Down around 40% from its peak, could Tellurian stock still be a long-term winner?


It has not been a pleasant walk for Earthling (NASDAQ: DIRE) shareholders. The stock is still down 70% from its 2019 high. And at the time of this writing, the stock is down 37% from its 2021 high. It is likely that many investors are starting to abandon this natural gas company, given its underperformance. .

However, in this video from Backstage Pass, recorded on September 9, Jason Hall, Motley Fool contributor, gives his take on Tellurian’s long-term prospects. He acknowledges that there are still a lot of risks, but he also thinks it could be a huge winner if his export facility in Louisiana is up and running in a timely manner.

Jason Hall: Just a quick, quick update on Tellurian, and I’m trying to find it. I had opened it. I have 30 more tabs open here so it’s hard to find them all.

The tellurian share has therefore fallen quite sharply since the end of August. The reason, that was really the last thing that came out of the company, was that the company was going to issue senior bonds, was going to go into debt, and it kind of hit its head against Nasdaq on it and withdrew the $ 50 million debt offer. But then there was some execution of a higher demand, I think it was oversubscription for another debt that was having problems. So she had additional capital thanks to that.

In short, due to concerns about its ability to raise capital and also this dilution due to oversubscription on other debts they had issued, the stock price fell from the peak that was there. at the end of August. So, for about a week and a half, the share price has fallen.

Here’s the good thing about Tellurian right now. It’s fairly well capitalized. He has a lot of cash on his balance sheet to run his operations. But at the end of the day, it all went down a bit with this company.

Tellurian, for the uninitiated, is the company that is a start-up trying to raise funds to build a liquefied natural gas export facility in Louisiana, where it can have access to low-cost natural gas. cost from the Permian Basin and some other shale games. The good thing is that he has enough long-term contracts with buyers of this natural gas to make it profitable, to build the first part of it. It’s economical now. There is therefore an economic justification. This is really important so that the lenders are ready to lend to build this facility. So that’s really great.

But now it looks like it will be next year before they make a final investment decision. So the risk means that this business, it doesn’t really have a business going on right now, only has a certain amount of capital to fund operations that it’s just going to burn that money and they have yet to give a nudge to build this facility, which means they have to have lenders lined up to pay it off. So there are a lot of questions out there. I think things are still in their favor. It just took a lot longer because of the economic environment.

I still think it’s a 10-, 20-, 30-, maybe a 40- or 50-bagger, frankly, just looking at what is – Chénière Energy is like the benchmark, what can be accomplished with building this type of business and the type of cash flow it can generate. But it just depends on how much dilution occurs between now and then, what conditions may apply to the debt it increases, and how quickly you can increase that ease. It could also be a zero, simply because it’s a startup with no real income. I think you just need to recognize this and hang in there for the long haul and not risk money that you can’t afford to lose as it is largely a binary outcome stock at this point .

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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