Tellurian's Driftwood LNG is a challenging project with significant risks, particularly related to financing and lack of signed sales and purchase agreements. Despite these challenges, Tellurian possesses key assets making it attractive to investors.
As we tie a bow on this section, we finally come to the financing challenge. As noted in the slide above, TELL is seeking equity partners for up to a 40% stake in Phase I. A quick glance at the slide above shows the non-standard capital structure of Driftwood. Over half is made up of LT debt and bonds, with cash flow from future sales of LNG making up about 15%, leaving investors with the balance.
TELL really has no moat, being on the U.S. Gulf Coast. Its cargos will have to sail through the Panama Canal to get to Asia. No worse or different than the other half a dozen LNG plants due to come online in the late 20's. It does have one unique asset, though, Souki., and doing it fairly smartly in my view. Japan and India are both big consumers of LNG with an incentive to tie up new supplies on long-term contracts.
The company also mentions in the press release they having conversations with oil operators, and I don't see the same pathway to fruition here. Oil companies are already deeply involved in LNG on their own, and exactly what TELL would bring to the table in that scenario escapes me. The remuneration for this came to a billion badly needed dollars. Companies like Bechtel don't take IOU's or equity. Cash on the barrelhead is what keeps them shoveling away.
TELL faces no liquidity crisis, with half a billion in cash on the books and little current debt. It can rock along like this for the foreseeable future. News that the company has been successful in pulling equity partners would give the stock a boost. A big boost probably. The company hit the $6.00 level mid-year '22. A tradeable event like an investor taking equity or a drawdown in supplies would be the catalyst for another upswing.
The company is as a speculative bet as you can make, but in the low $1 range it's one that's paid off numerous times in this saga. That would be my suggestion if you're a bottom fisher and the muses are speaking to you on TELL. Get in low, and take profits immediately when you hit your target. Rinse and repeat as opportunities arise.
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