Tellurian (NYSE: TELL) has struggled in recent months with the loss of its high-profile chairman and the news of an LNG export ban, but plans to sell off its upstream business has reignited investor interest.
At the time of writing, the independent LNG aspirant was up nearly 32% today. The company announced it had asked financial advisor Lazard to “explore opportunities” for the sale of its upstream.
Initially, the company had planned to use its own gas to feed its Driftwood LNG project. This thinking has changed.
CEO Octávio Simões there were “alternative gas supply strategies available to us from various basins and our ownership of upstream assets is not necessary at this stage of Tellurian’s development”.
Tellurian has a “substantial number of drilling locations that we believe will be highly attractive to oil and gas producers that can develop them more quickly than we would”.
Selling off these assets would allow Tellurian to cut its debt substantially, the CEO continued, while also providing additional cash to develop Driftwood LNG.
“Currently, this approach is more attractive than issuing equity to fund our 2024 development activities and working capital needs,” Simões added.
The company produced 19.5 billion cubic feet in the quarter ending on September 30, 2023, from the Haynesville/Bossier shale. It has 31,149 net acres, with stakes in 159 producing wells and more than 400 drilling locations.
Tellurian did not speculate as to how much it might raise from the sale. It bought a package of assets in the Haynesville in August 2022 for a total price of $133.8 million. The company has previously described these assets as a “physical hedge” that make Tellurian a fully integrated pure-play LNG producer.
The company appointed Lazard as financial advisor in December, following the exit of Charif Souki. Simões said Lazard had been hired to provide “advice on unlocking the value of our asset base and to help expand our thinking”.
Driftwood has an export licence for LNG shipments to non-FTA countries. As such, management have been relaxed in the face of changes to the US plans for LNG approvals.
The Driftwood project has 11 million tonnes per year of LNG capacity, requiring 550 bcf per year of feedgas.
Souki has faced a number of setbacks. He founded Cheniere Energy but a major investor forced him out in 2015. Souki subsequently lost his ranch in Aspen, following a court case after being unable to meet obligations on a personal loan.