Tellurian Explores Sale of Haynesville Upstream Assets

Rhea-AI Summary

Tellurian Inc. (NYSE American: TELL) has announced plans to explore opportunities for the sale of its upstream business, aiming to reduce debt and expenses to focus on developing Driftwood LNG. CEO Octávio Simões stated that the company has a substantial number of drilling locations that can be developed more quickly by oil and gas producers. The company produced 19.5 Bcf of natural gas for the quarter ended September 30, 2023, and maintains an exemplary operational safety record and demonstrates responsible environmental stewardship.

Insights

Energy Sector Analyst

The decision by Tellurian Inc. to engage Lazard for the potential sale of its upstream business reflects a strategic shift towards optimizing their core operations, specifically the Driftwood LNG project. The upstream segment, which involves exploration and production of natural gas, is capital intensive and poses a different set of risks compared to the midstream and downstream segments. Tellurian's move to divest these assets can be seen as an attempt to reallocate capital and focus on areas with potentially higher returns.

For stakeholders, this could mean a leaner business model with reduced operational complexity and overhead costs. The sale of upstream assets may also provide Tellurian with the necessary liquidity to reduce debt and avoid dilutive equity financing, which would be favorable for existing shareholders. However, this strategy is not without risks, as it increases dependence on third-party suppliers for natural gas, potentially affecting the cost structure and margins for the Driftwood LNG project in the long term.

Financial Analyst

The announcement indicates that Tellurian is looking to strengthen its balance sheet by reducing debt and lowering general and administrative expenses through the sale of its upstream assets. This is a significant move, as it suggests Tellurian's management is prioritizing financial stability and operational efficiency over vertical integration. By not issuing equity, Tellurian is avoiding shareholder dilution, which is often viewed positively by the market.

Investors should note the production figures of 19.5 billion cubic feet for the last quarter, which will no longer contribute to Tellurian's revenue once the sale is finalized. This potential revenue gap will need to be filled by the Driftwood LNG project's success or other initiatives. Additionally, Tellurian's commitment to environmental stewardship, such as implementing an active emissions monitoring program, may enhance its corporate image and appeal to environmentally conscious investors, potentially impacting the company's valuation positively.

Environmental, Social and Governance (ESG) Analyst

From an ESG perspective, Tellurian's mention of operational safety, environmental stewardship and specific measures like electrifying new production sites and committing to green completions is noteworthy. These initiatives align with the broader industry trend towards sustainable practices and may improve Tellurian's ESG ratings. Such improvements can attract investment from funds focused on sustainability, which are becoming increasingly significant in the market.

However, the sale of upstream assets does not eliminate the environmental impact of these operations; it merely transfers the responsibility to another entity. Stakeholders with a strong focus on ESG may scrutinize the buyer's environmental credentials and the terms of the sale to ensure that Tellurian's sustainability efforts are not undermined by the divestiture.

HOUSTON--(BUSINESS WIRE)-- Tellurian Inc. (Tellurian) (NYSE American: TELL) announced today it has asked its financial advisor, Lazard, to explore opportunities for the sale of Tellurian’s upstream business.

Tellurian natural gas assets 2024 (Graphic: Business Wire)

Chief Executive Officer Octávio Simões said, “As we commercialize Driftwood LNG, Tellurian has been reviewing its strategy, including the dynamics of the U.S. natural gas market in the context of global LNG demand. 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.”

“By unlocking the full value of these high-quality assets, we aim to substantially reduce our debt, further reduce our general and administrative expenses, and provide additional cash, enabling us to develop Driftwood LNG. Currently, this approach is more attractive than issuing equity to fund our 2024 development activities and working capital needs,” Simões added.

Tellurian produced 19.5 billion cubic feet (Bcf) of natural gas for the quarter ended September 30, 2023. Tellurian’s natural gas assets include 31,149 net acres, interests in 159 producing wells and over 400 drilling locations. Tellurian maintains an exemplary operational safety record and demonstrates responsible environmental stewardship. Implementing an active emissions monitoring program, electrifying all new production well sites, and committing to green completions are just a few examples of Tellurian’s efforts to reduce its carbon footprint.

About Tellurian Inc.

Tellurian intends to create value for shareholders by building a low-cost, global natural gas business, profitably delivering natural gas to customers worldwide. Tellurian is developing a portfolio of LNG marketing and trading, infrastructure that includes an ~ 27.6 mtpa LNG export facility and an associated pipeline. Tellurian is based in Houston, Texas, and its common stock is listed on the NYSE American under the symbol “TELL”.

For more information, please visit www.tellurianinc.com. Follow us on Twitter at twitter.com/TellurianLNG

CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of U.S. federal securities laws. The words “anticipate,” “assume,” “believe,” “budget,” “estimate,” “expect,” “forecast,” “initial,” “intend,” “may,” “plan,” “potential,” “project,” “proposed,” “should,” “will,” “would,” and similar expressions are intended to identify forward- looking statements. Forward-looking statements herein relate to, among other things, the capacity, timing, and other aspects of the Driftwood LNG project, the potential sale of Tellurian’s upstream assets, the attractiveness of such assets to other oil and gas producers, and related strategic, balance sheet and liquidity matters. These statements involve a number of known and unknown risks, which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements. These risks include the matters discussed in Item 1A of Part I of the Annual Report on Form 10-K of Tellurian for the fiscal year ended December 31, 2022, filed by Tellurian with the Securities and Exchange Commission (the SEC) on February 22, 2023, and other Tellurian filings with the SEC, all of which are incorporated by reference herein. There can be no guarantee that a successful sale of the upstream assets will occur or that the consideration to be received by Tellurian will enable the Company to meet its stated goals. The forward-looking statements in this press release speak as of the date of this release. Although Tellurian may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so except as required by securities laws.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240205012839/en/

Media:

Joi Lecznar

EVP Public and Government Affairs

Phone +1.832.962.4044

joi.lecznar@tellurianinc.com

Investors:

Matt Phillips

Vice President, Investor Relations

Phone +1.832.320.9331

matthew.phillips@tellurianinc.com

Source: Tellurian Inc.

FAQ

What is Tellurian's ticker symbol?

The ticker symbol for Tellurian Inc. is TELL.

What is Tellurian's plan for its upstream business?

Tellurian has announced plans to explore opportunities for the sale of its upstream business.

How much natural gas did Tellurian produce for the quarter ended September 30, 2023?

Tellurian produced 19.5 billion cubic feet (Bcf) of natural gas for the quarter ended September 30, 2023.

What environmental efforts has Tellurian made?

Tellurian has implemented an active emissions monitoring program, electrified all new production well sites, and committed to green completions to reduce its carbon footprint.

What is Tellurian's focus for developing Driftwood LNG?

Tellurian aims to substantially reduce its debt, further reduce its general and administrative expenses, and provide additional cash to develop Driftwood LNG.