In key news on Australian stocks, Woodside Energy Group (AU:WDS) announced an agreement to acquire U.S.-based liquefied natural gas (LNG) developer Tellurian (TELL) in a deal valued at $1.2 billion. The Australian oil and gas giant believes that this deal, which includes Tellurian’s U.S. Gulf Coast Driftwood LNG project, will bolster its position in the U.S. and establish it as a “global LNG powerhouse.” It will also help Woodside Energy to capitalize on the growing demand for LNG since the Russia-Ukraine war.
Details of the Woodside Energy-Tellurian Deal
Woodside Energy’s acquisition of Tellurian involves a cash payment of $900 million, or $1.00 per share of TELL stock. The deal price reflects a 75% premium to Tellurian’s closing stock price of $0.57 on Friday. Under the terms of the transaction, Woodside will extend a loan of up to $230 million to Tellurian to ensure that the activity at the Driftwood LNG site continues.
TELL shares have plunged about 66% over the past year, as the company struggled to secure funding for developing its ambitious Driftwood project on a 1,200-acre site near Lake Charles, Louisiana. The current development plan has a total permitted capacity of 27.6 Mtpa (million tonnes per annum).
The Driftwood development project involves four phases. Woodside Energy expects development costs of about $900 to $960 per tonne for phases 1 and 2. Interestingly, Tellurian’s Board of Directors has approved the acquisition and urged its shareholders to accept the deal. The acquisition is expected to be completed in the fourth quarter of this year.
Woodside Energy’s Expansion Efforts
Woodside Energy anticipates that the Tellurian acquisition and the Driftwood project will strengthen its existing capacity of about 10 Mtpa of equity LNG in Australia. The company believes that the Tellurian deal will give it a complementary U.S. portfolio and help in capturing additional “marketing optimization opportunities across both the Atlantic and Pacific Basins.”
Earlier this year, Woodside Energy abandoned its efforts to acquire domestic rival Santos (AU:STO) through a $80 billion merger after the two companies disagreed on the terms of the transaction. The company’s expansion efforts come at a time when the energy sector is witnessing some massive deals, including Chevron’s (CVX) acquisition of Hess and Exxon Mobil’s (XOM) acquisition of Pioneer Natural Resources.
Meanwhile, Woodside Energy aims to invest $5 billion in new energy products and lower carbon projects by 2030. This amount includes Woodside’s proposed H2OK hydrogen project in Oklahoma.
Is Woodside Energy a Good Stock to Buy?
Woodside Energy stock has a Moderate Buy consensus rating based on six Buys, five Holds, and one Sell recommendation. The average WDS stock price target of AU$32.34 implies 13.3% upside potential. Shares have declined 5% so far this year.
