This teaser solution was originally published on February 27, 2023, we’re re-posting here to answer a new wave of reader questions. The ad has not been updated in any meaningful way, and what follows has not been updated since late February. We’ll add a brief update at the bottom…

Here’s the email tease I got from Whitney Tilson recently…

“For the first time ever, my firm Empire Financial Research is going ‘on location.’

“I hired a full film crew to capture every detail of how this opportunity works…

“And how you can use it to potentially make a 10x return, perhaps in 12 months or less.

“What we’ll show you is something very few Americans have ever seen up close and in-person.”

And there’s no shortage of hyperbole, of course… this is from Jared Kelly, who hosts the “presentation” with Tilson:

“This opportunity is so incredible… so groundbreaking… so critical to the future of the United States economy, we’ve decided the only way you can truly “get it” is to see this location with your own eyes…

You’ll also learn about a crisis which is set to change everything in your daily life, from where you shop for groceries, to what kind of car you’ll drive, to where you’ll go next year on vacation.

According to Whitney, the fate of an entire continent lies in the balance thanks to this crisis, which could topple governments.”

And this is clearly an energy-related story, since Tilson and Kelly are traveling to Houston… and they provide some examples of past huge winners in the space:

“In the past, we’ve seen gains connected to this opportunity reach as high as 8,800%… in as quickly as a little more than a year.”

That’s a reference to Tellurian (TELL), the small company that’s hoping to succeed Cheniere as the next successful LNG export stock, and they do show the 8,800% return for Tellurian during its first exciting run from a few pennies to $20 in 2016 and 2017… though there is no indication or specific claim that Tilson bought or recommended Tellurian back then, they’re just trying to plant a bug in your mind about the potential of tiny energy stocks. In fact, though they make no mention of this, Tilson did recommend TELL about six months ago for his new energy-focused newsletter — and it turned out to be terrible timing, he recommended it just before they announced a failed bond offering and dropped from $4 to below $2.

No surprise there, advertisements never highlight failures or mediocrity — they want to include only past charts that go “up and to the right,” to build that impression of inevitable wealth if you’ll only pull out your credit card and buy their ideas.

And, in fact, it’s that same energy-focused newsletter that Tilson is trying to sell today — he’s pitching subscriptions to Energy Supercycle Investor ($2,500/yr), and the bait is his portfolio of ten “hand-picked energy stocks” as well as the “#1 Windfall Opportunity” … so let’s see if we can sift through the clues and name some names for you.

This is clearly a LNG-related pitch, because the place they’re meeting is Cheniere’s Sabine Pass LNG Terminal, right on the Louisiana-Texas border (and across the Sabine Pass from the Golden Pass LNG terminal, which is under construction, owned by Qatar and ExxonMobil, and plans to start exporting LNG as soon as next year). It is a hotbed of LNG activity, and well-connected to the natural gas infrastructure of the Gulf Coast — as are the other in-development LNG terminals, like Tellurian’s Driftwood and the private equity-funded Venture Global LNG on the Calcasieu River, about 40 miles to the east of Sabine Pass (Driftwood is shooting to open in 2026 if they can get funding quickly, Venture Global’s Calcasieu Pass plant is expecting to begin commercial operations late this year).

And as probably won’t surprise you, since he’s selling a newsletter called Energy Supercycle Investor that he just launched about six months ago, Whitney Tilson believes the Russian invasion of Ukraine and the ongoing turmoil in energy markets, with a “worldwide energy shortage,” is going to create a “new energy supercycle,” which is what will fuel his “1,000% windfall opportunity.”

Here’s a bit from Tilson:

“The energy problem is bigger than inflation, because high energy prices are a big culprit in the higher prices we’ve been seeing at the grocery store lately…

“And energy is a major source of the political problems we’re seeing with Russia and China.

“But thanks to my experience and inside connections, I’ve discovered the solution to the immediate problem of energy shortages…

“I call it the ‘1,000% Windfall’ because we’ve already seen how these kinds of opportunities can pay out 10 times or more, from a single investment.”

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And despite the fact that he pitched Tellurian back in September, Tilson claims he was still “skeptical” before he got to visit Sabine Pass in person and see the scope of the investment being made.

So what’s this stock he’s pitching? Is it another LNG company? Here’s how he refers to it…

“… this ‘1,000% Windfall’ is in a very special corner of the energy market.

“Based on my team’s research, this opportunity has directly impacted only around 20 specific public stocks.”

And he cites a few examples of “companies associated with this ‘1,000% windfall’, including Matador Resources, DCP Midstream and Devon Energy, which all soared during the energy boom over the past couple years… and particularly after the Russian invasion of Ukraine caused the oil and natural gas markets to go bonkers. Devon and Matador are independent exploration companies who produce both oil and natural gas, and have some midstream assets for processing and transporting gas, DCP midstream is a MLP that owns gathering networks for gas and oil and some key Gulf Coast natural gas pipelines. Just FYI, all have indeed done spectacularly well since the 2020 bottom for energy stocks (as have many of their peers, of course), and over the past decade Matador has been a big winner (Devon and DCP have trailed the S&P pretty dramatically for that longer period of time).

And Tilson makes the point that he sees shortages in all kinds of energy, not just one, so he might be recommending a variety of different kinds of energy companies…

“Look, the story behind this new energy supercycle is simple:

“There simply isn’t enough energy supply to meet demand.

“Energy isn’t being produced to scale on a global scale…

“And energy isn’t being supplied to where it needs to go.

“This applies to oil, gas, green energy… you name it.

“These shortages create huge distortions in the market, which are culminating in a new supercycle.

“This supercycle in turn creates huge opportunities to make money, especially from this “1,000% Windfall” opportunity I’m currently tracking… “

And, of course, there’s a reason why they flew to Texas for this photo op at Sabine Pass… in Jared Kelly’s words…

“… this windfall is directly connected to what we saw there…

“According to Whitney, America already has a solution to the shortages in places like Europe…

“This energy resource is liquefied natural gas, or LNG.

“And the exciting thing for investors is that LNG still remains a ‘secret corner’ of the energy markets…

“But probably not for much longer… as billionaires and Wall Street slowly figures out what Whitney has already identified.

“In fact, Whitney explained to me this is exactly what makes LNG a ‘1,000% Windfall opportunity for investors over the next 12 months…”

OK, so he might recommend other stuff in Capital E Energy for his “Supercycle” newsletter, but the “1,000% Windfall” bit is, no surprise, Liquefied Natural Gas (LNG). Which, in case you haven’t seen the dozens of teaser pitches highlighting this over the past year, is natural gas that has been supercooled to turn it into a liquid, so that it can be efficiently transported via specialized (and pressurized) LNG Tankers, helping to build an international trade in natural gas that could someday be similar to oil. It’s still far more common and cost-effective for natural gas to be shipped by pipeline than by LNG tanker, so local prices for gas range much more wildly than they do for crude oil, but as more LNG capacity is built the global prices should gradually smooth out over time — and there is a rapid pace of development of new terminals, from Qatar to Australia to the US Gulf Coast, and a growth, including some emergency construction in Europe spurred this year, in receiving terminals for LNG.

I don’t know if we’re going to have 1,000% windfalls, and some of the projects, like Tellurian’s Driftwood facility, have been slowed down a bit because of higher interest rates and falling natural gas prices, but the LNG world is gradually going from a local oddity several decades ago to a meaningful global market. (Natural gas has actually been in a disastrous freefall for several months because of the unseasonably warm winter in the US and Europe, and because Europe reacted quickly to Russia’s invasion in building up storage facility and rationing energy…. but that’s probably temporary, if the war continues then this won’t be Europe’s only challenging winter).

He provides a few other examples of “LNG stocks” that have gone “supersonic” during the post-COVID and post-Ukraine boom, like Range Resources (RRC), Pioneer Natural Resources (PXD) and Diamondback Energy (FANG) (None of which have much to do with LNG directly… but all of whom certainly benefitted from the much higher natural gas prices we got in 2022 as a result of LNG demand. And, of course, he shows a chart of Cheniere Energy (LNG), operator of that Sabine Pass terminal, whose share price dropped below $40 when COVID hit (since energy consumption collapsed, globally if temporarily), and spiked to about $180 in late 2022 (they also fell back to $140 in early January as gas prices were falling, though that’s not highlighted in the ad).

So what’s the one stock Tilson likes most as his “1,000% Windfall” idea? We start to get a few clues…

“Whitney also revealed to me he has one particular LNG stock which he sees as the best potential “1,000% Windfall” opportunity right now…

“This stock currently trades for around $2 a share, but could very well rise 1,000% in the coming 12 months….”

Any more hints about it? This is what we gleaned from the ad…

“… small company based in Houston, which is smack dab in the middle of all this, and perfectly positioned to capitalize on this LNG and this supercycle….

“… it’s currently building one of America’s largest LNG export terminals.

“As we speak, this company secured all the critical permits.

“The Department of Energy and the Federal Energy Regulatory Commission gave it their stamp of approval.

“The brand-new terminal is already under construction. When it’s finished, it could change the LNG industry forever.”

What else?

“… it’s also building a fully integrated LNG business.

“Which means when it’s fully up and running, it will be the first integrated LNG business in America, in fact.”

Sheesh, sounding AWFULLY FAMILIAR so far. Any other hints?

“I’m confident in this project because the man behind this project is a genius when it comes to the LNG business.

“This ‘LNG genius’ is already a billionaire.

“And here’s the exciting thing: He’s already made a ton of money for investors in LNG.

“This man turned his last company into the second largest LNG exporter in the world…

“In fact, just a few years ago, this ‘LNG genius’ created an investment opportunity which could have paid off an amazing 8,800% in a little more than a year.

“And he’s about to do it again.

“Put it this way: If he only does one-eighth as well this time, we’ll be sitting on a 1,000% gain…”

Dang. Sounds like we’re just dealing with a repeat of Tilson’s recommendation from last year… though at a much lower price. Can we confirm that for sure?

Let’s see what the other clues are…

“… why is the stock you’re recommending only trading for around $2 a share?

“Because the company needs to raise capital to complete its LNG project, and investors worry that it won’t be able to raise it, or that it will be on such onerous terms that existing shareholders get hammered.

“These outcomes are certainly possible, so this stock is risky – as veteran investors would say, ‘it’s got hair on it.’ So size it appropriately.

“But even a small investment could pay off in a big way, because I think the company will weather the current crisis – and once it does, the stock could skyrocket.”

So yep, I’m afraid we’re dealing with another well-trodden idea here today — Tilson’s primary pitch is for Tellurian (TELL), again. And just as a little bit of Chutzpah, the order form indicates that they’re giving you a bunch of “special reports” as part of your reward for signing up for this Energy Supercycle Investor… and that list includes both the “1,000% Windfall Opportunity” he’s pitching today and the report titled, “400% Upside: The $4 Stock at the Center of the Energy Supercycle” — which, of course, was ALSO about Tellurian, just written back in October when TELL was around $4 a share (we covered that “$4 Stock” at the time here, if you want to read one of our many previous stories about Tellurian). (And yes, the math is similar… a 1,000% gain from today’s price would be just shy of $20… roughly the same end point as a 400% gain would have provided if you bought at $4, six months ago.)

So yes, Charif Souki is often held up as an “LNG Genius” because he took his failed LNG import project at Cheniere (which was built in 2008, and intended to solve the crisis of falling US natural gas production), and, after fracking created a gas boom in the US a few years later, tiptoed along the edge of bankruptcy but then raised another $25 billion, under Souki’s leadership, and turned Sabine Pass into an LNG export project. That was by no means a guaranteed success, and Cheniere spent a decade as a fought-over money pit before it began actually producing and shipping LNG (that was almost exactly seven years ago, in early 2016). And yes, in case you’re curious, they were not the only ones — the neighboring Golden Pass, owned by Qatar (70%) and ExxonMobil (30%), was originally planned as a way to import gas from Qatar to the US, though it flipped the switch and will be an export terminal when it opens (in the next year or so).

Around the time Sabine Pass exported its first cargo, Charif Souki had a falling out with board at Cheniere, and with activist investor Carl Icahn, and was essentially fired… after which he quickly founded another LNG export company, and went about trying to build Tellurian into a competitor, with the new twist being that Tellurian would also own natural gas production in the nearby Haynesville Shale and therefore would be “vertically integrated” and earn more of a margin, turning their own gas into LNG rather than having to buy it from other US producers.

Tellurian was mired in controversy for a few years, too, with Cheniere alleging that Souki used loans made by Cheniere to a third party (and “stolen plans”) to jump-start what became Tellurian’s Driftwood project, though that lawsuit ended up being dismissed in 2020, just about the time that Tellurian was collapsing because of delays at Driftwood and the sudden shock of the pandemic shutdowns. And yes, Tellurian did provide 8,000% gains for those who bought what was then a penny stock at the first inklings of Souki’s involvement… though within a few weeks, as the story started to make the rounds, they got some seed investment from Total, and they bought up some producing natural gas wells, the shares were in the $2 range in early August of 2016, on their way to spiking up to $20. Today, almost seven years later, we’re back below $2 again (though it is a MUCH larger company — there were about five million shares outstanding back in 2016, it was really a speculative microcap, today that has grown more than a hundredfold, there are more than 560 million shares outstanding.

Could the stock go back to $20 someday? Sure, but it will probably take a good offtake deal or two, and probably after that, after some energy major makes a big deal with Tellurian to de-risk the project, some massive bond offerings that could begin to cover the huge construction bills that they’ll begin to see in future years. Tellurian’s last crisis was that rising interest rates and inflation have increased the price of building Driftwood significantly, but that they also failed to get buyers interested in even a $1 billion bond offering last Fall (which was the primary reason for the stock dropping from $4 to $2 the last time Tilson recommended the stock), and, on top of that, two of their early “offtake” partners pulled out shortly thereafter, presumably, at least in part, because they didn’t see Driftwood meeting its commitments anytime soon. That might be a mixed blessing in the end, because the analysis I’ve seen indicates that people didn’t think those were very good offtake deals for Tellurian, with limited commitments and guarantees from the gas buyers, but in the short term it was definitely seen as bad news by investors. There has never been a better environment for LNG projects than we saw last Summer… and Tellurian still couldn’t make a good deal to move Driftwood forward. That’s not the final word, but it’s surely reason for a little caution to go along with your “1,000% windfall” daydream.

Here’s what I noted last time I looked at Tellurian, a couple weeks ago when I was discussing the latest of Porter Stansberry’s many teases of the stock:

The payoff is enormous if it works out, but in cash flow terms that payoff is also several years away, since the facility will take a long time to build… so if we’ve all made nice with Russia by then, and all is forgiven and forgotten, well, the price of natural gas in Europe or Japan might not be as high as Tellurian is hoping….

I’d think of the shares here as being more like a five-year levered option on LNG exports, and it’s not completely clear how much that leverage will cost (either through dilutive share offerings at low prices, some kind of strategic deal, or relatively expensive bond financing). If there’s a big surge to come in the share price at Tellurian sometime soon, it will probably be because they make some kind of financing deal for the Driftwood Project that delights investors — and they have enough cash for the early stages of the work that are happening right now, so they can probably afford to be at least a little bit patient.

Will it work out? So much depends on the construction cost, including the financing cost and whatever deals they have to make to get Driftwood completed over the next few years, that it’s really a pretty wild guess at this point… the good news, if Driftwood does eventually get financed and finished and is profitable at some point, is that it’s pretty cheap, and expectations are pretty low. They could go lower, for sure, it’s unlikely that Driftwood will have its first train operational before 2027, and a lot can happen in that time… but they’ve invested about a billion dollars into Driftwood so far, and even if you ignore their producing natural gas properties (which last quarter produced an operating profit of $48 million), the company is valued at less than their investment-to-date in Driftwood (TELL’s enterprise value is about $700 million). Really, Tellurian is a little $1 billion equity stub on the Driftwood project, and it’s likely that the price of that project is increasing pretty steadily these days (a year ago, it was expected that Phase 1 would cost about $12 billion… it must be higher than that now).

The big positive for Tellurian would be a farm-out of a big stake in Driftwood to a partner with deep pockets who can help bring down the financing costs, perhaps one of the big French or German energy companies, or even a US energy company who wants better access to foreign markets (the gas-only companies like EQT don’t have enough money for that kind of deal, but the big integrated energy majors like ExxonMobil do). I don’t see any sign of such a partnership yet, and you can certainly sense that trying to guess at what gas prices might be in Europe or Tokyo five and ten years from now is a tough starting point, especially at a time when prices are falling almost everywhere, but that’s probably the big hope for Tellurian… we just have to see if Charif Souki can sell someone on his vision. It makes some sense to me as a long-term strategic project, but I don’t have $10 billion to contribute… the amount of money it takes to build these projects is truly overwhelming, and the fact that money isn’t free anymore, with interest rates finally rising to somewhat rational levels, is probably a big impediment.

A one-year chart of Tellurian shows that late-September collapse following their failed bond offering… but it also shows us just how much natural gas prices drive sentiment for this long-term LNG export hopeful — that’s Tellurian’s share price in purple and the US standard natural gas futures price (Henry Hub) in orange, with one of the reference prices for imported natural gas prices in Europe in blue. The good thing is that Germany is building lots of LNG terminals right now and will likely quadruple their LNG imports in the next five or six years, so there should be lots of buyers if and when Driftwood gets built… the bad thing is that we don’t know where the price will settle at that time, and risking $10-20 billion to build a project is not as exciting when prices are falling and interest rates are rising. I’d weigh it as a decent chance that there will still be a nice arbitrage to be made between natural gas prices in Louisiana and the price you can charge if you’ll liquefy it and deliver it to Germany’s Wilhelmshaven terminal in the North Sea in 2027, but I certainly don’t know what the future holds.

So sure, there’s a compelling narrative and potential profit. It’s exactly the kind of story that newsletters love to peddle — maybe a 1,000% windfall opportunity if Charif Souki can pull a financing rabbit out of his hat and excite investors this year… or maybe, instead, a long slow slog of raising money and making offtake deals from a position of weakness if they can’t. Your guess at the probability of either outcome is likely to be as good as mine, just don’t bet so much on a 1,000% dice roll that you’ll suffer if Driftwood is delayed and faces cost overruns and can’t get decent financing, and Tellurian spends another few years falling 90%.

That’s just what I think, though, and I haven’t speculated on this one — with your money, of course, it’s your call. Ready to bet big on the next decade bringing an LNG boom? Think Tellurian is the best way to play that future, or do you like the cheap US natural gas producers, or the LNG tanker owners, or even the established LNG operators like Cheniere? Maybe something more exotic or indirect, like the Japanese commodity trading houses or the equipment makers or the Australian gas exporters? Let us know with a comment below.

May 15, 2023 Update: No final news on the most important front, which is financing the Driftwood project, but they have made some progress — including a proposed sale/leaseback deal for the land under Driftwood which could generate a billion dollars in capital to help move the project forward (the deal is not final, but the proposal was a sale for $1 billion, and a lease back for 40 years at a 8.75% cap rate with annual 3% rent increases). They’re also seeking equity partners and additional capital beyond that, of course, and that sale/leaseback deal is contingent on getting more funding commitments, since the estimates are that they’ll need at least another $10 billion in capital just to complete Phase 1 of Driftwood… but they have to begin to turn the tide and get people interested in financing the project somehow. Perhaps this will be the first step.

Tellurian has also received some regulatory approval for its pipeline projects (the pipelines will be needed to feed Driftwood with natural gas). At the same time, they’ve halted most investment in their Haynesville natural gas fields because pricing is too low to justify more drilling right now, (their breakeven is probably around $3/MMBtu, latest prices are well below that), and they don’t want to tie up capital in drilling if it’s not profitable… though they still plan to continue adding more acreage to their Haynesville holdings as they want to be able to feed Driftwood with their own gas production in 2027.

No big change to my opinion — still high risk, still clearly going to be expensive to build and finance, and that is made a little more challenging by the fact that natural gas prices are very soft so far this year… but it’s also one of very few LNG export facilities under construction, so it’s a logical focus for investors if the LNG business gets popular again. The comments from readers on the original version of this article are still attached below, feel free to join in the discussion…