- Revenues were $25.35 million in the second quarter of 2021, up from $6.33 million the same quarter a year ago.
- For the six months ended June 30, 2021, Tellurian issued 63.8 million shares of common stock under the at-the-market program for net proceeds of approximately $182.4 million.
- The FID is now scheduled in 2022.
- I recommend trading short-term TELL.
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Investment Thesis and Presentation
Tellurian Inc. (NYSE:TELL) reported its second-quarter 2021 results on August 3, 2021.
Quarterly results snapshot
Revenues for the quarter were $25.35 million with a net loss of $30.6 million or $0.08 per diluted share. Shares outstanding diluted jumped 57.3% to 386.05 million from 245.36 million in 2Q20.
The investment thesis is a tricky proposition for "LNG projects" not firmly secured but presenting an interesting story nonetheless.
The principal issue here is the project financing and the constant "wait-for-tomorrow-we-will-do-it." I am getting more skeptical, looking at the funding needed and the dilution that will happen. But it is probably due to my cautious nature and previous catastrophic experiences in similar large projects.
So far, the company was ultimately able to find enough contracts to allow for a reduced project. It is progress.
Tellurian signed 10-year agreements to sell 3 million tonnes per annum of LNG with commodity traders Vitol and Gunvor Group and in July with Royal Dutch Shell (RDS.A) (RDS.B) for 3 million tonnes per annum of LNG.
Those three contracts total nine mtpa and nearly all of the capacity of Driftwood LNG's first two plants in Louisiana. President and CEO Octávio Simões said,
Tellurian intends to market up to 10 mtpa of LNG in our first phase on a JKM, TTF or blended price basis, as our integrated model provides the flexibility to offer this valuable product. We welcome Gunvor, the largest independent global trader of LNG volumes, to Driftwood and look forward to providing a cleaner fuel to meet growing global energy needs and enable energy access.”
This year, the project has moved from a business model that seeks partners like TotalEnergies (TTE) to a model that sells LNG to buyers like Vitol or Gunvor.
It is the main reason why Tellurian terminated a stock and LNG purchase agreement with France's TotalEnergies SE related to Tellurian's proposed Driftwood LNG export plant in Louisiana.
Because of the gambling nature of the investment, it would be unwise to invest a large amount of Cash here.
But it is also essential to invest a good amount long-term and, above all, short-term trade LIFO about 60% of your long-term position until the payday eventually comes.
The Driftwood LNG Project Phase I
Driftwood LNG LLC, owned by Tellurian Inc., is developing a liquefied natural gas production and export terminal on the west bank of the Calcasieu River, south of Lake Charles, Louisiana.
Tellurian, in recent months, decided on the smaller of two options for the first phase of the natural gas liquefaction and export facility. The decision was taken after the company could not secure more contracts.
Questions remained about whether the company's strategy of using 10-year supply contracts to finance an LNG export project will ultimately be successful. LNG project developers have traditionally relied on longer-term sale and purchase agreements that cover periods of 15 or 20 years. But an answer may materialize in the months ahead.
The company has started the financing process of Phase I that requires about $12 billion in investment. Furthermore, Tellurian will need at least a decade to build out their production and export facilities before generating revenue.
Tellurian exercised a long-term lease option with Port of Lake Charles in June 2021. It is a 20-year term lease agreement with extension options of up to 50 years.
Tellurian Inc. - 2Q21 Balance Sheet and Trend - The Raw Numbers
|Total Revenues $ million||6.33||14.27||8.62||8.71||25.35|
|Quarterly Earnings $ million||-128.85||-29.47||-11.65||-26.99||-30.60|
|EBITDA $ million||-112.66||-10.02||96.55||-18.44||-27.44|
|EPS (diluted) $ per share||-0.53||-0.10||-0.04||-0.08||-0.08|
|Operating Cash Flow $ million||-27.10||-9.14||-13.23||-10.48||-20.48|
|CapEx in $||0.12||0.00||0.92||1.40||5.35|
|Free Cash Flow||-27.22||-9.15||-14.15||-11.88||-25.83|
|Total Cash in $ million||88.31||77.95||78.30||58.73||111.86|
|Total Borrowing in $ million||140.04||118.43||111.09||16.85||0|
|Shares Outstanding (diluted)||245.36||291.41||311.99||356.68||386.05|
|Revenue Natural Gas||6.33||7.27||8.62||8.71||5.58|
Source: Company 10-Q
Analysis: Revenues, Free Cash Flow, Net Debt
1 - Quarterly revenues were $25.35 million for 2Q21
Revenues were $25.35 million in the second quarter of 2021, up from $6.33 million the same quarter a year ago.
Net loss was $30.60 million or 0.08 per diluted share compared to a loss of $128.85 million or $0.18 per diluted share in 2Q20.
2 - Free cash flow was a loss of $25.83 million in 2Q21
Note: Free cash flow is the Cash from operation minus CapEx.
Trailing yearly free cash flow is a loss of $61.01 million with a loss of $25.83 million in 2Q21.
3 - The company had no more borrowing at the end of June.
Tellurian had total Cash of $111.86 million and no more borrowing at the end of June.
The company uses an At-the-Market Program with about $345.8 million remaining at the end of June. It is a vast potential dilution that any shareholder invested in the company should pay attention to. In the recent 10Q, the company said:
For the six months ended June 30, 2021, we issued 63.8 million shares of our common stock under our at-the-market program for net proceeds of approximately $182.4 million.
As of June 30, 2021, we had remaining availability under the at-the-market program to raise aggregate gross sales proceeds of up to approximately $345.8 million.
The debt is gone, but the shares outstanding are now 470 million compared to 245.36 million in 2Q20.
Technical analysis and commentary
TELL forms an ascending triangle pattern with resistance at $4.20 and support at $3.35. The trading strategy is to keep a core long-term position and trade short-term LIFO using the stock volatility.
The project will take many years, and the company is using the stock to finance its needs. As you can see, the shares outstanding are shooting to the sky, and it is only a beginning. Thus, be very careful and invest in TELL what you can afford to lose.
Warning: The TA chart must be updated frequently to be relevant.
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This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of TELL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
I own a small core long-term position but I trade short-term frequently around it.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.