Tellurian fights to keep its Driftwood LNG project alive
07/02/2024 11:00
By Curtis Williams and David French
HOUSTON, Feb 7 (Reuters) - The proposed sale of LNG
developer Tellurian's TELL.A natural gas production assets
represents a move to stay afloat amid dwindling survival
options, said two people familiar with the company's thinking.
Tellurian has spent years and hundreds of millions of
dollars trying to finance and build the 27.6 million metric ton
per annum (mtpa) Driftwood plant in Lake Charles, Louisiana. On
Tuesday, it put on the market a natural gas production unit that
it once dangled as an incentive for investors to invest in the
plant.
The company's ability to raise new money from the stock
market has shriveled with its shares trading for less than
48-cents apiece, and revenue from the gas production business
drying up as prices tumbled.
It had warned investors last fall that continued losses and
dwindling cash reserves might not be enough within a year to
cover operating and debt costs. The going-concern warning
preceded its ouster of chairman and co-founder Charif Souki.
Full-year 2023 results are due in coming weeks. They will
likely show a drop in the $59.2 million in cash and equivalents
it held at the end of September due to the latest drop in
natural gas prices. That cash figure was a down from $474
million at the end of 2022.
The top priorities for Tellurian's management are increasing
its liquidity, and reducing expenses by resetting of its
commercial relationships and contracts to get better deals, said
a person familiar with management's thinking.
"Driftwood is trying to reestablish commercial
relationships, that is vital. They need to finalize sales
contracts and sources of equity investments without which the
project can't move forward," said Alex Munton, director of
global gas and LNG research at consulting firm Rapidan Energy
Group.
Tellurian declined to comment on any further actions it may
take to change the course of its business.
The drop in natural gas prices in the last year has squeezed
its revenue. U.S. gas futures on Tuesday fell to $2 per thousand
cubic feet (mcf), a fresh nine-month low and less than a third
of 2022's average price of $6.50 per mcf.
A sale of Tellurian's Haynesville shale assets will be only
a stopgap measure. They produce a relative small, 200 million
cubic feet per day, not enough to cover the billions of dollars
required to complete the construction of Driftwood LNG, Munton
said.
Still, Tellurian says the asset sale will give it room to
maneuver.
"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," CEO Octavio Simoes
said.
(Reporting by Curtis Williams in Houston and David French in
New York; Editing by Lincoln Feast.)
((Curtis.Williams@thomsonreuters.com; +1 346 324 7560;))