Australia's Woodside Energy to buy US LNG developer Tellurian for $1.2 bln (updated)
22/07/2024 02:53
(Adds at paragraphs 12, and 15-17 decision to sell the project
was unanimous, analyst comment)
By Ayushman Ojha and Curtis Williams
July 22 (Reuters) - Australia's Woodside Energy WDS.AX
said on Monday it had agreed to buy U.S. liquefied natural gas
developer Tellurian TELL.A , including its U.S. Gulf Coast
Driftwood LNG export project, for $1.2 billion including debt.
The agreement could strengthen the United States' position
as the world's largest producer of the superchilled gas by
securing the completion of Tellurian's 27.6 million metric ton
per annum facility in Lake Charles, Louisiana.
The transaction includes the $900 million cash purchase of
outstanding Tellurian common stock at $1 per share, Woodside
said in a statement, representing a more than 75% premium to
Tellurian's last closing price.
The deal gives the Australian firm access to a fully
authorised project in the U.S. amid difficulties for other LNG
developers to advance proposals due to President Joe Biden
administration's pause on approvals for new LNG exports to
countries that do not have free trade agreements with the U.S.
The acquisition "positions Woodside to be a global LNG
powerhouse," said the company's CEO, Meg O'Neill.
The transaction adds a scalable U.S. LNG development
opportunity to Woodside's existing 10 million metric tons a year
of equity LNG in Australia, she added.
The agreement will also help solve Tellurian's financial
woes. The U.S. company has been searching for financial partners
to fund the Driftwood LNG facility. In May, it said it would
sell its upstream assets to pay off some of its debt.
The Driftwood LNG project has had many setbacks, including
the cancellation of some LNG supply deals amid concerns over the
company's ability to finish the project.
In a letter on Sunday urging shareholders to accept the
offer, Tellurian Executive Chairman Martin Houston said the deal
was in the company's best interests because it would be
difficult to raise the billions required to build the plant
without a commitment from long-term customers for all of the
project's output.
"Equity providers are now less inclined to take risk ahead
of projects being fully contracted," Houston told shareholders.
Tellurian's ability to get immediate cash from the sale was
also a reason he gave for supporting the offer.
Houston said the Board's decision to recommend the sale of
the Driftwood project was unanimous as it was felt that cash in
hand was better than the uncertainty of the project.
Woodside said it was aiming for the project to be ready for
a final investment decision for phase 1 from the first quarter
of 2025.
"Woodside expects to leverage its global LNG expertise
to unlock this fully permitted development and expand its
relationship with Bechtel, which is the EPC (engineering,
procurement and construction) contractor for both Driftwood LNG
and our Pluto Train 2 project in Australia," Woodside said.
Saul Kavonic, an energy analyst at MST Marquee, said this is
the right kind of acquisition that Woodside should be pursuing,
versus an earlier attempted deal to merge with Australian firm
Santos.
"It is leveraging Woodside's LNG expertise to access
financially distressed yet otherwise advantaged LNG assets at
good price, which Woodside can add real value to," he said,
adding Woodside can bring Driftwood forward better than
Tellurian.
"Woodside can remedy marketing relationships, funding, and
operator capability deficits Tellurian suffered from to add
value here. A lot of potential LNG buyers and acquirers of
Tellurian were put off engaging due to former Tellurian
management history. Woodside owning the asset it will remedy
this."
At the start of the year, Woodside and Santos had been in
merger talks but discussions fell apart as the two companies
could not agree on a valuation level.
(Reporting by Ayushman Ojha in Bengaluru and Curtis Williams in
Houston; additional reporting by Emily Chow; Editing by Chris
Reese, Christopher Cushing, Jamie Freed and Michael Perry)
((Ayushman.Ojha@thomsonreuters.com;))