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    Tellurian terminates three Driftwood SPAs [UPDATE]

Summary

The terminations follow cancellation of a bond issue that would have provided financing for Driftwood. Updates with CEO comments.

by: Dale Lunan

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Tellurian terminates three Driftwood SPAs [UPDATE]

US LNG developer Tellurian said September 23 three sale and purchase agreements (SPAs) covering offtake from its Driftwood LNG project in Louisiana had been terminated.

The three terminated SPAs, all signed in the summer of 2021, include two with Shell LNG covering a total of 3mn mt/yr and one with commodities trader Vitol, also for 3mn mt/yr. Shell terminated its SPAs, while the Vitol agreement was terminated by Tellurian, according to a regulatory filing by Tellurian.

The SPA terminations come in the wake of Tellurian’s cancellation earlier this week, citing uncertainty in bond markets, of a $1bn issue of senior secured notes and warrants. Proceeds would have been used to help finance continued work at Driftwood, which is in early construction even though Tellurian has yet to make a final investment decision on the $13bn first phase of the project.

Tellurian’s shares plunged about 24%, to $2.75, after the bond issue was pulled on September 19, leading some to speculate that the future of the 27mn mt/yr Driftwood LNG project was in jeopardy. In trading today, shares fell further, to $1.62, before recovering by noon ET to $2.22, a drop of nearly 20% on the day.

CEO Octavio Simoes later in the day sought to calm investor concerns with a statement saying the company’s updated financing strategy –  part of which involved terminating the Shell and Vitol SPAs – will be to prioritise securing equity partners.

“The potential corporate and strategic partners we are seeking may want LNG volumes that they can sell globally and now we have some capacity to offer that option,” he said. We have made good progress on our construction plan and will continue funding that with our cash and operating cash flow.”