Woodside Energy surpasses US competition with a multi-billion-dollar Tellurian deal

In a multibillion-dollar deal, Australian company Woodside Energy has acquired the troubled U.S. liquefied natural gas (LNG) developer Tellurian for $1.2 billion. With this move, Woodside aims to establish itself as a global LNG giant. The transaction, announced on Sunday, marks the end of a protracted saga for Tellurian, which dismissed its chairman in December after the $25 billion Driftwood export project in Louisiana repeatedly stalled. According to Tellurian's Executive Chairman, Martin Houston, the sale was inevitable. In a letter to shareholders, Houston explained that Woodside's attractive offer outweighed the risks and uncertainties of going it alone. The Driftwood facility, being built on a 1,200-acre site along the Calcasieu River, would be one of the largest export terminals in the U.S. upon completion. However, the project faced numerous setbacks, lost key buyers, and struggled to secure financing despite rising U.S. gas demand following Russia's invasion of Ukraine. Tellurian was founded in 2016 by Houston and U.S. LNG pioneer Charif Souki. Souki had previously helped his former company Cheniere break through in the U.S. LNG export sector but was dismissed from Tellurian in December as the problems mounted. Tellurian's market value plummeted drastically, from a peak of nearly $3 billion in 2017 to less than $500 million by Friday. The purchase price, consisting of $900 million in cash plus the company’s liabilities, represents a 75 percent premium on the most recent closing price. For Woodside, Australia’s largest oil and gas developer, the deal offers better access to the booming U.S. LNG export market. Woodside CEO Meg O'Neill stated that the acquisition of Tellurian and its Driftwood LNG project positions Woodside as a global LNG giant. Woodside, with a history dating back to the 1950s and which doubled its size in 2022 through a merger with BHP's oil and gas division, is actively seeking acquisitions to bolster its growth prospects. This year, Woodside held talks with local competitor Santos about a $52 billion deal, which ultimately failed due to disagreements. Analyst Saul Kavonic of MST Marquee called the Tellurian purchase a "bargain price" near book value. Woodside is better positioned to develop the project due to its existing relationships in the LNG sector. He added that Woodside plans to sell stakes in the project to partners, with interest from investors in Japan, the Middle East, and the U.S. However, Woodside must still clarify the impact of the Driftwood development on its dividend policy for investors. The company already has a significant presence in the U.S. market as the majority owner of the Shenzi field off the Louisiana coast. By acquiring Tellurian, Woodside follows the trend of consolidation in the global energy sector, where major corporations like Chevron and ExxonMobil are also acquiring smaller rivals to secure growth opportunities.