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 . Haynesville Shale 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. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. |, Related topics: | 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. Altogether, Tellurian would need to dilute shareholders by approximately 7x. 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. swan event, that Driftwood one day actually gets built. Hess earnings for 2021 are expected to rise 116.2% year over year. Chairman Souki addresses the matter on a YT video. 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. In June, TELL signed a long-term contract with Vitol for 3 mtpa. 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. 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. Headquartered in Houston, TX, Tellurian is a liquefied natural gas developer. Tellurian (NYSE:TELL) yesterday announced that in 2023 it's likely to see $400 million of EBITDA from one of its wholly-owned subsidiaries. Four of the analysts have a buy rating, while three have a sell rating on the stock. To get to Final Investment Decision, Tellurian needs to secure additional natural gas assets in the Haynesville shale. Please. 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. Basically, Tellurian is now little more than a story stock without a meaningful contract and without its Final Investment Decision (''FID'') in place. 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. 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. You'll now be able to see real-time price and activity for your symbols on the My Quotes of Nasdaq.com. If indeed Tellurian did manage to raise $8 billion of debt, its interest payments would be at least 8%. 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. 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. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. JKM Per the terms of the deal, TotalEnergies had an option to purchase 1.5 million tons per year of LNG from Tellurian. If you have an ad-blocker enabled you may be blocked from proceeding. LNG When the symbol you want to add appears, add it to Watchlist by selecting it and pressing Enter/Return. The company estimates that the 27.6 mmty facility would cost $25 billion to build. Notably, Tellurian plans to start preparing the Driftwood facility for construction in the second half of 2021, with construction beginning in early 2022. 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 said the first phase of Driftwood would cost about $16.8 billion and produce about 16.5 MTPA of LNG. can go wrong? ISSN 2577-9877 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. View Subscription Options 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. You have 3 free articles remaining. The company is developing a portfolio of natural gas production assets and has nearly 100 drillable locations. However, the company missed the. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. Not at less than $2 per share. Tellurian has no signed Final Investment Decision. Total also will purchase about 20 million additional. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Tellurians high-risk/high-reward business plan hinges on the seamless integration of several moving parts, as well as high LNG prices and demand. Over the past decade, it has made growing its natural gas trading, production, and supply business a key priority. Tellurian wanted all potential investors to be focused on the holy grail story. Yesterday, Tellurian Executive Chairman Charif Souki made a video arguing that Tellurian doesn't want signings with Chevron (CVX). While this does not fully change the investment case here, it does support the case that Tellurian has cash-flow generating assets. By the start of 2020, several LNG export projects had already reached a final investment decision, putting . All rights reserved. Now, the visitors are greeted to the sight of boats stuck in a sea of invasive green water hyacinth weed. Tellurian is one of several LNG developers that have put off making a final investment decision because it is tough to find customers in a world with low natural gas prices due to coronavirus . Tellurian has an amazing story. Souki declares that Driftwood's schedule is now pushed back, admitting that ''there's no question about that'' (4:57). Great chart showing how coal prices should increase with LNG prices.$LNG $TELL $TGA $BTU $AR $CRK https://t.co/SazUOygfKk. (Adds delay of final investment decision to Q1 2022 from 2021) May 27 (Reuters) - U.S . 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. | 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. So the core business is priced at 4x EBITDA. I provide a hand-holding service. 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. 1.800.427.5747 Is this happening to you frequently? I wrote this article myself, and it expresses my own opinions. The Hartbeespoort dam in South Africa used to be brimming with people enjoying scenic landscapes and recreational water sports. I argue that this meaningfully improves the bull case. Driftwood isn't expected to produce its first feed gas at least until 20252026 and assume a decision by the first quarter of 2022. Tellurian shares were trading around $4.42 per share, up about 0.4%, on Monday afternoon. "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 have no business relationship with any company whose stock is mentioned in this article. Not only has Tellurian struggled to get its Final Investment Decision (''FID'') going for months. Create your Watchlist to save your favorite quotes on Nasdaq.com. What Souki doesn't address is that Tellurian was expecting to sign its Final Investment Decision in the summer of 2022. 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. 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. In this case, it will need to dilute shareholders by around 6.2x. Tellurian stock has been pumped up this year due to rising natural gas prices and the meme crowd. 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. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. 1.800.427.5747 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. 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. Bulls may disagree with this, but what bulls will agree with is that this stock is not for the faint-hearted. We are all working together to compound returns. Tellurian CEO Octvio Simes said the company "continues to execute on our plan to market Driftwood LNG volumes on indices that our customers want.". Looking for a portfolio of ideas like this one? And looking out to next year, Tellurian is expected to make around $400 million of EBITDA. I follow countless companies and select for you the most attractive investments. 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. 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. 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. 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. To read this article on Zacks.com click here. 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 like by 2026 when Driftwood gets going natural gas prices will be lower than in the US than are in Europe. I am not receiving compensation for it (other than from Seeking Alpha). 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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. Please. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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. Nov 30, 2020 Houston-based liquefied natural gas company Tellurian Inc. (Nasdaq: TELL) announced a new president and CEO on Nov. 30. Since I wrote Pipe Dream, Tellurian's share price has taken a tumble. I argue that if Tellurian ends up funding Driftwood with 80% through equity, shareholders are paying approximately 3x its 2026 cash flows from operations. Another big fear for investors could be the dilution of their holdings. The bigger question is what LNG prices will be in 2026. 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. However, Tellurian yesterday guided that it would expect to see $400 million of EBITDA in 2023. Follow the topics you want and receive the daily emails. Last years loss included a $81.1 million impairment of upstream properties. Tellurians Driftwood LNG is arguably the single most ambitious US LNG project. High upside energy, commodity, tech, and dividend stocks. 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. 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. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. The agreements had built on TotalEnergies' original $207 million . See here for a complete list of exchanges and delays. Download now.]. If you have an ad-blocker enabled you may be blocked from proceeding. As you can see above, Tellurian's Driftwood is expected to cost approximately $14 billion. Going on to state that there's plenty of interest from private equity to get involved in the sector. Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. I believe that anyone reading this knows the spiel well. The ongoing natural gas market recovery has made many analysts turn bullish on the companys stock. So, let's get to this story's next episode. Its stock has gained 80.3% compared with the industrys 10.8% growth. 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. Haynesville Shale Today, that discovery is still the heart of the Zacks Rank. See here for a complete list of exchanges and delays. Please disable your ad-blocker and refresh. Tellurian has yet to secure financing for the entirety of the Driftwood LNG project. Our Standards: The Thomson Reuters Trust Principles. Other major company-specific developments have been the signing of its long-term contracts for uptake of potential production from its Driftwood project. Get access to 100,000+ more news articles & industry data. You have 3 free articles remaining. He thinks that the company should benefit from the expected growth and rapid evolution of the global liquified natural gas market. The LNG market has since tightened and the outlook is improving as the global economy recovers in the aftermath of the Covid-19 outbreak. Earnings Credit Suisse analyst Spiro Dounis said Tellurian's rate of commercial progress has accelerated "from virtually nothing to once per week. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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. Why? 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. But does this mean it won't get built at all? B.Riley initiated on TELL with a buy rating and a target price of $8 in July. I have no business relationship with any company whose stock is mentioned in this article. Tellurian has been working toward a final investment decision on Driftwood, which the company said it thinks will cost $28.9 billion, for years. 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