by (Bloomberg) — Woodside Energy Group Ltd. agreed to buy troubled U.S. liquefied natural gas export developer Tellurian Inc. for about $900 million, betting on rapid growth in global demand for the fuel.
Bloomberg’s most read articles
Australia’s largest oil and gas producer will pay about $1 per share in cash to take full control of Tellurian, including the Driftwood LNG project on the U.S. Gulf Coast, it said on Monday. Woodside shares fell 2.1% in Sydney, their biggest one-day drop since May 1, after the news broke. Tellurian shares were up more than 65% in premarket trading Monday morning in New York.
Woodside is one of the energy companies that has argued most strongly that more gas will be needed to complement the expansion of intermittent renewables. It is looking for potential investments in U.S. LNG to help expand its supply portfolio, and Driftwood is one of the few that has not been affected by President Joe Biden’s January pause on approvals.
“The acquisition of Tellurian and the development opportunity for Driftwood LNG positions Woodside as a global LNG powerhouse,” said Meg O’Neill, Woodside’s CEO. “A complementary position in the US would enable us to better serve our customers globally and capture new marketing optimization opportunities in the Atlantic and Pacific basins.”
Woodside is targeting a final investment decision on the first phase of the Driftwood project from the first quarter of 2025. If all four phases are completed, the Louisiana mill could export 27.6 million tonnes per year, almost triple Woodside’s current capacity and almost 6% of the global total at the end of last year.
Since its founding in 2016 by LNG industry pioneer Charif Souki, who stepped down in December as part of a personal bankruptcy proceeding, Tellurian has struggled to get its project off the ground. Martin Houston, another industry veteran who co-founded Tellurian and is its current chairman, has pledged to cut costs, and there have been talks to sell the company.
“Woodside’s entry into Driftwood brings a high degree of certainty around the project,” Houston said in an interview.
Driftwood stands out from other U.S. LNG projects by signing long-term contracts tied to Asian and European spot prices. This exposed importers to spot market volatility and ultimately cost Tellurian a number of potential contracts, including with a major Indian customer, Shell Plc, and Vitol SA.
Woodside “can do a better job of moving the project forward than Tellurian,” said Saul Kavonic, an energy analyst at Sydney-based MST Marquee. The Australian company “can address the marketing relationship, financing and capacity gaps of the operators. This is the kind of deal Woodside should be doing – one where Woodside can get in at a lower cost and add value.”
Private U.S. gas drilling group Aethon Energy has entered into a non-binding agreement to buy LNG from the Driftwood project, after acquiring Tellurian’s upstream gas assets earlier this year. Chairman Gordon Huddleston said in an interview that the company looked forward to working with Woodside.
Woodside has been exploring opportunities to boost its exports. Earlier this year, it ended talks with rival Santos Ltd. that would have made it one of the largest LNG producers in the Asia-Pacific region. The company hopes to attract potential partners to the Driftwood project and expects to sell about 50% of it, it said in a presentation.
O’Neill said on a conference call with analysts that the company has already received inquiries to collaborate on the U.S. LNG project. The transaction is expected to close in the fourth quarter.
–With assistance from Rob Verdonck and Elizabeth Elkin.
(Updated with stock price in second paragraph.)
Bloomberg Businessweek’s Most Read Articles
©2024 Bloomberg LP
