Analyst Issues Mea Culpa on Bad Math After LNG Stock Slumps

(Bloomberg) -- A Stifel Nicolaus & Co. analyst is flagging a mathematical error in a recent downgrade of Tellurian Inc. that wiped out 13% of the would-be American natural gas exporter’s market value.

“After further examination, we have located an error in our calculation of the proposed private equity component of Tellurian’s capital structure,” Stifel analyst Ben Nolan said in a note to clients Thursday, a day after his downgrade triggered a selloff. “Subsequently, we are reducing our share count estimate and adjusting our earnings estimates to compensate for the new share count.”

Tellurian clocked its biggest loss since December 2017 on Wednesday after Nolan said low gas prices would hurt the company’s marketing margins and cash flows. Tellurian rose 5.4% to $7.03 on Thursday in New York.

Despite disclosing the error in a note titled “Mea Culpa on TELL Share Count,” Nolan said he was sticking with his “hold” rating and 44% reduction in the stock’s price target. Nolan is one of five analysts with “hold” ratings on Tellurian, while six have “buys,” according to data compiled by Bloomberg.

The report was later republished with an “erratum,” removing the data underlying Stifel’s investment scenario. “We are re-publishing this note without those items because we feel they are not relevant to the subject matter,” the note said.

Tellurian and Nolan did not immediately respond to requests for comment.

It’s not the first time a research analyst has walked back a report. A Barclays analyst in 2017 downgraded SemGroup Corp. just hours after she told clients the prior week’s rout left the pipeline company at an attractive valuation, warranting the equivalent of a “buy” rating. The about-face came after the firm discovered their share-count math artificially inflated valuation.

--With assistance from Michael Bellusci.

To contact the reporter on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Christine Buurma, Joe Carroll

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