Shares of Tellurian (TELL 7.71%) tumbled 33.7% in January, according to data provided by S&P Global Market Intelligence. That continued the liquefied natural gas (LNG) company's steep slide. It has now lost 85% of its value over the past three years after tumbling 55% in 2023.
The main factor weighing on the LNG stock is its precarious financial position. It has hired an advisor to help it find ways to fund its massive Driftwood LNG project, which is going slower than investors would have hoped.
Trying to find ways to stay afloat
The sell-off in Tellurian has accelerated in recent months due to concerns about its ability to continue operating. Its auditors raised concerns about the company's finances late last year. It has since ousted its co-founder and former chairman and hired a financial advisor to "assist with shaping commercial structures as well as balance sheet management." It also swapped $37.9 million in debt for equity to help give it some more breathing room.
Concerns about the company's financial position persisted for most of last month. However, there was a brief bounce in late January when a few news outlets reported that the financial advisor it hired, Lazard, would explore a range of options for the company, including a potential sale. The report initially caused shares to spike.
However, the company quickly downplayed those reports. Its new chairman, Martin Houston, wrote to shareholders in a letter that Lazard would focus on "commercial matters." Its primary goal is to find customers and equity partners for its Driftwood project, which it believes will be a powerful platform for creating shareholder value.
While Tellurian seems to have ruled out selling its entire business, it has since asked Lazard to explore the potential of selling its upstream natural gas production business in the Haynesville region in east Texas and Louisiana. The company believes that selling those assets could provide cash to reduce its debt and help fund its Driftwood project. A sale of that business would be a much more attractive option than selling more shares, given their plunge over the past year.
Is it time to buy this beaten-down LNG stock?
Tellurian has cratered over the past few years due to concerns about how it would finance its massive Driftwood project. The company is running dangerously low on cash to operate and advance that major project. That led it to hire Lazard to help commercialize the project and find equity partners to help finance its construction. Lazard is also exploring the sale of Tellurian's natural gas assets.
Given the steep slump in its stock price, Tellurian's shares could spike on any positive news on those fronts. However, given its troubling financial picture, the company is a very risky bet. Because of that, investors should avoid this stock until there's a lot more clarity on how it will fund Driftwood.
