Everybody has one or two stocks that they are irrationally optimistic about and think will make them a millionaire. Most of the time, those investments go up in smoke, and that's when having a diversified portfolio pays off.

Every once in a while, though, one of these smaller companies catches fire and generates incredible returns for your portfolio. If you're lucky enough to find one of these stocks and hold on to it for years, you might even get a stock that achieves what we at The Motley Fool have coined a spiffy-pop.

One stock that has caught my attention and made me incredibly bullish is Tellurian (NASDAQ:TELL). The company is trying to build a next-generation liquefied natural gas (LNG) terminal in the United States. Is it a risky investment? Oh, yeah. Do a lot of things have to swing its way to realize its potential? You betcha. Do I believe that the company could be the millionaire-maker stock in my portfolio? Absolutely. Here's why: 

LNG Loading dock.

Image source: Getty Images.

Fundamentals are there

It's getting harder and harder to overstate the impact of natural gas from shale in America. Shale drilling has gone from what was once considered a high-cost, marginal source of natural gas requiring a gimmicky extraction method, to the predominant production technique to unlock unprecedented amounts of cheap gas. What's more, with the abundance of this gas and the cheap extraction methods we have developed, U.S. natural gas is priced at a significant discount to gas from other sources around the world. This means there are ample opportunities for companies to export it and generate a profit from the difference in regional prices. 

Natural gas, and LNG in particular, is in high demand globally right now because of its lower carbon footprint, compared to coal, for power generation. And it is a lower-cost fuel for home heating. According to Bloomberg New Energy Finance, LNG demand is expected to grow by 72% between now and 2030, making it the fastest growing fossil fuel by a wide margin.

Companies exporting LNG are right in the middle of a cheap, ample supply of gas looking for a market, and fast-growing global demand. It is why the country's first LNG terminal, Cheniere Energy's (NYSEMKT:LNG) Sabine Pass facility in Louisiana, has exceeded expectations thus far and is even defying conventional wisdom in the LNG market. 

Tellurian is looking to capture its own piece of this market with its proposed Driftwood LNG export terminal. The facility would be able to export 27.6 million tons of LNG annually, and Tellurian is looking to supply that terminal with its own pipelines and its own production.

Why Tellurian is unique

Tellurian isn't the only company looking to get into the LNG export game. Cheniere Energy already has a fully operational facility and is looking to expand, and big-name companies like ExxonMobil have proposed facilities for the Gulf Coast. Also, Tellurian is nothing more than a business plan right now. So there is a lot of risk for this small company going up against industry titans. Despite these challenges, here's why I think Tellurian has what it takes to succeed:

  • This isn't management's first rodeo: One of the things that is compelling about Tellurian's chances of bringing this plan to fruition is that most of its management has already done so somewhere else. It's founder and chairman, Charif Souki, was the founder and CEO of Cheniere Energy before Carl Icahn forced him out. Current Tellurian CEO Meg Gentle was one of Souki's top lieutenants at Cheniere and held a variety of roles, including EVP of marketing and CFO. Six of the company's officers and vice presidents are Cheniere alumni, and the company also plucked a lot of talent from BG Group's LNG business after Royal Dutch Shell bought them out. There aren't many people out there who have the experience starting a business from scratch that this crew has.
  • Everyone has some skin in the game: It's always encouraging when a company's founders and executives own a considerable share of the company. That is certainly the case here, as founders and employees own 43% of shares outstanding. Even more interesting, though, is that some big-name companies have taken equity stakes as well. French oil giant Total has a 19% stake in the company and will undoubtedly be looking to use Tellurian to move its shale gas production overseas. Also, the company slated to build the facility, Bechtel, and the supplier of the LNG liquefaction equipment, General Electric, have taken equity stakes. So not only does management have a stake in the company's success, so do its vendors and contractors.
  • A compelling business model: Building an LNG facility takes a lot of money, and a company without existing operations and cash flow to fund development needs to raise a lot of cash. Cheniere relied on lots of debt, private equity, and some creative financial moves. It wasn't ideal, but it got the job done. What Tellurian is looking to do instead is bring in partners for the project that will have part ownership of Driftwood LNG. For an up-front payment of $1,500 per ton of production capacity, companies can buy a stake in Driftwood that will give them the right to buy LNG at cost. Tellurian plans to sell 58% of the facility under this arrangement, which would leave Tellurian with 11.6 million tons of annual LNG production. The bright side for Tellurian: It will need only $3.5 billion in debt to complete it. Just for reference, Cheniere has taken on $26.9 billion in debt for its two facilities. 
LNG Loading dock at night

Image source: Getty Images.

If management can pull this off as its current investor presentations project, Tellurian would be sitting on a facility that will produce $2 billion in annual free cash flow. That's assuming the average Gulf Coast netback price for LNG -- the market price for LNG where its sold minus the transportation cost to ship it there -- is $6 per million BTU. Currently, it's $8.85 per million BTU, so there are even upside opportunities in those assumptions. 

What's next?

So a lot of things must fall into place for Tellurian to make this happen. It needs to get equity partners to buy a stake in Driftwood LNG at the set price; it needs to obtain all the necessary permits, including the all-important permit from the Federal Energy Regulatory Commission (FERC) to export to non-free-trade-agreement countries, and it needs to build the terminal on time and on budget. 

Tellurian has already completed two crucial steps. It has negotiated a guaranteed lump-sum contract with Bechtel (making Bechtel responsible for cost overruns). And it has conducted an open season for its two gas pipelines, both of which were oversubscribed -- which means that producers requested more space in the pipelines than what will be available. While these two things are no guarantee that this project will happen, they certainly help show its viability.

Many of the things that need to happen before Tellurian breaks ground will likely occur in the next six months. It has been actively marketing Driftwood to potential partners since February and expects to announce the winning bids either this or next quarter. Then, FERC says it will be issuing permit notices in January of 2019. So we could get several answers about Tellurian's future very soon.

TELL Chart

TELL data by YCharts.

Millionaire maker?

I can't guarantee anyone that they will be instant millionaires with this stock, but it sure does look like there is a lot of potential to realize some huge gains if things happen according to management's plan. Today, the company has a market capitalization of just under $2 billion. Gauging by estimated cash flows from this facility, the stock trades for about 1 times free cash flow once the facility is fully operational. 

It might be a leap of faith to assume that things go according to plan, and any investor in Tellurian has to realize this could all go belly up if it doesn't get enough customers or obtain all the necessary permits. But for a company to be irrationally optimistic about, Tellurian looks like a good candidate. 

Tyler Crowe owns shares of ExxonMobil, Tellurian Inc., and Total. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.