Why Tellurian Shares Were Soaring Today
During a volatile trading session for most stocks, shares of natural gas upstart Tellurian (NYSEMKT: TELL) rose Wednesday, up 8.2% as of 2 p.m. ET. Natural gas prices were up strongly after having moderated over the past few weeks. However, Tellurian also announced an acquisition to take advantage of persistently high natural gas prices. This deal should help the company's liquidity, as Tellurian's main asset is a liquid natural gas (LNG) project that is still under construction and consuming cash.
On Wednesday, Tellurian announced it would pay privately held EnSight Energy Partners $125 million for natural gas assets in the Haynesville Shale, a natural gas formation that spans east Texas, Louisiana, and Arkansas. Tellurian may also be on the hook for another $7.5 million payment to EnSight in 2023, depending on the price of natural gas. All in all, the assets are projected to expand Tellurian's annual natural gas production by 30% and its asset-level EBITDA (earnings before interest, taxes, depreciation, and amortization) by 25%.
Management projects that the new assets will produce asset-level EBITDA of between $90 million and $120 million in 2023, based on a $30 million capital investment program, and projects the 10-year present value of proved reserves in this field to be worth about $180 million. As long as those projections hold true, this looks like a solidly high-return acquisition.
Source Fool.com
