Tellurian Inc.

Tellurian Inc. (NASDAQ: TELL), formerly Magellan Petroleum Corporation, is an oil and gas exploration and production company. The Company focuses on developing liquefied natural gas (LNG) projects along the United States Gulf Coast through its subsidiary, Tellurian Investments Inc.

Key Highlights

• Reduced debts:During the Q3 2020, the company raised USD 32.8 million in net proceeds through common stock issuances and reduced debt by USD 33.9 million. Furthermore, the group extended the Term Loan maturity to March 2022.

• The sequential improvement in production: In Q3 2020, the company reported a natural gas production of approximately 4.1 billion cubic feet equivalent (Bcfe) and remained flat with an exit rate of 47 million cubic feet equivalent per day (mmcfed). Natural gas sales rose to USD 7.3 million, increase over USD 6.3 million in sales for the last quarter.

• Liquidity:Currently, the company is funding its operations, development activities, and general working capital needs through cash on hand and proceeds from various potential financing transactions. The current capital resources consist of approximately USD 77.9 million of cash and cash equivalents as of September 30, 2020, on a consolidated basis.

Financial overview of Q3 2020 (In Thousands of USD)

Source: Company

• In Q3 2020, the company reported revenue of USD 14.27 million, increase by approximately USD 4.9 million, compared to USD 9.3 million in the previous corresponding period. The revenue increased primarily due to the sale of an LNG cargo in the current period compared to no sales in the prior period.
• Company minimized its total operating costs and expenses in Q3 2020, to USD 29.25 million, compared to 47.7 million in Q3 2019. The group controlled its Development expenses, depreciation cost and G&A expenses to a great extent but the cost of sales increased due to costs associated with the sale of an LNG cargo.
• The company reported a lower net loss in Q3 2020 to USD 29.4 million, against a loss of USD 39.6 million in Q3 2019. A rise in revenue and controlled operating expenses helped the group minimize the quarter's net losses, partially offset by higher interest cost.

Risks associated with investment: 

Pandemics or disease outbreaks, such as the currently ongoing COVID-19 outbreak, may adversely affect its efforts to reach a final investment decision for the Driftwood Project, the company's key project.

Valuation Methodology (Illustrative): EV to Sales

Note: All forecasted figures and peers have been taken from Thomson Reuters

Stock Recommendation: The stock of TELL appreciated ~191% and ~124% in the last three months and six months, respectively and closed above the long-term-support levels of 100-days, 150-days and 200-days simple moving average, indicating a bullish price trend. The group is seeking investments in new drilling and infrastructure space in order to secure the low-cost of gas production to combat the lower commodity price scenario. We have valued the stock using EV to Sales-based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Golar LNG Ltd, Cheniere Energy Inc etc. Considering the aforesaid facts, current price movements, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of USD 2.49 on January 20, 2021.

TELL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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