Houston-based Tellurian Inc., which is building a global natural gas business centered around Gulf Coast exports and onshore upstream development, has an estimated $29 billion in “near-term investments,” CEO Meg Gentle said Thursday.
The company, which started up in 2016, has captured the market’s attention with a plethora of splashy dealmaking that includes the Driftwood liquefied natural gas (LNG) export terminal to be sited on Louisiana’s coast. Last fall it also veered into the upstream sector, agreeing to buy producing assets and undeveloped acreage in the Haynesville Shale to help feed the exports.
Rumors began flying a few days ago that Tellurian is ready to snap up Chesapeake Energy Corp.’s Haynesville properties, but Gentle said there was no deal on the table. Tellurian last year secured about 12,000 net acres in the play.
“Tellurian plans to acquire 15 Tcf of natural gas over the project life as part of our overall integrated strategy to develop Driftwood Holdings,” she said. “We are looking primarily in the Haynesville Shale and are speaking with many producers, but we have no transaction close to completion at this point.”
Any asset acquisitions would be done through Driftwood Holdings LLC and financed by third-party investments.
“We continue to make very good progress in our discussions with third-party investors, expect to execute agreements in Driftwood Holdings over the next few months, and be in a position to close funding of phase one for 11 mmt between the third and fourth quarters of 2018,” Gentle said.
Driftwood LNG, to be sited on 1,000 acres in Calcasieu Parish, LA, would have liquefaction capacity of 27.6 million metric tons/year (mmty), requiring up to 4 Bcf/d of feed gas. The project is designed for up to 20 trains, three storage tanks and three marine berths.
Tellurian in January said it engaged Goldman Sachs & Co. LLC and SG Americas Securities, LLC, i.e. Societe Generale, to serve as financial advisers for Driftwood Holdings. The holding company was formed to own and operate the gas producing assets, pipeline assets and the LNG export facility.
Tellurian is offering equity interests in Driftwood Holdings at a cost of $1,500/metric ton in exchange for LNG at cost.
The company also is testing support to build out a three-pronged pipeline system to transport gas to the Gulf Coast. The Tellurian Pipeline Network would include the Driftwood Pipeline (DWPL), scheduled to start up in 2021, the Haynesville Global Access Pipeline (HGAP) and the Permian Global Access Pipeline (PGAP).
The DWPL, scheduled to start up in 2021, would be a 96-mile, 48-inch diameter gas pipeline, to transport up to 4 Bcf/d from near Gillis, LA, to Driftwood LNG. For HGAP, a nonbinding open season was launched last month to gauge interest in a 42-inch diameter gas pipeline that would connect up to 2 Bcf/d of Haynesville and Bossier shale volumes to customers in southwestern Louisiana.
PGAP as proposed would be a 42-inch diameter system able to transport up to 2 Bcf/d over 625 miles. PGAP would originate at the Waha Hub in West Texas and connect to the Permian and associated unconventional plays around Midland, then terminate near Gillis, with proposed deliveries from various gas pipeline systems in the region.
Last year, Tellurian received approval from the Department of Energy to export gas from Driftwood to free-trade agreement nations. The Federal Energy Regulatory Commission plans to issue a final environmental impact statement on Driftwood by Oct. 12.
A federal authorization decision on Driftwood is scheduled for next January, which would allow Tellurian to make a final investment decision. To date, the company has completed front-end engineering and engineering/procurement/construction agreements. The timing and cost is about $550/metric ton, it said.
“In 2017, Tellurian was able to guarantee its project costs, gain a regulatory scheduling notice and obtain access to capital markets,” Gentle said. “By integrating our business, we are recognizing the strength of the commoditized LNG market, and we are offering customers the opportunity to share in the benefits of the low-cost structure as our partners.
“The experienced team at Tellurian is developing asset opportunities representing $29 billion of near-term investments that will deliver natural gas to the growing LNG hub in southwest Louisiana and enable exports to global markets.”
The company reported a net loss in 2017 of $231.5 million (minus $1.23/share). It ended fiscal 2017 with about $128.3 million of cash/cash equivalents and said it remains debt free with about $276.8 million in assets. Proved gas reserves totaled 327 Bcfe.