Tellurian Exploring Sale of its Upstream Assets

The company looks to focus its efforts on getting phase one of its Driftwood LNG up and running by shedding Haynesville acreage.

The company's Haynesville holdings encompass just over 31,000 acres holding over 400 drilling locations.
SOURCE: Tellurian

Tellurian has instructed financial advisor Lazard to explore opportunities for the sale of the company’s upstream business. The company produced 19.5 Bcf of natural gas for the quarter ended 30 September 2023, consisting chiefly of assets located in the Haynesville Shale.

Tellurian’s natural gas assets include 31,149 net acres, interests in 159 producing wells, and over 400 drilling locations.

“As we commercialize Driftwood LNG, Tellurian has been reviewing its strategy, including the dynamics of the US natural gas market in the context of global LNG demand,” said Octávio Simões, chief executive at Tellurian. “We have concluded that there are alternative gas supply strategies available to us from various basins and our ownership of upstream assets is not necessary at this stage of Tellurian’s development. We have a substantial number of drilling locations that we believe will be highly attractive to oil and gas producers that can develop them more quickly than we would.”

Tellurian would use proceeds from the sale to reduce its debt, further reduce its general and administrative expenses, and provide additional cash, enabling it to develop Driftwood LNG.

Simões added that this approach is more attractive than issuing equity to fund the company’s 2024 development activities and working capital needs.

Tellurian expanded its production footprint as recently as August 2022 when it closed the acquisition of certain assets in the Haynesville from privately held EnSight IV Energy Partners and EnSight Haynesville Partners for $125.5 million in cash.

“By owning and operating upstream assets, a pipeline network, and the Driftwood LNG terminal, Tellurian will have the ability to sell natural gas into domestic or international markets. This combination of assets represents a compelling value for our shareholders,” he said.

Tellurian has been struggling to get its Driftwood LNG project off the ground. Last December, the company ousted its chairman and cofounder Charif Souki as an executive officer, weeks after auditors raised doubts about the company's ability to cover future expenses. Souki turned Cheniere Energy from an LNG importer into a major exporter but had been unable to replicate that success at Tellurian.

In September 2022, the company announced it would shift its focus to securing equity investors in Driftwood from the sales agreement model that was not generating the volume deals needed to fund the project.