Woodside buys Tellurian to place itself as ‘world LNG powerhouse’

Unlock the Editor’s Digest without cost

Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.

Woodside Vitality has agreed to purchase struggling US liquefied pure gasoline developer Tellurian in a $1.2bn deal that the Australian firm stated would flip it right into a “world LNG powerhouse”.

The transaction, introduced by the businesses on Sunday, attracts a line underneath a long-running saga surrounding Tellurian, which ousted its chair in December amid repeated struggles to get its $25bn Driftwood export venture in Louisiana off the bottom.

“Regardless of our current progress, we’ve been clear that the corporate’s scenario necessitated an exploration of all potential options, together with a possible sale,” wrote Tellurian government chair Martin Houston in a letter to shareholders. “Finally, we determined the enticing supply in hand outweighed the dangers and uncertainty related to going it alone.”

Tellurian was based in 2016 by Houston, a former BG Group government, and US LNG pioneer Charif Souki, with the purpose of growing the Driftwood venture on a 1,200-acre website alongside the Calcasieu river. If accomplished, it will be one of many nation’s largest export terminals.

However the venture has confronted repeated setbacks, dropping key patrons and struggling to lift funds regardless of a surge in demand for US gasoline since Russia’s invasion of Ukraine.

Souki, credited with kick-starting the US LNG export business at his former firm Cheniere, was ousted as government chair at Tellurian in December as its struggles intensified.

The corporate’s travails have brought on its market worth to break down from a excessive of just about $3bn in 2017 to lower than $500mn on Friday. The sale value, which incorporates $900mn in money plus the corporate’s debt, is a 75 per cent premium to its most up-to-date shut.

For Woodside, Australia’s largest oil and gasoline developer, the deal offers it a greater foothold within the booming US LNG export business at a time when demand for the super-chilled gasoline is about to develop quickly.

“The acquisition of Tellurian and its Driftwood LNG improvement alternative positions Woodside to be a worldwide LNG powerhouse,” stated Woodside chief government Meg O’Neill.

Woodside, which traces its roots to the Nineteen Fifties and doubled in dimension in 2022 when it merged with BHP’s oil and gasoline division, has been on the hunt for acquisitions to bolster its development prospects.

It held talks with native rival Santos this yr for a $52bn deal that will have created a “nationwide champion”, but it surely fell aside after the 2 firms didn’t agree phrases.

Saul Kavonic, an analyst with MST Marquee, stated Woodside had acquired Tellurian at a “discount value” near e book worth and could be higher set to develop the venture than the prevailing administration resulting from its present relationships within the LNG sector.

He added Woodside would look to promote stakes within the venture to companions in time, with Japanese, Center Japanese and US buyers probably as soon as Woodside takes management of the property.

“That is the proper of M&A Woodside must be pursuing,” he stated, including that Woodside would nonetheless must element the impression of growing Driftwood on its dividend coverage to buyers.

The Perth-based firm already has a burgeoning presence within the US market, the place it’s the majority proprietor of the Shenzi discipline, off the coast of Louisiana.

The Tellurian takeover is the newest instance of consolidation within the world vitality sector as giant teams comparable to Chevron and ExxonMobil have taken out smaller rivals to spice up their development prospects.