LNG

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.