The mayhem caused by Hurricane Ida earlier this month was of concern to the energy sector. However, the more recent Hurricane Nicholas caused less damage to U.S. energy infrastructure, leaving oil prices largely unchanged. Moreover, the International Energy Agency (IEA) sees oil demand rebounding by 1.6 million bpd in October. Also, as of September 9, natural gas prices were 99% higher year-to-date and could reach 13-year highs this winter.

In the second quarter, average revenues from the energy sector grew 93.9% year-over-year, with oil and gas production industry revenues registering 137.3% growth year-over-year. Investors’ optimism about the industry is evident in the Energy Select Sector SPDR Fund’s (XLE) 67.2% gains over the past year versus SPDR S&P 500 ETF Trust (SPY) 37.4% returns.

Given the industry’s strong growth prospects, Wall Street analysts expect energy stocks Tellurian Inc. (TELL) and NextDecade Corporation (NEXT), which are currently trading at less than  $10, to rally more than 75% in price in the near term.

Tellurian Inc. (TELL)

TELL is Houston, Tex.-based a natural gas company that is focused mainly on developing liquefied natural gas (LNG) production on the United States Gulf Coast and engages in building up infrastructure assets.

On August 6, TELL closed an approximately $100.7 million public offering of shares of its common stock at $3.00 per share. The company plans to use the proceeds for financing corporate activities and the accumulation of upstream assets.

In July, TELL signed a Sales and Purchase Agreement (SPA) with Shell NA LNG LLC, a subsidiary of Royal Dutch Shell plc (RDS-A), for the Driftwood LNG project. Regarding the  SPA, President and CEO Octávio Simões said, “Shell manages one of the largest and most diverse portfolios of LNG in the world and is leading the industry in delivering CO2e neutral LNG cargoes. Owing to Driftwood’s integrated project, our ability to accurately measure well to loading arm emissions and reduce emissions where operationally possible further enables Shell’s CO2e neutral LNG offering.”

For the three months ended June 30, TELL’s total revenue increased 300.6% year-over-year to $25.35 million, attributed to $19.78 million in LNG sales. In the six months ended June 30, the company’s cash, cash equivalents, and restricted cash at the end of the period came in at $111.86 million, up 21.9% from the same period last year.

A $18.78 million consensus revenue estimate for the current quarter (ending September 2021) indicates a 179% increase from the prior-year quarter.

TELL’s stock has gained 397.2% in price over the past year and 175.8% year-to-date to close yesterday’s trading session at $3.53.

The two Wall Street analysts that rated TELL have rated it Buy. The $6.83 12-month median price target indicates a 93.5% potential upside. The price targets range from a low of $5.50 to a high of $8.00.

NextDecade Corporation (NEXT)

NEXT is an LNG company focused on activities like liquefaction and sale of LNG. The Houston, Tex., company’s operations focus mainly on the Rio Grande LNG terminal facility in the Port of Brownsville, Southern Texas.

On August 2, the company agreed to issue $5 million of  Series C Convertible Preferred Stock to TEP Next Decade, LLC, an affiliate of Energy & Power Transition Partners, LLC (EPTP). “We share EPTP’s vision of making North America’s power and energy systems more sustainable and through NextDecade’s wholly-owned subsidiary, NEXT Carbon Solutions, we are helping lead the way by reducing the costs of carbon capture and storage projects.” said Matt Schatzman, NextDecade’s Chairman and Chief Executive Officer.

In the six months ended June 30, NEXT’s cash and cash equivalents at the end of the period increased 8% year-over-year to $40.6 million, while net cash provided by financing activities increased 130.6% from the same period last year to $34.27 million.

The Street’s $5.07 million revenue estimate for its next year (fiscal 2022) reflects a 50.6% year-over-year increase.

NEXT’s stock has gained 26.8% in price year-to-date and 55% over the past six months to close yesterday’s trading session at $2.65.

The consensus price target of $4.71 indicates a 77.7% potential upside. The price targets range from a low of $2.00 to a high of $9.00.

TELL shares were trading at $3.68 per share on Friday afternoon, up $0.15 (+4.25%). Year-to-date, TELL has gained 187.50%, versus a 19.78% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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