Intrinsic Value Tellurian Inc. (0LE3.L)

• Previous Close: £1.00
• Intrinsic Value: n/a
• Upside potential: n/a%

Stock Valuation Context

Business Model And Market Position

Tellurian Inc. operates in the global natural gas sector, focusing on LNG production, marketing, and infrastructure development. The company is constructing a significant LNG export facility with a capacity of 27.6 million tons per annum, supported by a pipeline network and natural gas assets in the Haynesville Shale region. Its vertically integrated model aims to capitalize on growing global LNG demand, particularly in Asia and Europe, where energy security concerns are driving imports. Tellurian differentiates itself through its midstream-to-export strategy, controlling production, transportation, and liquefaction to optimize margins. However, it faces intense competition from established LNG players like Cheniere Energy and emerging projects in the U.S. Gulf Coast. The company’s market position remains speculative, as its Driftwood LNG project is still under development, requiring substantial capital and regulatory approvals to reach full operational capacity.

Revenue Profitability And Efficiency

In FY 2023, Tellurian reported revenue of $166.1 million USD, primarily from natural gas sales, but posted a net loss of $166.2 million USD, reflecting high development costs and operational inefficiencies. The negative operating cash flow of $11.2 million USD and capital expenditures of $317.5 million USD underscore the company’s heavy investment phase. Margins remain pressured due to pre-revenue project spending and volatile natural gas prices.

Earnings Power And Capital Efficiency

Tellurian’s diluted EPS of -$0.29 highlights its current lack of earnings power, as the company prioritizes infrastructure build-out over profitability. Capital efficiency is constrained by the capital-intensive nature of LNG projects, with significant upfront costs before cash flows materialize. The firm’s ability to monetize its assets hinges on timely project completion and securing long-term LNG offtake agreements.

Balance Sheet And Financial Health

The balance sheet shows $75.8 million USD in cash against $487.6 million USD in total debt, indicating liquidity risks amid high leverage. With negative free cash flow and substantial capex requirements, Tellurian relies on external financing to fund its growth. The absence of dividend payouts aligns with its focus on reinvesting scarce resources into project development.

Growth Trends And Dividend Policy

Tellurian’s growth is tied to the Driftwood LNG project, which could transform its revenue profile once operational. However, delays or cost overruns pose risks. The company does not pay dividends, retaining all capital for development. Future revenue growth depends on global LNG demand and successful execution of its export strategy.

Valuation And Market Expectations

With a market cap of $194.8 million USD and a beta of 2.568, Tellurian is viewed as a high-risk, high-reward bet on LNG expansion. Investors appear skeptical, given the negative earnings and project execution risks. Valuation metrics are less relevant until the company achieves stable cash flows from its LNG facility.

Strategic Advantages And Outlook

Tellurian’s strategic advantage lies in its integrated LNG model and prime U.S. Gulf Coast location, benefiting from low-cost shale gas. However, the outlook remains uncertain, contingent on securing financing, regulatory approvals, and customer contracts. Success hinges on global energy market dynamics and the company’s ability to transition from development to operations.

Sources

Company filings, market data