Please ensure Javascript is enabled for purposes of website accessibility

Why Tellurian Stock Rocketed 22% Higher at the Open Today

By Reuben Gregg Brewer - Jun 3, 2021 at 10:50AM

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

Shares of the energy and infrastructure company rallied on a company announcement. Here's a quick look at the good news.

What happened

Shares of Tellurian (TELL 5.50%), which operates in the U.S. energy sector, exploded higher in the first half-hour of trading on Thursday, gaining just over 22% at one point in early trading. There's no question about what got investors so enthusiastic here, as the company announced a major contract today.

So what

One of the biggest themes with Tellurian is that it is building energy infrastructure, including a natural gas pipeline and a liquified natural gas export facility. Both will be operated under the name Driftwood. These are big and expensive projects that will take a fairly long time to complete, and the company is still in the early stages of the process.

While management is working on that task, however, it has also been looking to ink deals with potential customers so it can lock in future revenue. That was the big news today, as Tellurian agreed to a 10-year deal to supply energy trader Vitol with LNG from the proposed Driftwood LNG export facility. The contract is projected to generate as much as $12 billion in revenue over its life.   

A person in protective gear in front of pipeline infrastructure.

Image source: Getty Images.

This is actually the second deal that Tellurian has signed so far in 2021. It signed a similarly sized deal with Gunvor Singapore in late May. The really important takeaway here is that Tellurian's LNG facility has customers ready to start taking deliveries once it is done. This is a pretty big deal, given that these contracts both validate the project and ensure that the company can actually live up to the financial commitments related to it.

That, in turn, should make finding funding for construction a lot easier. Investors appear justified in their enthusiasm today.   

Now what

Tellurian's stock is up over 300% so far in 2021 and has more than doubled over the past month or so. The recent gains aren't shocking given the contract wins noted above. That said, there's still a lot more work to be done before the Driftwood LNG facility is up and running.

More-conservative investors will probably want to wait and see before jumping aboard here, given that the development process is still in its early stages. More-aggressive types, however, could find that Tellurian stock, while likely to be volatile, is starting to look increasingly attractive.   

Reuben Gregg Brewer 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.

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.
TELL
$4.03 (5.50%) $0.21

*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 analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

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.