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Tellurian Inc., which is developing the Driftwood liquefaction export project in Calcasieu Parish, Louisiana, issued a frank warning to the investment world in its third-quarter 2023 financial filing.
“There is substantial doubt about our ability to continue as a going concern,” according to regulatory filings.
While the announcement may not be a surprise to those following Tellurian’s story over the past couple of years, the warning should raise serious and credible doubts about the company’s ability to push Driftwood over the finish line.
Tellurian said in regulatory filings it has “historically generated losses and negative cash flows from operations” and has “not yet established an ongoing source of revenues that is sufficient to cover our future operating costs and obligations as they become due” over the next 12 months.
The Houston-based company reported a net loss of $65.4 million in third-quarter 2023, larger than its reported loss of $14.2 million in third-quarter 2022, Tellurian said in its Oct. 31 quarterly filing with the Securities and Exchange Commission (SEC). At the end of the third quarter, the company had $59.3 million in cash and cash equivalents and $23.7 million in accounts receivable.
Tellurian has used cash plus proceeds from debt and equity issuances as well as income from its upstream operations to cover its liquidity needs, the company said in the filing.
However, Tellurian’s three primary segments — upstream, midstream and marketing and trading — all reported net losses in the third quarter while its corporate segment was impacted by a loss on the extinguishment of debt.
Tellurian, which has upstream operations in the Haynesville Shale, continues to eye potential acquisitions in the basin that would use a combination of stock, available cash or proceeds raised in the equity or debt markets for funding.
Tellurian’s natural gas production reached 19.5 Bcf in the third quarter, up 71% from 11.4 Bcf year-over-year. At the end of the quarter, the company’s natural gas assets included 31,149 net acres and interests in 159 producing wells, Tellurian said Nov. 2 in a separate company press release.
“Tellurian’s upstream segment continues to provide growing natural gas production, improving significantly over the third quarter of last year, and we see natural gas prices on the rise through year-end,” Tellurian President and CEO Octávio Simões said in the release.
Driftwood dreams unchanged
Despite the financial results reported in the third quarter, Tellurian continues to push plans to develop the Driftwood project.
The proposed Driftwood export facility would have a liquefaction capacity of up to 27.6 million tonnes per annum. The terminal would include up to 20 liquefaction trains, three full containment LNG storage tanks and three marine berths, according to the company’s SEC filing.
Tellurian estimates the total cost related to Driftwood to “be $25 billion, including owners’ costs, transaction costs and contingencies but excluding interest costs incurred during construction and other financing costs,” the company said.
“We are having a number of discussions with counterparties for both equity partnership and liquefied natural gas offtake for the Driftwood project and investment in the Driftwood Line 200/300 pipeline,” Simões said in the release. “We have invested over one billion dollars to develop and advance construction of the fully permitted Driftwood project and remain on target to produce first LNG in 2027.”
PPHB Managing Director James “Jim” K. Wicklund told Hart Energy in late October that Tellurian’s business model, which differs from others because of its upstream and LNG components, has spooked lenders and will continue to be a challenging model.
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