Tellurian Eyes Upstream Asset Sale Under New Chairman

Tellurian Inc. is exploring opportunities for the sale of its upstream business in the Haynesville Shale as the company reviews its strategy regarding the Driftwood LNG project, a liquefied natural gas (LNG) export facility being constructed on the Calcasieu River west bank in Louisiana.

“As we commercialize Driftwood LNG, Tellurian has been reviewing its strategy, including the dynamics of the U.S. natural gas market in the context of global LNG demand”, Tellurian CEO Octávio Simões said in a statement Tuesday. “We have concluded that there are alternative gas supply strategies available to us from various basins and our ownership of upstream assets is not necessary at this stage of Tellurian’s development. We have a substantial number of drilling locations that we believe will be highly attractive to oil and gas producers that can develop them more quickly than we would”.

“By unlocking the full value of these high-quality assets, we aim to substantially reduce our debt, further reduce our general and administrative expenses, and provide additional cash, enabling us to develop Driftwood LNG. Currently, this approach is more attractive than issuing equity to fund our 2024 development activities and working capital needs”, Simões added.

Tellurian produced 19.5 billion cubic feet (Bcf) of natural gas for the quarter ended September 30, 2023. Tellurian’s natural gas assets include 31,149 net acres, interests in 159 producing wells and over 400 drilling locations, according to the release.

Driftwood LNG LLC, owned by Tellurian, is developing an LNG production and export terminal on the west bank of the Calcasieu River, south of Lake Charles, Louisiana, that is targeted to export up to 27.6 million metric tons of LNG globally once completed, according to the company’s website.

Meanwhile, the company’s new chairman, Martin Houston, wrote in a letter to shareholders, “We continue to work with Bechtel on the site at Driftwood under the LNTP2 (limited notice to proceed) program and explore options for additional scope depending on the progress on the commercialization front. We are balancing our spend across Driftwood, the upstream company and G&A [general and administrative expenses]”.

Martin, who was vice chairman and the company’s co-founder, replaced former chairman Charif Souki in December. Souki will no longer serve as an executive or officer of the company or hold any managerial responsibilities, although he remains a member of the board, according to an earlier news release.

Regarding the Biden’s administration’s pause of all new and pending applications for export authorization to Non-Free Trade Agreement (Non-FTA) countries, Martin wrote, “We already have our license to export LNG to Non-FTA Countries which is valid through 2050. As we get closer to completing construction, we plan to adjust the in-service date condition under that license to accommodate our construction timeline”.

“We will continue to monitor the DOE’s assessment process review and any impacts it may have to our Non-FTA export license. I would add that in the meantime, the global demand outlook for LNG has not changed, so any scarcity will drive opportunity for Tellurian”, Martin continued.

Tellurian’s board in December also appointed former General Counsel Daniel Belhumeur as President of Tellurian, and former Deputy General Counsel Meredith Mouer as General Counsel and Chief Compliance Officer of Tellurian.

“This is an important moment for Tellurian as we navigate several key initiatives”, Simões said in an earlier statement. “We are focused on unlocking shareholder value via execution of potential development and commercial partners at Driftwood LNG, while also evaluating options to refinance our existing debt, streamline costs and improve our balance sheet. These management changes ensure alignment and continuity. I look forward to working with Daniel as he oversees key functions while I prioritize bringing Driftwood LNG, now with growing commercial momentum, to final investment decision”.

“We have the leadership team in place to execute our strategic priorities, and together we will move the business forward”, Belhumeur said.

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