tell-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-5507

Tellurian Inc.

(Exact name of registrant as specified in its charter)

Delaware

06-0842255

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

1201 Louisiana Street,

Suite 3100,

Houston,

77002

(Address of principal executive offices)

(Zip Code)

(Registrant’s telephone number, including area code): (832) 962-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock, par value $0.01 per share

TELL

NYSE

American LLC

8.25% Senior Notes due 2028

TELZ

NYSE

American LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

As of October 31, 2023, there were 634,842,364 shares of common stock, $0.01 par value, issued and outstanding.

Tellurian Inc.

TABLE OF CONTENTS

Page

Part I — Financial Information (Unaudited)

Item 1.

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Operations

Condensed Consolidated Statement of Changes in Stockholders’ Equity

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

Part II — Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 5.

Other Information

Item 6.

Exhibits

Signatures

Cautionary Information About Forward-Looking Statements

The information in this report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical facts, that address activity, events, or developments with respect to our financial condition, results of operations, or economic performance that we expect, believe or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “budget,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “initial,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “proposed,” “should,” “will,” “would” and similar terms, phrases, and expressions are intended to identify forward-looking statements. These forward-looking statements relate to, among other things:

•our businesses and prospects and our overall strategy;

•our ability to continue as a going concern;

•planned or estimated costs or capital expenditures;

•availability of liquidity and capital resources;

•our ability to obtain financing as needed and the terms of financing transactions, including for the Driftwood Project;

•revenues and expenses;

•progress in developing our projects and the timing of that progress;

•attributes and future values of the Company’s projects or other interests, operations or rights; and

•government regulations, including our ability to obtain, and the timing of, necessary governmental permits and approvals.

Our forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. These statements are subject to a number of known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from any future results or performance expressed or implied by the forward-looking statements. Factors that could cause actual results and performance to differ materially from any future results or performance expressed or implied by the forward-looking statements include, but are not limited to, the following:

•the uncertain nature of demand for and price of natural gas and LNG;

•risks related to shortages of LNG vessels worldwide;

•technological innovation which may render our anticipated competitive advantage obsolete;

•risks related to a terrorist or military incident involving an LNG carrier;

•changes in legislation and regulations relating to the LNG industry, including environmental laws and regulations that impose significant compliance costs and liabilities;

•governmental interventions in the LNG industry, including increases in barriers to international trade;

•uncertainties regarding our ability to maintain sufficient liquidity and attract sufficient capital resources to implement our projects or otherwise continue as a going concern;

•our limited operating history;

•our ability to attract and retain key personnel;

•risks related to doing business in, and having counterparties in, foreign countries;

•our reliance on the skill and expertise of third-party service providers;

•the ability of our vendors, customers and other counterparties to meet their contractual obligations;

•risks and uncertainties inherent in management estimates of future operating results and cash flows;

•our ability to maintain compliance with our debt arrangements;

•changes in competitive factors, including the development or expansion of LNG, pipeline and other projects that are competitive with ours;

•development risks, operational hazards and regulatory approvals;

•our ability to enter into and consummate planned financing and other transactions;

•risks related to pandemics or disease outbreaks;

•risks of potential impairment charges and reductions in our reserves; and

•risks and uncertainties associated with litigation matters.

The forward-looking statements in this report speak as of the date hereof. Although we may from time to time voluntarily update our prior forward-looking statements, we disclaim any commitment to do so except as required by securities laws.

DEFINITIONS

To the extent applicable, and as used in this quarterly report, the terms listed below have the following meanings:


Bcf						Billion cubic feet of natural gas
DD&A						Depreciation, depletion and amortization
DFC						Deferred financing costs and original issue discount
EPC						Engineering, procurement and construction
FID						Final investment decision as it pertains to the Driftwood Project
FERC						U.S. Federal Energy Regulatory Commission
GAAP						Generally accepted accounting principles in the U.S.
LNG						Liquefied natural gas
LSTK						Lump sum turnkey
Mtpa						Million tonnes per annum
NYSE American						NYSE American LLC
Phase 1						Plants one and two of the Driftwood terminal
Train						An industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG
U.S.						United States

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


TELLURIAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts, unaudited)

	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	59,279	$	474,205
Accounts receivable	23,700		76,731
Prepaid expenses and other current assets	13,083		23,355
Total current assets	96,062		574,291

Property, plant and equipment, net	1,098,699		789,076

Other non-current assets	71,009		63,316
Total assets	$	1,265,770	$	1,426,683

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	37,301	$	4,805
Accounts payable due to related parties	55		—
Accrued and other liabilities	118,682		129,180
Borrowings	—		163,556
Total current liabilities	156,038		297,541

Long-term liabilities:
Borrowings	372,386		382,208
Finance lease liabilities	121,675		49,963
Other non-current liabilities	45,474		24,428
Total long-term liabilities	539,535		456,599

Commitments and Contingencies (Note 9)

Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 authorized: 6,123,782 and 6,123,782 shares outstanding, respectively	61		61
Common stock, $0.01 par value, 1,600,000,000 authorized: 601,337,236 and 564,567,568 shares outstanding, respectively	5,842		5,456
Additional paid-in capital	1,697,693		1,647,896
Accumulated deficit	(1,133,399)		(980,870)
Total stockholders’ equity	570,197		672,543
Total liabilities and stockholders’ equity	$	1,265,770	$	1,426,683

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


TELLURIAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Natural gas sales	$	43,250	$	81,103	$	126,172	$	168,442
LNG sales	—		—		—		120,951
Total revenue	43,250		81,103		126,172		289,393

Operating costs and expenses:
Operating expenses	21,754		8,428		60,047		18,536
LNG cost of sales	—		—		—		131,663
Development expenses	10,042		12,891		33,629		48,244
Depreciation, depletion and amortization	23,661		12,860		71,058		22,735
General and administrative expenses	22,176		41,495		85,716		97,334
Total operating costs and expenses	77,633		75,674		250,450		318,512

(Loss) income from operations	(34,383)		5,429		(124,278)		(29,119)

Interest expense, net	(3,992)		(6,944)		(12,184)		(13,790)
Loss on extinguishment of debt, net	(29,473)		—		(32,295)		—
Other income (expense), net	2,431		(12,718)		16,228		(37,966)

Loss before income taxes	(65,417)		(14,233)		(152,529)		(80,875)
Income tax	—		—		—		—
Net loss	$	(65,417)	$	(14,233)	$	(152,529)	$	(80,875)

Net loss per common share(1):
Basic and diluted	$	(0.12)	$	(0.03)	$	(0.28)	$	(0.15)

Weighted-average shares outstanding:
Basic and diluted	559,952		538,549		546,087		523,189


(1) The numerator for both basic and diluted loss per share is net loss. The denominator for both basic and diluted loss per share is the weighted-average shares outstanding during the period.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


TELLURIAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, unaudited)

					Three Months Ended September 30,				Nine Months Ended September 30,
					2023		2022		2023	2022
Total shareholders’ equity, beginning balance	$	599,374	$	653,734	$	672,543	$	418,301

Preferred stock	61		61		61		61

Common stock:
Beginning balance	5,560		5,454		5,456		4,774
Common stock issuances	282		—		383		677
Share-based compensation, net	—		1		3		3
Share-based payment	—		1		—		2




Ending balance	5,842		5,456		5,842		5,456

Additional paid-in capital:
Beginning balance	1,661,735		1,645,920		1,647,896		1,344,526
Common stock issuances	35,762		—		48,425		299,063
Share-based compensation, net	196		1,033		1,372		2,750

Share-based payments	—		62		—		676






Ending balance	1,697,693		1,647,015		1,697,693		1,647,015

Accumulated deficit:
Beginning balance	(1,067,982)		(997,701)		(980,870)		(931,059)
Net loss	(65,417)		(14,233)		(152,529)		(80,875)
Ending balance	(1,133,399)		(1,011,934)		(1,133,399)		(1,011,934)

Total shareholders’ equity, ending balance	$	570,197	$	640,598	$	570,197	$	640,598

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


TELLURIAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(152,529)	$	(80,875)
Adjustments to reconcile Net loss to Net cash used in operating activities:
Depreciation, depletion and amortization	71,058		22,735
Amortization of debt issuance costs, discounts and fees	2,997		1,494
Share-based compensation	1,375		2,753
Share-based payments	—		678
Net unrealized loss on financial instruments not designated as hedges	7,820		13,553
Loss on extinguishment of debt, net	32,295		—
Other	2,147		745
Net changes in working capital (Note 15)	32,129		(26,802)
Net cash used in operating activities	(2,708)		(65,719)

Cash flows from investing activities:
Acquisition and development of natural gas properties	(107,038)		(236,558)
Driftwood Project construction costs	(168,210)		(117,793)
Land purchases and land improvements	—		(19,412)
Investment in unconsolidated entity	—		(6,089)
Note receivable	(18,000)		(5,000)
Capitalized internal use software and other assets	(2,129)		(1,278)
Net cash used in investing activities	(295,377)		(386,130)

Cash flows from financing activities:
Proceeds from common stock issuances	47,662		309,021
Equity issuance costs	(1,442)		(9,281)
Borrowing proceeds	—		501,178
Borrowing issuance costs	—		(11,487)
Borrowing principal repayments	(166,666)		—
Other	(1,073)		(98)
Net cash (used in) provided by financing activities	(121,519)		789,333

Net (decrease) increase in cash, cash equivalents and restricted cash	(419,604)		337,484
Cash, cash equivalents and restricted cash, beginning of period	508,468		307,274
Cash, cash equivalents and restricted cash, end of period	$	88,864	$	644,758

Supplementary disclosure of cash flow information:
Interest paid, net of capitalized interest	$	15,629	$	11,152

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 1 — GENERAL

Tellurian Inc. (“Tellurian,” “we,” “us,” “our,” or the “Company”), a Delaware corporation, is a Houston-based company that is developing and plans to operate a portfolio of natural gas, LNG marketing, and infrastructure assets that includes an LNG terminal facility (the “Driftwood terminal”), related pipelines and upstream natural gas assets (collectively referred to as the “Business”). The Driftwood terminal and related pipelines are collectively referred to as the “Driftwood Project.”

The terms “we,” “our,” “us,” “Tellurian” and the “Company” as used in this report refer collectively to Tellurian Inc. and its subsidiaries unless the context suggests otherwise. These terms are used for convenience only and are not intended as a precise description of any separate legal entity associated with Tellurian Inc.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. The Condensed Consolidated Financial Statements, in the opinion of management, reflect all adjustments necessary for the fair presentation of the results for the periods presented. All adjustments are of a normal recurring nature unless otherwise disclosed.

Certain reclassifications have been made to conform prior period information to the current presentation. The reclassifications did not have a material effect on our consolidated financial position, results of operations or cash flows.

To conform with GAAP, we make estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements and the accompanying notes. Although these estimates and assumptions are based on our best available knowledge at the time, actual results may differ.

Our Condensed Consolidated Financial Statements have been prepared in accordance with GAAP, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business as well as the Company’s ability to continue as a going concern. As of the date of the Condensed Consolidated Financial Statements, we have historically generated losses and negative cash flows from operations. We have not yet established an ongoing source of revenues that is sufficient to cover our future operating costs and obligations as they become due during the twelve months following the issuance of the Condensed Consolidated Financial Statements. To date, the Company has been meeting its liquidity needs primarily from cash on hand and the combined proceeds generated by debt and equity issuances, upstream operations, and the sale of common stock under its at-the-market equity offering programs. As of September 30, 2023, the Company had approximately $59.3 million in cash and cash equivalents and approximately $23.7 million of accounts receivable, which we expect will not be sufficient to satisfy its obligations, fund its working capital needs and allow it to remain compliant with debt covenants and liquidity thresholds for twelve months after the date the Condensed Consolidated Financial Statements are issued. These conditions raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued. The analysis used to determine the Company's ability to continue as a going concern does not include cash sources that management expects to be available within the next twelve months but are outside of the Company's direct control.

The Company plans to mitigate these conditions by generating additional proceeds from various other potential financing transactions, such as issuances of equity, equity-linked and debt securities, or similar transactions, managing certain operating and overhead costs, refinancing the Replacement Notes, offering equity interests in the Driftwood Project and, if necessary, exploring opportunities to monetize all or a portion of its upstream natural gas assets (collectively “Management’s Plans”). The Company's ability to effectively implement Management’s Plans, should the Company choose to do so, is subject to numerous risks and uncertainties, including risks associated with market demand for our equity and debt securities, commodity prices and other factors affecting natural gas markets. As of the date of this filing, Management’s Plans have not been implemented to alleviate the conditions which raise substantial doubt. The Condensed Consolidated Financial Statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 2 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following (in thousands):


	September 30, 2023		December 31, 2022
Prepaid expenses	$	1,908	$	2,174
Deposits	273		172
Restricted cash	4,688		9,375
Derivative asset, net current (Note 8)	—		10,463
Other current assets	6,214		1,171
Total prepaid expenses and other current assets	$	13,083	$	23,355

Restricted Cash

Restricted cash as of September 30, 2023 and December 31, 2022 represent cash held in escrow under the terms of the purchase and sale agreement for the acquisition of certain natural gas assets in the Haynesville Shale.

NOTE 3 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consist of the following (in thousands):


	September 30, 2023		December 31, 2022
Upstream natural gas assets:
Proved properties	$	495,026	$	412,977
Wells in progress	66,917		55,374
Accumulated DD&A	(161,004)		(92,423)
Total upstream natural gas assets, net	400,939		375,928

Driftwood Project assets:
Terminal construction in progress	473,496		292,734
Pipeline construction in progress	29,247		—
Land and land improvements	53,664		52,460
Finance lease assets, net of accumulated DD&A	55,827		56,708
Buildings and other assets, net of accumulated DD&A	318		340
Total Driftwood Project assets, net	612,552		402,242

Fixed assets and other:
Finance lease assets, net of accumulated DD&A	71,315		—
Leasehold improvements and other assets	17,910		12,672
Accumulated DD&A	(4,017)		(1,766)
Total fixed assets and other, net	85,208		10,906

Total property, plant and equipment, net	$	1,098,699	$	789,076

Terminal Construction in Progress

During the nine months ended September 30, 2023, we capitalized approximately $180.8 million of directly identifiable project costs as Driftwood terminal construction in progress.

Pipeline Construction in Progress

On April 21, 2023, the Company received FERC approval for the construction of the Driftwood pipelines. During the second quarter of 2023, pipeline materials and rights of way of approximately $14.6 million were transferred to construction in progress in accordance with our accounting policies. During the nine months ended September 30, 2023, we also capitalized approximately $14.6 million of directly identifiable project costs as Pipeline construction in progress.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 4 — OTHER NON-CURRENT ASSETS

Other non-current assets consist of the following (in thousands):


	September 30, 2023		December 31, 2022
Land lease and purchase options	$	31	$	300
Permitting costs	—		916
Right of use asset — operating leases	13,628		13,303
Restricted cash	24,897		24,888
Investment in unconsolidated entity	6,089		6,089
Note receivable	24,189		6,595
Pipeline materials and rights of way	—		9,136
Other	2,175		2,089
Total other non-current assets	$	71,009	$	63,316

Restricted Cash

Restricted cash as of September 30, 2023 and December 31, 2022 represents cash collateralization of a letter of credit associated with a finance lease.

Note Receivable

In February 2023, the Company issued an amended and restated promissory note due June 14, 2031 (the “Note Receivable”) to an unaffiliated entity engaged in the development of infrastructure projects in the energy industry. The outstanding principal balance of the Note Receivable as of September 30, 2023 was approximately $24.2 million. The promissory note bears interest at a rate of 6.00%, which is capitalized into the outstanding principal balance annually.

Pipeline materials and rights of way

Pipeline materials and rights of way were transferred to construction in progress in the second quarter of 2023. See Note 3 Property, Plant and Equipment.

NOTE 5 — RELATED PARTY TRANSACTIONS

Related Party Contractor Service Fees and Expenses

The Company entered into a one-year independent contractor agreement, effective January 1, 2022, with Mr. Martin Houston, the Vice Chairman of the Company’s Board of Directors. Pursuant to the terms and conditions of this agreement, the Company paid Mr. Houston a monthly fee of $50.0 thousand plus approved expenses. In December 2022, the Company amended the independent contractor agreement to expire on the earlier of (i) termination of Mr. Houston and (ii) December 31, 2023, and to increase the monthly fee to $55.0 thousand plus approved expenses. For the three and nine months ended September 30, 2023, the Company paid Mr. Houston $110.0 thousand and $440.0 thousand, respectively, for contractor service fees and expenses. For the three and nine months ended September 30, 2022, the Company paid Mr. Houston $150.0 thousand and $475.0 thousand, respectively, for contractor service fees and expenses. As of September 30, 2023 and 2022, a balance of $55.0 thousand and $0.0, respectively, were owed to Mr. Houston.

NOTE 6 — ACCRUED AND OTHER LIABILITIES

Accrued and other liabilities consist of the following (in thousands):


	September 30, 2023		December 31, 2022
Upstream accrued liabilities	$	42,292	$	71,977

Payroll and compensation	25,473		37,329
Accrued taxes	1,242		730
Driftwood Project development activities	20,745		4,423
Lease liabilities	4,610		2,875
Accrued interest	4,626		5,793
Embedded derivatives (Note 8)	13,268		—
Other	6,426		6,053
Total accrued and other liabilities	$	118,682	$	129,180

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 7 — BORROWINGS

The Company’s borrowings consist of the following (in thousands):


	September 30, 2023
	Principal repayment obligation		Unamortized Premium (DFC)		Carrying value
Senior Secured Convertible Notes due 2025	$	83,334	$	2,779	$	86,113
Senior Secured Notes due 2025	250,000		(19,075)		230,925
Senior Unsecured Notes due 2028	57,678		(2,330)		55,348
Total borrowings	$	391,012	$	(18,626)	$	372,386


	December 31, 2022
	Principal repayment obligation		Unamortized DFC		Carrying value
Convertible Notes, current	$	166,666	$	(3,110)	$	163,556
Convertible Notes, non-current	333,334		(6,219)		327,115
Senior Unsecured Notes due 2028	57,678		(2,585)		55,093
Total borrowings	$	557,678	$	(11,914)	$	545,764

Amortization of the borrowings’ premium and DFC is a component of Interest expense, net in the Company’s Condensed Consolidated Statements of Operations. We amortized approximately $1.3 million and $3.0 million during the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2022, we amortized approximately $0.9 million and $1.5 million, respectively.

Senior Secured Convertible Notes due 2025 (Extinguished)

On June 3, 2022, we issued and sold $500.0 million aggregate principal amount of 6.00% Senior Secured Convertible Notes due May 1, 2025 (the “Extinguished Convertible Notes”). Net proceeds from the Extinguished Convertible Notes were approximately $488.7 million after deducting fees and expenses. The Extinguished Convertible Notes had quarterly interest payments due on February 1, May 1, August 1, and November 1 of each year and on the maturity date. DFC of approximately $11.5 million were capitalized.

Partial Redemption

On March 27, 2023, the holder of the Extinguished Convertible Notes delivered to the Company notice to redeem $166.7 million of the initial principal amount of the Extinguished Convertible Notes at par, plus accrued interest (the “Redemption Amount”). On March 28, 2023, the Company irrevocably deposited the Redemption Amount of approximately $169.1 million in order to satisfy the redemption and retirement of $166.7 million principal amount of the Extinguished Convertible Notes, plus accrued interest. As a result of paying the Redemption Amount prior to the Extinguished Convertible Notes’ contractual maturity, the Company wrote off approximately $2.8 million of prorated unamortized DFC, which was recognized within Loss on extinguishment of debt, net, in its Condensed Consolidated Statements of Operations.

Extinguishment

On August 15, 2023, we issued and sold in a private placement $250.0 million aggregate principal amount of 10% Senior Secured Notes due October 1, 2025 (the “Senior Notes”) and approximately $83.3 million aggregate principal amount of 6% Secured Convertible Notes (the “Secured Convertible Notes”) due October 1, 2025 (collectively the “Replacement Notes”). The issuance of the Replacement Notes to the holder of the Extinguished Convertible Notes resulted in the satisfaction and discharge of the Company’s outstanding principal repayment obligation under the Extinguished Convertible Notes. As a result, the Company recorded a Loss on extinguishment of debt of approximately $29.5 million in its Condensed Consolidated Statements of Operations.

Senior Secured Notes due 2025

The Senior Notes have quarterly interest payments in cash due on the first day of January, April, July, and October of each year, commencing in October 2023. DFC of approximately $20.1 million were capitalized and are being amortized over the term of the Senior Notes using the effective interest rate method. Holders of the Senior Notes may force the Company to redeem the applicable Senior Notes for cash upon (i) a fundamental change or (ii) an event of default. On or after October 1, 2024, the holders of the Senior Notes may redeem up to the entire principal amount of the Senior Notes for a cash purchase price equal to the principal amount of the Senior Notes being redeemed, plus accrued and unpaid interest, if the Company’s

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

liquidity falls below (a) $200.0 million, if the Secured Convertible Notes are not outstanding at such time, or (b) $250.0 million, if any of the Secured Convertible Notes are outstanding at such time. The Company may provide written notice to each holder of the Senior Notes calling all of such holder’s Senior Notes for redemption for a cash purchase price equal to 100% of the principal amount being redeemed, plus accrued and unpaid interest (the “Optional Redemption”).

Our borrowing obligations under the Senior Notes are collateralized by a first priority lien on the Company’s equity interests in Tellurian Production Holdings LLC (“Tellurian Production Holdings”), a wholly owned subsidiary of Tellurian Inc. Tellurian Production Holdings owns all of the Company’s upstream natural gas assets described in Note 3, Property, Plant and Equipment. The Senior Notes contain financial and non-financial covenants, including a minimum cash covenant of $50.0 million. As of September 30, 2023, we remained in compliance with all covenants under the Senior Notes.

As of September 30, 2023, the estimated fair value of the Senior Notes was approximately $231.2 million. The Level 3 fair value was estimated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and inputs that are not observable in the market.

Senior Secured Convertible Notes due 2025

The Secured Convertible Notes have quarterly interest payments in cash due on the first day of January, April, July, and October of each year, commencing in October 2023. The holders of the Secured Convertible Notes have the right to convert the notes into shares of our common stock at an initial conversion rate of 512.8205 shares per $1,000 principal amount of notes (equivalent to a conversion price of approximately $1.95 per share of common stock) (the “Conversion Price”), subject to adjustment in certain circumstances. The Company will force the holders of the Secured Convertible Notes to convert all of the notes if the trading price of our common stock closes above 300% of the Conversion Price for 20 consecutive trading days and certain other equity conditions are satisfied. Holders of the Secured Convertible Notes may force the Company to redeem the applicable Notes for cash upon (i) a fundamental change or (ii) an event of default. On or after October 1, 2024, the holders of the Secured Convertible Notes may redeem up to the entire principal amount of the notes for a cash purchase price equal to the principal amount of the notes being redeemed, plus accrued and unpaid interest, if the Company’s liquidity falls below (a) $75.0 million, if the Senior Notes are not outstanding at such time, or (b) $250.0 million, if any of the Senior Notes are outstanding at such time.

Our borrowing obligations under the Secured Convertible Notes are collateralized by a first priority lien on the Company’s equity interests in Tellurian Production Holdings and mortgages of the material real property oil and gas assets of Tellurian Production Holdings LLC and its subsidiaries (together, the “Collateral”). Tellurian Production Holdings owns all of the Company’s upstream natural gas assets described in Note 3, Property, Plant and Equipment. The Collateral will be removed as a secured obligation under the Secured Convertible Notes if the Senior Notes are no longer outstanding. The Secured Convertible Notes contain financial and non-financial covenants, including a minimum cash covenant of $50.0 million. As of September 30, 2023, we remained in compliance with all covenants under the Secured Convertible Notes.

As of September 30, 2023, the estimated fair value of the Secured Convertible Notes was approximately $82.1 million. The Level 3 fair value was estimated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and inputs that are not observable in the market.

Replacement Notes Embedded Derivatives

As part of the issuance of the Replacement Notes, the Company agreed to issue an aggregate total of 25.7 million shares of its common stock (the “Share Coupon”) to the holders of the Replacement Notes. The Share Coupon is payable quarterly on the first day of January, April, July, and October of each year, commencing on or before October 2023. To the extent that the average daily volume-weighted average price of the common stock of the Company during each quarter is less than $1.35, the Company will pay a cash amount equal to that difference multiplied by the number of shares issuable for that quarter (the “Cash Shortfall Payments”). Upon any retirement, redemption, or conversion of the Replacement Notes, the Company will issue any and all unpaid Share Coupon plus Cash Shortfall Payments, as applicable (the “Make Whole”).

The Company evaluated the potential embedded features within the Replacement Notes host contracts and determined that the Share Coupon, the Cash Shortfall Payments and the Make Whole embedded features required bifurcation as a single unit of account from the Replacement Notes and accounted for them separately at fair value. See Note 8, Financial Instruments, for more information on the fair value measurement of the Replacement Notes embedded derivatives.

Senior Unsecured Notes due 2028

On November 10, 2021, we sold in a registered public offering $50.0 million aggregate principal amount of 8.25% Senior Unsecured Notes due November 30, 2028 (the “Senior Unsecured Notes”). Net proceeds from the Senior Unsecured Notes were approximately $47.5 million after deducting fees. The underwriter was granted an option to purchase up to an additional $7.5 million of the Senior Unsecured Notes within

SEC Form 10-Q filed by Tellurian Inc.