Meg Gentle is the CEO of Tellurian Inc (ticker symbol TELL), a company that is developing a massive LNG export terminal in Louisiana called Driftwood. Meg joins The Stock Podcast to talk about Tellerian Inc.’s asset portfolio, US energy exports, and the LNG industry. If you don’t know what LNG is, you really need to listen to this interview with Meg. LNG is one of the fastest growing exports in the US. Why? Because the cost to produce natural gas in the US keeps falling, and with growing domestic supply, this commodity needs a home. And it’s companies like Tellurian that make it possible to send the natural gas to international markets. At the time this interview was recorded, Tellurian Inc. had a market cap of $1.9B, nearly $60M of debt, and a little more than $130M in cash, bringing the total enterprise value to just shy of $1.8B.
To summarize some of the key points, Tellurian is developing the Driftwood LNG export terminal. But what’s really interesting about Tellurian compared to other LNG companies is that they’re building an integrated system. That means Tellurian won’t just liquify the natural gas, but they’ll own a piece of the production, transportation, and liquefaction.
And by building an integrated LNG business, that essentially gives the Tellurian full control of its future. To put things in context as to why LNG exports are such a big deal, consider that about a decade ago, the US was importing LNG. But something interesting was happening in the oil patch during the early 2000s. Some small, intrepid energy companies were developing a new way to extract oil and gas from something called shale. As the frackers perfected this new method of oil and gas extraction, production costs came down and supply started to grow very rapidly. With the growth in domestic supply, natural gas prices declined precipitously. While it may not make gas producers super happy, the price of natural gas in the US has declined to the extent that the country will soon become one of the largest LNG exporters in the world. For producers, at least there’s a volume story!
Relevant Links:
- The International Group of Liquefied Natural Gas Importers (GIIGNL) publishes an annual report, which is a great reference for LNG developments.
- For information and details on the LNG industry in the United States, the Energy Information Agency (EIA) is an essential resource.
- If you’re interested in learning more about Tellurian Inc., check out their investor relations page here.
- Tellurian also has a great media presence! They’ve got their own podcast called Chat With Tell and a YouTube channel.
- For more on Meg Gentle, here is her LinkedIn profile.
Recommended Reading
The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters
Interview Transcript
Participants
Meg Gentle, CEO at Tellurian Inc. (TELL)
Nate Abercrombie, The Stock Podcast
Interview Transcript
Nate: Meg Gentle, thank you so much for coming onto the podcast. It’s going to be a pleasure talking about your business and your industry.
Meg: Thank you, Nate, for having me.
Nate: Could we first just start off talking about your background? How’d you get into the industry and how did you find yourself at Tellurian?
Meg: Sure. Gosh, I’ve been in the natural gas business now for about 25 years, so I don’t like to admit it’s been that many years. I actually started working for Anadarko Petroleum, and did a lot of international gas projects for them and worked for about 13 years with Shinier Energy through the import terminal days and the export terminal days. I was the CFO of Shinier when we raised all the capital for Sabine Pass, so about $20 billion of capital equity and debt. And then I moved to London to build Shinier Marketing, which I think is now the 13th largest LNG marketer on a worldwide basis. And when I came back from London, I decided to join the team at Tellurian to start a new company, and build LNG infrastructure in the Gulf coast. So that brings us to today.
Nate: Could you just tell me a little bit about what Tellurian does?
Meg: Tellurian was formed in early 2016 to build a new company for LNG Terminal infrastructure and also other infrastructure development on the Gulf coast. We have plans to build a 28 million ton LNG facility in Louisiana, and we’re actually developing that on a joint venture partnership basis. So we are raising the equity for that terminal by selling partnership interest to the rest of the LNG market. And we’re ready to start construction this year and deliver our first LNG in 2023
Nate: So for listeners who don’t really know what LNG is or they’re not familiar with the industry, it’d be really great to have just an overview of what LNG is, what does it stand for, first of all. And then just if you could just talk about the history of the industry, that would be really helpful.
Meg: Oh, well back to the stone age days. No, I’m just kidding. LNG stands for liquefied natural gas, and it’s actually natural gas that is transported on ships at very cold temperatures, negative 260 degrees Fahrenheit, which reduces the mass of the gas, and allows it to be transported and in much larger volume. And the industry has been in existence for about 60, maybe almost 70 years now.
Meg: Originally the very first producers of LNG were Indonesia and Alaska, actually. And the industry grew by transporting from the producing area directly to the customer. And then the ship would come back to the producer and back to the customer. So it was very point to point, we like to say, and since it takes a lot of capital to build a liquefaction plant to basically super cool the gas, that capital investment was supported by long term contracts that were very strict in what each of the counter-parties could do.
Meg: If we fast forward many decades, the US started increasing its natural gas production in excess of what the US and frankly North American market can consume. And so we built some LNG export terminals. The first one was Cheniere Energy’s terminal. In the lower 48 in Louisiana, that came online in 2016. And that has really changed everything about the market, because the gas from the US is destination flexible. So instead of point to point, the big LNG traders are taking the gas and they can put it on their vessel, and move it to whatever is the country or market willing to pay the highest price for it.
Meg: So today we like to talk about the LNG market as finally becoming a grownup commodity, like the oil market trades. And in that context we, the LNG producers, have had to start thinking about different business models for selling that gas. So with the birth of Tellurian as a new company, this is some of the work we’ve been doing to try to bring LNG to the market with greater flexibility, and frankly lower and lower costs.
Continue reading by becoming a member!
