Thursday, February 27, 2020

Indian Company's Deal with PGAP Pipeline Owner at Risk

Tellurian's Permian Global Access Pipeline is part of a big vision, one dependent on tens of billions in financingImploding energy prices place that vision at risk.. 

Bloomberg reported:

An emerging U.S. natural gas developer, along with its $28 billion export project, has been rattled by the attempts of a potential major customer in India to probe the market for competing supplies, highlighting mounting pressure on sellers amid a global glut of the fuel.

India’s largest liquefied natural gas buyer, Petronet LNG Ltd., has started soliciting offers for supply under terms similar to a tentative agreement it signed with Tellurian Inc. last year, according to people with knowledge of the matter.

The Petronet tender, combined with the lack of a deal announcement that was expected during President Donald Trump’s visit to India this week, adds to doubts that Tellurian will be able to secure a sizable anchor investment from Petronet for its Driftwood LNG project, according to Michael Webber, managing partner of Webber Research & Advisory LLC.

“It’s supportive of our overall skepticism of the deal,” he said.
No Driftwood LNG plant, likely no PGAP.

Tellurian Chairman Charif Souki said in late January that the company would finalize a deal with Petronet soon, and that it plans to make a final investment decision on the first phase of Driftwood in the “next couple of months” and break ground in the second quarter.
Stay tuned.

Update:   Reuter's reported "That agreement, worth about $2.5 billion, was expected to be finalized by March 31. Tellurian said the companies extended the deadline to May 31 to support Petronet's review process.  The Cowen analysts noted Tellurian had about $80 million in cash and about $88 million in debt due May 23, presenting a potential liquidity issue unless the company secures equity interest in Driftwood."

Update 2-29-20:   Tellurian's stock price dropped over 50% yesterday to $1.80.  In mid January the stock was around $9 per share in anticipation of the deal progressing.

Update 3-2-20:  Two Tellurian founders were forced to sell millions of shares of company stock on Friday as the stock plummeted.  The company issued a press release on how it intends to survive.

Update 3-3-20:   Bloomberg reported the riskiness of Tellurian's plans and recent moves raise "real access to capital concerns and liquidity concerns."

Update 3-29-20:  Tellurian pushed back its term loan to November 2021.  Houston Business Journal reported:

LNG buyers are less interested in making long-term commitments in the current market, but there is also a lot of uncertainty in debt financing for LNG projects, Dewar said. 

“We’re still waiting to see what the potentially massive impact is on the debt side,” Dewar said.

All of this is especially tough for companies looking to build new assets without an existing operational base, Dewar said. That would include companies in Houston like Liquefied Natural Gas Ltd. and Tellurian Inc. (Nasdaq: TELL). Tellurian, for instance, plans to lay off 40 percent of its headcount as part of an effort to reorganize and reduce costs so it can survive in the current market.

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