REG - Woodside Energy Grp. - Woodside to acquire Tellurian and Driftwood LNG

Woodside EnergyAnnouncement

22/07/2024 07:00

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RNS Number : 1945X  Woodside Energy Group Ltd  22 July 2024

Woodside Energy Group Ltd

ACN 004 898 962

Mia Yellagonga

11 Mount Street

Perth WA 6000

Australia

T +61 8 9348 4000

www.woodside.com

 

ASX: WDS

NYSE: WDS

LSE: WDS

 

Announcement

 

Monday, 22 July 2024

 

 

WOODSIDE TO ACQUIRE TELLURIAN AND DRIFTWOOD LNG

 

§ Creates a global LNG powerhouse

§ Attractive entry into scalable, fully permitted 27.6 million tonnes per
annum (Mtpa) US LNG development option

§ Significant cash generation potential to underpin long-term shareholder
returns

 

Woodside has entered into a definitive agreement to acquire all issued and
outstanding common stock of Tellurian (NYSE: TELL) including its owned and
operated US Gulf Coast Driftwood LNG development opportunity ("Driftwood
LNG").

 

The consideration for the transaction is an all-cash payment of approximately
$900 million, or $1.00 per share of outstanding Tellurian common stock. The
implied enterprise value is approximately $1,200 million. 1  This represents
an attractive entry into an opportunity with more than $1 billion of
expenditure incurred to date.

 

"The acquisition of Tellurian and its Driftwood LNG development opportunity
positions Woodside to be a global LNG powerhouse," said Woodside CEO Meg
O'Neill.

 

"It adds a scalable US LNG development opportunity to our existing
approximately 10 Mtpa of equity LNG in Australia. Having a complementary US
position would allow us to better serve customers globally and capture further
marketing optimisation opportunities across both the Atlantic and

Pacific Basins.

 

"The Driftwood LNG development opportunity is competitively advantaged.
Woodside expects to leverage its global LNG expertise to unlock this fully
permitted development and expand our relationship with Bechtel which is the
EPC contractor for both Driftwood LNG and our Pluto Train 2 project in
Australia.

 

"Through this acquisition, we are delivering on our strategy to thrive through
the energy transition. Woodside believes that LNG will play a key role in the
energy transition and is well positioned to deliver the energy the world needs
while delivering significant value to our shareholders."

 

Strategic rationale

 

The acquisition of Tellurian and its Driftwood LNG development opportunity
strengthens Woodside's positioning to deliver on our strategy to thrive
through the energy transition. The expected benefits of the acquisition
include:

 

·      Expanding Woodside's position as a leading independent LNG
company;

·      Adding a high-quality, fully permitted US LNG development option
to Woodside's portfolio;

·      Leveraging Woodside's LNG development, operations and marketing
expertise to unlock the development and create value;

·      Enabling value creation from marketing optimisation with
geographic diversification;

·      Increasing long-term cashflow generation potential with a phased
development to manage investment decisions aligned with Woodside's capital
allocation framework; and

·      Supporting Woodside's carbon competitiveness through increased
exposure to LNG and potential to reduce the average Scope 1 and 2 emissions
intensity of Woodside's LNG portfolio.

 

Woodside's target of reducing net equity Scope 1 and 2 emissions by 2030, and
aspiration for net zero by 2050, are unchanged. 2 

 

Driftwood LNG

 

Driftwood LNG is a fully permitted, pre-final investment decision (FID)
development opportunity located near Lake Charles, Louisiana. The current
development plan comprises five LNG trains through four phases, with a total
permitted capacity of 27.6 Mtpa.

 

The foundation development includes Phase 1 (11 Mtpa) and Phase 2 (5.5 Mtpa).
Woodside is targeting FID readiness for Phase 1 of the Driftwood LNG
development opportunity from the first quarter of 2025.

 

The Driftwood LNG development opportunity is competitively advantaged:

 

·      The development is fully permitted, and has a valid non-free
trade agreement (FTA) export authorisation. The development also recently
received an extension of its Federal Energy Regulatory Commission (FERC)
authorisation;

·      The design is cost and carbon competitive. Woodside expects
development costs of

~$900-960/tonne for Phase 1 and 2. 3  The contracting strategy is a lump-sum
turnkey contract with LNG contractor Bechtel; and

·      Construction has commenced, with pilings for Trains 1 and 2
complete, foundation work in progress and pilings underway for the LNG tanks.
The progress on ground work reduces the risk to EPC timeline and cost.

 

 

Transaction details

 

Under the proposed transaction Woodside, or a wholly owned subsidiary of
Woodside, will acquire 100% of the issued and outstanding shares of common
stock of Tellurian Inc. ("Tellurian").

 

Tellurian's Board of Directors has approved the transaction and has
recommended that its shareholders approve the transaction. The transaction is
targeting completion in the fourth quarter of the 2024 calendar year.

 

The transaction is subject to satisfaction of customary conditions precedent,
including maintenance of validity for existing authorisations (e.g. Department
of Energy (DOE) and FERC), Tellurian shareholder approval, regulatory approval
and other approvals.

 

In connection with entry into a binding agreement to acquire Tellurian,
Woodside will provide a loan to Tellurian of up to $230 million to ensure
Driftwood LNG site activity and de-risking activities maintain momentum prior
to completion of the transaction. The loan is secured by a first priority lien
over the borrower's assets subject to customary exclusions. The latest
maturity date for the loan is

15 December 2024 or the date of transaction completion.

 

Woodside's sole financial adviser is PJT Partners and its legal adviser is
Norton Rose Fulbright.

 

About Woodside

 

Woodside led the development of the LNG industry in Australia. With a focused
portfolio, Woodside is recognised for its world-class capabilities as an
integrated upstream supplier of energy. Woodside's proven track record and
distinctive capabilities are underpinned by 70 years of experience.

 

About Tellurian

 

Tellurian aims to generate shareholder value by establishing a competitive LNG
enterprise, effectively supplying natural gas to customers worldwide.
Headquartered in Houston, Texas, Tellurian is developing Driftwood LNG, an
approximately 27.6 Mtpa LNG export facility and associated pipeline.

 

Teleconference

 

A conference call providing an overview of the transaction with a question and
answer session will be hosted by Woodside CEO and Managing Director Meg
O'Neill on Monday, 22 July 2024 at

08:00 AWST/10:00 AEST (19:00 CDT Sunday, 21 July 2024).

 

We recommend participants pre-register five to 10 minutes prior to the event
with one of the following links:

·      https://webcast.openbriefing.com/wds-ann-2024/
(https://webcast.openbriefing.com/wds-ann-2024/) to listen to a live stream of
the question-and-answer session

·      https://s1.c-conf.com/diamondpass/10040740-jh78y6.html
(https://s1.c-conf.com/diamondpass/10040740-jh78y6.html) to participate in the
question and answer session. Following pre-registration, participants will
receive the teleconference details and a unique access passcode.

 

An investor presentation follows this announcement and will be referred to
during the conference call. It will also be made available on the Woodside
website (www.woodside.com (http://www.woodside.com) ) and has today been
submitted to the FCA National Storage Mechanism and will shortly be available
for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://aus01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fdata.fca.org.uk%2F%23%2Fnsm%2Fnationalstoragemechanism&data=05%7C02%7Clucy.bowman%40woodside.com%7C03e6340eeff546bff71608dca583e2d1%7Ca3299bbaade64965b011bada8d1d9558%7C0%7C0%7C638567233541541946%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=3G%2BZ7ofQVPEz3BsNzMvBInTqdRvBtNEH6Z58JMtXiLY%3D&reserved=0)
.

A copy of the transcript of the conference call will also be submitted to the
National Storage Mechanism and will be available for inspection at the web
address set out above following the conclusion of the conference call.

 Contacts:

 INVESTORS                                                 MEDIA

 Marcela Louzada                                           Christine Forster (Australia)

 M: +61 456 994 243                                        M: +61 484 112 469

 E: investor@woodside.com (mailto:investor@woodside.com)   E: christine.forster@woodside.com (mailto:Christine.forster@woodside.com)

                                                           Rob Young (United States)

                                                           M: +1 281 790 2805

                                                           E: robert.young@woodside.com (mailto:robert.young@woodside.com)

 

This announcement was approved and authorised for release by Woodside's
Disclosure Committee.

 

Announcement contains inside information

This announcement contains inside information. Marcela Louzada, Vice President
Investor Relations is responsible for release of this announcement.

 

Forward-looking statements

 

This presentation contains forward-looking statements with respect to
Woodside's business and operations, market conditions, results of operations
and financial condition, including, for example, but not limited to,
statements regarding Woodside's proposed acquisition of Tellurian, the
development, completion and execution of Woodside's projects, expectations
regarding future capital expenditures, future results of projects, operating
activities, new energy products, expectations and plans for renewables
production capacity and investments in, and development of, renewables
projects, expectations and guidance with respect to production, investment
expenditure and gas hub exposure for 2024, and expectations regarding the
achievement of Woodside's net equity Scope 1 and 2 greenhouse gas emissions
targets. All statements, other than statements of historical or present facts,
are forward-looking statements and generally may be identified by the use of
forward-looking words such as 'pathway', 'guidance', 'foresee', 'likely',
'potential', 'anticipate', 'believe', 'aim', 'estimate', 'expect', 'intend',
'may', 'target', 'plan', 'strategy', 'forecast', 'outlook', 'project',
'schedule', 'will', 'should', 'seek' and other similar words or expressions.
Similarly, statements that describe the objectives, plans, goals or
expectations of Woodside are forward-looking statements.

Forward-looking statements in this presentation are not guidance, forecasts,
guarantees or predictions of future events or performance, but are in the
nature of future expectations that are based on management's current
expectations and assumptions. Those statements and any assumptions on which
they are based are subject to change without notice and are subject to
inherent known and unknown risks, uncertainties, assumptions and other
factors, many of which are beyond the control of Woodside, its related bodies
corporate and their respective beneficiaries. Important factors that could
cause actual results to differ materially from those in the forward-looking
statements include, but are not limited to, the occurrence, or failure or
certain events to occur, of any event, change or other circumstances that
could give rise to the termination of the merger agreement with Tellurian; the
risk that the closing conditions for the acquisition of Tellurian will not be
satisfied, including the risk that regulatory approvals will not be obtained,
the risk that Tellurian shareholder approval will not be obtained, the
possibility that the transaction will not be completed in the expected
timeframe or at all, potential adverse effects to the businesses of Tellurian
during the pendency of the transaction, the risk of security holder litigation
relating to the transaction, including resulting expense or delay, the
potential that the expected benefits and opportunities of the acquisition, if
completed, may not be realised or may take longer to realize than expected;
challenges inherent in the development of LNG facilities, fluctuations in
commodity prices, actual demand for Woodside products, currency fluctuations,
geotechnical factors, drilling and production results, gas commercialisation,
development progress, operating results, engineering estimates, reserve and
resource estimates, loss of market, industry competition, environmental risks,
climate related risks, physical risks, legislative, fiscal and regulatory
developments, changes in accounting standards, economic and financial markets
conditions in various countries and regions, political risks, project delay or
advancement, regulatory approvals, the impact of armed conflict and political
instability (such as the ongoing conflict in Ukraine or the Middle East) on
economic activity and oil and gas supply and demand, cost estimates, and the
effect of future regulatory or legislative actions on Woodside or the
industries in which it operates, including potential changes to tax laws, and
the impact of general economic conditions, inflationary conditions, prevailing
exchange rates and interest rates and conditions in financial markets.

A more detailed summary of the key risks relating to Woodside and its business
can be found in the "Risk" section of Woodside's most recent Annual Report
released to the Australian Securities Exchange and the London Stock Exchange
and in Woodside's most recent Annual Report on Form 20-F filed with the United
States Securities and Exchange Commission (SEC) and available on the Woodside
website at https://www.woodside.com/investors/reports-investor-briefings
(https://www.woodside.com/investors/reports-investor-briefings) . You should
review and have regard to these risks when considering the information
contained in this presentation.

Investors are strongly cautioned not to place undue reliance on any
forward-looking statements. Actual results or performance may vary materially
from those expressed in, or implied by, any forward-looking statements.

Important additional information and where to find it

 

This communication may be deemed to be solicitation material in respect of the
proposed acquisition of Tellurian by an affiliate of Woodside. In connection
with the proposed transaction, Tellurian intends to file relevant materials
with the U.S. Securities and Exchange Commission ("SEC"), including
Tellurian's proxy statement in preliminary and definitive form. Promptly after
filing the definitive proxy statement, Tellurian will mail the definitive
proxy statement and a proxy card to the stockholders of Tellurian.

INVESTORS AND SECURITY HOLDERS OF TELLURIAN ARE URGED TO READ ALL RELEVANT
DOCUMENTS FILED WITH THE SEC, INCLUDING TELLURIAN'S PROXY STATEMENT (WHEN THEY
ARE AVAILABLE), BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION AND THE PARTIES TO THE PROPOSED TRANSACTION.

Investors and security holders of Tellurian are or will be able to obtain
these documents (when they are available) free of charge from the SEC's
website at www.sec.gov (http://www.sec.gov) or free of charge from Tellurian
on Tellurian's investor relations website at https://tellurianinc.com/
(https://tellurianinc.com/) .

Participants in the solicitation

 

This communication does not constitute a solicitation of proxy, an offer to
purchase or a solicitation of an offer to sell any securities. Woodside,
Tellurian and certain of their respective directors and executive officers may
be deemed to be participants in the solicitation of proxies from the security
holders of Tellurian in connection with the proposed transaction. Information
regarding the interests of these directors and executive officers in the
proposed transaction will be included in the definitive proxy statement
referred to above. Security holders may also obtain information regarding the
names, affiliations and interests of Woodside's directors and executive
officers in the Woodside Annual Report on Form 20-F for the fiscal year ended
December 31, 2023, which was filed with the SEC on February 27, 2024. Security
holders may obtain information regarding the names, affiliations and interests
of Tellurian's directors and executive officers in Tellurian's  definitive
proxy statement in connection with its 2024 Annual Meeting of Stockholders
(the "Tellurian Proxy Statement"), which was filed with the SEC on April 25,
2024, under "Proposal 1 --Election of Directors to the Company's Board
--Background Information About the Nominees and Other Directors," "Proposal 1
--Election of Directors to the Company's Board --Executive Officers,"
"Compensation Discussion and Analysis" and "Security Ownership of Certain
Beneficial Owners and Management." To the extent that holdings of Tellurian's
securities have changed since the amounts printed in the Tellurian Proxy
Statement, such changes have been or will be reflected on Statements of Change
in Ownership on Form 4 filed with the SEC. Information regarding Tellurian's
transactions with related persons is set forth under the caption "Certain
Relationships and Related Party Transactions" in the Tellurian Proxy
Statement.

Additional information regarding the interests of such individuals in the
proposed transaction will be included in the definitive proxy statement
relating to the proposed transaction when it is filed with the SEC. These
documents (when available) may be obtained free of charge from the SEC's
website at www.sec.gov (http://www.sec.gov) , Woodside's website at
www.woodside.com/investors (http://www.woodside.com/investors) and Tellurian's
website at https://tellurianinc.com (https://tellurianinc.com) . The contents
of the websites referenced above are not deemed to be incorporated by
reference into the proxy statement.

 

Climate strategy and emissions data

 

All greenhouse gas emissions data in this presentation are estimates, due to
the inherent uncertainty and limitations in measuring or quantifying
greenhouse gas emissions, and our methodologies for measuring or quantifying
greenhouse gas emissions may evolve as best practices continue to develop and
data quality and quantity continue to improve.

Woodside "greenhouse gas" or "emissions" information reported are net equity
Scope 1 greenhouse gas emissions, Scope 2 greenhouse gas emissions, and/or
Scope 3 greenhouse gas emissions, unless otherwise stated.

For more information on Woodside's climate strategy and performance, including
further details regarding Woodside's targets, aspirations and goals and the
underlying methodology, judgements, assumptions and contingencies, refer to
Woodside's Climate Transition Action Plan 2023 (CTAP) available on the
Woodside website at https://www.woodside.com/sustainability/climate-change
(https://www.woodside.com/sustainability/climate-change) . The glossary and
footnotes to this presentation provide clarification regarding the use of
terms such as "lower carbon" under Woodside's climate strategy. A full
glossary of terms used in connection with Woodside's climate strategy is
contained in the CTAP.

 

 

 

 

 1  Includes $50 million for Tellurian's Series C Convertible Preferred equity
shares, ~$90 million of net debt, a ~$90 million net working capital
adjustment, ~$65 million for management and debt change of control costs. Does
not include expected interim funding from signing to close or management
construction incentive payment awards.

 2  Woodside's net emissions reduction targets are for net equity Scope 1 and
2 greenhouse gas emissions, with a targeted reduction of 15% by 2025, 30% by
2030, with an aspiration of net zero by 2050. The net emissions reduction
targets are relative to a starting base representative of the gross annual
average equity Scope 1 and 2 greenhouse gas emissions over 2016-2020 and may
be adjusted (up or down) for potential equity changes in producing or
sanctioned assets with a final investment decision prior to 2021.

 3  Includes EPC (engineering, procurement, construction), owner's costs and
contingency costs. Excludes pipeline costs.

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