Prime Deal Makes Tellurian a Winning Natural Gas Play


Looking for a cheap way to gain exposure to the fast-moving natural gas market? Give Tellurian (NASDAQ:TELL) a try, as TELL stock is highly affordable and it’s been sparking investors’ interest lately.

natural gas storage at night, storage facility reflected in pond

Source: Shutterstock

Tellurian focuses on liquefied natural gas. With its $25 billion investment in U.S.-based natural gas infrastructure, Tellurian is among the most ambitious competitors in its niche industry.

The company’s primary project is known as Driftwood LNG ( “LNG” refers to liquid natural gas). Tellurian is looking to build the Driftwood LNG liquefaction export facility near Lake Charles, Louisiana.

As we’ll see, the company has made notable progress on the facility. There’s even a well-known energy company getting involved – and that could be very lucrative for Tellurian.

A Closer Look at TELL Stock

It’s been an extended, tough battle for Tellurian’s long-term shareholders.

Back in the 1980s, TELL stock traded above $10. In 2021, the stock can’t seem to stay above $5.

Yet confident traders should be able to envision the share price exceeding $5 at some point. After all, the stock hit a 52-week high of $5.76 in June.

Just be advised that since it’s a low-priced name, TELL stock has a tendency to make swift moves in both directions.

Therefore, investors should only take a small position in Telluride. Also, be sure to monitor natural gas prices closely, as they will affect TELL stock.

If the shares do break above $5 and stay there for awhile, then $6.25 and $7.50 should be the next targets to aim for. It’s not a bad idea to consider booking some profits at those levels if the stock reaches them.

Favorable Macro Conditions

Some readers may not be fully convinced that producing liquefied natural gas is a great way to earn revenues.

To counter any skepticism, Tellurian has found a couple of fast facts that convey the favorable conditions of the LNG market.

For one thing, EU carbon prices are up around 110% over the last 12 months. That increase suggests that natural gas could be cost-effective.

Furthermore, global liquefied natural gas demand has grown by an annual average of 7% over the last five years.

Now don’t get the wrong idea. Natural gas is still a fossil fuel, so it’s not as clean as solar or wind energy.

On the other hand, Tellurian points out that natural gas is a “complementary cleaner energy source to support global decarbonization.”

To put it another way, the macro conditions look good for natural gas as it can provide a bridge from petroleum and coal to cleaner fuels.

And, with no debt and all the necessary permits already secured, Tellurian offers investors an excellent pure play on liquefied natural gas.

Two Plants and One Huge Deal

On the financial front, Tellurian ended the second quarter with roughly $111.9 million of cash and cash equivalents and no borrowing obligations.

Moreover, the company generated approximately $5.6 million of revenues in Q2 from selling natural gas.

That’s certainly encouraging, but it’s not even the headline news. Indeed, there’s a potentially game-changing deal afoot.

The big development is that Tellurian has finalized liquefied natural gas sale and purchase agreements with Royal Dutch Shell (NYSE:RDS.A, NYSE:RDS.B) subsidiary Shell NA LNG.

Driftwood LNG is a massive project , expected to yield 3 million tonnes per annum (mtpa) of liquefied natural gas over a ten-year period.

And Shell Energy EVP Steve Hill offered up an eye-opening statistic, along with a healthy dose of optimism concerning the agreement with Tellurian.

“LNG demand is expected to nearly double by 2040,” Hill explained.

“This deal secures additional competitive volumes for our portfolio by the mid-2020s, enabling us to continue providing diverse and flexible LNG supply to our customers,” he added.

The Bottom Line

By now, you should be convinced that there’s a place for natural gas as the world transitions to relatively cleaner energy sources.

For investors, Tellurian provides exposure to this fast-emerging market.

So even as TELL stock struggles to find its footing, its share price can exceed $5.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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