Tellurian (TELL) PT Lowered to $6 at BofA Securities as Long Term Contract Changes Normalize LNG Purchasing

BofA Securities analyst Julien Dumoulin-Smith lowered the price target on Tellurian (NASDAQ: TELL) to $6.00 (from $10.50) while maintaining a Buy rating after the company eliminated its prior integrated equity ownership model (customer ‘buy-ins’ in exchange for long term access to inexpensive LNG) in favor of a more ‘traditional’ structure backed by long-term contracts plus some small portion of uncontracted LNG. This transition follows the recent announcement of two 10-yr SPAs, one with 3 mtpa with Gunvor, and a second for 3 mtpa with Vitol.

The analyst stated "While Final Investment Decision (FID) now looks more promising than before (with targeted 1Q22 NTP and thus 2026 production start), we note the JKM/TTF-linked contract structures for both, with no indication from mgmt of an embedded pricing floor. This presents the broader question of pricing risk, given appearances of substantial exposure to commodity price volatility. Such a possibility not only places a wide range around prospective valuation for shares (due to perceived margin variability) but also creates uncertainty around financing ability (as well as financing costs)."

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