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Tellurian Upgraded at Morgan Stanley on Improved Outlook

LNG developer Tellurian has signed several deals in the past couple of weeks, leading Morgan Stanley to lift its rating on the stock.

Shares of Tellurian  (TELL) - Get Tellurian Inc. Report rose Monday after analysts at Morgan Stanley upgraded the developer of liquefied natural gas to equal weight from underweight and quadrupled its price target on the stock to $8 a share. 

The Houston company's Driftwood project is on track to start its first phase of operation. The project features plans to build a $4.2 billion pipeline to bring supply from the Permian Basin. 

While those plans have hit snags in recent months, Morgan Stanley analysts expect a final decision on the project within a year. 

On the macro level, Morgan Stanley analyst Devin McDermott say a global gas-market recovery is "well underway."

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"Covid drastically altered many commodity markets, resetting the outlook across many parts of the energy value chain," McDermott said. 

"At the start of this year, we refreshed our global gas outlook to reflect this dynamic, expecting growing demand and stagnant supply to push the global gas market into a new phase of tightening, supporting rising prices, larger seasonal differentials, and widening global spreads as transport arbs reopen."

Morgan Stanley held an underweight rating on Tellurian for several years. But over the past two weeks the company has signed agreement totaling 6 million metric tons a year. 

"Not only do these deals advance progress toward final investment decision, but it marks a shift in marketing strategy toward standard sales and purchase agreements, away from selling equity stakes in the project (although the company is still marketing both options)," the firm said. 

Tellurian shares at last check were 1.7%. higher at $5.02. They've traded on Monday up as much as 5.3% at $5.19.