Shares of Tellurian (NASDAQ: TELL) rose nearly 44% last month, according to data provided by S&P Global Market Intelligence. Part of the reason for the surge was that shares were simply correcting for a largely overdone dive at the end of 2018. The more important factor driving the stock higher was the anticipation for a key regulatory milestone to be met.
Tellurian had long told investors to expect the Federal Energy Regulatory Commission (FERC) to finalize its Environmental Impact Statement (EIS) in January 2019 for its massive liquefied natural gas (LNG) export terminal called Driftwood LNG. Investors were so excited that when the formal announcement was made on Jan. 18, shares had already gained 20% since the beginning of the month.
Image source: Getty Images.
The issuance of the final EIS means Tellurian is on track to begin construction of Driftwood LNG in the first half of 2019. While the export terminal isn't expected to begin operations until 2023, and there are more regulatory hoops to jump through between now and then, investors are eyeing the significant long-term potential.
Driftwood LNG will have a full nameplate capacity of 4 billion cubic feet per day (Bcf/d). By comparison, Cheniere Energy expects its Sabine Pass export terminal to eventually reach 4.2 Bcf/d, while its Corpus Christi facility should reach 2.14 Bcf/d. The promise of those two facilities have earned Cheniere Energy a market cap of $17 billion. Tellurian is currently sitting at a market cap of $2.4 billion.
Considering Tellurian expects its equity stake in Driftwood LNG will generate $2 billion in cash flow per year once the facility ramps up, investors might be right to be taking a patient, long-term approach. That figure could change, especially if the company has to sell more equity in the project than originally expected to avoid taking on exorbitant debt, but the potential for future stock gains appears likely to remain intact regardless at a market cap of just $2.4 billion.
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