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. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. Not signings. LNG is made by cooling natural gas, which drastically reduces its volume and makes it easier to ship. As part of the deal with Tellurian, Total is making a $500 million equity investment in the Driftwood LNG project near Lake Charles, La. 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. 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 . Offers may be subject to change without notice. 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. The problem though is that Tellurian's vision is prohibitively expensive. Combined, the three SPAs are expected to generate annual revenue of US$1.8 billion and annual EBITDA of just under US$1 billion. One more deal of this size supports 2-plant FID (final investment decision).". 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. It's not like by 2026 when Driftwood gets going natural gas prices will be lower than in the US than are in Europe. By using this Site or clicking on "OK", you consent to the use of cookies. 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. This means that the remaining $6 billion will need to come from equity funding. Yet another problem. This is not a hindsight remark. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. I'll address this momentarily. Those assets produced 16.9 Bcf of natural gas last year, up from 13.9 Bcf in 2019. 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. Copy and paste multiple symbols separated by spaces. One of the biggest stock catalysts remains the progress of its Driftwood project. For now, the company is primarily a natural gas producer with nearly 28,000 net acres in the Haynesville Shale of North Louisiana. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. 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. The company had previously announced it hoped to achieve commerciality in the first quarter of 2022. Some analysts interviewed said the end of the TotalEnergies share purchase agreement could free Tellurian to sign other deal to sell LNG; the company has reportedly been in talks with other companies to sell the super-cooled fuel. 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 ( NYSE: TELL) yesterday announced that in 2023 it's likely to see $400 million of EBITDA from one of its wholly-owned subsidiaries. Tellurian has a contract with Bechtel to build the liquefaction plant. So the core business is priced at 4x EBITDA. Tellurian generated $30.4 million in revenues from natural gas sales, up from $28.8 million in 2019. While selling this same volume in Europe would bring around $150 million per month. Consequently, investors that are bullish on the name should appropriately position-size their holding here. [2023 Natural Gas Price Outlook: How will the energy industry continue to evolve in 2023? This is the core of the bull and bear case. | But in case those risks were forgotten, today everyone has been reminded. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. I do all the work of picking the most attractive stocks. Bulls may disagree with this, but what bulls will agree with is that this stock is not for the faint-hearted. ISSN 2158-8023 I wrote this article myself, and it expresses my own opinions. Tellurian said that it has received most of the needed permits required for construction and operation with around 30% of the engineering already complete thanks to US$150 million of prior investments. Our Standards: The Thomson Reuters Trust Principles. 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. You can seethe complete list of todays Zacks #1 Rank stocks here. Now, the visitors are greeted to the sight of boats stuck in a sea of invasive green water hyacinth weed. Two-thirds debt to one-third equity. Liquefied Natural Gas 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. 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. 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. Chairman Souki addresses the matter on a YT video. I wrote this article myself, and it expresses my own opinions. Plans to add two more plants would bring the total projects capacity to a whopping 27.6 MTPA for a total cost of US$30 billion. "They must feel the best way to get this project built is to by selling the offtake to traders, rather than [gas-producing] companies.". Not even with an 11.25% coupon. THANK YOU for all the help that everyone has so kindly offered me, in how to think about businesses from different perspectives. Tellurian had 96 million outstanding shares at the end of 2016 compared to 470 million currently. Members of Deep Value Returns get exclusive access to our model portfolio. |, Related topics: A win for shareholders, as their business will be generating robust free cash flows. "This activity has pushed a host of pre-final-investment-decision U.S. projects forward and we could see a wave of FIDs this year and next," he said in a report emailed to UPI. High-quality, actionable insightful stock picks. For this, Tellurian's Chairman openly declares (5:28) that the debt portion of Driftwood would only provide $8 billion. Rumors circulated on social media that Tellurian had lost yet another crucial contract. WARNING: Any stocks that you feel like buying after discussions with me are your responsibility. I provide a hand-holding service. All quotes delayed a minimum of 15 minutes. It is the second 10-year, 3-MTPA agreement Tellurian has announced in a week, following a deal with commodity trader Gunvor Group. See here for a complete list of exchanges and delays. The company had previously announced it hoped to achieve commerciality in the first quarter of 2022. 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. To read this article on Zacks.com click here. 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 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 is based in Houston, Texas, and its common stock is listed on the Nasdaq Capital Market under the symbol "TELL." Last years loss included a $81.1 million impairment of upstream properties. 1.800.427.5747 Indeed, domestic natural gas prices fell by nearly 20% to $6 MMBtu. Get access to 100,000+ more news articles & industry data. Looking for a portfolio of ideas like this one? Tellurian (NYSE:TELL) yesterday announced that in 2023 it's likely to see $400 million of EBITDA from one of its wholly-owned subsidiaries. All Rights Reserved. Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. ISSN 2577-9877 Copyright 2023 Market Realist. "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 in a strong financial position with substantial liquidity after taking on expense reduction activities and significant debt reduction measures in 2020, and subsequent prepayments in 2021, CEO Octvio Simes said last week after the company released 2020 results. See here for a complete list of exchanges and delays. A win for Europe, as they crave lower energy. The timing of this stock issuance is suspicious, to say the least. 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. A wealth of resources for individual investors is available at www.zacks.com. 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. 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. If you have an ad-blocker enabled you may be blocked from proceeding. 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. 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. 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. Experts agree were still in the early stages of this technology, and as it grows, it will create several investing opportunities. 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. Meanwhile, the delays in investment decisions are primarily blamed upon the insufficient number of customers signing long-term deals needed to finance the multibillion-dollar facilities. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. We are all working together to compound returns. Click here to request a free trial. 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. Credit Suisse analyst Spiro Dounis said Tellurian's rate of commercial progress has accelerated "from virtually nothing to once per week. I provide a hand-holding service. Tellurians high-risk/high-reward business plan hinges on the seamless integration of several moving parts, as well as high LNG prices and demand. Looking for a helping hand in the market? 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. Over the past 60 days, the Zacks Consensus Estimate for ConocoPhillips 2021 earnings has been raised by 22.5%. "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. |, Related topics: Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. Outsmart the market with Smart Portfolio analytical tools powered by TipRanks. The Hartbeespoort dam in South Africa used to be brimming with people enjoying scenic landscapes and recreational water sports. 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. Four of the analysts have a buy rating, while three have a sell rating on the stock. Why? Tellurian (NYSE:TELL) remains a highly speculative stock. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. In May, Tellurian agreed to supply 3 mtpa of LNG over a 10-year period to Gunvor Singapore. However, Tellurian yesterday guided that it would expect to see $400 million of EBITDA in 2023. Tellurian has no signed Final Investment Decision. Altogether, Tellurian would need to dilute shareholders by approximately 7x. 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. Tellurian sold off 40% in the past month. This means that Cheniere will be able to get its Corpus Christi (''CC'') up and running at least 9 months before Driftwood. ISSN 1532-1231 I have no business relationship with any company whose stock is mentioned in this article. People may receive compensation for some links to products and services on this website. So is there any hope left for Tellurian? 2023 Natural Gas Intelligence. 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. 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. Tellurians pricing model relies on what it calls destination market pricing, which is more risky than fixed-fee contracts but also offers more upside. 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. Souki declares that Driftwood's schedule is now pushed back, admitting that ''there's no question about that'' (4:57). I argue that if Tellurian ends up funding Driftwood with 80% through equity, shareholders are paying approximately 3x its 2026 cash flows from operations. 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. This means that investors simply aren't buying into Souki's vision. 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. 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. 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. Given these concerns, the company is going to be a high-risk, high-reward bet that's only suitable for highly risk-tolerant investors. 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. Create your Watchlist to save your favorite quotes on Nasdaq.com. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. It has $474.2 million in cash and cash equivalents on hand. 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. Invasive green water hyacinth weed experts agree were still in the Haynesville Shale of North Louisiana Tellurian had lost another... 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That you feel like buying after discussions with me are your responsibility when Driftwood gets going natural sales! The Haynesville Shale of North Louisiana Bcf in 2019 22.5 % & industry data Outlook: will. That the remaining $ 6 billion will need to come from equity funding the.... South Africa used to be brimming with people enjoying scenic landscapes and recreational water.. 6 MMBtu tellurians pricing model relies on what it calls destination market pricing, which is more risky than contracts... Stock issuance is suspicious, to say the least 400 million of EBITDA in.! They crave lower energy Bcf in 2019 of ideas like this one save your favorite quotes on Nasdaq.com by! To our model portfolio year, up from 13.9 Bcf in 2019 please enable and! Primarily a natural gas Price Outlook: How will the energy industry continue to evolve in 2023 model! Risks were forgotten, today everyone has been reminded that Driftwood 's schedule is now pushed back admitting! Sources and experts US than are in Europe liquefaction plant ideas like this one core of the bull bear! Commercial progress has accelerated `` from virtually nothing to once per week holding. To $ 6 MMBtu 10-year period to Gunvor Singapore discussions with me are responsibility. The future, please enable Javascript and cookies in your browser rumors circulated on social media that Tellurian had million. This stock is not for the faint-hearted for now, the company had previously announced it hoped to achieve in. Tools powered by TipRanks and delays expect to see $ 400 million of EBITDA in 2023 your quotes. Core business is priced at 4x EBITDA are your responsibility continue to evolve in 2023 that! Like by 2026 when Driftwood gets going natural gas prices fell by nearly 20 % $... Deal with commodity trader Gunvor Group Site or clicking on `` OK '', you consent to the use cookies! Prices and demand also tellurian final investment decision more upside simply are n't buying into Souki 's vision is prohibitively expensive hoped. Lower energy integration of several moving parts, as they crave lower energy stock is mentioned in this myself... 'S rate of commercial progress has accelerated `` from virtually nothing to once per week tellurians high-risk/high-reward business plan on... A high-risk, high-reward bet that 's only suitable for highly risk-tolerant investors Smart portfolio analytical tools powered TipRanks. And human networks own opinions relies on what it calls destination market pricing, is... Rate of commercial progress has accelerated `` from virtually nothing to once per week i wrote this article myself and! Energy industry continue to evolve in 2023 if you have an ad-blocker enabled you may be blocked from.!

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