Earlier this month, oil giant ExxonMobil (NYSE:XOM) announced that it was going to take a massive $20 billion writedown. A substantial portion of that writedown is tied to a big investment the company made in natural gas a number of years ago that worked out terribly. At the same time, the company's management has decided to prioritize its capital investments going forward, focusing on oil assets it thinks will deliver the best returns. 

On the Dec. 2 edition of "The Wrap" on Motley Fool Live, host Jason Hall took a look at this big move and its implications for American LNG export stocks, specifically Tellurian (NYSEMKT:TELL) and NextDecade (NASDAQ:NEXT). The two are still years away from generating any revenue. Both are counting on big investors, including oil majors like ExxonMobil, to help fund construction of their export facilities. Will they be able to raise the money? Check out the video below for more. 

 

Jason Hall: The company says "we have to focus on our biggest return projects." It's got this big offshore project that it's working on, I think it's Guyana. That's a big deal. It's focusing on developing it's Permian Basin assets in Texas, and that's oil. There's a lot of gas that comes up, but the oil is where the money is there.

But what I wanted to talk about this is in regards to natural gas exports. Specifically, thinking about some of the pure plays like Tellurian TELL, and NextDecade NEXT, these are start-ups. Their focus has been building out these liquefaction and export facilities on the Gulf Coast.

The bottom line is the coronavirus pandemic, it crashed the oil market, and it just completely cut off access to capital. More recently, Tellurian CEO, Meg Gentle, she followed Charif Souki, one of the co-founders of Tellurian from Cheniere Energy (NYSEMKT:LNG), it sounds like she was pushed out. She's replaced by a gentleman named Octavio Simoes, who came from Sempra LNG & Midstream. He's been an advisor to Tellurian for some time.

Tellurian also just told FERC, which is regulatory body that wanted to withdraw the application for its Permian Global Access Pipeline, which was supposed to be a direct connection to super-cheap natural gas from the Permian. Anyways, as things stand today, the two companies Tellurian and NextDecade, they have enough money to ride out about a year or so. NextDecade in particular, has more cash and some more liquidity and it doesn't have any debt. Tellurian has $120 million in debt but it just recently renegotiated to kick it off (maturity) a little bit further. Neither one of these companies has any meaningful revenue-generating operations.

From a regulatory perspective, they are in good shape. They pretty much checked off all the boxes to move forward with the facilities, except the most important box, and that's funding. So I think it's one of those things where people might be hearing the economy is bouncing back, natural gas prices are up. Hey, let's take a look at these start-ups in LNG.

Here's the bottom line. I think there's still going to be really big demand for the natural gas that they could be exporting in three or four or five years. It's not clear if they're going to be the ones doing it. They're going to have to get to the point where somebody is going to sign on the dotted line and provide the funding to build these facilities. If you have cash you could risk, and just accept the fact that you could completely lose. If they do manage to get to that finish line, these stocks, you could make a ton of money.

But I think for most investors, Cheniere Energy is probably still the way to invest in this sector, especially if it's capital that you really don't want to put completely at risk. Cheniere, this is the original LNG export company in America. There's a reason the stock price is down only 6% this year. Cheniere generated more than $1.5 billion in operating cash over the past year. They're already there.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.