Woodside grows US LNG footprint with purchase of Texas-based Tellurian

Woodside Energy has revealed a $US900 million ($1.3 billion) bid to have a fresh crack at North American LNG, with chief executive Meg O’Neill declaring the company needs to focus on the projects it can control.

It’s the latest overseas adventure for Woodside as the Perth business looks for opportunities offshore amid an uncertain regulatory environment for oil and gas in Australia.

Markets were told early Monday that Woodside had lobbed a bid to buy New York-listed Tellurian, developer of the proposed Driftwood LNG project on the Gulf Coast.

Driftwood could produce almost 28 million tonnes of the fuel annually through five processing trains.

Woodside hopes to be ready for a final investment decision on stage one early next year, and to have gas flowing by 2029. The company also plans to sell half its stake to help cover the capital cost.

The bid comes three years after Woodside was burned on a previous North American LNG play, taking a $US33m hit in 2021 when it dropped out of the Kitimat LNG joint venture in Canada.

The 2022 merger deal with BHP’s petroleum arm also brought a series of Gulf of Mexico projects into Woodside’s portfolio including Trion and Shenzi.

That means Woodside has an increasing array of international projects competing for cash with the company’s traditional Western Australian heartland.

When asked how Driftwood squares up against the giant Browse project planned off Australia’s North West coast, Ms O’Neill indicated Browse was still on the agenda.

The project has been derailed three times in just more than a decade, with the fields’ remoteness a big barrier.

Ms O’Neill said Woodside was pushing hard but approvals were the biggest roadblock.

“We do want to make sure we are advancing opportunities we have control over,” she said — a veiled warning that the company could take its cash elsewhere.

Approvals in the United States have already been granted for Driftwood, despite a January pause in LNG permitting.

Tellurian has struggled to get Driftwood off the ground with American investors wanting long term certainty over potential offtake deals.

That’s less of a problem for Woodside because the company has a wider portfolio with existing gas deals and the potential for spot market sales.

Ms O’Neill also touted the deal will give the company options across the Atlantic and the Pacific.

MST Marquee analyst Saul Kavonic said this was “the right kind of M&A Woodside should be pursuing”.

“It is leveraging Woodside’s LNG expertise to access financially distressed yet otherwise advantaged LNG assets at good price, which Woodside can add real value to,” Mr Kavonic said.

“But the market will have initial questions on the impact of the development for hopes for much higher dividend yields”.

He said Saudi’s Aramco, ADNOC or Japanese buyers might consider taking a stake in the project now that Woodside will be the operator.

Mr Kavonic said Woodside would be better placed to market the gas, secure funding and run the plant than Tellurian.

Barrenjoey warned Driftwood could cost $US16bn and deliver “marginal” economics.

A note authored by Dale Koenders and April Lowis said Woodside might chew up much of the capacity on its balance sheet to deliver the development.

“We think it will likely be a mixed response today,” the Barrenjoey analysts said, adding investors wanted returns rather than long-term growth options.

Australasian Centre for Corporate Responsibility lead analyst Alex Hillman said the acquisition showed the company was “thumbing its nose” on climate risk after investors torpedoed Woodside’s climate plan at an annual meeting in April.

“Woodside does not have a strong track record with greenfields projects,” Mr Hillman said.

“The last two major projects it completed, Pluto and Sangomar, were both late and over budget.

“Our analysis shows Woodside investors did not recover their cost of capital on either of these projects.”

Woodside shares fell 2.2 per cent to $28.56 at the time of writing.