Please ensure Javascript is enabled for purposes of website accessibility

Why Tellurian Stock Nearly Doubled in May

By Lou Whiteman - Jun 4, 2021 at 4:25PM

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

The company's natural gas export plan took a big step closer to becoming reality.

What happened

As energy stocks go, Tellurian (TELL 5.50%) has always been considered a high-risk, high-potential reward sort of company, with a great deal of uncertainty about whether the risk would pay off. In May, the company announced solid progress in its natural gas export plan, causing the stock to gain 96.8%, according to data provided by S&P Global Market Intelligence.

So what

Tellurian's business is built around a plan to export liquefied natural gas (LNG). In theory, it is a huge potential opportunity: North America has ample supplies of low-cost natural gas, and when liquified, that gas can be shipped in large quantities to markets where it is in demand. Cheniere Energy has had success exporting LNG, and Tellurian, which was established by one of Cheniere's founders, is attempting to build its Driftwood LNG export facility on the west bank of the Calcasieu River, south of Lake Charles, Louisiana. 

Pressured LNG tanks by the water.

Image source: Getty Images.

The problem is building a new export facility is expensive, even without concerns such as a pandemic, and Tellurian needs commercial support to make Driftwood a reality. The company got a much-needed boost in May when it announced an agreement to supply Gunvor Singapore with 3 million tonnes per annum (mtpa) of LNG over a 10-year period. That agreement covers more than 10% of the facility's proposed 27.6 mtpa capacity.

The agreement is the second major milestone for Tellurian, following a 2019 deal with Total to sell 1 mtpa of Driftwood LNG to the French oil giant. Total also agreed to invest $500 million in the project.

Now what

The deal with Gunvor Singapore is a huge step in the right direction, but investors should be mindful that it is only one small step toward the goal. The company has said it is working with four to five LNG buyers on contracts representing 12 to 15 mtpa of LNG. Those contracts are vital to making Driftwood a reality.

Tellurian is off the mat, but it still has a way to go. Even after nearly doubling in May, the stock is still down 32% since the beginning of 2020. Investors had all but lost hope last year during the pandemic, but with each new agreement that hope is slowly being restored.

Lou Whiteman owns shares of Tellurian Inc. 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.