Woodside to acquire US LNG company Tellurian in $1.2bn deal
Australian energy company Woodside has entered into a definitive agreement to acquire US-based LNG company Tellurian, including its owned and operated Driftwood LNG, for $1.2bn, including debt, the company announced on July 22.
The deal features an all-cash payment of approximately $900mn, or $1.00/share of outstanding Tellurian stock, representing a significant premium to Tellurian’s last traded price of $0.57/share. Woodside will provide a loan to Tellurian of up to $230mn to ensure Driftwood LNG site activity and de-risking activities maintain momentum prior to completion of the transaction.
“The acquisition of Tellurian and its Driftwood LNG development opportunity positions Woodside to be a global LNG powerhouse,” said Woodside CEO Meg O’Neill. “It adds a scalable US LNG development opportunity to our existing approximately 10mn tonnes/year of equity LNG in Australia.”
“Having a complementary US position would allow us to better serve customers globally and capture further marketing optimization opportunities across both the Atlantic and Pacific Basins,” she added.
“Through this acquisition, we are delivering on our strategy to thrive through the energy transition. Woodside believes that LNG will play a key role in the energy transition and is well positioned to deliver the energy the world needs while delivering significant value to our shareholders," O’Neill said.
The expected benefits of the acquisition include the expansion of Woodside’s position as a leading independent LNG company, the addition of a fully permitted US LNG development option to Woodside’s portfolio, increased long-term cash flow generation potential with a phased development to manage investment decisions aligned with Woodside’s capital allocation framework, and support for Woodside’s carbon competitiveness through increased exposure to LNG and the potential to reduce the average Scope 1 and 2 emissions intensity of Woodside’s LNG portfolio.
Driftwood LNG is a fully permitted, pre-final investment decision (FID) development opportunity located near Lake Charles, Louisiana. The current development plan comprises five LNG trains through four phases, with a total permitted capacity of 27.6mn tonnes/year. The foundation development includes Phase 1 (11mn tonnes/year) and Phase 2 (5.5mn tonnes/year). Woodside is targeting FID readiness for Phase 1 of the Driftwood LNG development opportunity in the first quarter of 2025.
The agreement is expected to help solve Tellurian's financial challenges. Earlier this month, Tellurian closed the sale of its integrated upstream assets for $260mn to affiliates of Aethon Energy. The deal, initially announced in May, fulfills a key objective outlined at that time and strengthens Tellurian's balance sheet. Proceeds from the sale were used to retire $230mn of non-convertible senior secured notes scheduled to mature in 2025.
The transaction, which was unanimously approved by both boards of directors, is expected to close in Q4 2024, subject to customary closing conditions, including approval from Tellurian shareholders and the receipt of regulatory approvals.
“This transaction provides substantial and certain value for our shareholders. Following our strategic repositioning in December, our new leadership has strengthened Tellurian’s position and advanced Driftwood LNG. Woodside’s offer reflects this progress, providing a significant premium to our share price,” said Martin Houston, executive chairman of Tellurian’s board of directors. In a letter to shareholders, Houston recommended that they accept Woodside’s offer. “Having weighed the balance of risk and return, we believe it is the best outcome for shareholders,” he said.
Earlier this year, Woodside was in talks for a potential merger with fellow Australian energy company Santos. The discussions were abandoned as the companies could not agree on the valuation. The merger also faced resistance from some Woodside investors.