Tellurian stock price analysis: too early to declare victory

By:
on May 29, 2024
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  • Tellurian’s share price jumped after the company sold its upstream business.
  • It also secured an offtake deal for its Driftwood project from Aetheon.
  • It is too early to declare victory since the company faces substantial challenges.

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Tellurian (NASDAQ: TELL) stock price has rebounded sharply from its lowest point this year as investors assess the company’s turnaround. It has recovered by over 70% from its lowest point this year, giving it a market cap of over $467 million.

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Tellurian’s turnaround continues

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Tellurian has been in the spotlight in the past few months as investors remained concerned about financing for its Driftwood project after several purchasers pulled out. 

While these concerns still remain, the company has made some progress during its turnaround strategy. In a statement, the company said that it would sell its integrated upstream assets to Aetheon in a $260 million deal. 

Aetheon will receive about 31,000 acres in the Haynesville and Bossier shale basins that has a capacity of up to 100 million cubic feet per day. At the same time, the Heads of Agreement between Aetheon and Tellurian will be a 20-year offtake program indexed to the Henry Hub. 

Tellurian hopes to use these proceeds to improve its balance sheet. It will do that by retiring its senior secured notes. It ended the last quarter with over $25 million in short-term debt and over $325 million in long-term debt against $52 million in cash and short-term investments.

Tellurian’s business has been under intense pressure for a long time, as I wrote here and here. As a result, the company was forced to release its founder, Charif Souki, who also started Cheniere Energy. Its stock has also tumbled from about $18 in 2017 to $0.56 today.

The company’s biggest challenge is its Driftwood LNG project, which is expected to cost over $10 billion to construct. Raising these funds will not be easy now that some of its offtake deals with the likes of Shell, Total, and Vitol have been scrapped.

The other challenge is that the prices of natural gas have pulled back in the past few years. It has crashed by over 80% from its highest point in 2022.

Tellurian’s Driftwood project could benefit from Biden’s administration to pause new permits for LNG exports. It will not be affected since it already has all the permits and has started construction, creating an opportunity.

It is unclear whether the permit pause will survive in court since 16 states have already sued the administration. 

The other potential catalyst for the Tellurian stock is that it is exploring a sale. It has already appointed Lazard, one of the top investment bankers in the US. In a statement in March, the chairman clarified that a complete sale was just one of the options available.

Tellurian stock price forecast

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tellurian stock

TELL chart by TradingView

Tellurian’s stock has been in a strong bearish trend for a long time as the company’s woes mounted. A company that was once valued at billions of dollars has now become a penny stock. Its stock is consolidating at the 50-day and 25-day Exponential Moving Averages (EMA).

At the same time, the stock has formed a double-bottom pattern at $0.3825. In most cases, this is one of the most popular bullish signs. However, it has remained below the descending trendline that connects the highest swings since July 2023.

Therefore, the stock will likely remain in this range for a while as investors focus on the progress on its Driftwood project. The key support and resistance levels to watch will be at $0.3825 and $1.

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