September 2022 Zoom Meeting
Update posted on Yahoo 8.24.2022 at 3:35 PM EST
Tyson Halsey, CFA speaking. My August 18th Seeking Alpha article got good reception. I believe TELL will sign an equity deal and the SWN conference call transcript suggested they want to help companies get to FID. Given that SWN is the largest Haynesville operator, they would seem a logical Driftwood funder. Speculation — if I were Souki, I would think TELL would want to sign SWN and someone else so that combined they have $3.2 billion which with TELL’s own “1 billion” they would close the equity side with $4.2bn. EQT makes sense, but if they are still hung up on permitting, CHK, CTRA, BP… others could be an alternate to EQT.
The day I wrote the Seeking Alpha Tellurian Inc. article the stock had a huge 13% move. However, at noon, volume spiked on the Haynesville closing. So the market, IMHO, is moving the company on the nat gas prospects for TELL and not my article debunking the short narrative or improved prospects for funding under a rolling equity first strategy. Nat gas then broke out, and TELL stock pushed higher. However, the announcement that Freeport will not reopen until November vs October caused nat gas (HH) to pull back. That caused recent weakness from its recent high near 4.89 two days ago. So, today, I added more stock and options to my personal account. I used to work on the NYFE (New York Futures Exchange) and we looked at price patterns on the market indexes. In the last week TELL stock spiked up on good volume and then pulled back. That pattern is a bull flag with positive price volume correlation.
The market got super negative on TELL since April due to concerns about the SPAs, an energy correction, and exacerbated by Dizard’s publication and SA knocking TELL a month ago. Both written arguments were flawed. With TELL’s short (98mm shares) and the nice volume pick up, I bought the dip today.
Buying when a security is down is a way to reduce risk. I did. I hope I am right.
Terence Brogan of The Brogan Group a division of Wellington Shields in Boston wrote me yesterday and said he thought the stock could get to $16/share. If TELL has FNTP and possibly FID, I believe that upside is totally reasonable by year end or FID in early 2023.
When the company like TELL gets funded, it experiences a massive derisking. Valuation formulas of future cash flows change from a 40% to 15% discount rate or something on that order. TELL’s investor presentation shows potentially $11bn in FCF when all trains are running in 2026. That assumes a $8 margin per mmBTU. With the energy crisis it seems increasingly reasonable that TELL could have a margin of $16/mmBTU.
The volume since my article shows psychology is changing. It is comforting knowing Blackrock John Paulson, Citadel and DE Shaw are in this too.
TELL is a high risk play. Do your own research. However, if they get TELL funded, I suspect that the appreciation rates I cited at Cheniere during their construction/financing periods, is indicative of the significant potential. I think buying on each funding announcement this year would be the shrewd investor strategy which institutions will likely employ. I look to derisk my position at $16 hopefully in the next 6 months when the funding FID/FNTP are done.
In the meantime, the shorts may begin to feel uncomfortable if the stock starts moving rapidly. One can only hope a speculative longs like the Reddit MEME stock buyers jump in. They won’t get burned in TELL the way they were with AMC and BBBY more recently. They have a better chance of not getting burned because TELL could be a great growth stock for the next 5 years. I hope so. I am long.
Technical comment on Tellurian Inc. by Terence Brogan of The Brogan Group, Wellington Sheilds in Boston.
Inflation and Geopolitical Black Swan Risks and Opportunities Webinar
Webinar Key Takeaways:
- We have entered an inflationary environment that rewards an inflation-oriented investment posture.
- Inflation is out of control and interest rates are rising.
- Interest rates are artificially depressed due to Federal Reserve accommodative policies since 2009 of abnormally low Fed Funds rates and $9 trillion in asset purchases.
- This cycle should last 7 to 16 years and reward commodity-oriented strategies while punishing long-duration assets like bonds and technology stocks.
- From 1999 to 2008, an inflationary cycle, the XLE energy ETF returned a 22% compounded annual return “CAGR” while the QQQ Tech ETF returned -3.157% CAGR.
- During 2009-2022, a deflationary cycle, the QQQ returned 20% CAGR and the XLE returned 3.68%.