LNG

Chesapeake Energy Corp. said it would purchase smaller market rival Southwestern Energy Co. for $7.4 billion in an all-stock transaction creating a $24Bln company that will be the nation’s largest natural gas producer.

Kinder Morgan Inc. (KMI) the leading US pipeline feed-gas company for liquefied natural gas plants and a key energy infrastructure developer, increased first-quarter net income and cash flow with more natural gas from the US Gulf Coast shale-gas basins.

The company reported first-quarter net income attributable to KMI of $679 million compared with $667M in the first three months of 2022.

Cash flow for the quarter from operations amounted to $1.33 billion versus $1.08Bln in the prior-year quarter.

“Our natural gas pipeline network is composed of some 70,000 miles of interstate and intrastate pipelines that move about 40 percent of US natural gas production, along with 700 billion cubic feet of natural gas storage, comprising 15 percent of total US natural gas storage capacity,” explained Steve Kean, KMI Chief Executive.

“While the US Congress debates much-needed infrastructure permitting reform, the system we operate under today makes it difficult to permit new natural gas pipelines in much of the country,” Kean stated.

Value added

“That in turn increases the value of our existing natural gas pipeline systems, which results in a favorable recontracting environment,” the CEO added.

“With a large portion of our existing natural gas pipeline network in Texas and Louisiana, we also benefit from our ability to expand to meet growing demand in the most infrastructure-friendly region of the country,” Kean said.

KMI said it was continuing to execute expansions of its existing natural gas pipeline systems.

“During the first quarter we made good progress on two such expansions. One will add approximately 550 million cubic feet per day of capacity to the Permian Highway Pipeline (PHP) system through additional compression with minimal new pipeline build,” said KMI.

“The other will increase capacity and reliability of services to Con Edison, a key business partner, by upgrading and adding compression facilities on the Tennessee Gas Pipeline (TGP) system in a critical region of the country,” the company added.

Gas gathering

KMI President Kim Dang gave an overview and praised the gas gathering systems for keeping the natural gas business on track.

“The Natural Gas Pipelines business segment’s financial performance was up in the first quarter of 2023 relative to the first quarter of 2022, primarily on higher contributions from our Texas Intrastate system, from Midcontinent Express Pipeline, from El Paso Natural Gas (EPNG) and from most of our gathering system assets,” explained Dang.

“Natural gas transport volumes were up 3 percent compared to the first quarter of 2022, primarily from increases on EPNG due to returning a pipeline to service, cooler weather, and the retirement of a coal-fired power plant,” she added.

“Natural gas gathering volumes were up 18 percent from the first quarter of 2022 primarily from our Haynesville and Eagle Ford systems,” Dang said.

WhiteHawk Energy, the US company with royalty and field assets covering 475,000 gross acres in the Marcellus Shale, has agreed to acquire natural gas assets primarily located in the Haynesville Shale from where more feed gas will flow to US Gulf Coast LNG plants.

Tellurian Inc., the developer of the US Driftwood LNG export plant proposed for Lake Charles in Louisiana, has resumed natural gas drilling in the Haynesville Shale basin in the north of the Gulf Coast state and could acquire more acreage.

Tokyo Gas, one of the leading Japanese LNG importer with a supply agreement at the Cove Point plant in Maryland, has now significantly boosted its shale-gas production plans in Texas by acquiring an additional stake in Houston, Texas-based Castleton Resources to own a majority of the company

Tellurian Inc., developer of the Driftwood LNG in Louisiana, said it was preparing a write-down of resource asset values and project cost cuts as well as a share offering, as its marketing arm sold an LNG cargo amid attempts to bring Indian company Petronet on board as a buyer and an investor.

“Tellurian continues to evaluate, and discuss with potential partners, the scope and other aspects of the Driftwood project in light of the evolving economic environment, investor needs and other factors,” said the company in a statement to the Nasdaq global stock exchange.

“As a result of these discussions, the company is evaluating certain potential changes to the project that, among other things, could significantly reduce the overall cost of Phase 1,” it explained.

“Whether the company implements changes to the project will be based on a variety of factors, including the results of continuing analysis, changing business conditions and investor feedback,” it added.

The Driftwood export facility is proposed for the west bank of the Calcasieu River, south of Lake Charles, and with output of 26 million tonnes per annum.

Tellurian said that to date about 30 percent of the engineering for Phase 1 of the Driftwood LNG terminal has been completed by US engineering, procurement and construction company Bechtel.

The statement to Nasdaq acknowledged that although Tellurian had not completed its financial statement for the second quarter of 2020, its capital resources amounted to about $88.3 million of cash and cash equivalents, of which approximately $40.1M was maintained at a wholly owned subsidiary of Tellurian Production Holdings.

“Subsequently, in early July, the company collected a receivable of approximately $7M from the sale of an LNG cargo to an unrelated third party,” Tellurian explained.

“As disclosed in the company’s proxy statement for the 2020 annual stockholders’ meeting, the company has agreed to reimburse one of its directors for certain expenses associated with a lawsuit with Cheniere Energy,” it said.

“In addition to amounts paid as of June 30, 2020, the company expects to incur related expenses of approximately $4.5M,” it added.

Declines in natural gas prices are also likely to lead to Tellurian incurring “substantial impairment charges” relating to its reserves and the carrying value of its assets.

From its acquisition in 2017 of Rockcliff Energy, Telllurian’s assets include about 3.3 million cubic feet per day of natural gas production, 1.4 trillion cubic feet gas resource.

In total, Tellurian holds 10,300 net acres in the prolific Haynesville Shale gas basin in Louisiana, located north of the proposed liquefaction plant, and with 22 company-operated wells and 32 non-operated wells.

Tellurian additionally announced it had entered into a securities purchase agreement with certain institutional investors for the sale of 35 million common shares at a price of $1.00 per share for total gross proceeds of $35M.

“The offering will generate net cash proceeds of approximately $32.5 million after deducting estimated expenses in connection with the offering,” said Tellurian.

“The registered direct offering is expected to close on or about July 24, subject to the satisfaction of customary closing conditions,” it added.

Roth Capital Partners is acting as the placement agent for the heavily discounted offering.

The latest events saw Tellurian shares drop by almost 20 percent on July 22 to $1.28 per share from $1.58 per share at the previous close.

The Tellurian shares on the Nasdaq had jumped by more than 56 percent on July 21, valuing Tellurian at $422 million from $270M the previous day, July 20, when they were worth $1.10 per share.

This was because of reliable reports that Petronet and Tellurian were again in talks about the Indian company purchasing up to 5 million tonnes of LNG and taking a big equity stake in the company.

Neither Tellurian nor Petronet have commented so far on the reports.