Tellurian Inc. agreed to sell about 800 Louisiana acres on which it is building part of the Driftwood liquefaction complex. Shares of the company jumped more than 20% Apr. 6 after the disclosure.
In a filing with the Securities and Exchange Commission, Tellurian executives said they have signed a letter of intent with an unnamed New York-based firm to have the investor buy the land in Lake Charles, La., for $1 billion and then lease it back to Houston-based Tellurian for 40 years. The signing comes a little more than 6 months after company leaders dropped a plan to sell more than $1 billion in debt as they seek continued funding to construct the 27.6-million tonne/year (tpy) Driftwood LNG plant (OGJ Online, Sept. 23, 2022).
The deal with the New York investor—by way of detail, Tellurian said only that the firm manages about $120 billion—calls for a capitalization rate (the commercial real estate’s rough equivalent of an equity’s dividend yield) of 8.75% as well as annual rent increases of 3% and calls for Tellurian to post a letter of credit for a year’s worth of rent.
The proposed deal also requires Driftwood’s investors to guarantee the master lease and calls for the company to line up contingent guarantors that the investment firm will approve. Both sides have agreed to work toward finalizing the sale-leaseback by mid-July.
Tellurian and its contractor, Bechtel, began construction on Driftwood’s first phase about a year ago. Last November, executive chairman Charif Souki said Tellurian had spent nearly $1 billion on the project to date and that on-site work had slowed to account for the company’s need to raise more capital (OGJ Online, Nov. 2, 2022). If built to design, Driftwood could cost $25 billion, Tellurian said in its latest annual report, and cover about 1,200 acres with up to 20 liquefaction trains, three LNG storage tanks, and three marine berths.
Tellurian shares (Ticker: TELL) were changing hands at $1.475 in afternoon trading Apr. 6, up about 25% on the day. The move, which erases the stock’s losses over the past month, has lifted the company’s market capitalization to about $830 million. Since early October, however, the shares are still down 45%.