Tellurian (TELL) is a large natural gas business that provides natural gas at a low cost to global customers. The company was founded in 2016 and is headquartered in Houston, Texas.
I am bullish on Tellurian because of its strong growth outlook, support from Wall Street analysts, and high upside potential.
Strengths
Tellurian seeks to create more value for customers and shareholders alike by creating a low-cost natural gas company. The business has developed a portfolio of natural gas production, LNG distribution and trading, and infrastructure that includes an approximate 27.6 mtpa liquid natural gas export facility and its associated pipeline.
Recent Results
Tellurian’s third quarter of 2021, which ended September 30, saw revenue of approximately $15.6 million. This compares to the $7.3 million in revenue generated in the third quarter of 2020.
The company showcased a strong balance sheet and ended the quarter with approximately $210.8 million in cash and cash equivalents and zero debt.
Tellurian posted a net loss of approximately $18.7 million, translating to a basic and diluted loss of $0.04 per share.
The company’s subsidiary, Driftwood, signed a three million tonnes per annum contract with Shell (RDS.A) for sales and purchase agreements. It also raised $116 million in a public stock offering in the third quarter of 2021.
Tellurian’s president and CEO, Octavio Simoes, said the company started its production from two recently completed wells of natural gas, which contributed to its financial strength and protected it from the effects of fluctuating global fuel prices.
The company plans to produce roughly 70 million cubic feet equivalent per day (mmcfed) by the end of 2021. It also plans to drill 12 to 14 natural gas wells that are expected to produce 220 mmcfed by the end of Fiscal Year 2022. The company is now focusing its attention on Driftwood and plans to instruct the construction company, Bechtel, to start construction by the start of 2022.
Valuation Metrics
TELL stock looks attractive as it trades at a forward enterprise-value-to-EBITDA ratio of 3.7x. Looking forward, the company expects revenue to grow by 54.8% in 2022 and EBITDA to grow by 219.7% in 2022.
Wall Street’s Take
Turning to Wall Street, Tellurian has a Moderate Buy consensus rating, based on one Buy assigned in the past three months. The Tellurian price target of $7 implies 131% upside potential.
Summary and Conclusion
TELL is a rapidly growing company that should benefit from strong demand for natural gas for many years to come. While the broader market is bearish on natural gas and other fossil fuels, Tellurian should still see strong growth thanks to natural gas’ status as a cheap, clean fuel alternative.
Additionally, Wall Street analysts are generally bullish on the stock, and the consensus price target indicates that it could double in price over the next year.
Furthermore, its robust growth outlook for the foreseeable future also suggests that total returns could be very strong going forward. As a result, I am bullish on TELL.
Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.
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