Shares of start-up liquefied natural gas exporter Tellurian (NASDAQ:TELL) are down 34.9% as of 11:30 a.m. EST today. On top of the broader market sell-off, the company's stock is dropping after a key partner asked for an extension on a memorandum of understanding (MoU).
Tellurian plans to build a liquefied natural gas (LNG) export facility on the U.S. Gulf of Mexico. Since it's a start-up company without an existing business to help fund the development, it's looking to do a creative deal with potential customers in which they buy an equity stake in the facility.
One of those big customers is Petronet, an Indian natural gas company. Last year, Tellurian and Petronet signed an MoU that Petronet would acquire a stake in the business equal to producing 5 million tons of LNG per year. That MoU was set to end in March, and Tellurian was hoping to lock down a firm commitment by then.
But on Thursday, Petronet asked for an extension of the memorandum so it could explore other options. While Tellurian's management is putting the best face on it by saying it is confident it can get a deal done, there is now a legitimate chance that it could lose what was considered an anchor client.
Tellurian's original plan was to have all its funding secured last year and make a final investment decision. That hasn't been the case, though, and this is another major setback. What's worse is that the company is spending on engineering and design, and it's bleeding the nascent company's funds.
Time is not Tellurian's friend right now, and if the company were to lose Petronet as a client, then it could be in some serious trouble.