Tellurian (Buy, TP: USD13.70) - Play on gas prices and founder
Tellurian stock hinges on global LNG prices, as well as execution risk. Mr. Souki (former founder of Cheniere Energy, USD16bn market cap today) is seeking to raise equity from buyers of natural gas in H1 2019, to obtain an FID to build a fully integrated US natural gas company with 27.6m tons of LNG production (first gas in 2023e). Tellurian shareholders would become owners of natural gas volumes linked to the equity raised by partners. We initiate coverage with a BUY and USD13.7 target price.Tellurian is developing a portfolio of natural gas production, liquefied natural gas (LNG) marketing, and infrastructure assets that includes an LNG terminal facility (the Driftwood terminal), and three related pipelines (the Pipeline Network). The proposed Pipeline Network will consist of three pipelines, the Driftwood pipeline, the Haynesville Global Access Pipeline and the Permian Global Access Pipeline. The Driftwood pipeline interconnect with existing interstate pipelines throughout southwest Louisiana to secure adequate natural gas feedstock for the Driftwood terminal. The Driftwood pipeline will be comprised of pipeline segments and compressor stations.
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