What happened

Shares of liquefied natural gas (LNG) exporter-in-the-making Tellurian Inc. (NASDAQ:TELL) fell 16% on Feb. 27, adding further injury to investors who have now seen the company lose more than one-third of its market value in two days. 

So what

While the rest of the oil and gas market has been pummeled by coronavirus-driven fears that global oil demand is going to fall, Tellurian has seen its stock take a beating over worries that it could be on the verge of losing some of the funding it will need to construct its $28 billion Driftwood LNG production-and-export facility. 

Vessel taking on LNG.

Image source: Getty Images.

Yesterday, word came out that Petronet LNG, the largest buyer of liquified natural gas in India, was shopping around for a better deal than it had tentatively reached with Tellurian. Today, Tellurian and Petronet more or less confirmed investor worries, announcing an extension to the memorandum of understanding the two had reached last September.

The deal, in which "Petronet and its affiliates intend to negotiate the purchase of up to five million tonnes per annum (5 mtpa) of liquefied natural gas (LNG) from the Driftwood project, concurrent with an equity investment in Driftwood Holdings," was set to expire in March, but the extension adds two months to that period. This comes after Tellurian executives were in India this week, looking to move the deal forward, not see it get kicked further down the road. 

Now what

This delay in reaching an agreement comes as other LNG deals in India are being signed. Earlier this week, U.S. President Donald Trump and his Indian counterpart, Prime Minister Narendra Modi, touted a deal between U.S.-based Chart Industries (NASDAQ:GTLS)ExxonMobil (NYSE:XOM), and Indian Oil Corporation to expand access to natural gas throughout the country. There's little doubt the market for Tellurian will continue to be spooked when it sees the company potentially losing traction on gaining capital to build Driftwood at the same time other companies are moving forward with deals in India. 

But despite the inherent risks that this extension seems to create, there's also reason to remain optimistic. Demand for LNG in India is growing 27% per year, and Modi has plans to invest some $60 billion to increase the country's natural gas infrastructure.

It's a little bit less certain today where Tellurian will get all of the capital it needs to build Driftwood, but there's still a relatively high likelihood that the two companies can get together on terms that work for both.