Please ensure Javascript is enabled for purposes of website accessibility

Shares of Tellurian Get Walloped Today

By Tyler Crowe - Feb 28, 2020 at 12:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With one of its customers looking at alternative sources, the company is at risk of a major setback in its plans for a liquefied natural gas export facility.

What happened

Shares of start-up liquefied natural gas exporter Tellurian (TELL -5.33%) 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).

So what

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.

an LNG export facility,

An LNG export terminal. Image source: Getty Images.

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.

Now what

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. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tellurian Inc. Stock Quote
Tellurian Inc.
$4.62 (-5.33%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.