Woodside Energy Group Ltd (ASX: WDS) saw its share price dip today, reflecting a 2.19% decrease from Friday's close of AU$29.21 to AU$28.57 apiece during Monday morning trade. This decline outpaced the broader S&P/ASX 200 Index (ASX: XJO), which was down 0.58% at the same time.
Strategic Acquisition of Tellurian Inc
Investors appear cautious following Woodside's announcement of a definitive agreement to acquire Tellurian Inc (NYSE: TELL) and its US Gulf Coast Driftwood LNG development. The acquisition involves an all-cash transaction of approximately US$900 million, equating to around US$1.00 per share, with an implied enterprise value of about US$1.2 billion (approximately AU$1.8 billion).
Driftwood LNG Project Overview
The Driftwood LNG project, located in Louisiana, is a fully permitted development opportunity pending a final investment decision (FID). The current development plan includes five LNG trains across four phases, with a total permitted capacity of 27.6 million tonnes per annum (Mtpa).
Potential Long-term Benefits
Woodside anticipates that acquiring Tellurian and its Driftwood LNG project will strengthen its position as a leading independent LNG company. The phased development approach aligns with Woodside’s capital allocation framework and is expected to enhance long-term cash flow generation.
Enhancing Global LNG Footprint
The acquisition is part of Woodside's strategy to increase its global LNG footprint, adding a scalable US LNG development opportunity to its existing 10 Mtpa of equity LNG in Australia. This complementary US position is aimed at better serving global customers and capturing additional marketing optimization opportunities across both the Atlantic and Pacific basins.
Strategic Alignment and Energy Transition
The Driftwood LNG project is seen as a competitively advantaged development that Woodside plans to leverage with its global LNG expertise. This acquisition is also in line with Woodside's strategy to navigate the ongoing global energy transition, with LNG playing a crucial role. The company aims to deliver energy needs while providing significant value to its shareholders.
Transaction Approval and Timeline
Tellurian's board has approved the acquisition, recommending that shareholders vote in favor. Both companies aim to complete the transaction in the fourth quarter of 2024.
Market Performance and Investor Sentiment
Despite the strategic acquisition, Woodside's share price has been under pressure, declining nearly 9% so far in 2024. Investors are weighing the long-term benefits of the Driftwood LNG project against the immediate market reaction.