HOUSTON - In a strategic move, Tellurian (NYSE:TELL) Inc. (NYSE American: TELL), a Houston-based energy company, has announced the engagement of its financial advisor Lazard (NYSE:LAZ) to explore the sale of its upstream business. This decision comes as the company shifts its focus toward the development of Driftwood LNG, its liquefied natural gas project.
Tellurian's Chief Executive Officer, Octávio Simões, stated that the review of their strategy in light of U.S. natural gas market dynamics and global LNG demand led to the conclusion that owning upstream assets is not essential at this stage of the company's development. According to Simões, the sale of these assets could attract oil and gas producers capable of more rapid development than Tellurian.
The assets in question include 31,149 net acres with interests in 159 producing wells and over 400 drilling locations. Tellurian reported a production of 19.5 billion cubic feet of natural gas for the quarter ended on September 30, 2023. The company has emphasized its commitment to environmental stewardship and operational safety, implementing measures such as an active emissions monitoring program and electrifying new production well sites.
The potential sale is positioned as a preferable alternative to issuing equity for funding Tellurian's development activities and working capital needs in 2024. Simões highlighted the goal of unlocking the full value of the upstream assets to substantially reduce debt, cut general and administrative expenses, and provide additional cash flow for the Driftwood LNG project.
Tellurian Inc. focuses on delivering natural gas worldwide at low costs and is developing infrastructure that includes an approximately 27.6 million tons per annum (mtpa) LNG export facility along with an associated pipeline.
The press release cautions that forward-looking statements involve risks that could cause actual results to differ materially from expectations. There is no assurance that the sale of the upstream assets will be successful or that the proceeds will meet the company's stated objectives. This announcement is based on a press release statement from Tellurian Inc.
InvestingPro Insights
In light of Tellurian Inc.'s recent strategic decision to explore the sale of its upstream business, real-time data from InvestingPro provides a snapshot of the company's financial health. With a market capitalization of $268.78 million, Tellurian operates with a significant debt burden, as indicated by a negative P/E ratio of -1.66 and an adjusted P/E ratio for the last twelve months as of Q3 2023 at -2.87, reflecting the challenges the company faces in generating profit.
The company's revenue has seen a decline of -26.45% over the last twelve months as of Q3 2023, with a quarterly drop of -46.67% in Q1 2023. This suggests that Tellurian's focus on selling its upstream assets could indeed be a timely strategy to streamline operations and concentrate on its Driftwood LNG project. Additionally, the stock price has taken a significant hit, with a -35.38% return over the last week, which could indicate an opportunity for investors considering the company's potential pivot.
InvestingPro Tips highlight that Tellurian's stock is currently trading in oversold territory, and with a price sitting at a mere 17.31% of its 52-week high, it could be at an attractive entry point for some investors. However, it's important to note that analysts do not anticipate the company will be profitable this year, and short-term obligations exceed liquid assets, which raises concerns about financial stability. For those interested in a deeper dive into Tellurian's financial situation, InvestingPro offers additional tips to help investors make informed decisions. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription, and gain access to over 15 more InvestingPro Tips for a comprehensive understanding of Tellurian's financial trajectory.
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