Woodside Energy Group, Australia’s largest oil and gas producer, is moving forward with its long-held growth plans reporting it has agreed to buy the U.S.-based Tellurian in a deal that values the company at approximately $1.2 billion. Tellurian is fully permitted and in an advanced stage of pre-FID development for the Driftwood LNG export project to be located near Lake Charles, Louisiana.
The companies announced today that Woodside has agreed to an all-cash price of approximately $900 million, or $1 per share, for Tellurian’s common stock. It represents a 75 percent premium on the share price with Tellurian highlighting it provides an immediate, significant return for investors versus the risks and costs associated with the development project. For Woodside, which has been seeking a big growth opportunity, it expands the company’s size and places it in a strong position in the U.S. market.
“The acquisition of Tellurian and its Driftwood LNG development opportunity positions Woodside to be
a global LNG powerhouse,” said Woodside CEO Meg O’Neill. “It adds a scalable US LNG development opportunity to our existing approximately 10 Mtpa of equity LNG in Australia. Having a complementary U.S. position would allow us to better serve customers globally and capture further marketing optimization opportunities across both the Atlantic and Pacific Basins.”
Work on the Driftwood site began in March 2022 with Bechtel Energy executing the Engineering, Procurement, and Construction (EPC) contract to begin construction of phase one. The target was to reach the final investment decision with the project coming online by 2026 or 2027. Tellurian encountered challenges launching a strategic repositioning in December 2023 with new management.
The advantage for Woodside is the project is fully permitted and not subject to the current hold on future licenses launched during the review of the industry under the Biden administration. If the project completes all its future expansion efforts it would be able to export nearly 28 tonnes per annum (mtpa) which would nearly triple Woodside’s current capacity. Based on 2023 figures, Driftwood could become six percent of the global export market.
Work is progressing on the site preparations for phase one of Driftwood, which would include two LNG plants with an export capacity of up to 11 Mtpa. The second phase calls for a further 5.5 Mtpa. Woodside reports it expects to close the acquisition in the fourth quarter and is targeting readiness for the FID for phase 1 of Driftwood in the first quarter of 2025.
Woodside says it looks to leverage its existing strong relationships with Bechtel, which is also leading the company’s Pluto Train 2 project in Australia as well as Baker Hughes and Chart. Woodside’s strong position in the market analysts said would also strengthen Driftwood and address market concerns about the project. Driftwood unlike other U.S. projects was proposing long-term contracts linked to the Asian and European spot price for LNG. That raised concern about volatility and some large potential customers including India’s Shell and Vitol did not make deals with Driftwood.
Woodside is already a majority owner of an oil and gas field located about 120 miles off the coast of Louisiana. The company has declared its intention to invest $5 billion in new energy projects over the next five to six years.
