LNG

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 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.

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.

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.

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, has awarded a contract to US oil and gas services company Baker Hughes for key equipment.

Baker Hughes has been awarded a contract by Driftwood Pipeline LLC, a subsidiary of Tellurian, to provide electric-powered Integrated compressor line technology and turbo-machinery equipment for several lines as part of a natural gas transmission project proposed for Beauregard and Calcasieu Parishes in southwest Louisiana.

Tellurian President and Chief Executive Octávio Simões said that the landmark project and technology would eliminate nearly all emissions for the proposed project.

“We value the expertise of Baker Hughes and look forward to partnering on delivering cleaner solutions for an energy-hungry world,” stated the Tellurian CEO.

Joey Mahmoud, President of Tellurian Pipelines, said that he anticipated the project would supply upwards of five and one-half billion cubic feet of natural gas daily, with virtually no emissions.

“Tellurian is doing its part by making this initial $240 million pipeline investment as part of the broader Driftwood Pipeline system which will provide enhanced supply reliability to meet the area’s projected industrial growth in a cleaner, more sustainable manner,” explained Mahmoud.

Capacity

The Driftwood LNG export 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.

Tellurian said that this contract marked the first time Baker Hughes would install its decarbonization technology for pipeline compression in North America.

“The project will initially include four 19 megawatt (MW) compressors and other turbo-machinery equipment for a total of four compressor trains, as well as a LM6000PF+ gas turbine for backup power for the initial phase of the pipeline project at Driftwood’s Indian Bayou Compressor Station,” said Houston-based Tellurian.

Rod Christie, executive vice president of turbo-machinery and process solutions at Baker Hughes, said that its customers around the world were seeking decarbonization solutions.

“Our zero-emissions ICL technology is already reducing the climate footprint of pipeline projects in many regions that deliver vital gas supplies, and now we are bringing it to North America, a region crucial to meeting global natural gas demand,” added Christie.

Baker Hughes said that its extended portfolio of technologies contribute to lower the carbon footprint across the natural gas supply chain, which is viewed by many as a critical path for the energy transition.

Tellurian Inc., the developer of the Driftwood LNG plant in Louisiana, said it ended 2021 with more than $300 million in liquidity and over $360M in standardized measure of discounted future net cash flows of proved natural gas reserves.

Tellurian said in its earnings report that it continued advancing the Driftwood LNG project in 2021 with several listed accomplishments, including sales and purchase agreements (SPAs) totaling nine million tonnes per annum of LNG output.

The Driftwood plant in Calcasieu Parish in Louisiana, near Lake Charles, has permits to produce 27.6 MTPA of LNG and the 10-year offtake agreements are with Shell North America and global commodities firms Vitol and Gunvor.

Tellurian said it ended its 2021 fiscal year with a strong balance sheet consisting of around $621.8M in total assets.

The company generated about $71.3M in revenues from natural gas and LNG sales and reported a net loss of around $114.7M, or $0.28 per share (basic and diluted), for all of 2021.

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

First phase

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 noted in its earnings that it had executed a long-term ground lease agreement with the Lake Charles Harbor and Terminal district and paid some debts to strengthened the balance sheet.

“The global economy is in the early stages of an energy super cycle driven by strong demand for natural gas and several years of underinvestment in energy infrastructure,” said Tellurian President and Chief Executive Octávio Simões.

“Tellurian is optimally positioned with fully executed market-based LNG SPAs and a permitted project,” added Simões.

The CEO confirmed a statement made in early February 2022 by Tellurian Executive Chairman Charif Souki that US engineering firm Bechtel would begin construction of Driftwood LNG in April and the company would seek to conclude the financing process shortly thereafter.

Shale-gas wells

Tellurian added in the report that it had drilled and put into production four new Haynesville Shale operated natural gas wells, increasing proved developed reserves by around 51 billion cubic feet (Bcf) as of the end of December 2021.

“Tellurian will continue our natural gas development program and expects to drill, complete and place into production additional operated Haynesville wells during 2022,” stated Simões.

The Haynesville gas resources produced 14.3 Bcf of natural gas for the year to the end of December and existing natural gas assets include 11,060 net acres, interests in 78 producing wells and estimated proved reserves of 323.3 Bcf.

“The reserve estimates were determined under US Securities and Exchange Commission guidelines and were prepared by an independent petroleum consulting firm,” said the company.

Tellurian Inc., the developer of the Driftwood LNG export plant in Louisiana and set to supply commodities trading firms Gunvor and Vitol as well as Royal Dutch Shell, has reduced losses in the third quarter.

The company posted losses of $15.9 million compared with a $29.5M loss during the prior-year period.

Tellurian’s revenues increased to $15.6M, up 9 percent from $14.3M reported in the same three month of 2020.

“Tellurian recently brought production online from two newly completed natural gas wells, adding to our financial strength and integrated model that provides a valuable hedge to volatile global prices,” said President and Chief Executive Octávio Simões.

“By year end 2021 we plan to produce approximately 70 million cubic feet equivalent per day,” added the CEO.

Simões said that the Houston, Texas-based company was also in discussions with counter-parties to expand the gas resources in the Haynesville Shale basin.

In addition, Tellurian has authorized a new drilling programme and plans to drill 12 to 14 wells to produce about 220 million cubic feet equivalent per day by year-end 2022.

The company plans to give US construction and engineering company Bechtel notice to proceed with construction in early 2022 for the site at Lake Charles where Tellurian also sealed a long-term lease option for a minimum of 20 year and options for 50 years.

Initial work includes pipeline relocation, highway and road widening, electrical infrastructure removal and the drilling of water wells.

Finance focus

Tellurian has now turned its focus to financing Driftwood LNG to the tune of $16.8 billion.

CEO Simões said that the Vitol, Gunvor and Shell deals have opened the way for positive project financing in that 9 million tonnes per annum of LNG has already been pre-sold.

As part of corporate activities during the quarter around $116M was raised in a public stock offering.

Subsequently Tellurian transferred its common stock listing from the Nasdaq Capital Market to the NYSE American.

Tellurian ended its third quarter with about $210.8M in cash and cash equivalents and no borrowing obligations.

“Tellurian has a strong balance sheet consisting of approximately $483.9M in total assets,” it added.

Tellurian Inc., the developer of the Driftwood LNG project in Louisiana, has sealed new employment contracts with Executive Chairman Charif Souki and President and Chief Executive Octávio Simões after signing key sales agreements.

The Houston, Texas-based company informed the Securities and Exchange Commission of executive compensation deals after signing 10-year supply accords earlier in 2021 with commodities companies Gunvor and Vitol as well as Royal Dutch Shell.

The Driftwood project has permits for production capacity of around 27 MTPA. The plant will be sited on the west bank of the Calcasieu River, just south of Lake Charles.

Tellurian told the SEC it entered into an employment agreement with the Chairman Souki for an initial three-year term and will automatically renew for an additional 12-month term at the end of the initial three-year term and each subsequent one-year anniversary thereafter, unless terminated by the company or Souki himself.

“The Executive Chairman’s employment agreement provides for an annual base salary of $1,200,000, which is consistent with the level of Mr. Souki’s cash compensation for fiscal year 2021 and is subject to annual review by the board of directors,” Tellurian said in its statement.

In addition, the Chairman Souki’s agreement provides for a discretionary annual cash bonus target of 150 percent of Souki’s annual base salary, subject to a cap of 300 percent.

“Payment of any such annual cash bonus will be based on Mr. Souki’s and the company’s performance, as determined by the board,” it added.

There were no other details of any other compensation that might be due to Souki in the form of company stocks.

Tellurian has also entered into an employment agreement with the President and CEO Octávio Simões for an initial term through June 5, 2024.

His employment would automatically renew for an additional 12-month term at the end of the initial term and each subsequent one-year anniversary thereafter, unless terminated.

“The CEO’s employment agreement provides for an annual base salary of $725,000, which is consistent with Mr. Simões's current annual base salary and is subject to annual review by the Board,” said the Tellurian filing.

“In addition, the CEO’s agreement provides for a discretionary annual cash bonus target of 125 percent of Mr. Simões’s annual base salary, subject to a cap of 218.75 percent of Mr. Simões’s annual base salary,” it added.

Pursuant to the CEO deal, the parties agreed to amend the terms of Simões’s restricted stock agreements covering a total of 2,000,000 shares of Tellurian restricted stock and a cash incentive award agreement providing for a cash award of up to $5 million (in each case vesting in one-third increments upon an affirmative final investment decision) by the board.

In project activities Tellurian has also filed applications with the US Federal Energy Regulatory Commission to build a new 37-mile pipeline in Louisiana that will originate near Ragley in Beauregard Parish and end near Carlyss in Calcasieu Parish, close to where the Driftwood facility will be located.

Tellurian Inc. has finalized yet another liquefied natural gas sale and purchase agreement with Royal Dutch Shell after two previous sealed deals with global commodities firms Gunvor and Vitol.

The Shell SPAs are on a free-on-board (FOB) basis at Driftwood LNG for a combination of 3 million tonnes per annum for a 10-year period, indexed with two indices, the Japan Korea Marker (JKM) and the Dutch Title Transfer Facility (TTF), each netted back for transportation charges.

The agreements mark the third deal that Tellurian has finalized in 10 weeks, totalling 9 MTPA and nearly all of the capacity of Driftwood LNG’s first two liquefaction Trains.

“Tellurian welcomes Shell to the Driftwood project,” said Tellurian President and Chief Executive Octávio Simões.

“Shell manages one of the largest and most diverse portfolios of LNG in the world,” he added.

Steve Hill, Executive Vice President of Shell Energy said the deal suited the Anglo-Dutch company as LNG demand was expected to nearly double by 2040.

“This deal secures additional competitive volumes for our portfolio by the mid-2020s, enabling us to continue providing diverse and flexible LNG supply to our customers. We look forward to working with Tellurian,” stated Hill.

The Houston, Texas-based company is moving ahead after signing firm deals in late May and early June 2021 with Gunvor and Vitol for a combined 6 MTPA from the Driftwood plant.

Each of the firm agreements is also for a period of 10 years with the supply indexed to the JKM and Dutch TTF.

Simões said that Tellurian would now focus on financing Driftwood to give US engineering contractor Bechtel notice to proceed with construction in early 2022.

The Driftwood project has permits for production capacity of around 27 MTPA. The plant will be sited on the west bank of the Calcasieu River, just south of Lake Charles.

Tellurian has also filed a formal application with the US Federal Energy Regulatory Commission to build a new 37-mile pipeline in Louisiana that will originate near Ragley in Beauregard Parish and end near Carlyss in Calcasieu Parish, close to where the Driftwood facility will be located.

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, has finalized a second LNG supply deal with international commodities company Vitol after previously signing another agreement in late May with Vitol’s market trading rival Gunvor.

Tellurian’s LNG sales and purchase agreement (SPA) with Vitol is for 3 million tonnes per annum on a free-on-board (FOB) basis for a 10-year period.

The volumes will be indexed to a combination of two indices, the Japan Korea Marker (JKM) for North Asian spot cargoes and the European benchmark Dutch Title Transfer Facility (TTF), each netted back for transportation charges, the same terms as the Gunvor deal.

Tellurian said that at today’s prices, each of these SPAs is valued at around $12 billion in revenue over 10 years for the Gulf Coast venture with proposed total output of over 27 MTPA.

Tellurian had earlier signed a supply deal with Gunvor to give the Driftwood project some momentum after several years of firms declining to commit to long-term contracts.

“Vitol expressed interest in the development of Driftwood early on, and it is finalizing this agreement,” explained Tellurian President and Chief Executive Octávio Simões.

Attractive

“As the world electrifies and our population grows, the demand for reliable, low-cost energy will continue to increase. LNG provides a stable source of fuel at an attractive price, and Tellurian’s integrated model is positioned perfectly to offer volumes on JKM, TTF or blended price basis,” added Simões.

Tellurian’s Executive Vice President LNG Marketing and Trading Tarek Souki added that the company had made exceptional progress in the first phase capacity sales by securing this second SPA.

“The two recent agreements represent an aggregate of $24Bln in estimated revenue. We will continue to be deliberate and selective in choosing our additional customers,” added Souki.

Pablo Galante Escobar, Global Head of LNG and European Gas and Power at Vitol, said the firm was excited to conclude this agreement with Tellurian.

“Our long-term commitment and investment-grade rating will help Tellurian as they continue their path to financial close,” he added.

Tellurian had hinted in its first-quarter earnings report at the start of May 2021 that the improving market favoured the signing soon of supply agreements.

The Houston, Texas-based company said it continued to build its Gulf Coast natural gas business and had concentrated on paying down debt.

The overall project plan for Tellurian now is for the Driftwood liquefaction plant to have first-phase production of 16 MTPA, rising to 27 MPTA with expansions.

Tellurian produced 3.3 billion cubic feet of natural gas for the quarter in the Haynesville Shale basin in north Louisiana.

Tellurian’s upstream assets include 9,704 net acres and interests in 72 producing wells.