This article originally ran as part of the Friday File for the Irregulars on January 12. It has not been updated or revised since then, though I’ve left the original reader comments appended and have also added an extra update comment at the bottom of the article.
–As Published on 1/12/18–
I’ve been working on putting together my Annual Review of all the stocks in my Real Money Portfolio for you, dear Irregular, but I’ve gotten such an overwhelming number of questions about the latest ad from Dr. Kent Moors at Money Map that I’m putting some of that annual review on hold so I can quickly address this pitch for you.
Here’s the headline that so many of you have been asking about today:
“Shocking Move by DOE Unlocks New $7 Trillion Energy Sub-Niche
“The race is on. Insiders are swarming. And now, a tiny $2 million startup has harnessed a patented technology that could ignite a 59,845% revenue-surge”
The ad is from Dr. Kent Moors for his Energy Inner Circle ($1,950/year), and on top of those stories about incredible revenue growth he’s got lots of breathless language about the Saudi’s taking this company over imminently, making you buckets of money.
So what’s the story? Let’s check the clues a bit…
“At the center of the frenzy, holding all the aces, sits a tiny $2 million startup
“This company didn’t even exist 18 months ago.
“It’s small, less than half of one-percent the size of Exxon.
“In fact, they barely cobbled together $2 million in revenue last year!”
OK… what else?
“And here’s the best part: This is pure ground floor.
“It’s happening so fast – and with such unstoppable momentum – that only a handful of Wall Street’s savviest players have been able to secure a position.”
Feeling that profit-lust rush to your head yet? Careful, copywriters are good and building the excitement… let’s see if we can add a dose of reality for you. First, to run through some of the other key clues, and Moors’ forecast (how can we come back and check the results if we don’t know what he’s promising, right?)
So we get some wild projections that this “$2 million company” could grow its revenue by 59,850%…
“This site is located along the Gulf Coast on the Calcasieu River, a proven natural-gas oasis…
“And this tiny $2 company has joined forces with engineering titan, Bechtel – to develop this acreage into the world’s premier natural gas export terminal…
“This one-of-a-kind facility will have 96 miles of natural gas pipeline, so as natural gas is pulled from the ground, it can be delivered directly for liquefaction.
“The facility will also contain 20 liquefaction units, each expected to produce up to 1.38 million tonnes of LNG per year!
“That’s a total of over 27 million tonnes of LNG per year!
Are you getting our free Daily Update
"reveal" emails? If not,
just click here...“At current Asian prices, that comes out to $12.7 billion!
“Remember, this is a $2 million company.
“Even at a mere 10% CAPACITY, that’s over $1.2 billion… a staggering 59,850% revenue surge!”
And he runs through a hypothetical cash flow example that leaves him with what he says is “a very conservative projection of $524 a share” for a company that is currently trading at about $10 a share.
And, of course, he says “time is of the essence” …
“… insiders are in an absolute frenzy…
“They’re putting their personal wealth into this tiny $2 million company like there’s no tomorrow.
“In fact, they’ve already grabbed up two out of every three available shares for themselves, and folks who hesitate could miss out on this deal completely.”
And the folks in charge have apparently generated huge returns in the past…
“For example, the Chairman of the Board guided his first company to 20,000% gains…
“The Vice Chairman sold his first company to Royal Dutch Shell for $70 billion…”
That would be BG Group, which helps to narrow down things a bit. This is, as some of you have no doubt already guessed, the LNG startup Tellurian (TELL).
And yes, insiders do own 2/3 of the shares of Tellurian… but that’s not because they’ve been “grabbing them up” — there haven’t been any insider purchases since the reverse merger that brought Tellurian public back in February (they took over the old listing of Magellan Petroleum)… those insiders got their shares at dramatically lower prices, mostly in the $5-6 neighborhood most recently if I’m following the right daisy chain of insider purchases and convertible bonds and other fundraisings that they did before the merger (including large investments from Total and GE). Insiders have generally been selling, in fact, though in very small amounts.
So what’s the business? Well, here’s how Moors describes it:
“The tiny $2 million company has harnessed a PATENTED scientific process that shrinks natural gas by 600-fold…
“And converts it into a liquid form!
“I’m telling you, this technology is Nobel Prize-worthy!”
That may be so… but notice the word he used: It has harnessed a patented process, not that it owns the patents. This doesn’t seem to be a technology company, and it’s unlikely that they have some unique technology in the natural gas liquefaction realm that makes them stand out from other companies who are developing liquefaction (gas-chilling, really) facilities.
There are a few major engineering companies who are capable of building big natural gas facilities for importing or exporting liquefied natural gas (LNG), including Bechtel, which is the firm Tellurian is working with, and I’m sure their technologies are slightly different, but as far as I know no one “owns” the patents on liquefaction or gasification to an extent that they can exert any leverage on these facilities (gasification, as you might guess, is what happens at the other end, when it leaves the tanker and gets put into the customer’s pipeline).
More from the ad:
“And now, this tiny $2 million company can take America’s $7 trillion bounty of cheap natural gas…
“Liquefy it…
“And whip it around the world, in a moment’s notice, to the highest bidder!
“We are talking profit margins I’m projecting to be off-the-charts…
“And the upside potential is truly staggering…”
That may eventually be true, I suppose, though it requires some imagination — the first wave of their LNG project, which they call Driftwood, is projected to begin commercial operations in 2023, so that “in a moment’s notice” stuff would be happening many years in the future, and they first have to raise about $15 billion to build it, according to their investor presentation. They do have an interesting-sounding plan, on paper, to increase their profit margins by essentially pre-selling a lot of the production to a major partner, but this is a huuuuge project.
Looking at Tellurian’s January 2018 investor presentation, they indicate that their Driftwood project will have a very low cost per tonne, and will have a massive capacity similar to the planned capacity of Sabine Pass — larger than even giant projects like the Gorgon field in Australia. Which is impressive sounding, to be sure, but also means the capital requirements are truly phenomenal… and it’s probably worth remembering that most of the huge global LNG projects have faced dramatic cost overruns over the past decade. These are huge, expensive and complex engineering and construction projects.
The hype is laid on pretty thick, even referencing Rockefeller…
“What John D. Rockefeller did with oil, this tiny company is doing with liquefied natural gas…
“And the upside could be tremendous…
“Now, by vertically-integrated, I mean the company CONTROLS every aspect of the business….
“This tiny $2 startup owns every significant aspect of the supply chain. Yep, just like Rockefeller…
“They own the land.
“They own the drills.
“They own the wells.
“They own the liquefaction modules.
“They own the storage tanks.
“And they own the ships.”
Well jeez, that does sound exciting, right? Except there are no liquefaction modules. There are no ships. There are a few wells, they say they’re currenlty producing 4 mmcf/d from 19 wells in Louisiana, though that’s a tiny fraction of the production they’re planning for 2022, as they begin to prepare for LNG export. They’ve just started the calendar ticking for the permitting process for their Driftwood LNG facility, the earliest that they might begin construction is probably mid-2019.
So yes, those things are all planned, some of the work is probably underway and perhaps ships are even ordered (I haven’t checked), and they may well come to pass, but they aren’t operating and churning out cash right now — these are far-future plans, particularly in the context of Wall Street.
What does that mean? Well, how many investors do you know right now who are basing their plans on 2023? Probably we all should, but there are a lot of things that can happen in the next few years, particularly with an extremely capital-intensive project that will be sensitive to both interest rates and commodity prices. And don’t pay any mind to the “$2 million” number — that’s largely irrelevant, as Tellurian generates a tiny amount of revenue on their producing natural gas wells, it has nothing to do with what they’re envisioning for the future. It’s not a “$2 million company,” that’s just the current level of their largely irrelevant revenues, it’s an ambitious $2.5 billion company trying to build a $15 billion project… any revenue that they generate before the LNG project is built will be completely overshadowed by the massive costs of building and financing Driftwood. If you want to buy this stock, you’ll need to do so based on projections for how profitable Driftwood will be when it is operational, perhaps as soon as six or seven years from now, and on what portion of that profit TELL will have to give up in order to get the project financed and built.
I’ve also seen some ads today that cite this as the possible next acquisition target of Saudi Aramco, as the Saudi oil company has been looking for US shale assets to buy lately… that’s possible, and has been reported by the Wall Street Journal, though I have no idea what the odds might be, or what the impact on Tellurian shares might be if a deal is done. Certainly Saudi Arabia has no need to import LNG, and definitely not from as far away as Louisiana, so they wouldn’t be as motivated to purchase future production for domestic reasons — there would presumably have to be a financial or strategic motivation.
So what does that all mean? Tellurian is attempting to become the next big LNG export company, and they do have an interesting-sounding plan for producing LNG at a relatively lower cost than many of the existing facilities, though such plans are probably easier to put to paper than they are to implement and the story will probably fluctuate a lot over the next few years as contracts are signed for production and we begin to get a better picture of what the profitability might be. After watching the ramp-up and decline of Cheniere (LNG and CQP) over the years, as fluctuating natural gas prices and massive borrowing costs have caused investors to flip from euphoria to despair and back again a few times, I’d hesitate to guess at what the Tellurian of 2023 might look like… but I would happily take the “under” if we’re betting on whether Tellurian will be at $500 a share by then.
–update 2/1/18–
The stock is relatively unchanged since Moors started promoting it in the second week of January, and that’s even after Jim Cramer’s Mad Money featured a fawning interview with Chairman Charif Souki on the 17th (Souki also founded Cheniere Energy and is a major TELL shareholder).
US natural gas is certainly abundant and inexpensive, though prices spiked last month because of the crazy cold winter, so exporting it to countries that need clean(er) energy (cleaner than coal, at least) makes logical sense, particularly because the prices that South Korea and Japan and China have been willing to pay for delivered LNG have been substantially higher than the cost to buy that gas on land in the US — so the big picture questions are really about where that cost differential will be when the facility is producing. The recent concern among investors and LNG exporters, both in the US and elsewhere, is that we might be getting to the point where the LNG export business is big enough that the buyers are getting some leverage… with uncertainty about where future demand will be relative to the aggressive ramp-up in future supply. There’s an article about that from Oilprice here, this is from last Fall but it gives some idea of the longer-term qualms that some folks have in this segment.
The huge amount of financing required means this company’s future results will likely be quite levered to natural gas differentials in the 2020s and 2030s (between the price in Oklahoma and the import price in Japan, for example), and the leadership of the Souki family, who Jim Cramer admires but who was fired by Cheniere’s board before that company started exporting gas a couple years ago (it’s widely reported that he was forced out by activist shareholder Carl Icahn, though I don’t know the details), means this stock is likely to get a lot of attention. Attention plus leverage can mean a bumpy ride, but much will depend on how they do their financing, and on what terms, and on how much the timeline and the project budget fluctuate over the next couple years.
Maybe Tellurian will indeed find a way to radically change the LNG industry, avoid massive delays and cost overruns, and extract more profit by reducing their input costs and being a gas producer as well as a liquefaction plant owner, or by getting a strong customer partner on board… I have no idea how it will play out… but I feel a lot more comfortable having a skeptical view of this one at this early stage. Your opinion may differ, of course… feel free to share it with a comment below.
Thank you for the info, those copywriters are good, almost had me.
Daniel,
Happy for you. Thank God for Stock Gumshoe!
Before committing always read the letters’ reviews here. I will not expand on what I already wrote about this “Dr” and many other did. But protect yourself at all times.
I took a small position and put it on my watch list. I’m looking for a pop from the hype.
My life Is wonderful now that Money Morning and MarketBeat.com finally figured out that I’m not interested in buying anything from them or reading their Mailings. Yes I prefer to see what they’re huckstering through Stock Gumshoe.
Thank you again, Dr. Moors needs a gag order. Your comment summed it up graciously “breathless language” in my neighborhood know as BS, sorry but he is off the charts, again IMHO.
This may happen but I think expensive and long term.
Thank you
Edward
It’s a long shot at best but worth keeping an eye on. This LNG business has a lot of “fluidity” to it. Dr. Kent Moors is a sharp guy. He likes to tout about all his world wide contacts in the energy business and how he has them all in his hip pocket and, on his “speed dial” phone at a moments notice. Well, that’s what these guys get paid to do – sell the hype and sell subscriptions . If things don’t work out as hyped up in their presentations, they can always fall back on that old cliche – “past results are no guarantee of future performance” – or, something like that! That’s what you call “PYA” in the investment/trading/financial news letter business!! Ya! they all have their disclaimers stating that they are not licensed’s to make stock/options recommendations however, when you get their text or e-mail alerts they clearly give exact instructions on what to buy, when and at what price. Now if that’s not hypocrisy I don’t know what is. I guess the SEC turns a blind eye to these guys because these financial news letter publishers is what helps keep the juices flowing on Wall Street. Oh well – go figure!
Bill Z.
In SEC vs. Lowe, the Supreme Court affirmed the First Amendment right to publish investment advice as long as it is not personal advice, which requires registration as an investment adviser. No hypocrisy and no blind eye. The SEC will go after fraud; see https://www.sec.gov/litigation/complaints/comp18090.htm.
once again we get more LAWFULLY VAGUE language from our court systems. Hey as long as they protect themselves and not the consumers. Thank God for Travis.
“Kent Moore” is full of crap. His picks are fantasies that never come true. Don’t waste your money on his stories.
Since he us “full of crap”, I took his advise and am up over 28% in just 2 weeks on TELL
Do not confound a rising market (natgas) with genius. You’d have made more money with oil in the past two weeks.
Moores is a total idiot with his recommendation – Guy should be banned off the WWW totally – I lost over 15k following one of his BEST Ever recommends (according to his crap) on a solar company a couple years ago
Be smart STAY AWAY from this jerk’s (Dr Idiot) advice
In the past I have owned investments in medium sized oil and gas companies which actually owned and operated LNG facilities. Only made a bit of money when companies were not hyped, just followed by conventional analysts, and were about to either come on stream or ramp up production.
Probably a good short term swing trade from all the world class BS!
Liquefied Natural Gas Limited (ASX:LNG) (OTCMKTS:LNGLY) (LNGL) is an ASX listed company.
Magnolia LNG have four liquefaction production trains under construction in the Port of Lake Charles, Louisiana, USA. LNG Technology Pty Ltd is a subsidiary of the Company’s patented OSMR(R) LNG whose portfolio consists of 100% ownership
After seeing Dr Moors previous picks flop eg: linc, maninga gas , and one of his solar stocks that went bankrupt l wouldn’t touch his suggestions again.
Thanks for the info and education.
Travis, TELL has a Market Cap of $2.5 Billion, so I’m missing how it qualifies as a ‘tiny $2-million start-up…please enlighten us…Thanks so much
$2 million in revenue. Irrelevant and misleading, but not technically untrue.
Thank you mate..
good one Travis!
It must be accurate. He’s got it down to being able to forecast revenue accurately, as it will gain, not 60,000%, not 100%, not 2%, but 59,845%. (sarcasm)
Is anyone ever impressed by the pulled-out-of-thin-air numbers these promoters use?
Never buy a stock when the underlining company is in investment phase, only buy when it’s heading into harvest phase. One of best all time examples was mci communications in the mid 1980’s, the first company to do a public offering of $1 BILLION of corporate bonds to build out its telecom infrastructure. When the tide started coming in mid 1987, the stock ultimately turned into a grand slam home run.
Money Morning is the last stable of writers that I would pay to read.
I bought clean energy (CLNE) a while back when it had run up quite a bit. I know, I know, but a relative was involved with the construction of retail stations as well as for some companies in freight delivery while clean was “taking off”! And….of course, T Boone was calling the shots. And I’m down to $1.56 p/sh today. Shoulda woulda coulda!
U.S. LNG export capacity is going up by a lot within the next couple of years, after which I would be more concerned about supply-demand conditions. 2023 is far off: anything can and will happen.
If TELL were really such a great investment idea–return for risk–it wouldn’t be marketed in such a way that you could determine the stock without paying for the research.
This was a fun read, so thanks, Stock Gumshoe!
Hi Travis: According to my notes made while I was reading this long pitch about Tellurian (you seem to be correct about the company), I believe there were some additional and Moors claimed very important “facts” that I don’t think you commented on, but that seemed to me to be a big part of why Moors thinks some new patented drilling or fracking technology will be HUGE for Tellurian’s shareholders:
(1) The LNG they would be able to obtain and sell sell would be C-H4 (1 carbon atom plus 4 hydrogen atoms) and therefore presumably (I am not a scientist) far cleaner when burned as fuel. So its use would produce far less pollution than the currently available LNG!
(2). C-H4 has not been available previously because, while its existence in huge quantities under the U.S. has been known for a long time, it is located at much greater depth and under much harder rock than the LNG that can be obtained using the newest fracking technologies.
(3) Obtaining it until now has been either impossible or much too expensive, but using Tellurian’s new and patented technology the cost of obtaining it can be very competitive.
If those things are true, in spite of the years and great capital expense that as you point out will be required to bring it to a needy world market, would you then share Dr. Moors’ enthusiasm about Telluriam’s prospects and possibly a lot of much earlier market hype?
CH4 is methane, which is mostly what people are thinking about when they talk about natural gas (though naturally occurring gas typically has other stuff in it, too).
The references are to processes that exist generally and are important and breakthrough ideas — fracking, liquefaction and super-cooled shipping, but they are the basis for all LNG export, in my understanding they are neither unique to TELL nor owned by any one LNG exporter. This is a common marketing trick — reference some big and important trends and then imply that “one little company” owns those trends or is the only one who can profit.
TELL may end up successful, I don’t know, it’s telling that they’re doing vertical integration, because that indicates to me that they think buying gas in the US and turning it into LNG might not be profitable enough in the future — they may need to actually produce the gas and skip one middleman.
That’s how I see it, anyway.
Exactly. Qatar (Middle East Country) has been doing LNG big-time forever. My former employer Chevron spent many, many times that $15B on their Gorgon and Wheatstone LNG projects in Australia (focused on the Far East markets), and about that much on another one in Angola, Africa, and lots of other companies have done the same thing. There is nothing new under the sun here. Just a bunch of hype. And these guys are very slow out of the gate here in the U.S. Chenier has been up and running for a couple of years now, and others are on their way. I’d be surprised if this one ever gets built.
I can only say that I have lost a lot of money following Moors recommendations.
In my opinion he is no expert when it comes to any investment advice, and if I even consider what he says I evaluate it with other advisors. Trying to think of one company he championed that I lost over 10k on. Was a few years ago sorry but it was then I started to ignore what he said.
Something that makes it sound like BS to me is this: if you cool natural gas low enough it WILL REVERT TO THE LIQUID STATE. That’s just chemistry folks, so how can they have “harnessed a patented process that shrinks natural gas by 600%?
Liquids are generally pretty incompressible, and I don’t know what the ratio is when you liquify NG. but that’s how they ship it around the world now.
Hi Jimmy Dunn,
By “shrinking natural gas by 600%”, they are talking about the space it takes up for shipping purposes, as a liquid compared to a compressed gas. When it is cooled enough to change phase into a cold dense liquid, you can really store a lot more natural gas in the same amount of space (and at essentially atmospheric pressure).
so is the 2 mill start up company lng that can:t be i have been looking for weeks and can not find it there are a lot of sites like money morring that want to make you pay for the name i don;”t have that kind of $ i been looking to invest a little that may help my family latter in life but everey time i here about somthing they want you to pay for it can anyone help me THANKS
“Shrinking by 600%” makes no sense. If you shrink something by 50% you have half the size or volume you started with; if by 100% you have nothing left so what the heck does shrinking by 600% mean? It’s gobbledygook. I think the ad said “shrinks …600-fold”, which also makes no sense. Presumably they mean “shrinks to 1/600 the volume” but for unabashed hype, better to use a BIG number than a small one even if it’s nonsensical..
I am so happy to now be a member of Stock Gumshoe. As most of these comments indicate – the game of dangling carrots the size of the Empire State building is largely the business of copywriters. These very talented people find a way to stimulate the “curiosity and greed button” in all of us, no matter how well protected or educated we think we are!
I, too, have fallen for the BS on occasion – but the results can be a lot more catastrophic than the (usually) thousand(s) of $$$ that must be shelled out to reveal the irresistible carrot. The last big one I fell for made an options shot-caller sound like a genius with lifelong success being able to find and evaluate bad debt to forecast imminent bankruptcy. I am embarrassed to disclose how much I lost before realizing this “genius” was a moron – and so was I for taking the bait.
Thank you for being real – and helping me stay real – STOCK GUMSHOE!