Tellurian Inc. will discontinue drilling in the Haynesville Shale due to lower gas prices for now, and the company lowered its average production forecast for 2023 by an average 18% compared to forecasts laid out just three months ago, Executive Chairman Charif Souki said.

“Given that prices have come down very dramatically, we have decided to discontinue the drilling for the time being. We're bringing some wells on stream now as we talk, and we also have a number of wells that will stay in inventory to be brought back very quickly when the price is justified,” Souki said in a May 3 video on the company’s website.

Tellurian’s production company produced roughly 200 million cubic feet per day (MMcf/d) in first-quarter 2023, matching volumes in fourth-quarter 2022, Souki said.

“So for the time being, we think we can stay at that 200 million a day for the balance of the year… with minimal expenses. And given that we're not spending any money on drilling, you can see 200 million a day multiplied by the gas prices gives you some significant cash flow still. So we have the cash, we have the cash flow, and we are not going to drill for now going forward until prices will recover.”

In its May 3 corporation presentation, Tellurian’s natural gas production in the first quarter averaged 214 MMcf/d  in first quarter. That was down versus 225 MMcf/d in fourth-quarter 2022. In first-quarter 2022, company averaged 68 MMcf/d.

In the same presentation, Tellurian forecasted average upstream production of between 180 MMcf/d and 190 MMcf/d in 2023, down from February guidance of 225 MMcf/d.

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Tellurian’s natural gas assets

As of March 31, Tellurian’s natural gas assets included interests in 152 producing wells on 30,915 net acres, the company said May 3.

Souki said in the video that the company had more than 400 locations which would allow for the company to quickly ramp up production “at the right time” — in two to three years to get to around 65% of the gas that’s needed for its share of Phase 1 of Driftwood LNG.

“And that will continue to be our focus. And you see that we've added 3,000 acres in the first quarter. It's becoming a lot easier because there's less competition. We intend to add 10,000 acres this year and 10,000 acres next year so that we're in a position, by the time we need it, for Driftwood in 2027 to have 100% of our production … for our share of Driftwood produced organically by our own company,” Souki said.

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“At this stage we can do this organically. We don't have to make any acquisitions for Phase 1, so [we’re] in a very strong position to be able to deliver our own gas at a very reasonable cost for our share of that facility.”

Tellurian is developing the Driftwood LNG project in Lake Charles, Louisiana, which will be completed in two phases. Phase I (plants one and two) will have an annual capacity of 550 Bcf and provide 11 million tonnes per annum (mtpa) by 2026. Phase II (plants three, four and five) will have an annual capacity of 830 Bcf and provide 16.6 mtpa.

In May, Tellurian also upped its estimated cost of Phase I to $14.5 billion due to “higher owner's cost and financing.” In February, the company said the project would cost $13.6 billion.

During the first quarter, Tellurian said it continued to make progress on Driftwood LNG phase one construction. Tellurian also repaid $166.7 million in principal balance of borrowing obligations in first-quarter 2023.

“We continue to have $150 million in the bank at the end of the quarter,” Souki said.