Tellurian Inc., the developer of the Driftwood LNG export plant in Louisiana, saw its shares plunge 40 percent on the week as it cancelled two sales and purchase agreements with UK major Shell and global commodities firm Vitol and said it had formulated a new financing strategy.
Shares in Tellurian tumbled by 15.60 percent in one day to $2.33 per share from $2.77 per share on the New York Stock Exchange American list after the statement saying it was seeking a strategic partner to pursue the venture.
The shares were down about 40 percent on the week through September 23 after negative reports emerged on the stock and the progress of the company to a final investment decision.
“The potential corporate and strategic partners we are seeking may want liquefied natural gas volumes that they can sell globally and now we have some capacity to offer that option,” said President and Chief Executive Octávio Simões.
Construction
“We have made good progress on our construction plan and will continue funding that with our cash and operating cash flow,” added the CEO. Tellurian's recent income has come from Haynesville shale gas sales and previously from some LNG trading
Houston. Texas-based Tellurian had initially said it would raise $1 billion by selling bonds to help finance Driftwood LNG for which some site clearing and preliminary work had already started at the site near Lake Charles and ahead of an FID.
Tellurian Executive Chairman Charif Souki said the focus was now on finding a strategic investor for the $12 billion project which had signed three SPAs in mid-2021 with Shell Vitol and with another global commodities firm Gunvor, whose SPA remains in place.
The strategy change followed previous unsuccessful talks with possible equity shareholders in return for them buying debt.
Tellurian’s SPAs with Shell and Vitol were for 3 million tonnes per annum of LNG each for 10 years from the first liquefaction Trains from the venture scheduled to come on stream in 2026 and with regulatory approvals for 27.6 MTPA of output.
Setback
“It sets us back, definitely. It puts in jeopardy the ability to deliver gas on the schedule that we were hoping to stick to,” explained Chairman Souki.
CEO Simões explained that what has not changed for Tellurian was that it was already operating as a natural gas producer with revenues from gas sales.
“Last quarter we produced 9 billion cubic feet of natural gas and had over $61 million in sales, and since then we have closed the EnSight acquisition,” noted Simões.
“Currently we have 11 natural gas wells in various stages of completion and therefore expect a significant increase in production and sales next quarter,” he said.
“In addition, we will add to our value when our fully permitted Driftwood LNG project is completed, and we can reach the global markets with LNG sales at global prices,” he stated.
