ARKANSAS, Dec 09 (Future Headlines)- In a strategic move to navigate financial challenges and refocus on profitability, Tellurian, a U.S. liquefied natural gas (LNG) developer, has ousted its chairman and co-founder, Charif Souki, from his executive officer role. The decision comes in the wake of auditors raising concerns about the company’s ability to cover future expenses, signaling a need for a change in leadership to steer the company in a new direction. Souki, a pivotal figure in the U.S. LNG export market, co-founded Tellurian in 2016 after a successful stint at Cheniere Energy. The management shake-up has implications for Tellurian’s flagship Driftwood LNG project and the broader LNG market.
Charif Souki played a pioneering role in creating the U.S. LNG export market in 1996, capitalizing on the discovery of significant shale gas reserves. He transformed Cheniere Energy from an LNG importer into a major exporter, establishing himself as a prominent figure in the industry. However, his tenure at Tellurian has not replicated the same success, and the company has faced challenges in attracting backers for its Driftwood export project.
Souki’s departure from Cheniere Energy in the past and his subsequent co-founding of Tellurian in 2016 marked a new chapter in his career. Martin Houston, who will now replace Souki as chairman, has been a part of Tellurian’s journey since its inception.
The announcement of Souki’s ouster had an immediate impact on Tellurian’s stock, with a 4% rise in extended trading. The company’s stock had seen highs of $11.19 in 2019 but faced a decline after initial backers, including LNG traders Vitol and Shell, withdrew from potential agreements for the Driftwood project. The 27.6 million metric tons per annum facility has encountered challenges, leading to changes in its strategic approach multiple times over the years.
Driftwood, with an initial projected cost of $14.5 billion, has struggled to secure sufficient potential clients for its first phase. The wavering support from key customers has been a recurring issue for Tellurian. In August, the termination of a contract with trader Gunvor Singapore Pte Ltd further highlighted the company’s difficulties in maintaining its customer base.
Last month, auditors cast a shadow over Tellurian’s financial outlook by placing a going concern warning on its financial statements. The warning raised doubts about the company’s ability to cover future expenses. The construction of the first phase of the Driftwood project had commenced, funded by equity sales and revenue from a small gas-production unit.
The financial challenges and the ongoing concern warning prompted the need for a reassessment of Tellurian’s leadership and strategic direction. The company has been in a position where it must address financial uncertainties while advancing its LNG projects, with the Driftwood project as a linchpin for its future success.
The ousting of Charif Souki as an executive officer and his replacement by Martin Houston as chairman is being viewed as a strategic shift for Tellurian. The change is seen as an indication of a more disciplined approach within the company and a heightened focus on achieving profitability. Ben Dell, managing partner at Kimmeridge, a private equity firm, remarked that the management change signals a shift in direction and underscores a commitment to greater discipline and profitability.
Ben Dell, known for his critical stance on Souki’s strategic decisions, views the management change as a positive step for Tellurian. The company’s strategic flip-flops and spending patterns have been subjects of scrutiny, and the new leadership may bring a fresh perspective to these challenges.
Tellurian’s future prospects are intricately tied to the success or failure of its Driftwood LNG project. The departure of Souki is seen as a significant move to salvage the company’s fortunes, with hopes that new leadership can bring about positive changes. The LNG market, characterized by dynamic demand and supply dynamics, is closely watching Tellurian’s developments, given its role as a prominent U.S. LNG player.
The challenges faced by Tellurian in retaining customers and securing long-term agreements for the Driftwood project reflect broader industry dynamics. The company’s ability to navigate these challenges will influence its position in the competitive LNG market.
Despite the management change, Tellurian remains focused on executing its plan to complete the construction of the Driftwood LNG project. Souki had recently acknowledged the adoption of a tried and tested method common in U.S. LNG projects, indicating a shift in approach to ensure project success.
Alex Munton, Director of Global Gas and LNG Research at consulting firm Rapidan Group emphasized that Tellurian’s concentration on completing the Driftwood LNG construction remains unwavering. The success of this project will be pivotal in reshaping Tellurian’s narrative in the LNG market and solidifying its position as a reliable LNG supplier.
Reporting by Moe Khaled; Editing by Sarah White