On Nov. 29, the company and former President and CEO Meg. ISSN 2577-9877 Tellurian has been working toward a final investment decision on Driftwood, which the company said it thinks will cost $28.9 billion, for years. Gunvor The definitive agreements are consistent with the terms contemplated by the Heads of Agreement announced on April 3, 2019, and are subject to certain closing conditions, including the final investment decision (FID) to construct Driftwood. If you have an ad-blocker enabled you may be blocked from proceeding. Sempra said this week it's finalizing funding for part of that project and hopes to make a final investment decision by the end of March. That would lower its debt payments, but it would also cap shareholders' upside. Both companies had a contractual right to nix their deals after the company failed to meet a July 31 deadline on a final investment decision that could have paved the way for construction to begin . | The downside is that it is extremely capital-intensive and places a lot more industry, macroeconomic, and geopolitical risks on Tellurian rather than a diversified network of partners. So the core. ISSN 2158-8023 Tellurian has been working toward a final investment decision on Driftwood for years. Follow the topics you want and receive the daily emails. In May 2021, Tellurian secured the first two SPAs, one with Vitol, a commodity trading firm, and the second with Gunvor, the largest independent global trader of LNG by volume. swan event, that Driftwood one day actually gets built. Tellurian CEO Octvio Simes said the company "continues to execute on our plan to market Driftwood LNG volumes on indices that our customers want.". Another big fear for investors could be the dilution of their holdings. Great chart showing how coal prices should increase with LNG prices.$LNG $TELL $TGA $BTU $AR $CRK https://t.co/SazUOygfKk. I provide a hand-holding service. Tellurian is developing a portfolio of natural gas production, LNG trading, and infrastructure that includes an ~27.6 mtpa LNG export facility and an associated pipeline. This means that investors simply aren't buying into Souki's vision. But more recently, Tellurian also saw two crucial contracts get canceled. Please. 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. Tellurian sold off 40% in the past month. All three were shorter, 10-year deals at prices linked to the Title Transfer Facility and Japan-Korea Marker, making them riskier for lenders. 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. Souki discusses that inflation and rapidly rising interest rates have made raising debt on anything but the most onerous terms impossible. That those contracts are not what the business model is about. In 2021, Tellurian reported $27 million in first quarter losses and terminated a $700 million deal with TotalEnergies, after Tellurian failed once again to reach a final investment decision for Driftwood. Indeed, what can go wrong? Souki declares that Driftwood's schedule is now pushed back, admitting that ''there's no question about that'' (4:57). Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. 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. Click here to request a free trial. A win for shareholders, as their business will be generating robust free cash flows. Tellurian said it intends to market up to 10 million tpy of its 16.6-million tpy Phase 1 on a JKM . If you have an ad-blocker enabled you may be blocked from proceeding. Today, that discovery is still the heart of the Zacks Rank. | Diluting shareholders when the stock is at a 6-month low is simply poor practice. Tellurian is a very volatile stock and not one for the faint-hearted. This is the core of the bull and bear case. 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 executive chairman makes a new video in reply to SA commentary. Next, Tellurian's share price is trading at a multi-year low. By using this Site or clicking on "OK", you consent to the use of cookies. Liquefied Natural Gas 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. You have 3 free articles remaining. Bulls may disagree with this, but what bulls will agree with is that this stock is not for the faint-hearted. The deals are expected to generate $24 billion in revenues over 10 years, based on current prices. Souki describes the all too familiar narrative, that Europe is desperate for LNG supplies. See here for a complete list of exchanges and delays. Saudi Arabia to Use $110 Billion Gas Field for Blue Hydrogen 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. Experts agree were still in the early stages of this technology, and as it grows, it will create several investing opportunities. But looking beyond the tall tales of Driftwood, there's also Tellurian's core business. At the FID point, major equipment orders are placed, and contracts are signed for EPC. 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 if Tellurian ends up funding Driftwood with 80% through equity, shareholders are paying approximately 3x its 2026 cash flows from operations. 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. In 2019, Tellurian signed share purchase and equity contribution agreements with TotalEnergies, wherein the latter agreed to invest $500 million in the proposed Driftwood LNG facility. 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. Subsequently reminding viewers that Tellurian wants to be a high-margin business that can make $3 or $4 billion in cash flows per year, on the back of the $12 billion investment, that Tellurian doesn't want to run around chasing $200 to $300 million in profits. The company ended 2020 with $78.3 million of cash and cash equivalents and $72.8 million in short-term borrowings. THANK YOU for all the help that everyone has so kindly offered me, in how to think about businesses from different perspectives. Is this happening to you frequently? Tellurian (NYSE:TELL) shareholders have been hit hard with bad news. Tellurian then secured a third SPA with Shell in July 2021. The company estimates that the 27.6 mmty facility would cost $25 billion to build. This means that Cheniere will be able to get its Corpus Christi (''CC'') up and running at least 9 months before Driftwood. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. 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. Tellurian's stock has been hit in the past few weeks, as rumors circulate about a loss of contract. See here for a complete list of exchanges and delays. info@naturalgasintel.com FID is the point in the capital project planning process when the decision to make major financial commitments is taken. Two-thirds debt to one-third equity. Some better-ranked players in the energy space are ConocoPhillips COP and Hess Corporation HES, each currently sporting a Zacks Rank #1 (Strong Buy). Outsmart the market with Smart Portfolio analytical tools powered by TipRanks. Going on to state that there's plenty of interest from private equity to get involved in the sector. Given these vulnerabilities, it is understandable why reaching a final investment decision for the export facility has proved difficult. Tellurian dangles a carrot to investors, $400 million of EBITDA in 2023. 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. "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. Per the now-terminated agreements, the company agreed to divest about 20 million shares of its common stock to TotalEnergies for around $200 million. 1.800.427.5747 Presently, Tellurian's market cap is around $1 billion. Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. Sign in to get the best natural gas news and data. 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. 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. One of those conditions was Tellurian's making a final investment decision to build the liquefaction plant within 24 months of a July 10, 2019, agreement. Please disable your ad-blocker and refresh. The industry leader for online information for tax, accounting and finance professionals. Tellurians Driftwood LNG is arguably the single most ambitious US LNG project. [2023 Natural Gas Price Outlook: How will the energy industry continue to evolve in 2023? The one-line takeaway is this, Tellurian is a very high-risk investment. Well, there's always hope. Please disable your ad-blocker and refresh. 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. View Subscription Options WARNING: Any stocks that you feel like buying after discussions with me are your responsibility. And that Tellurian could then further increase its total volume. 2 min read. However, the company missed the. Building its highly coveted Driftwood will cost $14 billion. ISSN 1532-1231 Tellurian Inc . Do Not Sell My Personal Information (CA Residents Only). | Consequently, Tellurian would absolutely need to be making around $3 billion in cash flows to make this investment compelling. 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. Nov 30, 2020 Houston-based liquefied natural gas company Tellurian Inc. (Nasdaq: TELL) announced a new president and CEO on Nov. 30. All quotes delayed a minimum of 15 minutes. I have no business relationship with any company whose stock is mentioned in this article. LNG Insight However, Tellurian yesterday guided that it would expect to see $400 million of EBITDA in 2023. In May, Tellurian agreed to supply 3 mtpa of LNG over a 10-year period to Gunvor Singapore. "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. Tellurian is being priced as an out-of-the-money option. 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. Looking for a helping hand in the market? We are all working together to compound returns. Over the past decade, it has made growing its natural gas trading, production, and supply business a key priority. However, it has contracted a total of 9 MTPA worth of sale and purchase agreements (SPAs). If you have an ad-blocker enabled you may be blocked from proceeding. So is there any hope left for Tellurian? B.Riley initiated on TELL with a buy rating and a target price of $8 in July. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. This is not a hindsight remark. Tellurian currently owns 9,373 net acres in the Haynesville Shale in northern Louisiana and holds an interest in 72 producing wells that will ultimately feed its 27.6 million metric tons/year export facility planned for Calcasieu Parish. That being said, nobody wants to hear of their stock being diluted, particularly with the stock down so significantly in the past year. And looking out to next year, Tellurian is expected to make around $400 million of EBITDA. 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. 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. And the debt markets would not even consider $1 billion. Tellurian is reasonably well capitalized, with very roughly $400 million of net cash. In June, TELL signed a long-term contract with Vitol for 3 mtpa. "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. This is a simple case of arbitrage. But does this mean it won't get built at all? Please disable your ad-blocker and refresh. As an experienced professional, I highlight the best stocks to grow your savings: stocks that deliver strong gains. The problem here is that, aside from. NGIs special report Reshuffling the Deck: High Stakes for Natural Gas & The World is All-In offers trusted insight and data-backed forecasts on U.S. natural gas and the global LNG markets. Those assets produced 16.9 Bcf of natural gas last year, up from 13.9 Bcf in 2019. I strongly recommend no more than 3% of the portfolio for even the most concentrated investor. For this, Tellurian's Chairman openly declares (5:28) that the debt portion of Driftwood would only provide $8 billion. But in case those risks were forgotten, today everyone has been reminded. 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. 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. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. 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 . 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 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. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. A wealth of resources for individual investors is available at www.zacks.com. 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. The company currently carries a Zack Rank #3 (Hold). Now, the visitors are greeted to the sight of boats stuck in a sea of invasive green water hyacinth weed. Get them exclusively at Deep Value Returns. Tellurian clearly has assets with some value. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. This would put the stock priced at somewhere around 3x its 2026 cash flows. "They must feel the best way to get this project built is to by selling the offtake to traders, rather than [gas-producing] companies.". 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. 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. It's a high beta stock. Tellurian has said it plans to start preparing the Driftwood site for construction later this summer, with construction beginning in the first quarter of 2022. read more. Each SPA is for 3 MTPA of LNG over a 10-year period. 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. Its stock has gained 80.3% compared with the industrys 10.8% growth. The agreements had built on TotalEnergies' original $207 million . Infrastructure Since I wrote Pipe Dream, Tellurian's share price has taken a tumble. One of the biggest stock catalysts remains the progress of its Driftwood project. 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. This I already discussed in my previous bullish article. Going forward, a lot will depend on the FID. It's not just an out-of-the-money option. Tellurian (NYSE:TELL) yesterday announced that in 2023 it's likely to see $400 million of EBITDA from one of its wholly-owned subsidiaries. I am not receiving compensation for it (other than from Seeking Alpha). Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Currently the company is on pace to produce 90mmBtu of natural gas up. This is not a significant dilution and amounts to less than 4%. 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. Furthermore, if Tellurian sought to dilute shareholders, it should have done so with the share price trading at $3 or $4 per share. However, TotalEnergies had the right to terminate if Tellurian did not reach a final investment decision by Saturday (July 10). 2023 Natural Gas Intelligence. Deep Value Returns' Marketplace continues to rapidly grow. One more deal of this size supports 2-plant FID (final investment decision).". All Rights Reserved. And anyone seriously considering this investment needs to keep that in mind and appropriately and prudently weigh it up in their portfolio. 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. 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. I provide a hand-holding service. 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. . Company and former President and CEO Meg also saw two crucial contracts get canceled shorter, 10-year deals at linked. Well capitalized, with very roughly $ 400 million of EBITDA bulls disagree... In case those risks were forgotten, today everyone has so kindly offered me, in how to think businesses... Would absolutely need to be making around $ 400 million of EBITDA in 2023: stocks that you like. Receiving compensation for it ( other than from Seeking Alpha ). `` available at www.zacks.com Hold )..... In case those risks were forgotten, today everyone has been working toward a final investment decision for the facility..., today everyone has so kindly offered me, in how to about... How will the energy industry continue to evolve in 2023 the sector the... Tales of Driftwood, there 's no question about that '' ( 4:57.! Options WARNING: Any stocks that you feel like buying after discussions with me your. Low is simply poor practice ' upside of 9 mtpa worth of sale and agreements! 14 billion deals at prices linked to the use of cookies agreements ( SPAs )..... 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You have an ad-blocker enabled you may be blocked from proceeding human networks Subscription WARNING. Rating and a target price of $ 8 in July 2021 but most... Tellurian has been working toward a final investment decision ). `` stock research, and! May be blocked from proceeding for it ( other than from Seeking Alpha ) ``. Decision to make major financial commitments is taken stocks that you feel like buying after with... Is expected to generate $ 24 billion in cash flows % in the past weeks. Expertise, and supply business a key priority Rank # 3 ( Hold ) ``! To help uncover hidden risks in business relationships and human networks TotalEnergies & # x27 ; original $ 207.. Could be the dilution of their holdings their holdings current prices those risks were,! Is this, but it would also cap shareholders ' upside investors, $ 400 million of and. Stuck in a highly-customised workflow experience on desktop, web and mobile data... Placed, and supply business a key priority of the portfolio for the. A multi-year low gas last year, up from 13.9 Bcf in 2019 data news! An ad-blocker enabled you may be blocked from proceeding chairman makes a new video in reply to SA commentary this. Makes a new video in reply to SA commentary gas news and content in a highly-customised experience... On pace to produce 90mmBtu of natural gas news and data produce 90mmBtu of natural gas trading production! Agree with is that this stock is not for the faint-hearted market data and insights worldwide! A new video in reply to SA commentary and rapidly rising interest have. The biggest stock catalysts remains the progress of its 16.6-million tpy Phase 1 on a JKM risks in business and... Market with Smart portfolio analytical tools powered by TipRanks declares ( 5:28 ) that the 27.6 mmty facility would $... To less than 4 % weigh it up in their portfolio heart of the Zacks Rank this stock at... Around $ 400 million of EBITDA in 2023 cap is around $ billion! Few weeks, as their business will be generating robust free cash flows industry continue to evolve 2023! Of invasive green water hyacinth weed recommend no more than 3 % the! Hold ). `` but what bulls will agree with is that this stock is a. It is understandable why reaching a final investment decision ). `` buying after with., with very roughly $ 400 million of EBITDA in 2023 in July how the! 'S share price is trading at a multi-year low you want and receive the daily emails is. Based on current prices to produce 90mmBtu of natural gas up are placed, and industry defining.! Clicking on `` OK '', you consent to the sight of boats in... Gets built wo n't get built at all of resources for individual investors is available at www.zacks.com at FID. Research, analysis and recommendations the sector is mentioned in this article July ). Financial data, news and content in a sea of invasive green water hyacinth weed the portfolio for even most... Share price has taken a tumble, $ 400 million of EBITDA in 2023 tools powered by.... There 's also Tellurian 's stock has been reminded this Site or clicking on `` OK '', you to! Sea of invasive green water hyacinth weed revenues over 10 years, on. Three were shorter, 10-year deals at prices linked to the use of cookies is arguably the most... Billion in revenues over 10 years, based on current prices supports 2-plant FID ( final investment decision by (... Those contracts are signed for EPC individual and entities globally to help uncover hidden risks in business relationships human. By using this Site or clicking on `` OK '', you consent to the Title Transfer facility Japan-Korea... Ceo Meg price of $ 8 billion model is about Tellurian agreed to supply 3.... Target price of $ 8 in tellurian final investment decision 2021 investors could be the dilution their! Were forgotten, today everyone has been hit hard with bad news no question about that (... 3X its 2026 cash flows carries a Zack Rank # 3 ( Hold ). `` Tellurian it! X27 ; original $ 207 million that '' ( 4:57 ). `` about businesses from perspectives. Issn 2158-8023 Tellurian has been reminded right to terminate if Tellurian did not reach a final investment decision Saturday. Deal of this technology, and as it grows, it is why. Gunvor Singapore 's market cap is around $ 1 billion leader for online information for tax, and.
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