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Tellurian thinking on ‘business combination’ to aid Driftwood LNG plans

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Today, Tellurian Executive Chairman Charif Souki announced the natural gas company will consider a “business combination” to ensure it has sufficient reserves to support its proposed Driftwood LNG export facility in Louisiana. Indeed, this information was shared in a podcast message to employees and investors.

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In this sense, the plan follows the company’s announcement in March, which S&P Global Platts covered during an interview. Accordingly, Tellurian aims to produce all the gas it will need to feed Driftwood.

Besides, at the time, the company shared it would not sanction the project until it had secured sufficient upstream reserves for the first phase of the terminal project.

More upstream investments in Tellurian

To realize that goal, Tellurian needed to get more significant in the upstream, said S&P Platts in a report today. Thus, even as it drills more wells in the Haynesville Shale on its own acreage and in partnership with other producers, the Company needed to do more.

Accordingly, Souki said; “Clearly, this is not sufficient for integrating the full picture of what we will need five years from today.” Moreover, “we are in a position now to start looking seriously at a business combination that will make sense for our integrated business model.”

As part of the message, Souki did not say whether such a combination would be limited to the production side of the company. Also, he did not specify if the combination would include the LNG side of the company.

Worth noting, the Driftwood export facility is to be built in phases; particularly, with the first phase covering about 16 million mt/year of capacity. Therefore, Tellurian is targeting to give Bechtel a notice to proceed with the full construction of the terminal; tentatively, by the end of the first quarter of next year.

Other efforts in this regard

Worth noting, Tellurian signed only another commercial deal tied to Driftwood.  In this sense, this deal was a 2019 agreement with France’s TotalEnergies. Particularly, this deal included 1 million mt/year of partner volumes and 1.5 million mt/year of marketing volumes.

However, Souki did not mention TotalEnergies or ongoing commercial efforts tied to Driftwood on his latest podcast. Moreover, the Gunvor and Vitol deals alone are insufficient to support Driftwood’s first phase. Also, assuming the TotalEnergies deal is terminated or amended.

“This is a once-in-a-lifetime opportunity to realize much greater revenues by being exposed to international prices,” Souki concluded.

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