(Bloomberg) — Woodside Energy Group Ltd. has agreed to acquire Tellurian Inc., a U.S. project developer that exports liquefied natural gas, for about $900 million, hoping to capitalize on rapid growth in global demand for the fuel.
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Australia’s largest oil and gas producer will pay about $1 a share in cash to take full control of Tellurian, including the proposed U.S. Gulf Coast Driftwood LNG project, it said Monday. Woodside shares fell 2.1% in Sydney, their biggest one-day drop since May 1, after the news was announced. Shares in Tellurian rose more than 65% in premarket trading Monday morning in New York.
Woodside has been one of the most vocal energy companies arguing that more gas will be needed to complement the expansion of intermittent renewables. It has been on the hunt for potential U.S. LNG investments to expand its supply portfolio, and Driftwood is just one of a handful of companies unaffected by President Joe Biden’s January pause on approvals.
“The acquisition of Tellurian and the development opportunity of Driftwood LNG positions Woodside as a global LNG powerhouse,” said Meg O’Neill, Chief Executive Officer of Woodside. “A complementary position in the U.S. would allow us to better serve customers globally and capture further marketing optimization opportunities in both 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 plant could export 27.6 million tonnes per year – nearly three times Woodside’s current capacity and almost 6% of the global total at the end of last year.
Tellurian has struggled to bring the facility to fruition since it was founded in 2016 by LNG industry pioneer Charif Souki, who left in December amid his own personal bankruptcy proceedings. Martin Houston — another industry veteran who co-founded Tellurian and is its current chairman — has vowed to cut costs and there have been previous talks to sell the company.
“With Woodside entering Driftwood, there is a great deal of certainty surrounding the project,” Houston said in an interview.
Driftwood distinguished itself from other U.S. LNG projects by signing long-term contracts tied to Asian and European spot prices. That exposed importers to the volatile spot market and ultimately cost Tellurian a number of potential deals, including with a major Indian customer, Shell Plc, and Vitol SA.
Woodside “can move the project forward better than Tellurian,” said Saul Kavonic, an energy analyst at MST Marquee in Sydney. The Australian company “can address marketing relationships, financing and the operator’s capacity gaps. This is the kind of deal Woodside should be doing — where Woodside can get in cheaply and add value.”
US private equity gas driller Aethon Energy has a non-binding agreement to buy LNG from the Driftwood project, after acquiring Tellurian’s upstream gas assets earlier this year. President Gordon Huddleston said in an interview that the company looks forward to working with Woodside.
Woodside has been exploring ways to boost exports. Earlier this year, it ended talks with smaller rival Santos Ltd., which would have made it one of the largest LNG producers in the Asia-Pacific region. The company expects to bring potential partners to the Driftwood project and aims to sell about 50%, it said in a presentation.
O’Neill said during an analyst call that the company has already received interest in partnering on US LNG. The transaction is expected to close in the fourth quarter.
–With assistance from Rob Verdonck and Elizabeth Elkin.
(Updated with the stock price in the second paragraph.)
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