Woodside Energy, an Australian petroleum exploration and production company, has agreed to acquire U.S. liquefied natural gas (LNG) developer Tellurian for $1.2 billion. This deal includes Tellurian’s Driftwood LNG export project located in Lake Charles, Louisiana.
The acquisition could significantly bolster the U.S.’s position as the world’s leading LNG producer by ensuring the completion of Tellurian’s substantial facility. Woodside’s purchase includes a $900 million cash offer for Tellurian’s common stock, priced at $1 per share. This represents a notable premium of over 75% above Tellurian’s most recent closing price.
Deal Structure and Financial Impact
The transaction is expected to finalize by the end of the year, subject to regulatory approvals. As part of the deal, Woodside will provide Tellurian with a $230 million bridging loan at a 12% interest rate. This loan aims to support ongoing operations and advance the construction of the Driftwood LNG plant.
Tellurian, struggling with financial difficulties, had been seeking partners to fund the Driftwood project. In May, the company announced plans to sell its upstream assets to manage its debt. The acquisition by Woodside offers a solution to these financial issues while providing Tellurian with the necessary capital to move forward.
“Woodside’s acquisition will help resolve Tellurian’s financial troubles and secure the future of the Driftwood project,” said Tellurian Executive Chairman Martin Houston. Moreover, he emphasized that the sale provides immediate cash flow, which is preferable to the uncertainty of continued project funding and development.
Strategic Benefits for Woodside
For Woodside Energy, this acquisition represents a strategic move to strengthen its position in the global LNG market. Currently, Woodside has a capacity of 10 million metric tons per year of equity LNG in Australia. However, the addition of Tellurian’s assets will enhance its portfolio and expand its operational reach.
Meg O’Neill, Woodside’s CEO, highlighted the strategic significance of this acquisition. “The deal positions Woodside as a global LNG powerhouse,” she stated. “It adds a scalable U.S. LNG development opportunity to our existing operations and strengthens our global footprint.”
The Driftwood LNG project has faced numerous challenges, including delays and canceled supply deals. However, with Woodside’s expertise and financial backing, there is optimism that the project can overcome these obstacles and proceed toward completion.
Energy analyst Saul Kavonic of MST Marquee commented on the deal, noting that it leverages Woodside’s LNG expertise to acquire financially distressed but strategically valuable assets. “This acquisition allows Woodside to address Tellurian’s marketing, funding, and operational issues, adding real value to the project,” Kavonic explained.
Future Prospects and Operational Changes
Woodside aims for the Driftwood project to reach a final investment decision for phase one by the first quarter of 2025. However, this timeline is contingent on overcoming current challenges and ensuring that all financial and regulatory requirements are met.
Tellurian executives, including President Daniel Belhumeur, will see substantial reductions in their bonus packages if they help finalize the project. Despite these changes, Tellurian has assured employees that no layoffs are planned, and the company will honor performance bonuses through the end of 2024.
Woodside and Tellurian have also agreed on terms that will allow Tellurian’s current team to remain in place during the transition period. This arrangement is designed to facilitate a smooth handover and ensure continuity in the project’s development.
In summary, Woodside’s acquisition of Tellurian marks a significant expansion in the LNG sector, with potential benefits for both companies and the broader energy market. Furthermore, the deal is expected to bolster Woodside’s position as a global LNG leader while providing Tellurian with the financial stability needed to complete its major U.S. project.
Source: Reuters
