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Tellurian stretches loan due date again as Driftwood LNG commercial talks continue

Highlights

Financial maneuver gives company breathing room

Louisiana project has yet to be formally sanctioned

Houston — Tellurian will have an additional four months to pay back a sizable loan, giving it further breathing room as it struggles to secure sufficient commercial support to advance its Driftwood LNG export project in Louisiana, according to a Sept. 21 US securities filing.

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While commercial discussions among US liquefaction terminal developers have picked up after coming to a virtual standstill during the summer due in large part to the coronavirus pandemic, Tellurian's prospects for Driftwood remain uncertain.

Investors have shed Tellurian shares. With its stock price below $1 for more than 30 consecutive trading days, the company recently received a de-listing notice from Nasdaq. It will have additional time for its stock to rise above that threshold before any action is taken.

To give itself a financial lifeline, Tellurian has cut 38% of its staff and scaled back its midstream ambitions, saying it will build only one of four proposed pipelines during the first phase of the Driftwood project if it decides to sanction the US facility. It also has worked on freeing up cash by adjusting its debt obligations.

In March, Tellurian negotiated an 18-month extension of the maturity of an $87.5 million loan that was to come due in May. That deal gave the company until Nov. 23, 2021, to pay back the money.

In its latest filing with the Securities and Exchange Commission, Tellurian said it negotiated a further extension to March 23, 2022.

As a condition, Tellurian must repay $12 million of the remaining principal immediately. The company gained the right to make certain investments in its production unit or any of its subsidiaries with proceeds from stock issuances or certain asset sales, the filing said.

Tellurian had long positioned itself as an integrated gas infrastructure company, with plans to produce its own feedgas in the Haynesville Shale and build a network of pipelines to connect those supplies and supplies from the Permian Basin and other plays to its Louisiana export terminal and to serve other customers.

For now, the first phase of construction will include only the Driftwood terminal and the already permitted 4 Bcf/d Driftwood Pipeline.

At full development, about half of the liquefaction terminal's approved 27.6 million mt/year capacity is expected to be used by equity investment partners that Tellurian has been soliciting. The rest would be held by Tellurian to market on its own gas .

The equity arrangements would require the partners to make a minimum upfront $500 million equity investment in the holding company that controls the Driftwood terminal and the pipelines that Tellurian builds, in exchange for the right to lift 1 million mt/year of LNG from the export terminal for the life of the facility.

To date, only France's Total has signed a firm partnership deal tied to Driftwood, a $500 million investment agreed to in 2019. Talks with India's Petronet about a potential equity deal have been said to be continuing.