market folly

We're posting up notes from the Capitalize For Kids 2018 investment conference.  Next up is Maria Jelescu of Ardinall Investment Management who pitched long Tellurian (TELL), seeing 25% 1-year upside and 4-9x in the long-term.


Maria Jelescu's Capitalize For Kids Presentation: Long Tellurian

•    TELL - LNG project. Large scale LNG development. US oversupplied. One of few pure-play LNG developers. 25% near term uplift 12 mo
•    Long term, stock has 4-9x potential
•    Full alignment w/ management and key stakeholders
•    Reviews how what used to be a group of regional gas markets with large price discrepancies is now becoming a global market.
•    Global demand is growing quite fast.
•    Clean, reliable and affordable solution for energy
•    Historically LNG for supermajors, Cheniere has changed that
•    Founders of Cheniere are founders of TELL. They have 20 year take or pays
•    LNG today: developed by Supermajor and JV partners that are buyers
•    Tellurian is building an integrated model where their equity partners are their customers
•    removes the 3 risk
o    Gas Supply - Own 15Tcf in resource for $1bn
o    Gas Transport Midstream pipeline
o    Gas Liquefaction - Bechtel contract


Alignment of partners Bechtel and GE. Own pipeline, etc.  Double the LNG Canada Project size.  Chairman former founder of Cheniere (LNG).

Management is making “Cheniere 2.0” with a twist.  Tellurian becomes the GP of the project where they get management fee ($100mm / year) + promote on 28-42% of LNG volumes. Partners commit entry price + fixed price.

Who are equity partners and who would pay the fees? Tellurian generates a ton of fees, but is the 2nd cheapest LNG project global, still gives a very high, unlevered, double digit returns as equity partners. Total, a 19% shareholder sees value. No firm partners yet, but plenty in the data-room

Management fee at 20x = equity market cap today. Get the carry for free.

Base case - low case: cash flow = market cap today.  Cost reimbursements after final investment decision in 2019 - > 25% to the share price.  Phase 3 = 9x in 9 years, assuming flat share count.


Be sure to check out the rest of the presentations from Capitalize For Kids 2018.