Tellurian Stock Forecast 2025—Concerns Outweigh Potential Returns

Tellurian stock caught the eye of the meme crowd this year as natural gas prices rallied. The stock has jumped by nearly 190 percent YTD but is off 30 percent from the highs it reached in June. Part of this decline is due to the company’s share offering in August. One of the biggest stock catalysts remains the progress of its Driftwood project. Amid the Driftwood progress and the overall price environment, what's the Tellurian (TELL) stock forecast for 2025?

Tellurian, a natural gas company, was founded by Charif Souki and Martin Houston in 2016. Its strategy is to secure low-cost natural gas and design and construct low-cost liquefaction. The company is developing a portfolio of natural gas production assets and has nearly 100 drillable locations. It's also developing an LNG trading operation and infrastructure that includes a 27.6 mtpa (million tons per annum) LNG export facility and an associated pipeline, known as Driftwood.

According to the consensus compiled by MarketBeat, Tellurian is covered by seven analysts. Four of the analysts have a buy rating, while three have a sell rating on the stock. The average target price for the stock is $6.34, which implies an upside of nearly 72 percent.

B.Riley initiated on TELL with a buy rating and a target price of $8 in July. B.Riley analyst Liam Burke is positive on the stock. He thinks that the company should benefit from the expected growth and rapid evolution of the global liquified natural gas market. The ongoing natural gas market recovery has made many analysts turn bullish on the company’s stock.

Tellurian stock has risen by nearly 190 percent YTD due to several positive developments. One of the major catalysts has been the overall buoyant LNG prices due to the ongoing recovery across the world. Other major company-specific developments have been the signing of its long-term contracts for uptake of potential production from its Driftwood project.

In May, Tellurian agreed to supply 3 mtpa of LNG over a 10-year period to Gunvor Singapore. In June, TELL signed a long-term contract with Vitol for 3 mtpa. Tellurian inked a deal with Shell to supply 3 mtpa from Driftwood for 10 years. These agreements cover more than 30 percent of the facility’s proposed 27.6 mtpa capacity.

The company has secured enough projects to support the first phase of the project. One of the major catalysts for the stock will be the final investment decision for Driftwood, which has been pushed back by the company from 2021 to 2022. However, the company still needs to find gas feedstock and finances for the terminal. The LNG terminal is expected to cost $12 billion.

Going forward, a lot will depend on the FID. Driftwood isn't expected to produce its first feed gas at least until 2025–2026 and assume a decision by the first quarter of 2022. The bigger question is what LNG prices will be in 2026. Unlike other U.S. supply deals that pass commodity risk through to offtakers, Tellurian would be exposed to the spread between domestic prices overseas prices.

Another big fear for investors could be the dilution of their holdings. In August, TELL did a secondary share offering worth $35 million. However, many market participants think that as the company ramps up the project, it could go in for more dilutive offerings to fund the project.

Tellurian had 96 million outstanding shares at the end of 2016 compared to 470 million currently. Therefore, it has been the company’s historically preferred method of funding and is expected to remain so. Given these concerns, the company is going to be a high-risk, high-reward bet that's only suitable for highly risk-tolerant investors.