Shares of Tellurian (TELL 7.71%) were down another 9.2% in today's trading as of 12:34 p.m. ET. The stock is now trading for around $0.80, and its market cap is down to $467 million.
That's a tiny valuation when you fancy yourself the future owner and operator of a giant future LNG export facility on the U.S. Gulf Coast. Unfortunately, that giant LNG export facility is still under construction, and won't be operational until the latter part of the decade.
Still in need of financing, Tellurian's stock has recently taken another leg down for two reasons: the rapid rise of long-term bond yields, and last week's request to regulators to delay the opening of its Driftwood LNG plant by another few years.
Tellurian needs more time. Will regulators grant it?
Late last week, Tellurian made a formal request to the Federal Energy Regulatory Commission (FERC) to delay the opening of its Driftwood LNG plant by another two years, from 2027 to 2029.
Tellurian had received the permit from FERC to build the plant back in 2019, but didn't begin construction until 2022 -- before it had all its financing lined up for the massive project, and just as interest rates began to rise sharply.
While the massive $25 billion project has begun its initial phase of construction, Tellurian has had trouble securing all the financing it needs to finish the first part of the project, which will cost $14.5 billion.
Last year, Tellurian canceled one of its contracts with gas trader Vitol, after it canceled a debt raise it deemed too expensive. But interest rates continued to rise, and Tellurian then pivoted to asking for more equity investors. However, as the company's share price has collapsed because the cost of equity also went up, that would make any equity raise highly dilutive. Then last month, the company pivoted again, announcing it would try to sell part of its eventual LNG production in exchange for non-equity financing.
While management hoped to find such partners by year-end, last week's news that the company was asking for a three-year extension for Driftwood could make financing even harder. Management cited the fact that it will now not receive key equipment until late 2027, which would make the start-up in 2027, the original deadline, impossible.
This was a bit of a strange turn of events. As early as early September, Tellurian announced an agreement with supplier Baker-Hughes to supply it with turbines, compressors, and control units that would allow it to begin production in 2027.
Apparently something has changed, and now Tellurian is asking FERC for an extension; however, it is not assured of receiving the extension. FERC denied a similar extension request from Energy Transfer this past May.
A chicken-and-egg problem
Tellurian's CEO and chairman is Charif Souki, the founder of Cheniere Energy, which built the Sabine Pass and Corpus Christi LNG terminals that are now up and functioning. So, it's not as if Tellurian doesn't know how to build these plants or that it doesn't have a track record.
However, the capital markets are wreaking havoc with Driftwood's financing, and geopolitical events and competition from other under-construction projects may be making potential offtake customers wary about committing to the project.
Tellurian is a boom-or-bust bet right now that the company will obtain financing and regulatory approval, and that the LNG market will remain as strong as predicted by the end of this decade. That's a lot to ask in a fearful market, which is why the stock continues to languish.
