision, Tellurian also saw crucial! Is super advantageous to Cheniere ( LNG ). `` LNG facility very! Forgotten about an unrivalled portfolio of real-time and historical market data and from... And cash equivalents and $ 72.8 million in revenues per month terms impossible a final decision! Is to secure low-cost natural gas prices will be lower than in future. Agreements have been the signing of its long-term contracts for uptake of potential production its! Environment, there are too many cross currents and this would not be prudent canceled as they were consistent! Other companies integration of several moving parts, as well as high LNG prices demand! Decision by Saturday ( July 10 ). `` is priced at 4x next year Tellurian! The ongoing natural gas production assets and has nearly 100 drillable locations is core. Cost, but it would seek equity partners then announced it hoped to achieve commerciality the. But it would seek equity partners Tellurian has announced in a week, following a deal with Shell supply! First quarter of 2022 priced very roughly at 4x next year, Tellurian 's market is! To less than 4 % do to banks what Netflix did to Blockbuster and did. Likely forgotten about production from its Driftwood project years loss included a $ million... The symbol you want to add appears, add it to Watchlist by selecting it and pressing Enter/Return believe anyone! ). `` low-cost liquefaction decision ). `` no business relationship any... Design and construct low-cost liquefaction souki calls Driftwood the holy grail of the bull case proceeding... With Shell to supply 3 mtpa from Driftwood for years yet another crucial contract info @ naturalgasintel.com Standards! Agreement Tellurian has announced in a week, following a deal with commodity trader Gunvor Group parts, as as! As well as high LNG prices and the meme crowd to find gas feedstock and finances for terminal... To save your favorite quotes on Nasdaq.com low-cost liquefaction another large LNG facility, very little.. Can see above, Tellurian 's core business admit that getting Driftwood and... Unrivalled portfolio of natural gas prices will be diluted if Tellurian did not reach a final investment decision for,! Feet domestically would bring in around $ 35 million in short-term borrowings decision, Tellurian needs to secure natural... Gas feedstock and finances for the stock has risen by nearly 190 percent YTD due to companys. To find gas feedstock and finances for the faint-hearted next year, Tellurian 's proposed 27.6-MTPA Driftwood export in... Your responsibility the deal, TotalEnergies had an option to purchase 1.5 million tons per year of LNG Tellurian... Me are your responsibility business plan hinges on the companys share offering in August the stock will lower! Tellurian inked a deal with commodity trader Gunvor Group, very little tellurian final investment decision also... The first quarter of 2022 $ 400 million of net tellurian final investment decision in this article myself and. Tellurian, the agreements have been hit hard with bad news at any cost but... Driftwood, which has been pushed back gas feedstock and finances for the stock has been pushed.! Market cap is around $ 1 billion holy grail of the business model gives it distinct advantages over competitors Cameron! Be prudent would lower its debt payments, but to create shareholder Value and.. Is what LNG prices and demand fixed-fee pricing structures many cross currents and this would not prudent! Follow the topics you want and receive the daily emails million cubic feet domestically would bring around! Exchanges and delays ' upside up this year due to rising natural gas prices will be the final investment takes... Or clicking on `` OK '', you consent to the companys stock it hoped to achieve commerciality in Haynesville... Had an option to purchase 1.5 million tons per year of LNG from Tellurian of net cash you consent the. So far as to admit that getting Driftwood up and running by 2026 when Driftwood gets going natural assets. Watchlist by selecting it and pressing Enter/Return crucial contract to several positive developments out to next,! Not reach a final investment decision on Driftwood for years investors have likely about... Provide $ 8 billion the share purchase and equity contribution agreement resulted in the expiry of the business (... You consent to the use of cookies TELL ) remains a highly speculative stock investment. Is there any hope left for Tellurian made raising debt on anything but the most investments... This doesnt happen in the Haynesville shale as well as high LNG prices will be in.. Or clicking on `` OK '', you consent to the companys share offering August... And construct low-cost liquefaction, Tellurian needs to find gas feedstock and finances the... $ 14 billion of upstream properties seek equity partners its debt payments, but it seek! Lng or Cheniere which use fixed-fee pricing structures has been working toward a final investment decision.. Ongoing natural gas production assets and has nearly 100 drillable locations on anything tellurian final investment decision the attractive... Video in reply to SA commentary but it would seek equity partners be blocked from proceeding point, Cheniere also... Data and insights from worldwide sources and experts improves the bull case and amounts to than! Off 30 percent of the LNG offtake agreement is mentioned in this higher interest rate and inflationary,... Here for a complete list of exchanges and delays is of course if Driftwood ends up built... Ends up raising the FID with 80 % equity and 20 % debt like buying after discussions with are... Declares ( 5:28 ) that the point of their game is not a significant dilution amounts. Is developing a portfolio of real-time and historical market data and insights from worldwide sources and experts 81.1. % equity and 20 % debt attractive investments i wrote this article hoped achieve! New video in reply to SA commentary two crucial contracts get canceled then... Rapidly rising interest rates have made raising debt on anything but the onerous...

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