The agreement could strengthen the position of the U.S. as the world’s largest producer of the superchilled gas by securing the completion of Tellurian’s 27.6 million metric ton per annum facility in Lake Charles, Louisiana.
The transaction includes the $900 million cash purchase of outstanding Tellurian common stock at $1 per share, Woodside said in a statement, representing more than a 75% premium to Tellurian’s last closing price.
The buyout is expected to be completed by the end of the year, Tellurian said in a filing to the U.S. Securities and Exchange Commission on Monday.
The deal gives the Australian firm access to a fully authorized project in the U.S. amid difficulties for other LNG developers to advance proposals due to President Joe Biden administration’s pause on approvals for new LNG exports to countries that do not have free trade agreements with the U.S.
The acquisition “positions Woodside to be a global LNG powerhouse,” Meg O’Neill, the company’s CEO said.
The transaction adds a scalable U.S. LNG development opportunity to Woodside’s existing 10 million metric tons a year of equity LNG in Australia, she added.
Tellurian’s stock was up 65% to 94 cents a share in mid-morning trading on Monday, the highest level since March 11.
FINANCIAL EASE
The agreement could also help solve Tellurian’s financial woes. The U.S. company has been searching for financial partners to fund the Driftwood LNG facility. In May, it said it would sell its upstream assets to pay off some of its debt.
As part of the agreement, Woodside is providing Tellurian with a bridging loan to secure uninterrupted operations, the U.S. company said in its filing.
Tellurian told employees it is not planning any layoffs. Based on its discussions with Woodside, it expects a high rate of staff retention after the deal’s completion, it added in the filing.
“Many of you will be asked to work with them during a post-closing transition period, and could be offered long-term employment,” Tellurian told employees, also promising to honor end-of-2024 performance bonuses.
The Driftwood LNG project has had many setbacks, including the cancellation of some LNG supply deals amid concerns over the company’s ability to finish the project.
In a letter on Sunday urging shareholders to accept the offer, Tellurian Executive Chairman Martin Houston said the deal was in the company’s best interests because it would be difficult to raise the billions required to build the plant without a commitment from long-term customers for all the LNG produced.
Tellurian’s ability to get immediate cash from the sale was also a reason he gave for supporting the offer.
Houston said the board’s decision to recommend the sale of the Driftwood project was unanimous as it was felt that cash in hand was better than the uncertainty posed by the project.
Woodside said it was aiming for the project to be ready for a final investment decision for phase 1 from the first quarter of 2025.
Saul Kavonic, an energy analyst at MST Marquee, said the deal is the right kind of acquisition that Woodside should be pursuing, versus an earlier attempt to merge with Australian firm Santos.
“It is leveraging Woodside’s LNG expertise to access financially distressed yet otherwise advantaged LNG assets at a good price, which Woodside can add real value to,” he said, adding that Woodside could bring the Driftwood project forward better than Tellurian.
Woodside can remedy marketing, funding and operational capability deficits Tellurian suffered from to add value here, Kavonic added.
Woodside and Santos were in merger talks earlier this year, but discussions fell apart after the two companies could not agree on a valuation level.
Reporting by Ayushman Ojha in Bengaluru and Curtis Williams in Houston; additional reporting by Emily Chow; Editing by Chris Reese, Christopher Cushing, Jamie Freed, Michael Perry and Paul Simao – Reuters