Australian LNG player Woodside has entered into a definitive deal to buy Tellurian, the developer of the Driftwood LNG export project in Louisiana.
Woodisde said in a statement the consideration for the transaction is an all-cash payment of about $900 million, or $1.00 per share of outstanding Tellurian common stock, while the implied enterprise value is about $1.2 billion.
This represents an “attractive entry into an opportunity” with more than $1 billion of
expenditure incurred to date, Woodside said.
Tellurian said in a separate statement the acquisition price represents a 75 percent premium to Tellurian’s closing price on July 19, 2024, and also a 48 percent premium to Tellurian’s 30-day volume weighted average price.
The US LNG firm this reflects Driftwood LNG’s “premier site, fully permitted status, advanced stage of pre-FID development and strong relationships with Bechtel, Baker Hughes, and Chart.”
Tellurian issued a limited notice to proceed to compatriot engineering and construction giant Bechtel in March 2022.
The company claims it has invested more than $1 billion in the Driftwood project up to date.
The transaction, which was unanimously approved by both boards of directors, is expected to close in the fourth quarter of 2024, subject to customary closing conditions, including approval from Tellurian and Woodside shareholders and the receipt of regulatory approvals.
Driftwood LNG FID in 2025?
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, it said.
The current development plan for the Driftwood project comprises five LNG trains through four phases, with a total permitted capacity of 27.6 mtpa.
According to Woodside, 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 company said.
Woodside expects development costs of about $900-960/tonne for Phase 1 and 2.
“Global LNG powerhouse”
“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 optimization opportunities across both the Atlantic and Pacific Basins,” O’Neill said.
The CEO said 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,” O’Neill said.
“Substantial and certain value”
In addition to this deal, Tellurian recently also completed the sale of its integrated upstream assets for $260 million to affiliates of Dallas-based private investment firm Aethon Energy Management.
In May, Aethon agreed to buy Tellurian’s assets to expand its footprint in the Louisiana Haynesville and Bossier shale basins with about 31,000 net acres.
Also, the two firms also agreed to negotiate a 20-year offtake agreement for 2 mtpa of LNG which would be indexed to Henry Hub plus a liquefaction fee, with appropriate credit support, to provide the basis for project financing of Driftwood LNG.
Martin Houston, executive chairman of Tellurian’s board of directors said this transaction with Woodside “provides substantial and certain value for our shareholders”.
“Following our strategic repositioning in December, our new leadership has strengthened Tellurian’s position and advanced Driftwood LNG. Woodside’s offer reflects this progress, providing a significant premium to our share price,” he said.
“After careful consideration of Tellurian’s opportunities and challenges, the board and senior management weighed an immediate and significant cash return against the risks and costs associated with the timeline to FID and determined that this offer is in our shareholders’ best interest,” Houston said.
“Woodside is a highly credible operator, with better access to financial resources and a greater ability to manage offtake risk, and I am confident it is the right developer to take Driftwood forward,” he said.