Tellurian Has the Right Jockey, But it Still Has a Race to Run


Recently, I gave InvestorPlace readers my opinion on seven natural gas stocks to buy. At that time, I wasn’t paying much attention to penny stocks. If I had, I may have given Tellurian (NASDAQ:TELL) a closer look. The company is a play on liquefied natural gas (LNG), and it’s one of the up-and-coming players in this niche. 

Image of an oil filed at the Permian Basin.

Source: FreezeFrames /

With oil prices rapidly climbing, I can understand why investors are looking to buy oil stocks. However, natural gas still looks like it can play an essential role in bridging the gap from our carbon present to our renewable-energy future. Moreover, natural gas prices have also been rising. 

Tellurian is a young company. It was founded in 2016. The company owns a subsidiary called Driftwood, which is “developing a liquefied natural gas (LNG) production and export terminal” in Louisiana. When the terminal becomes operational, it will yield 3 million tons per annum (mtpa) of LNG over a ten-year period, Tellurian estimates.

However, what’s more significant to me is who launched Tellurian. Its founder is Charif Souki. The investment banker-turned-energy pioneer also founded Cheniere Energy (NYSE:LNG), which is one of the largest players in the LNG sector.

Souki was ousted as Cheniere’s CEO in 2015. However, his significance to the LNG sector was established before he left the firm.

LNG Exporting Is Big Business

The growth of fracking in the U.S. has made the country one of the primary exporters of LNG. And according to Royal Dutch Shell (NYSE:RDS.A, NYSE:RDS.B) Executive Vice President Steve Hill, demand for LNG is expected to double by 2040.

As I mentioned earlier,  the world needs a bridge to a renewable energy future, and natural gas is well-suited to play that role.

Currently, Europe is highly dependent on renewable energy. However, as the United States (and specifically residents of Texas) learned this winter, wind and solar have their limitations. And that means that Europe is one of the key buyers of LNG.

Investors Will Need Patience

Unfortunately, Tellurian’s Driftwood project won’t be up and running in time to export LNG to Europe this winter. However, the continent should have strong demand for LNG for several years, and Tellurian looks poised to be one of the key players in the market. But it has to get Driftwood online, and it will take some time and perhaps some additional capital to do so.

On the capital front, the company suffered a bit of a setback when it was forced to withdraw a $50 million debt offering. That was a big reason for the most recent dip of TELL stock. However, Tellurian appears to have enough capital to get the project across the finish line.

And the company has recently announced a series of contracts.  The deals ensure that it will have enough revenue coming through the door to make building the pipeline economical.

TELL Stock May Reward the Risk-Tolerant

Analysts’ average price target on TELL stock is $6.34. That’s about 80% above the $3.47 level at which it’s trading this afternoon. That gap may be enough to get retail investors excited.

One thing that investors may want to focus on is the high implied volatility of a call option on TELL stock with a strike price of $15  that expires on January 21, 2022. Options with high levels of implied volatility suggest that investors expect stocks to make a big move.

However, big moves are not unusual for penny stocks. And at a couple of points in 2021, TELL stock has become a meme stock.

That simply reinforces the idea that TELL stock carries risk. However, if you have a healthy risk tolerance, you could do worse than to take a bullish position in TELL stock at its current price 

On the date of publication, Chris Markoch 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.  

 Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019. 

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