Tellurian Inc. executives this week abandoned a plan to sell more than $1 billion of debt to help finance the Houston-based company’s Driftwood LNG plant, leading executive chairman Charif Souki to say he has shifted his focus to finding a strategic investor for the $12 billion Louisiana project. In addition, two of the three contracts the company signed in mid-2021 have been canceled.
Souki and the Tellurian leadership team said last week that talks with potential investors about a debt sale that would fund the next round of work at Driftwood—which, if fully built out, would have a capacity of 27.6 million tonnes/year (tpy)—had led them to offer a number of sweeteners (OGJ Online, September 14, 2022). As it turns out, those enticements weren’t enough to secure success for the offering and keep Driftwood’s construction on track for a 2026 opening.
“It sets us back, definitely. It puts in jeopardy the ability to deliver gas on the schedule that we were hoping to stick to,” Souki said in a short video statement. “We would never put in jeopardy the balance sheet of Tellurian to try to accelerate the process by taking disproportionate risks.”
Pointing to the strong global demand for US LNG, Souki said he is devoting more attention to finding a strategic investment partner for Driftwood: “This is where the money is today,” Souki said. That process, he cautioned in stark contrast to his confidence in finding financing four months ago (OGJ Online, May 12, 2022), could take a while because of the potential partners involved.
Tellurian's quest might also have become trickier because it now has just one signed supply agreement remaining. On Sept. 23, 2022, the company said in a filing with the US Securities and Exchange Commission that executives with Shell PLC had terminated its sale and purchase agreement and that Tellurian's leaders had told Vitol Inc. that a similar agreement had been spiked. That leaves Tellurian with only Gunvor as a signed potential customer for Driftwood production.
Shares of Tellurian (Ticker: TELL) fell 11% to about $2.76 on Sept. 22, adding to losses that have them down nearly 30% for the week. The company’s market capitalization is now about $1.6 billion.