LNG

Woodside Energy gears up to officially break ground on the $17.5 billion Louisiana LNG facility today – the biggest direct foreign investment in the state’s history. Planned production capacity is up to 16.5 mtpa, with first LNG targeted in 2029.

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. 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.

Vitol, the world’s largest independent energy and commodities firm, said its traded liquefied natural gas volumes increased slightly to 17.6 million tonnes during 2022 and with 67 percent sold to Europe in the fourth quarter.

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.

Aug 30 (LNGJ) - Tellurian Inc., the developer of the Driftwood LNG export plant in Louisiana with 27.6 million tonnes per annum of output and an associated pipeline, intends to offer and sell units consisting of 11.25 percent senior secured notes due in 2027 ($1,000 principal amount per note) and warrants to purchase shares of Tellurian common stock in an underwritten public offering.

   “The company intends to use the net proceeds from the offering by contributing them to the Driftwood Project entities to support the construction of the Driftwood Project,” said the company. B. Riley Securities, Inc. is acting as sole bookrunning manager for the offering. Tellurian noted that offering may be made only by means of a prospectus supplement and an accompanying prospectus.

During the second quarter of this year, Tellurian generated $61.3 mill in revenue from natural gas sales on a production increase of around 47%, compared to the previous quarter. 

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, has purchased more assets in the Haynesville Shale to boost feed gas resources when the plant comes on stream.

The Houston, Texas-based company entered into an agreement to purchase natural gas assets from the privately held companies EnSight IV Energy Partners LLC and EnSight Haynesville Partners LLC.

The purchase price was $125 million, subject to customary closing adjustments, and a contingent payment of $7.5M based on the price of natural gas and which may be payable in March 2023 under certain conditions.

Tellurian said it would fund the purchase with cash on hand and anticipates finalizing the acquisition of the EnSight assets in the third quarter of 2022.

Driftwood project owner Tellurian has existing gas field assets in the Haynesville Shale which extends through areas located in East Texas and Western Louisiana.

Tellurian produced 6.1 billion cubic feet of natural gas in the first quarter of 2022 compared with 4.9 Bcf for the previous quarter.

Its existing upstream assets in the Basin include 13,521 net acres and interests in 82 producing wells as of March 2022.

Export project

The Driftwood LNG export plant has permits to produce 27.6 million tonnes per annum of LNG and has 10-year offtake agreements with the likes of Shell North America and global commodities firms Vitol and Gunvor.

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.

On its new Haynesville assets, Tellurian said current net production was 45 million cubic feet of natural gas per day with the fields having 100 percent natural gas.

The purchase covers around 5,000 net acres in the core of the Haynesville Shale in DeSoto, Bossier, Caddo, and Webster Parishes and with 44 producing wells and five wells in progress.

With this deal Tellurian said that its Haynesville Shale acreage increased to 20,000 net acres, with 275 gross drilling locations and a net resource expected at 2 trillion cubic feet.

“We have been diligently growing our natural gas production and reserves in the Haynesville,” said John Howie, head of Tellurian’s natural gas fields.

“These assets provide Tellurian with both cash flow and a physical hedge for Driftwood LNG,” added Howie.

“The EnSight asset is a great fit with Tellurian’s existing position in the Haynesville Shale and allows us to step into an ongoing development program and bring on-line significant additional natural gas volumes in the fourth quarter of 2022,” he stated.

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, reported a rise in revenue from natural gas production because of increased prices and volumes from its Haynesville Shale assets as progress continued on construction preparations and LNG volume agreements.

The company generated $26M in revenues from natural gas sales, compared to $8.7M in the first quarter of 2021. 

Tellurian said it ended the quarter with about $296M of cash and cash equivalents and $732M in total assets.

The Houston-based company also confirmed it had completed its site preparation and issued a limited notice to proceed to US LNG plant engineer Bechtel to begin construction of the Driftwood export facility.

“Tellurian’s own natural gas production and sales provide valuable operating cash and a unique advantage to us as a liquefied natural gas supplier,” said President and CEO Octávio Simões in the first-quarter 2022 earnings statement.

The Driftwood plant has permits to produce 27.6 million tonnes per annum of LNG and has 10-year offtake agreements with Shell North America and global commodities firms Vitol and Gunvor.

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.

Output

“We are nearing net production of 100 million cubic feet equivalent per day and plan to reach 200 mmcfe per day by year-end,” added Simões.

“Tellurian production is now generating free cash flow after capex and we intend to maintain capex at approximately $150M a year,” explained the CEO.

“With Bechtel now onsite beginning construction of Driftwood, we are on schedule to begin LNG production in 2026,” he stated.

Tellurian produced 6.1 billion cubic feet of natural gas for the quarter to the end of March compared with 4.9 Bcf for the previous
quarter.

Tellurian’s upstream assets include 13,521 net acres and interests in 82 producing wells as of March 2022.