Tellurian Driftwood LNG Project Progresses Despite Withdrawal of Public Offering

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Researched by Industrial Info Resources (Sugar Land, Texas)--Tellurian Incorporated (NASDAQ:TELL) (Houston, Texas), which will produce and export liquefied natural gas (LNG) from its planned Driftwood terminal in Louisiana, announced last week that it was withdrawing a proposed public offering of 10 million shares of stock because of adverse market conditions. The withdrawal is not seen as having an impact on the project's long-term viability.

In a press release issued by the company, Tellurian Chief Executive Officer Meg Gentle said, "Due to the current market environment and in the interest of achieving the best value for our stockholders, we have decided to withdraw our recently announced public offering of common stock."

The move, which comes only a day after the company announced the planned public offering, seems to be due to temporary market conditions rather than a lasting devaluation of the stock. The entire U.S. stock market took a nosedive last Wednesday, the day that Tellurian announced the public offering, with the Dow Jones Industrial Average falling 373 points, its biggest drop since September. The across-the-board selloff appears to be what prompted Tellurian to withdraw the offering. "The market fell off yesterday, and we are in a great position to not have to issue equity in a down market," company spokesperson Joi Lecznar said in an email to Bloomberg.

Tellurian's Driftwood LNG project near Lake Charles, Louisiana, is planned to kick off in 2018 and will have an initial production capacity of 5.2 million tonnes per year when completed in 2022. The facility will be expanded by up to four additional 5.2 million-tonne-per-year production trains, construction of which will begin in subsequent years. Each production train has an estimated total investment value of $5 billion. Accompanying the project is a planned $1 billion natural gas pipeline project that will carry up to 4 billion cubic feet per day of natural gas to the facility. The planned pipelines will tie into the Tennessee Gas Pipeline, the Texas Eastern Transmission mainline system and the Columbia Gulf Transmission system.

Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Industry, said, "I doubt that the withdrawal of the additional public offering will impact the timing of the project. I think that other factors such as permitting and customer commitment will have more of an effect on the project execution schedule. Despite its 'startup' status in this space, Tellurian has a very experienced management team, which has been moving at a fast pace and has secured investments from companies like GE and closed a merger with Magellan Petroleum Corporation, and has awarded FEED [front-end design and engineering] and technology licensing contracts to Bechtel and Chart Industries, respectively. Tellurian is still going to be a key player in the next round of LNG activity in the coming years."

Despite the withdrawal of the public offering, the project doesn't seem lacking in financing. Late last year, Total SA (NYSE:TOT) (Paris, France) said it would purchase a 23% stake in the company for $207 million. "Investing in Tellurian at an early stage will give us the opportunity to potentially strengthen our mid- and long-term LNG portfolio thanks to a very cost competitive project," said Total's president of Gas, Renewables and Power, Philippe Sauquet, in a statement. In addition, GE Oil & Gas (Houston, Texas) has purchased a $25 million stake in the project.

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