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Tellurian Investments to go public with buy of E&P company Magellan

Tellurian Investments, a private company co-founded by former Cheniere Energy CEO Charif Souki, will become a public company with the acquisition of Denver-based exploration and production company Magellan Petroleum, the companies have said.

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The merged company, which will be headquartered in Houston, will focus on the development of midscale LNG projects, Antoine Lafargue, Magellan's senior vice president, CFO and treasurer, said in an interview Friday.

Magellan, an upstream oil and gas company in existence since the 1950s, and Tellurian announced their deal Thursday. The deal value was not given and a Tellurian spokeswoman Friday declined to provide it.

Until recently, Denver-based Magellan had focused on a CO2 estimated ultimate recovery project in Montana. After the company, which also holds some assets in Australia and the UK, sold its core CO2-EUR business, it conducted a strategic alternatives review process to assess the potential alternatives for its future, Lafargue said.

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"We ran a pretty extensive process and we thought that the most appropriate business model that was available to the company was the one that Tellurian presented," he said.

The merger deal that Tellurian proposed "gave the shareholders of Magellan some chance of having some stock appreciation and the opportunity to participate in a very exciting business model," Lafargue said.

For the time being Magellan is expected to retain its name and corporate identity, although "I can't tell if it's going to change in the future or not," said Lafargue, who said he has been offered a position with the new merged company.

The merger is subject to the usual closing conditions, including a vote to obtain the approval of Magellan shareholders. The Magellan management has recommended that shareholders vote in favor of the merger.

The companies expect the deal to close in the fourth quarter of the year.

Souki, the colorful founder and former Chairman and CEO of Cheniere Energy, left that company last December, after being forced out of his leadership position by a board largely controlled by activist investor Carl Icahn. In February, Souki joined Martin Houston, former COO of BG Group, to found Tellurian Investments, a private company focused on the development of mid-scale LNG facilities on the US Gulf Coast.

Following the formation of Tellurian, its founders expressed an interest in going public through an initial public offering, in order to raise capital to found the company's planned projects.

Tellurian's major project is Driftwood LNG, a proposed LNG production and export terminal on the west bank of the Calcasieu River, south of Lake Charles, Louisiana. The project is proposed to have an export capacity of up to 26 million mt/year of LNG.

In addition, subsidiary Driftwood LNG Pipeline is proposing to build and operate a 96-mile feed-gas pipeline system to deliver an average of 4 Bcf/d of natural gas to the Driftwood LNG facility. The proposed pipeline project would consist of 11 miles of 36-inch-diameter single pipeline, 11 miles of 42-inch-diameter single pipeline, 38 miles of 42-inch-diameter dual pipeline, 36 miles of 48-inch-diameter single pipeline, three compressor stations and up to 15 meter stations and associated tie-ins at up to 13 sites.

The merger would give Magellan's shareholders the opportunity ?to participate at an early stage in an investment potentially similar to Cheniere Energy's remarkable success, under the leadership of Charif Souki," Magellan President and CEO J. Thomas Wilson said in the joint statement.

"With this transaction, we will be able to access more attractive financing in order to develop Driftwood LNG, which should come on stream in 2022, just as the markets for new LNG open up," Houston said.

Under the terms of the merger agreement, upon closing each share of Tellurian will be converted into the right to receive 1.30 shares of Magellan. Magellan will issue approximately 122 million shares of common stock to Tellurian shareholders, representing approximately 95% of Magellan's pro forma outstanding common stock.

--Jim Magill, jim.magill@platts.com
--Edited by Richard Rubin, richard.rubin@spglobal.com