Page 4 - NorthAmOil Week 39 2022

NorthAmOil COMMENTARY NorthAmOil

Setbacks for Tellurian’s

Driftwood LNG

Tellurian’s Driftwood LNG project in Louisiana is facing new

uncertainty after the company withdrew a $1bn bond sale

and had two offtake agreements terminated

LOUISIANA US-BASED Tellurian has found its plans to build Financing woes
the Driftwood LNG export project on the Lou- The withdrawal of the bond sale came after Tel-
WHAT: isiana Gulf Coast beset by new uncertainty. On lurian tried to sweeten the deal on offer in a bid
Tellurian’s planned September 19, the company announced it was to attract investors, raising the effective yield
Driftwood LNG export withdrawing a high-yield bond sale worth $1bn to 12.5%. It also added shale gas fields to the
project in Louisiana has after struggling to attract investors. Then on Sep- secured assets included in the transaction. The
found itself beset by new tember 23, the company said sales and purchase bond was offered at a discounted price of $0.955
uncertainty. agreements (SPAs) for a combined 6mn tonnes on the dollar.
per year (tpy) of LNG supplies from the project The move was seen as a signal that investors
WHY: with two of Driftwood’s offtakers, Shell and were demanding increasingly favourable terms
The company cancelled Vitol, was terminated. in order to be willing to fund construction of
a $1bn high-yield bond These developments throw Driftwood’s future Driftwood LNG, whose first phase is estimated
sale and lost two major into new doubt. Tellurian has sought to assuage to cost around $12.8bn, according to a recent
offtakers over the course investor concerns by saying the company has Tellurian filing. The company had reportedly
of a few days. updated its financing strategy for the project to been hoping to raise at least $7.5bn in project
prioritise finding equity partners and has sought financing from banks, and had been circulating
WHAT NEXT: to emphasise its status as an existing natural gas term sheets with 20 banks, according to a Cred-
Subsequently, Tellurian producer with revenue from its output. None- itSights report cited by Bloomberg. The news
said it had updated its theless, the market appeared to take a negative service also noted that the all-in-yield being
Driftwood financing view and the company’s share price crashed by offered in the bond sale had been rated BBB
strategy to prioritise 24% immediately following the announcement minus by Egan-Jones Ratings Co. but was near
finding equity partners. of the cancelled bond sale. trading levels for the average CCC rated credit,
Given that Tellurian still needs to secure fur- which is among the riskiest debt.
ther financing for Driftwood and that it had The structure of Tellurian’s SPAs did not
previously expected Shell and Vitol’s SPAs to appear to give investors much confidence either
support construction of the first phase of the – with this even more of a challenge now that
project, the latest developments make the path two of them have been cancelled. But prior to
forward considerably more difficult. the cancellation, the fact that the SPAs were

P4 www. NEWSBASE .com Week 39 29•September•2022