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Why Tellurian Stock Slumped 15.5% in April

By Matthew DiLallo – Updated May 6, 2019 at 10:39AM

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The LNG project developer gave back some of its gains last month.

What happened

Shares of Tellurian (TELL -15.52%) had been red-hot in 2019. The LNG project developer's stock rallied more than 60% through the end of March, fueled by a bounce back in the oil market and growing optimism about the company's Driftwood LNG project. Shares, however, gave back some of those gains in April, slumping 15.5% for the month, according to data provided by S&P Global Market Intelligence. That sell-off came even though Driftwood took a few steps closer to becoming a reality.

So what

Tellurian's Driftwood LNG project received a big stamp of approval in April after French energy giant Total (TTE -6.32%) signed a series of agreements to support the development. Total agreed to invest $500 million directly into Driftwood as well as buy 2.5 million tons of LNG per year from the facility. Total also agreed to purchase 20 million shares of Tellurian stock for $200 million. That will boost Total's stake in the company, which it initially acquired in 2017 when it bought 46 million shares for $207 million.

An LNG facility at twilight.

Image source: Getty Images.

Driftwood also received good news on the regulatory front last month as the Federal Energy Regulatory Commission (FERC) approved its construction. That put Tellurian another step closer toward green-lighting the $30 billion project to build an LNG export facility as well as several associated natural gas pipelines. The company continues to anticipate approving the project in the first half of this year, setting it up to produce LNG in 2023.

Finally, Tellurian took steps to secure shippers for some of its proposed natural gas pipelines last month. The company launched processes to lock in shipments on its planned Haynesville Global Access Pipeline and Delhi Connector pipeline. Those systems would cost a combined $2.4 billion and start service in 2023 to line up with Driftwood's timetable.

Now what

Tellurian is getting close to giving Driftwood the green light. That could set investors up for a significant future payday given the cash flow the facility could eventually generate. However, investors need a very long-term mind-set and higher risk tolerance to consider Tellurian's stock since it will likely remain highly volatile as the market continues to weigh the promise of Driftwood against the risks that not everything will go according to plan.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Tellurian Inc. Stock Quote
Tellurian Inc.
$2.34 (-15.52%) $0.43
TotalEnergies Stock Quote
$44.94 (-6.32%) $-3.03

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