LNG

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, has signed an agreement to sell its Haynesville gas production business in East Texas and Louisiana to Dallas, Texas-based Aethon Energy Management, a private investment firm.

Tellurian said Aethon had agreed to pay $260 million for the shale gas business and additionally signed an accord to purchase 2 million tonnes per annum of LNG from the Driftwood liquefaction plant.

“The assets will expand Aethon’s footprint in the Louisiana Haynesville and Bossier shale basins with approximately 31,000 net acres, including gathering and treating systems that have capacity for up to 100 million cubic feet per day that will bring Aethon’s pro forma gathering and treating capacity to over 3 Bcf per day across its assets,” said a statement.

Lazards role

Tellurian earlier in 2024 hired the investment bank Lazards to explore a sale of its Haynesville gas production business as part of efforts to raise new capital to continue the Driftwood project with full permits to produce 27.6 million tonnes per annum.

The Driftwood project as it currently stands involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of Trains.

According to the regulatory permits and building schedules the Phase One development would include the first two of these blocks for 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.

Tellurian’s natural gas assets include 31,149 net acres, interests in 159 producing wells and over 400 drilling locations in the Haynesville Shale.

The Tellurian-Aethon Heads of Agreement contemplates the parties negotiating a 20-year offtake agreement which would be indexed to Henry Hub plus a liquefaction fee, with appropriate credit support, to provide the basis for project financing of Driftwood LNG.

The Tellurian-Aethon transaction is expected to close during the second quarter of 2024 and Tellurian will use the proceeds to reduce borrowings and for general corporate purposes.

Project boost

“Agreements with Aethon take us several steps closer to developing the Driftwood LNG project, for which Aethon is a vital partner,” said Tellurian Executive Chairman Martin Houston.

“The offtake agreement for 2 MTPA provides the foundation to accelerate Driftwood and demonstrates that we have successfully aligned our commercial offerings to meet the needs of potential customers,” Houston explained.

“For Tellurian, the proceeds from the sale of our upstream assets allow us to retire senior secured notes and strengthen our balance sheet for the long term,” stated Houston.

The Aethon firm’s Chief Executive for energy funds, Albert Huddleston, said that the expanding scale of its integrated business continues to deliver capital efficiency and industry-leading margins as the firm work to accelerate the role of natural gas in the broader energy transition.

“This Fund II and Fund III acquisition provides complementary growth opportunities alongside our extensive upstream and midstream footprint in the Haynesville with more than 20 years of existing inventory life,” added Huddleston.

Lazard served as financial advisor to Tellurian in this transaction, and Akin Gump served as legal counsel. Gibson Dunn provided legal counsel for Aethon. 

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, continues to be the focus of takeover speculation while losses have just doubled in the first quarter of 2024 and revenues halved from natural gas production assets in the Haynesville Shale basin.

Tellurian earlier in 2024 hired the investment bank Lazards to explore a sale of its Haynesville gas production business in East Texas and Louisiana as part of efforts to raise new capital to continue the Driftwood project with full permits to produce 27.6 million tonnes per annum.

Tellurian then added that it would consider offers for the whole of Driftwood LNG after unsuccessfully pursuing long-term sales and purchase agreements to finance the development.

The Driftwood project as it currently stands involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of Trains.

According to the regulatory permits and building schedules the Phase One development would include the first two of these blocks for 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.

Tellurian’s natural gas assets include 31,149 net acres, interests in 159 producing wells and over 400 drilling locations in the Haynesville Shale.

Latest earnings

Tellurian’s latest balance sheet showed that income from natural gas sales halved in the first quarter of 2024 to $25.47 million from $50.93M in the same three months of 2023.

Net losses also surged to $42.02M from $27.49M of losses in the same quarter of 2023.

Executive Chairman Martin Houston made no comment on the takeover speculation nor on gas assets sales and said in the earnings statement that Tellurian continued making progress on Driftwood LNG phase one construction with contractor Bechtel Energy of the US.

“Over the past few months, our senior team has sharpened its focus on stability, financial discipline and execution and we are laser-focused on bringing Driftwood to final investment decision,” Houston explained.

“To this end, we continue to take important steps to improve our balance sheet and liquidity position, and we continue to benefit from our strong regulatory standing,” he added.

“In addition, we have better aligned our commercial offerings to meet the needs of potential customers and we are highly encouraged by our ongoing commercial discussions,” Houston stated.

Permit extension

The Chairman noted that Driftwood LNG received an extension through 2029 to both the order authorizing construction from the US Federal Energy Regulatory Commission and its Section 404 permit from the US Army Corps of Engineers.

As of the end of March, Tellurian said it had $1.3 billion in total assets, including around $51.8M of cash and cash equivalents.

Tellurian Inc., the developer of the Driftwood liquefied natural gas export plant near Lake Charles in Louisiana, has moved to agree an amendment to the terms of certain debts after a month of various key decisions.

Tellurian said the amendment was expected to enhance near-term liquidity and provide the company with flexibility to successfully complete the sale of its upstream assets. 

Among other items, the amendment provisions include a reduction in Tellurian’s minimum cash balance requirement and the ability for the company to make its upcoming interest payments in-kind.

“This amendment to our debt agreement is pivotal towards establishing a sustainable capital structure and accelerating our strategic priority, Driftwood LNG,” explained Chief Executive Octávio Simões.

“It also provides us the time and flexibility to complete the sale of our upstream assets in a manner that maximizes value for our shareholders while we maintain our focus on the intensive negotiations associated with the commercialization of Driftwood LNG,” stated Simões.

Capacity

The Driftwood project involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of Trains.

The Phase One development would include the first two of these blocks for 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.

Analysts note that it has been a busy February 2024 for Tellurian as it also said it was exploring the sale  of Haynesville Shale basin upstream natural gas assets.

Tellurian has engaged the investment bank Lazards to explore opportunities for the sale of the gas assets.

The Houston, Texas-based company said that it had concluded that there were alternative gas supply strategies available to Tellurian from various basins and its ownership of upstream gas wells was not necessary at this stage of the liquefaction plant’s development.

Tellurian’s natural gas assets include 31,149 net acres, interests in 159 producing wells and over 400 drilling locations in the Haynesville Shale.

On the regulatory front, Tellurian was also told in mid-February that the US Federal Energy Regulatory Commission had issued an extension to its order authorizing the construction of Tellurian’s plant.

Building deadline

As extended, the order requires construction to be completed by April 18, 2029. 

Tellurian applied for the extension back in 2023 to ensure it had enough time to complete the construction of all five LNG Trains for the facility with a nameplate capacity of  27.6 MTPA.

Tellurian’s main contractor for the Driftwood construction is the US engineering company Bechtel Energy.

In September 2023, Tellurian signed an agreement with US LNG-equipment supplier Baker Hughes to secure a delivery schedule for eight LM6000PF+ gas turbines, main refrigerant compressors and control units required for Phase One construction.

Tellurian said the Baker Hughes agreement supported its aim of having the Driftwood venture achieving initial LNG production in four years’ time. 

Dec 28 (LNGJ) - Chatterjee Fund Management (CFM), the private equity firm with offices in New York, has increased shareholdings in US LNG plant developer Tellurian Inc. and its proposed Driftwood LNG plant in Louisiana. A filing by Tellurian with the US Securities and Exchange Commission showed that Chatterjee raised its stake to 7.3 percent from 5.2 percent previously. Tellurian’s shares on the American list of the New York Stock Exchange rose by 7.55 percent after the announcement to $0.95 per share.

   The Chatterjee firm was founded in 1989 by Purnendu Chatterjee, a former investment adviser to the Quantum Group of Funds and a former partner to consultants McKinsey & Company Inc. Tellurian said that from late December CFM acquired 9.84 million shares and a Marshall Islands-registered Chatterjee fund LVS bought 3.17M shares so that CFM now owns 28.52M shares and LVS has 17.63M shares. “Therefore, CFM and Dr Chatterjee may be deemed to beneficially own 46.16M shares, which represents approximately 7.3 percent of outstanding shares,” Tellurian said.

Tellurian Inc., the developer of the Driftwood liquefied natural gas export plant near Lake Charles in Louisiana, has ousted co-founder Charif Souki as Executive Chairman and has chosen Souki’s long-time business partner Martin Houston as the new Tellurian Chairman.

Tellurian Inc., the developer of the Driftwood liquefied natural gas export plant near Lake Charles in Louisiana, increased third-quarter natural gas production and revenues as it continued to progress with the financing of the venture and discussions with counterparties for offtake and equity.

Tellurian produced 19.5 billion cubic feet of natural gas for the quarter to the end of September compared with 11.4 Bcf for the same period of 2022.

The Houston-based company’s natural gas assets included 31,149 net acres and interests in 159 producing wells.

Its main production area of operations is the Haynesville Basin covering northwest Louisiana and East Texas.

Tellurian posted a loss of $12.55 million in the quarter compared with a profit $40.07M in the same quarter of 2022.

For the nine months the losses came to $44.23M versus a profit of $83.17M in the prior-year period.

Revenues

Tellurian generated around $43.2M in revenues from natural gas sales in the third quarter compared with $81.1M in the third quarter of 2022, a change driven by decreased realized natural gas prices partially offset by increased production volumes.

Tellurian reported a net loss of approximately $65.4M, or $0.12 per share (basic and diluted), for the quarter compared with a net loss of about $14.2M, or $0.03 per share (basic and diluted), for the same period of 2022.

As of the end of September, Tellurian said it had approximately $1.3Bln in total assets, including $59.3M of cash and cash equivalents.

“Tellurian’s upstream segment continues to provide growing natural gas production, improving significantly over the third quarter of last year, and we see natural gas prices on the rise through year end,” said President and Chief Executive Octávio Simões.

“We are having a number of discussions with counterparties for both equity partnership and LNG offtake for the Driftwood project and investment in the Driftwood Line 200/300 pipeline,” Simões explained.

Investments

“We have invested over one billion dollars to develop and advance construction of the fully permitted Driftwood project and remain on target to produce first LNG in 2027,” Simões stated.

The Driftwood project involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of four Trains.

The Phase One development would include the first two of these blocks for 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.

Tellurian also signed an accord in April 2023 to sell the site of the Driftwood plant to institutional investors for $1Bln and to lease back the site comprising 800 acres of land.

Tellurian’s main contractor for the Driftwood construction is the US engineering company Bechtel Energy.

In September 2023, Tellurian signed an agreement with US LNG-equipment supplier Baker Hughes to secure a delivery schedule for eight LM6000PF+ gas turbines, main refrigerant compressors and control units required for Phase One construction.

Tellurian said the agreement supported its aim of having the Driftwood venture achieved initial LNG production in four years’ time.

Tellurian Inc., the developer of the Driftwood liquefied natural gas export plant near Lake Charles in Louisiana, has signed an agreement for the supply of eight main refrigerant compression packages for the Phase One development of the Driftwood project.

Tellurian Inc., the developer of the Driftwood liquefied natural gas LNG export plant near Lake Charles in Louisiana, has given an update of engineering work being carried out by Bechtel Energy and costs per tonne of LNG.

The $1.5-billion US Driftwood Pipeline project comprising two feed-gas lines for the liquefied natural gas export plant in Louisiana has been formally approved by regulators.

Tellurian, the Driftwood project developer, said in a statement that the pipelines, known as Line 200 and Line 300, would be constructed in Beauregard Parish and Calcasieu Parish in the Gulf Coast state.

The Houston, Texas-based company, said the pipelines would be capable of delivering up to 5.5 billion cubic feet of natural gas per day.

Tellurian said the pipelines would have “virtually no emissions” due to the implementation of electric-powered Integrated Compressor Line (ICL) technology from US energy technology and services company Baker Hughes.

The company said the permits were awarded by the Federal Energy Regulatory Commission on April 21.

Bechtel contract

Leading US LNG engineering company Bechtel Energy has already been given limited notice to proceed with construction of Phase One of the Driftwood liquefaction plant.

The Tellurian project involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of four Trains.

The Phase One development would include the first two of these blocks with 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.

“Tellurian thanks the FERC for their thorough and collaborative review of our Driftwood Pipeline Project and we look forward to delivering natural gas in a cleaner and highly reliable way to Southwest Louisiana,” said Tellurian President and Chief Executive Octávio Simões.

Earlier in April, Tellurian signed an accord to sell the site of the Driftwood plant near Lake Charles to New York-based institutional investors.

Tellurian said that the sale and lease back deal had been the subject of a binding letter of intent for the 800 acres of land owned by Tellurian’s subsidiary, Driftwood LNG LLC.

Master lease

The agreement will see Tellurian receiving $1 billion for the land and a lease.

“It will consist of the sale by Driftwood LNG and purchase by a special purpose entity to be formed by the investor of Driftwood LNG’s interests in the property for $1.0Bln pursuant to a purchase and sale agreement,” said Tellurian.

On the closing of the transaction a 40-year lease of the property from the purchaser to Driftwood LNG will be signed in the form of a master lease.

There is also a requirement that the equity investors in Driftwood LNG become joint and contingent guarantors of the master lease.

Tellurian Inc. has signed an accord to sell the site of the proposed Driftwood liquefied natural gas plant in Lake Charles in Louisiana to a New York-based institutional investor.

Tellurian said in a stock exchange filing that the sale and lease back deal has been the subject of a binding letter of intent for the 800 acres of land owned by Tellurian’s subsidiary, Driftwood LNG LLC.

The agreement with the unnamed investment firm with $120 billion in assets under management will see Tellurian receiving $1 billion for the land and a lease.

“It will consist of the sale by Driftwood LNG and purchase by a special purpose entity to be formed by the investor of Driftwood LNG’s interests in the property for $1.0Bln pursuant to a purchase and sale agreement,” said Tellurian.

On the closing of the transaction a 40-year lease of the property from the purchaser to Driftwood LNG will be signed in the form of a master lease.

The terms of the master lease will include, among other requirements, a capitalization rate of 8.75 percent and annual rent escalators of 3.00 percent as well as a requirement that Driftwood LNG posts a letter of credit equal to 12 months of rent.

Guarantors

There is also a requirement that the equity investors in Driftwood LNG become joint and contingent guarantors of the master lease.

“The master lease contingent guarantors are also required to hold an investment grade rating of BBB or higher or attain an equivalent shadow credit rating, or be otherwise acceptable to the purchaser,” noted Tellurian in its filing.

The Houston-based company is quoted on the American list of the New York Stock Exchange.

The accord contemplates that the parties will use “commercially reasonable efforts” to finalize the purchase agreement and master lease on or before July 14, 2023.

“The LOI will terminate on July 14, 2023 if Driftwood LNG fails to identify the contingent guarantors by such date and will terminate on July 31,” it said.

The satisfaction of the closing conditions in the purchase agreement also including Driftwood LNG securing financing commitments for Phase One of the LNG export project.

Leading US LNG engineering company Bechtel Energy has already been given limited notice to proceed with construction of Phase One of the Driftwood liquefaction plant.

The Tellurian project involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of four Trains.

The Phase One development would include the first two of these blocks with 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.