A unit of US LNG firm Tellurian, the developer of the Driftwood project in Louisiana, has canceled the purchase of three LNG cargoes as part of a deal it signed in April 2019.
Tellurian Trading UK entered into a deal on January 26, 2022, to cancel three LNG cargoes that the company was committed to purchase in April, July and October 2022, Tellurian said in its first-quarter report.
The company has to pay a cancellation fee of about $1 million for all three LNG cargoes.
Tellurian said it does not have any further commitments or obligations under this LNG SPA, but it did not provide any additional details.
The firm previously said it had entered into the LNG SPA with an undisclosed LNG trader to buy one cargo on a DES basis per quarter beginning in June 2020 through October 2022.
Under the deal, the volume of each cargo ranged from 3.3 to 3.6 million mmBtu while the price was linked to the JKM which surged earlier this year and in October last year.
January LNG cargo sold, net loss grows
Prior to canceling the deal, Tellurian sold one LNG cargo in January to an undisclosed buyer.
The sale boosted the company’s total revenue to $146.9 million in the first quarter, compared to $8.7 million in the same period in 2021.
Tellurian attributed the rise to a $17.3 million increase in natural gas sales revenues as a result of increased realized natural gas prices and production volumes, and a $121 million increase in LNG sales revenues from the sale of the LNG cargo.
However, the company said its cost of sales increased $133.4 million when compared to the first quarter last year primarily due to the purchase of the cargo.
Tellurian said this and development, administrative, and other expenses increased the company’s net loss to $67 million, compared to $27 million in the year before.
The firm ended the first quarter with nearly $300 million in cash on hand and total assets of about $732 million.
In addition, Tellurian completed its owners’ site preparation and issued a limited notice to proceed to Bechtel to begin construction of the Driftwood LNG terminal.
“Tellurian’s own natural gas production and sales provide valuable operating cash and a unique advantage to us as a liquefied natural gas (LNG) supplier. We are nearing net production of 100 million cubic feet equivalent per day and plan to reach 200 mmcfe/d by year end,” president and CEO, Octavio Simoes, said.
Tellurian production is now generating free cash flow after capex and the company intends to maintain capex at about $150 million a year, according to Simoes.
“With Bechtel now onsite beginning construction of Driftwood, we are on schedule to begin LNG production in 2026,” he added.