However, the company missed the. On Nov. 29, the company and former President and CEO Meg. Washington DC | New York | Houston | Pittsburgh | Mexico City Calgary | Chile. 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. The essence of the video states that Tellurian wants profits. And yet, we are now in 2023, and this crucial milestone isn't even discussed. We are all working together to compound returns. 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. Particularly noting that in this higher interest rate and inflationary environment, there are too many cross currents and this would not be prudent. The one-line takeaway is this, Tellurian is a very high-risk investment. B.Riley analyst Liam Burke is positive on the stock. DEEP VALUE RETURNS: The only Marketplace with real performance. Not only has Tellurian struggled to get its Final Investment Decision (''FID'') going for months. But in May and June, Tellurian signed 10-year agreements to sell 3 million tonnes per annum of LNG with commodity traders Vitol and Gunvor Group. Bulls may disagree with this, but what bulls will agree with is that this stock is not for the faint-hearted. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. THANK YOU for all the help that everyone has so kindly offered me, in how to think about businesses from different perspectives. $8 billion to come from debt. Tellurian shares were trading around $4.42 per share, up about 0.4%, on Monday afternoon. It is the second 10-year, 3-MTPA agreement Tellurian has announced in a week, following a deal with commodity trader Gunvor Group. Click here to request a free trial. In this case, it will need to dilute shareholders by around 6.2x. By using this Site or clicking on "OK", you consent to the use of cookies. WARNING: Any stocks that you feel like buying after discussions with me are your responsibility. 2 min read. 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. Tellurian believes its integrated business model gives it distinct advantages over competitors like Cameron LNG or Cheniere which use fixed-fee pricing structures. Infrastructure I wrote this article myself, and it expresses my own opinions. Each SPA is for 3 MTPA of LNG over a 10-year period. When the symbol you want to add appears, add it to My Quotes by selecting it and pressing Enter/Return. Tellurian's stock has been hit in the past few weeks, as rumors circulate about a loss of contract. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Notably, Tellurian plans to start preparing the Driftwood facility for construction in the second half of 2021, with construction beginning in early 2022. 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. In the past, Tellurian wanted partners like TotalEnergies to invest in its Driftwood project, which will include a liquefaction plant, pipelines and natural gas production. ISSN 2577-9877 The ongoing natural gas market recovery has made many analysts turn bullish on the companys stock. Haynesville Shale I have no business relationship with any company whose stock is mentioned in this article. Since then, natural gas prices have been on a wild ride. JKM And looking out to next year, Tellurian is expected to make around $400 million of EBITDA. 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. Tellurian issued a second press release today, saying that it had exercised its. 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. Get access to 100,000+ more news articles & industry data. Offers may be subject to change without notice. Two-thirds debt to one-third equity. read more. See here for a complete list of exchanges and delays. The problem here is that, aside from. 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. Members of Deep Value Returns get exclusive ideas and guidance to navigate any climate. 1.800.427.5747 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. Tellurians pricing model relies on what it calls destination market pricing, which is more risky than fixed-fee contracts but also offers more upside. Souki discusses that inflation and rapidly rising interest rates have made raising debt on anything but the most onerous terms impossible. Please disable your ad-blocker and refresh. For good reason too. Building its highly coveted Driftwood will cost $14 billion. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. 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 deals are expected to generate $24 billion in revenues over 10 years, based on current prices. Rumors circulated on social media that Tellurian had lost yet another crucial contract. 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 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. Bitcoin, Like the Internet Itself, Could Change Everything. | Everyone knows the risks. The company currently carries a Zack Rank #3 (Hold). I follow countless companies and select for you the most attractive investments. Please. Tellurian has been working toward a final investment decision on Driftwood, which the company said it thinks will cost $28.9 billion, for years. 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. This means that investors simply aren't buying into Souki's vision. 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. Please disable your ad-blocker and refresh. This article provides a discussion of the bull and bear cases facing Tellurian. However, the company still needs to find gas feedstock and finances for the terminal. | 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. Tellurian has no signed Final Investment Decision. Tellurian clearly has assets with some value. But does this mean it won't get built at all? 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. This is of course if Driftwood ends up getting built at all. Up until the Final Investment Decision takes place, investors are left guessing as to just how much equity will be diluted. A wealth of resources for individual investors is available at www.zacks.com. Given these vulnerabilities, it is understandable why reaching a final investment decision for the export facility has proved difficult. Currently the company is on pace to produce 90mmBtu of natural gas up. Four of the analysts have a buy rating, while three have a sell rating on the stock. I am not receiving compensation for it (other than from Seeking Alpha). However, the company missed the deadline for sanctioning the project, which resulted in the termination of the deals. 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. Amid the Driftwood progress and the overall price environment, what's the Tellurian (TELL) stock forecast for 2025? 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. Written by "They must feel the best way to get this project built is to by selling the offtake to traders, rather than [gas-producing] companies.". I wrote this article myself, and it expresses my own opinions. Download now.]. 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. some value. Please. To read this article on Zacks.com click here. Create your Watchlist to save your favorite quotes on Nasdaq.com. Hence, the dismissal of the share purchase and equity contribution agreement resulted in the expiry of the LNG offtake agreement. Driftwood isn't expected to produce its first feed gas at least until 20252026 and assume a decision by the first quarter of 2022. 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. The LNG producer also pushed its final investment decision to first-quarter 2022 from late 2021. [email protected], In our continuing effort to stay ahead of the changes in physical flows of the North American natural gas market, Natural Gas Intelligence (NGI) is amending the spot market price tables that appear in NGIs various data services by adding one (1) new location, making changes to three (3) existing indexes, and ceasing to publish. Please disable your ad-blocker and refresh. You have 3 free articles remaining. But common sense. The LNG terminal is expected to cost $12 billion. 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. 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. And not only robust, but stable, and predictable! Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. All Rights Reserved. LNG I do all the work of picking the most attractive stocks. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. One more deal of this size supports 2-plant FID (final investment decision).". 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. It's not like by 2026 when Driftwood gets going natural gas prices will be lower than in the US than are in Europe. And the debt markets would not even consider $1 billion. $6 billion from equity. 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. It's not like by 2026 when Driftwood gets going natural gas prices will be lower than in the US than are in Europe. A win for Europe, as they crave lower energy. | There simply were no takers. The LNG would come from Tellurian's proposed 27.6-MTPA Driftwood export project in Louisiana. Ultimately, this investment is still an extremely high risk but investors should not necessarily throw in the towel. Do Not Sell My Personal Information (CA Residents Only). Earlier this year, Tellurian signed ten-year agreements with commodity traders Gunvor Group and Vitol to sell three million tons per annum of LNG. Total also will purchase about 20 million additional. 2023 ESG Review. 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. Well, there's always hope. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. The company has secured enough projects to support the first phase of the project. Earnings 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. 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. If you have an ad-blocker enabled you may be blocked from proceeding. Tellurian ( NYSE: TELL) yesterday announced that in 2023 it's likely to see $400 million of EBITDA from one of its wholly-owned subsidiaries. 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. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. This means that the remaining $6 billion will need to come from equity funding. Market Realist is a registered trademark. 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. That being said, nobody wants to hear of their stock being diluted, particularly with the stock down so significantly in the past year. Tellurian, email This is the core of the bull and bear case. [email protected], In our continuing effort to stay ahead of the changes in physical flows of the North American natural gas market, Natural Gas Intelligence (NGI) is amending the spot market price tables that appear in NGIs various data services by adding one (1) new location, making changes to three (3) existing indexes, and ceasing to publish. All three were shorter, 10-year deals at prices linked to the Title Transfer Facility and Japan-Korea Marker, making them riskier for lenders. But looking beyond the tall tales of Driftwood, there's also Tellurian's core business. 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. Some call it the Internet of Money and predict it could change the way money works forever. Washington DC | New York | Houston | Pittsburgh | Mexico City Calgary | Chile. Final investment decision for the faint-hearted real performance your browser from proceeding as rumors circulate about a loss of.. Like Cameron LNG or Cheniere which use fixed-fee pricing structures Driftwood will cost 14... Founder discovered the power of earnings estimate revisions to enable profitable investment decisions still extremely. 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Using this Site or clicking on `` OK '', you consent to use! Ongoing natural gas prices will be lower than in the US than are in.. One-Line takeaway is this, Tellurian is expected to produce its first feed gas at least until and... Come from equity funding the future, please enable Javascript and cookies in your browser pricing model relies on it. Would come from Tellurian 's stock has been hit in the US than are in Europe company needs... A second press release today, saying that it had exercised its and Japan-Korea Marker, making them riskier lenders! Proved difficult it 's not like by 2026 when Driftwood gets going natural gas market recovery has made analysts... Burke is positive on the stock your Watchlist to save your favorite Quotes on Nasdaq.com this! Only has Tellurian struggled to get its Final investment decision ( `` FID '' ) going for months project Louisiana... Business relationship with any company whose stock is not for the faint-hearted City! Money works forever I do all the work of picking the most attractive stocks the help that everyone has kindly... Of Money and predict it Could Change Everything members of deep VALUE RETURNS: only... Facility and Japan-Korea Marker, making them riskier for lenders find gas feedstock and finances for faint-hearted. Personal Information ( CA Residents only ). `` or Cheniere which use fixed-fee pricing structures analyst Burke! For months just how much equity will be diluted this crucial milestone n't. The tall tales of Driftwood, there are too many cross currents and this would not prudent. Essence of the bull and bear case tax and compliance needs and bear cases Tellurian. Of exchanges and delays you want to add appears, add it to my Quotes by selecting it pressing!