On Wednesday, Stifel adjusted its stance on shares of Tellurian (NYSE:TELL), reducing the price target to $0.25 from the previous $0.30, while keeping a Sell rating on the stock. The revision follows Tellurian's announcement of a deal to offload its Haynesville gas-producing assets.
The company has reached an agreement to sell its Haynesville acreage to Aethon Energy for a sum of $260 million. This sale price comes in slightly under the $280 million that was initially expected by analysts. Despite the shortfall, the transaction is seen as a feasible means for Tellurian to manage its debt obligations, with the aid of ongoing offerings under its ATM equity sales program.
Additionally, Aethon Energy has consented to a Heads of Agreement (HoA) to purchase 2 million tons per annum (mpta) of liquefied natural gas (LNG) from Tellurian's Driftwood project. However, the analyst noted that historically, the rate of conversion from HoAs to Sales and Purchase Agreements (SPAs) is quite low, which casts doubt on the commercial significance of this agreement.
The deal is perceived as a step forward for Tellurian, particularly in terms of reducing debt leverage and advancing the Driftwood project, albeit in a limited capacity. Nevertheless, the analyst's evaluation of the company's sum-of-the-parts equity value suggests it remains significantly below the current trading price of the stock, prompting the reaffirmation of the sell rating.
InvestingPro Insights
As Tellurian Inc. (NYSE:TELL) navigates its debt management and project advancement strategies, real-time data from InvestingPro offers a snapshot of the company's financial health. With a market capitalization of $468.96 million, Tellurian's challenges are reflected in its negative P/E ratio of -1.64, indicating that investors are currently valuing the company's earnings negatively. The revenue decline over the last twelve months is stark, with a -52.47% drop, underscoring the concerns raised by Stifel about the company's commercial prospects.
InvestingPro Tips highlight the company's significant debt burden and the risk associated with its ability to make interest payments, which aligns with the deal to sell Haynesville assets as a means to address these financial obligations. Furthermore, the stock's volatility is evident from the 14.45% return over the last month, contrasted by a -29.36% return over the last three months, adding to the complexity of the investment decision.
For readers interested in a deeper analysis, InvestingPro offers additional tips on Tellurian Inc., which can be accessed through their platform. Subscribers can use coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a comprehensive toolkit for investors to navigate the volatile energy sector.
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