UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~Washington, D.C. 20549

FORM 10-Q

~~(MARK ONE)~~



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

For the quarterly period ended ~~December 31, 2016~~September 30, 2017



¨	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

~~MAGELLAN PETROLEUM CORPORATION~~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.)

~~1775 Sherman~~1201 Louisiana Street, Suite ~~1950, Denver, CO~~3100, Houston, TX	~~80203~~	77002
(Address of principal executive offices)		(Zip Code)

~~(720) 484-2400~~(832) 962-4000

(~~Registrant's~~Registrant’s telephone number, including area code)

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. þYes ¨x Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). þYes ¨x Noo

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



Large accelerated filer	o¨		Accelerated filer	o¨
Non-accelerated filer	o ¨		Smaller reporting company	x
(Do not check if a smaller reporting company)		~~Smaller reporting~~	Emerging growth company	þ¨

If an emerging growth company, indicate by check mark if the registrant has elected 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 þ☐ No ☒

~~The number~~As of ~~shares outstanding of~~October 31, 2017, the ~~issuer's single class~~issuer had 212,691,264 shares of common stock ~~as of February 3,~~outstanding.

TELLURIAN INC. AND SUBSIDIARIES

Form 10-Q for the Three and Nine Months Ended September 30, 2017 ~~was 5,879,610, which is net of 1,209,389 treasury shares held by the registrant.~~

TABLE OF CONTENTS



~~ITEM~~	Definitions	1
		~~PAGE~~
	~~PART I — FINANCIAL INFORMATION~~Part I. Financial Information

~~ITEM 1~~Item 1.	~~FINANCIAL STATEMENTS (UNAUDITED)~~Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets	12
	Condensed Consolidated Statements of Operations	23
	Condensed Consolidated Statements of ~~Comprehensive~~ ~~Loss~~	3
	~~Condensed Consolidated Statement of Stockholders'~~Changes in Stockholders’ Equity ~~(Deficit)~~	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	76

~~ITEM 2~~Item 2.	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	3515

~~ITEM 3~~Item 3.	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Quantitative and Qualitative Disclosures about Market Risk	4522

~~ITEM 4~~Item 4.	~~CONTROLS AND PROCEDURES~~Controls and Procedures	4522

	~~PART II — OTHER INFORMATION~~Part II. Other Information
~~ITEM 1~~	~~LEGAL PROCEEDINGS~~
Item 1.	46Legal Proceedings	22

~~ITEM 1A~~Item 1A.	~~RISK FACTORS~~Risk Factors	4622
~~ITEM 2~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~
Item 2.	46Unregistered Sales of Equity Securities and Use of Proceeds	34

~~ITEM 6~~Item 5.	~~EXHIBITS~~Other Information	4734

Item 6.	Exhibits	36

	~~SIGNATURES~~Signatures	4837

DEFINITIONS

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



Bcf/d	Billion cubic feet per day
DOE/FE	U.S. Department of Energy, Office of Fossil Energy
EPC	Engineering, procurement, and construction
FEED	Front-End Engineering and Design
FERC	U.S. Federal Energy Regulatory Commission
FTA countries	Countries with which the U.S. has a free trade agreement providing for national treatment for trade in natural gas
LNG	Liquefied natural gas, a form of natural gas consisting primarily of methane (CH4) that is in liquid form at near atmospheric pressure
LSTK	Lump Sum Turnkey
Mtpa	Million tonnes per annum
NASDAQ	NASDAQ Capital Market
NGA	Natural Gas Act of 1938, as amended
Non-FTA countries	Countries with which the U.S. does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted
PSD	Prevention of Significant Deterioration
SEC	U.S. Securities and Exchange Commission
Train	An industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG
USACE	U.S. Army Corps of Engineers
U.S.	United States
U.S. GAAP	Generally accepted accounting principles in the U.S.

PART ~~I -~~I. FINANCIAL INFORMATION

ITEM 11. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~

~~MAGELLAN PETROLEUM CORPORATION~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)~~

~~(In thousands, except share amounts)~~

December 31,
2016 June 30,
2016
(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 507
$ 1,680
Securities available-for-sale 1,542
601
Accounts receivable 58
16
Prepaid and other assets 1,960
2,087
Current assets held for sale (Note 5) —
26,042
Total current assets 4,067
30,426

PROPERTY AND EQUIPMENT, NET (SUCCESSFUL EFFORTS METHOD):
Unproved oil and gas properties 29
32
Wells in progress 332
337
Land, buildings, and equipment (net of accumulated depreciation of $536 and $517 as of December 31, 2016, and June 30, 2016, respectively) 69
86
Net property and equipment 430
455

OTHER NON-CURRENT ASSETS:
Goodwill, net 500
500
Other long-term assets 19
169
Total other non-current assets 519
669
Total assets $ 5,016
$ 31,550

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 478
$ 791
Accrued and other liabilities 2,538
2,826
Notes payable 31
783
Current liabilities held for sale (Note 5) —
10,638
Total current liabilities 3,047
15,038

COMMITMENTS AND CONTINGENCIES (Note 17)

PREFERRED STOCK (Note 3 and Note 12):
Series A convertible preferred stock (par value $0.01 per share): Authorized 0 and 28,000,000 shares as of December 31, 2016 and June 30, 2016, respectively, issued 0 and 22,683,428 shares as of December 31, 2016, and June 30, 2016, respectively; liquidation preference of $0 and $29,093 as of December 31, 2016, and June 30, 2016, respectively —
23,501
Total preferred stock —
23,501



TELLURIAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
	September 30,				December 31,
	2017				2016
ASSETS
Current assets:
Cash and cash equivalents	$	138,023			$	21,398
Accounts receivable	75				48
Accounts receivable due from related parties	2,668				1,333
Prepaid expenses and other current assets	2,837				1,964
Total current assets	143,603				24,743

Property, plant and equipment, net	25,216				10,993
Deferred engineering costs	9,000				—
Goodwill	1,190				1,190
Note receivable due from related party	—				251
Other non-current assets	11,213				1,901
Total assets	$	190,222			$	39,078

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	27,189			$	24,403
Accounts payable due to related parties	323				323
Total current liabilities	27,512				24,726

Embedded derivative	—				8,753

Commitments and contingencies (Note 7)				1

Stockholders’ equity:
Series A convertible preferred stock: par value $0.001 per share; zero and 5.5 million shares authorized and issued, respectively	—				5
Common stock: par value $0.01 and $0.001 per share, respectively; 400 million shares and 200 million shares authorized, respectively; 214.0 million shares and 109.6 million shares issued, respectively	1,943				101
Treasury stock: 1.3 million and zero shares, respectively, at cost	(828		)		—
Additional paid-in capital	454,986				102,148
Accumulated deficit	(293,391		)		(96,655		)
Total stockholders’ equity	162,710				5,599
Total liabilities and stockholders’ equity	$	190,222			$	39,078

STOCKHOLDERS' EQUITY (DEFICIT):
Common stock (par value $0.01 per share): Authorized 300,000,000 shares, issued 7,088,999 and 6,972,023 shares as of December 31, 2016, and June 30, 2016, respectively 71
70
Treasury stock (at cost): 1,209,389 shares as of December 31, 2016, and June 30, 2016 (9,806 ) (9,806 )
Capital in excess of par value 104,557
94,069
Accumulated deficit (98,126 ) (96,234 )
Accumulated other comprehensive income 5,273
4,912
Total stockholders' equity (deficit) 1,969
(6,989 )
Total liabilities, preferred stock and stockholders' equity (deficit) $ 5,016
$ 31,550

The ~~notes~~Notes to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements (unaudited) are an integral part of these financial statements.

~~MAGELLAN PETROLEUM CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)~~

~~(In thousands, except share and per share amounts)~~

THREE MONTHS ENDED SIX MONTHS ENDED
December 31, December 31,
2016 2015 2016 2015
OPERATING EXPENSES:
Depreciation $ 9
$ 13
$ 20
$ 32
Exploration 8
22
163
39
General and administrative 649
1,131
2,677
2,896
Total operating expenses 666
1,166
2,860
2,967

Loss from operations (666 ) (1,166 ) (2,860 ) (2,967 )

OTHER INCOME (EXPENSE):
Gain (loss) on investment in securities 138
117
138
(143 )
Other income (expense) (3 ) 42
(4 ) 64
Total other income (expense) 135
159
134
(79 )

Loss from continuing operations, before tax (531 ) (1,007 ) (2,726 ) (3,046 )

Income tax expense —
—
—
—
Loss from continuing operations, net of tax (531 ) (1,007 ) (2,726 ) (3,046 )

DISCONTINUED OPERATIONS (Notes 3, 4 and 5):
Income (loss) from discontinued operations, net of tax 4
(362 ) (235 ) (1,373 )
Gain on disposal of discontinued operations, net of tax —
—
1,069
—
Net income (loss) from discontinued operations 4
(362 ) 834
(1,373 )

Net loss (527 ) (1,369 ) (1,892 ) (4,419 )

Preferred stock dividends —
(460 ) (162 ) (913 )
Adjustment of preferred stock to redemption value (Note 12) —
—
162
—

Net loss attributable to common stockholders $ (527 ) $ (1,829 ) $ (1,892 ) $ (5,332 )

Earnings (loss) per common share (Note 14):
Weighted average number of basic shares outstanding 5,879,610
5,757,533
5,858,177
5,730,157
Weighted average number of diluted shares outstanding 5,879,610
5,757,533
5,858,177
5,730,157

Basic and diluted earnings (loss) per common share:
Net loss from continuing operations, including preferred stock dividends and adjustment to redemption value of preferred stock $(0.09) $(0.25) $(0.47) $(0.69)
Net income (loss) from discontinued operations $0.00 $(0.06) $0.14 $(0.24)
Net loss attributable to common stockholders $(0.09) $(0.32) $(0.32) $(0.93)



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

	Successor												Predecessor
	Three Months Ended September 30,						Nine Months Ended September 30,						Nine Days Ended April 9, 2016			For the period from January 1, 2016 through April 9, 2016
	2017			2016			2017			2016			Nine Days Ended April 9, 2016			For the period from January 1, 2016 through April 9, 2016
Revenue	$	—		$	—		$	—		$	—		$	—		$	—
Revenue, related party	—			—			—			—			—			31
Total revenue	—			—			—			—			—			31

Costs and expenses:
Development expenses	8,793			15,917			44,998			30,422			—			52
General and administrative	17,302			28,533			80,125			37,737			157			617
Goodwill impairment	—			—			77,592			—			—			—
Total costs and expenses	26,095			44,450			202,715			68,159			157			669

Loss from operations	(26,095		)	(44,450		)	(202,715		)	(68,159		)	(157		)	(638		)

Gain on preferred stock exchange feature	—			—			2,209			—			—			—
Other income, net	3,800			49			4,339			118			—			—

Loss before income taxes	(22,295		)	(44,401		)	(196,167		)	(68,041		)	(157		)	(638		)
Provision for income taxes	(569		)	(4		)	(569		)	166			—			—
Net loss attributable to common stockholders	$	(22,864	)	$	(44,405	)	$	(196,736	)	$	(67,875	)	$	(157	)	$	(638	)

Net loss per common share:
Basic and diluted	$	(0.12	)	$	(0.37	)	$	(1.06	)	$	(0.81	)

Weighted average shares outstanding
Basic and diluted	192,405			120,128			186,143			83,979

The ~~notes~~Notes to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements (unaudited) are an integral part of these financial statements.

~~MAGELLAN PETROLEUM CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)~~

~~(In thousands)~~

THREE MONTHS ENDED SIX MONTHS ENDED
December 31, December 31,
2016 2015 2016 2015
Net loss $ (527 ) $ (1,369 ) $ (1,892 ) $ (4,419 )

Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss) (321 ) 34
(171 ) (14 )
Reclassification of unrealized gain (loss) on securities available-for-sale to earnings due to sale of securities 123
94
123
(231 )
Unrealized holding gain on securities available-for-sale 54
910
409
92
Other comprehensive income (loss), net of tax (144 ) 1,038
361
(153 )

Comprehensive loss $ (671 ) $ (331 ) $ (1,531 ) $ (4,572 )



TELLURIAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)

	Common Stock			Treasury Stock					Convertible Preferred Stock
	Shares	Par Value Amount		Shares		Cost			Shares		Par Value Amount			Additional Paid-in Capital			Accum. Other Comp. Income		Accum. Deficit			Total Stockholders’ Equity
Balance, January 1, 2016 (Successor)	—	$	—	—		$	—		—		$	—		$	—		$	—	$	—		$	—
Common stock issued for acquisition	500	1		—		—			—		—			999			—		—			1,000
Issuance of common stock	98,356	98		—		—			—		—			57,276			—		—			57,374
Restricted stock awards	5,075	—		—		—			—		—			—			—		—			—
Share-based compensation	1,905	2		—		—			—		—			24,228			—		—			24,230
Other comprehensive income	—	—		—		—			—		—			—			8		—			8
Net loss	—	—		—		—			—		—			—			—		(67,875		)	(67,875		)
Balance, September 30, 2016 (Successor)	105,836	$	101	—		$	—		—		$	—		$	82,503		$	8	$	(67,875	)	$	14,737

Balance, January 1, 2017 (Successor)	109,609	$	101	—		$	—		5,468		$	5		$	102,148		$	—	$	(96,655	)	$	5,599
Merger adjustments	51,540	1,390		(1,209	)	—			—		—			86,533			—		—			87,923
Share-based compensation	1,231	12		—		—			—		—			18,986			—		—			18,998
Issuance of common stock	36,373	364		—		—			—		—			216,724			—		—			217,088
Restricted stock awards	8,060	4		—		—			—		—			2,953			—		—			2,957
Share-based payments	1,700	17		—		—			—		—			21,148			—		—			21,165
Reclass of embedded derivative	—	—		—		—			—		—			6,544			—		—			6,544
Treasury stock	—	—		(82	)	(828		)	—		—			—			—		—			(828		)
Exchange from Series A preferred stock	—	—		—		—			(5,468	)	(5		)	—			—		—			(5		)
Exchange to Series B preferred stock	—	—		—		—			5,468		55			(50		)	—		—			5
Exchange from Series B to common stock	5,468	55		—		—			(5,468	)	(55		)	—			—		—			—
Net loss	—	—		—		—			—		—			—			—		(196,736		)	(196,736		)
Balance, September 30, 2017 (Successor)	213,981	$	1,943	(1,291	)	$	(828	)	—		$	—		$	454,986		$	—	$	(293,391	)	$	162,710

The ~~notes~~Notes to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements (unaudited) are an integral part of these financial statements.

~~MAGELLAN PETROLEUM CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)~~

~~(In thousands)~~

Common
Stock

Treasury
Stock
Capital in Excess of Par Value Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders' Equity (Deficit)
June 30, 2016 $ 70
$ (9,806 ) $ 94,069
$ (96,234 ) $ 4,912
$ (6,989 )
Net loss —
—
—
(1,892 ) —
$ (1,892 )
Other comprehensive income, net of tax —
—
—
—
361
$ 361
Stock and stock-based compensation 1
—
599
—
—
$ 600
Net shares repurchased for employee tax costs upon vesting of restricted stock —
—
(3 ) —
—
$ (3 )
Preferred stock dividend —
—
—
(162 ) —
$ (162 )
Adjustment of preferred stock to redemption value (Note 12) —
—
—
162
—
$ 162
Contribution to equity upon redemption of preferred stock (Notes 3, 5 and 12) —
—
9,892
—
—
$ 9,892
December 31, 2016 $ 71
$ (9,806 ) $ 104,557
$ (98,126 ) $ 5,273
$ 1,969



TELLURIAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
	Successor						Predecessor
	Nine Months Ended September 30,						For the period from January 1, 2016 through April 9, 2016
	2017			2016			For the period from January 1, 2016 through April 9, 2016
Cash flows from operating activities:
Net loss	$	(196,736	)	$	(67,875	)	$	(638	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	231			55			8
Goodwill impairment	77,592			—			—
Loss on disposal of assets	—			37			3
Provision for income tax benefit	—			(170		)	—
Gain on Series A convertible preferred stock exchange feature	(2,209		)	—			—
Gain on sale of securities	(3,481		)	—			—
Share-based compensation	21,963			24,230			—
Share-based payments	19,397			—			—
Changes in operating assets and liabilities:
Accounts receivable	(9		)	(67		)	1
Accounts receivable due from related parties	(1,334		)	(243		)	(32		)
Prepaid expenses and other current assets	(797		)	(2,074		)	13
Accounts payable and accrued liabilities	(324		)	17,519			281
Accounts payable due to related parties	—			63			253
Note receivable due from related party	251			—			—
Other, net	(711		)	(787		)	—
Net cash used in operating activities	(86,167		)	(29,312		)	(111		)

Cash flows from investing activities:
Cash received in acquisition	56			210			—
Deposit for acquisition	(8,515		)	—			—
Deferred engineering costs	(9,000		)	—			—
Purchase of property - land	—			(8,491		)	—
Purchase of property and equipment	(1,101		)	(708		)	(268		)
Proceeds from sale of available-for-sale securities	4,592			—			—
Net cash used in investing activities	(13,968		)	(8,989		)	(268		)

Cash flows from financing activities:
Proceeds from the issuance of common stock	218,195			58,886			—
Tax payments for net share settlement of equity awards	(828		)	—			—
Equity offering costs	(607		)	(1,512		)	—
Net cash provided by financing activities	216,760			57,374			—

Effect of exchange rate changes on cash	—			8			—
Net increase (decrease) in cash and cash equivalents	116,625			19,081			(379		)
Cash and cash equivalents, beginning of period	21,398			—			589
Cash and cash equivalents, end of period	$	138,023		$	19,081		$	210

The ~~notes~~Notes to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements (unaudited) are an integral part of these financial statements.

~~MAGELLAN PETROLEUM CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)~~

~~(In thousands)~~

SIX MONTHS ENDED
December 31,
2016 2015
OPERATING ACTIVITIES:
Loss from continuing operations, net of tax $ (2,726 ) $ (3,046 )
Adjustments to reconcile net loss to net cash used in operating activities:
Foreign transaction (gain) loss (44 ) 53
Depreciation 20
32
(Gain) loss on investment in securities (138 ) 143
Stock compensation expense 600
307
Net changes in operating assets and liabilities:
Accounts receivable (45 ) 40
Prepaid and other current assets 196
129
Accounts payable and accrued liabilities (668 ) 893
Net cash used in operating activities of continuing operations (2,805 ) (1,449 )

INVESTING ACTIVITIES:
Additions to property and equipment (2 ) (1 )
Proceeds from sale of Weald Basin assets (Notes 4 and 5) 586
—
Proceeds from sale of investment securities 604
1,443
Proceeds from One Stone Exchange, including cash transferred from held for sale at closing (Notes 3 and 5) 950
—
Net cash provided by investing activities of continuing operations 2,138
1,442

FINANCING ACTIVITIES:
Purchase of common stock (3 ) (11 )
Payment of cash in lieu of issuance of fractional shares in one share-for-eight shares reverse stock split —
(6 )
Deferred financing costs, net —
(24 )
Proceeds from issuance of notes payable —
108
Payments on notes payable (143 ) (35 )
Net cash used in financing activities (146 ) 32

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities of discontinued operations (76 ) (387 )
Net cash used in investing activities of discontinued operations (224 ) (39 )
Net cash used in operating and investing activities of discontinued operations (300 ) (426 )

Effect of exchange rate changes on cash and cash equivalents (60 ) (25 )
Net decrease in cash and cash equivalents (1,173 ) (426 )
Cash and cash equivalents at beginning of period 1,680
769
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 507
$ 343

Supplemental schedule of non-cash activities:
Unrealized holding gain (loss) and foreign currency translation gain (loss) on securities available-for-sale $ 338
$ (32 )
Securities available-for-sale received as proceeds on sale of Weald Basin assets (Notes 4 and 5) $ (925 ) $ —
Increase in both accrued or other liabilities and prepaid or other assets related to Sopak $ 54
$ 54
Purchase of insurance policies financed with notes payable $ 16
$ 108
Forgiveness of notes payable upon closing of Exchange (Notes 3 and 5) $ 625
$ —
Adjustment of preferred stock to redemption value $ (162 ) $ —
Preferred stock dividends paid in kind $ 162
$ 913
Contribution to equity upon redemption of preferred stock (Notes 3, 5 and 12) $ 9,892
$ —

Non-cash activities of discontinued operations:
Change in accounts payable and accrued liabilities related to property and equipment of discontinued operations $ 293
$ (86 )

~~The notes to the condensed consolidated financial statements (unaudited) are an integral part of these financial statements.~~

TELLURIAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~

(unaudited)

N~~ote~~NOTE 1 ~~- Basis of Presentation~~— BACKGROUND AND BASIS OF PRESENTATION

~~Description of Operations~~

~~Magellan Petroleum Corporation (the "Company" or "Magellan" or "MPC" or "we") is an independent oil~~Tellurian plans to develop, own and ~~gas exploration and production company. Subject to the closing of the announced merger with Tellurian Investments Inc. (“Tellurian”), Magellan will become~~operate a ~~company focused on the development of liquefied~~global natural gas ~~(“LNG”) projects along the United States Gulf Coast~~business and ~~complementary business lines in the energy industry. Historically active internationally, Magellan also owns interests in the Horse Hill-1 well~~to deliver natural gas to customers worldwide. Tellurian is establishing a portfolio of natural gas production, LNG trading, and ~~related licenses in the Weald Basin, onshore UK,~~infrastructure including an LNG terminal facility (the “Driftwood terminal”) and an ~~exploration block, NT/P82,~~associated pipeline (the “Driftwood pipeline”) in ~~the Bonaparte Basin, offshore Northern Territory, Australia.~~

The Company conducts its operations through two wholly owned subsidiaries corresponding to the geographical areas in which the Company operates: Magellan Petroleum (UK) Limited ("MPUK"), and Magellan Petroleum Australia Pty Ltd ("MPA"). Following the closing of the merger with Tellurian, which is expected in the first quarter of calendar year 2017, the combined company will operate its LNG business in the US through its new wholly owned subsidiary, Tellurian.

We believe that Magellan’s sources of value are embedded in the Company’s platform and portfolio of assets. Magellan’s strategy is therefore focused on recovering shareholder value by realizing the value of its existing assets.

On July 10, 2015, the Company completed a one share-for-eight shares reverse stock split with respect to the Company's common stock. All amounts of shares of common stock, per share prices with respect to common stock, amounts of stock options to purchase common stock, respective exercise prices of each such option, and amounts of shares convertible upon conversion of the Series A convertible preferred stock for periods both prior and subsequent to the split have been adjusted in this report to reflect the reverse stock split.

We were founded in 1957 and incorporated in Delaware in 1967. The Company's common stock has been trading on NASDAQ since 1972 under the ticker symbol "MPET". Upon the closing of the merger with Tellurian, the Company’s name will be changed to Tellurian Inc. The Company’s common stock will continue to trade on the NASDAQ and its ticker symbol will become “TELL”.

~~Our principal executive offices are located at 1775 Sherman Street, Suite 1950, Denver, Colorado 80203, and our phone number is (720) 484-2400.~~

~~Going Concern~~

The Company has incurred losses from operations for the six months ended December 31, 2016 of $2.9 million, has experienced negative cash flows from operating activities of continuing operations of $2.8 million for the six months ended December 31, 2016, and as of December 31, 2016, its cash balance was $507 thousand. The Company continues to experience liquidity constraints and has been selling certain of its assets to fund its operations, which has resulted in the Company having no source of revenue. However, these liquidity constraints continue, and proceeds from these asset sales may not provide sufficient liquidity to fund the Company's operations for the next twelve months. As a result of these conditions and events, there is substantial doubt about the Company's ability to continue as a going concern. We believe that following the closing of the merger with Tellurian, the combined company will be ableto raise capital to fund the combined company's operations due to the attributes of Tellurian's business plan and management. Therefore, we believe that Magellan's ability to continue as a going concern in the short-term is subject to the closing of the merger with Tellurian, the primary condition of which closing is the approval by the Company’s shareholders of the merger agreement that is expected to be sought in the first quarter of calendar year 2017. Should the merger with Tellurian not close, the Company will need to seek other alternatives in order to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might result from the outcome of this uncertainty.

~~Special Committee of the Board of Directors~~

~~In light of the Company's constrained capital resources~~Southwest Louisiana (the Driftwood terminal and the ~~significant capital requirements to develop~~Driftwood pipeline collectively, the ~~Poplar field using CO~~₂-Enhanced Oil Recovery ("EOR"), on June 5, 2015, the Company formed a special committee of independent members of the Board of Directors of the Company (the "Special Committee") to i) consider various strategic alternatives potentially available to the Company, which included, but were not limited to, sales of some or all of the assets of the Company, joint ventures, a recapitalization, and a sale or merger of the Company and ii) amend compensation arrangements of executives and employees for the purpose of retention and alignment of their interests with the interests of common stockholders during

~~such strategic alternatives review process. The Special Committee engaged Petrie Partners, LLC ("Petrie") as financial advisor to assist in the consideration of such matters.~~

As discussed in Note 2 - Merger with Tellurian, on August 2, 2016, at the direction of the Special Committee, Magellan entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tellurian and River Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Magellan (“Merger Sub”“Driftwood Project”). Pursuant to the Merger Agreement, each outstanding share of common stock, par value $0.001 per share, of Tellurian will be exchanged for 1.300 shares of common stock, par value $0.01 per share, of Magellan, and Merger Sub will merge with and into Tellurian (the “Merger”), with Tellurian continuing as the surviving corporation, a direct wholly owned subsidiary of Magellan, and the accounting acquirer.

As discussed in Note 3 - One Stone Exchange, and Note 5 - Discontinued Operations, on March 31, 2016, at the direction of the Special Committee, the Company and its sole preferred stockholder One Stone Holdings II LP ("One Stone"), an affiliate of One Stone Energy Partners, L.P., entered into an Exchange Agreement (the "Exchange Agreement") pursuant to which 100% of the outstanding shares of Magellan Series A convertible preferred stock (the "Series A Preferred Stock") were exchanged in consideration for 100% of the Company's interest in Nautilus Poplar LLC and 51% of the outstanding common units in Utah CO2 LLC (“Utah CO2,” and together with Nautilus Poplar LLC, the "CO2 Business", or "NP", or the "former NP segment"), as adjusted by the Cash Amount (as defined in the Exchange Agreement and discussed further below) (the “Exchange”). On August 1, 2016, all the conditions to the closing of the Exchange were met and the Exchange was consummated.

As discussed in Note 4 - Sale of Weald Basin Assets, and Note 5 - Discontinued Operations, on June 10, 2016, at the direction of the Special Committee, MPUK entered into three concurrent agreements (the "Weald Agreements") for divestiture of certain of its Petroleum Exploration and Development Licenses ("PEDLs"), its peripheral offshore license near the Isle of Wight, and settlement of legal claims related to the Central Weald licenses with its partner and operator, Celtique Energie Weald Limited ("Celtique"). On August 11, 2016, the transactions contemplated by the Weald Agreements closed.

Following the closing of the Exchange with One Stone, and the subsequently announced Merger with Tellurian, the Board determined that the task of the Special Committee had substantially been completed, and on September 26, 2016, the Board disbanded the Special Committee.

~~Principles of Consolidation and Basis of Presentation~~

The accompanying ~~condensed consolidated financial statements include the accounts~~unaudited Condensed Consolidated Financial Statements of ~~Magellan and its wholly owned subsidiaries, MPUK, and MPA,~~Tellurian as of and for ~~periods through~~ the ~~closing of the Exchange on August 1, 2016, NP (which has been discontinued and was transferred to One Stone upon closing), and~~period ended September 30, 2017, have been prepared in accordance with ~~accounting principles generally accepted in the United States ("GAAP")~~U.S. GAAP for interim financial information and ~~in accordance~~ with ~~the instructions to Form 10-Q and~~ Rule ~~8-03~~10-01 of Regulation ~~S-X published by~~S-X. Accordingly, the ~~US Securities and Exchange Commission (the "SEC"). Accordingly, these interim unaudited condensed consolidated financial statements~~Condensed Consolidated Financial Statements do not include all of the information and footnotes required by U.S. GAAP for complete ~~annual period~~ financial statements. In ~~the~~our opinion, ~~of management,~~ all adjustments, ~~considered~~consisting only of normal recurring adjustments necessary for a fair presentation, have been included. All such adjustments are of a normal recurring nature. All intercompany transactions have been eliminated. Operating results for the six months ended December 31, 2016, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2017. This report

The information included herein should be read in conjunction with the consolidated financial statements and ~~footnotes thereto included in~~ the ~~Company's Annual Report on Form 10-K~~accompanying notes of Tellurian Investments Inc. (“Tellurian Investments”) as of and for the fiscal year ended ~~June 30, 2016 (the "2016~~December 31, 2016. Such information was included in Tellurian’s Current Report on Form 10-K"). All amounts presented are in US dollars, unless otherwise noted. Amounts expressed in Australian currency are indicated as "A$." Amounts expressed in the currency of the United Kingdom are indicated as "£."

~~Certain amounts in our prior period financial statements have been reclassified to conform to the current period presentation.~~

~~Effective~~8-K/A filed with the ~~execution of the Exchange Agreement~~SEC on March ~~31, 2016,~~15, 2017 following the ~~Company reclassified~~completion of a merger (the “Merger”) of Tellurian Investments with a subsidiary of Magellan Petroleum Corporation (“Magellan”) on February 10, 2017 (the “Merger Date”). Magellan changed its corporate name to Tellurian Inc. shortly after completing the ~~operations of NP to discontinued operations, and they are reported in discontinued operations~~Merger.

The Merger was accounted for as a “reverse acquisition,” with Tellurian Investments being treated as the ~~period from July 1, 2016 through~~accounting acquirer. As such, the ~~closing of the Exchange on August 1, 2016 in the accompanying~~historical condensed consolidated ~~financial statements,~~comparative information as of and for all ~~prior~~ periods ~~presented.~~in 2016 in this report relates to Tellurian Investments and its subsidiaries. Subsequent to the Merger Date, the information relates to the consolidated entities of Tellurian Inc., with Magellan reflected as the accounting acquiree. The Company ~~also reclassified assets~~continues to operate as a single operating segment for financial reporting purposes.

In connection with the Merger, each issued and ~~liabilities~~outstanding share of ~~NP to assets~~Tellurian Investments common stock was exchanged for 1.3 shares of Magellan common stock. All share and ~~liabilities held for sale~~per share amounts in the Condensed Consolidated Financial Statements and related notes have been retroactively adjusted for all periods ~~prior~~presented to ~~closing~~give effect to this exchange, including reclassifying an amount equal to the change in par value of common stock from additional paid-in capital.

On April 9, 2016, Tellurian Investments acquired Tellurian Services LLC (“Tellurian Services”), formerly known as Parallax Services LLC (“Parallax Services”). Under the financial reporting rules of the ~~Exchange in~~SEC, Parallax Services (“Predecessor”) has been deemed to be the ~~accompanying condensed consolidated~~predecessor to Tellurian (“Successor”) for financial ~~statements.~~reporting purposes.

~~Effective with~~Except where the ~~execution of~~context indicates otherwise, (i) references to “we,” “us,” “our,” “Tellurian” or the ~~Weald Agreements on June 10, 2016, the Company reclassified the operations related to the respective licenses to discontinued operations, and they are reported in discontinued operations~~“Company” refer, for the period from July 1, 2016 through the closing of the transactions contemplated by the Weald Agreements on August 11, 2016 in the accompanying condensed consolidated financial statements, and for all prior periods presented. The Company also reclassified assets and liabilities related to the respective licenses to assets and liabilities held for sale for all periods prior to ~~closing of~~ the ~~transactions contemplated by the Weald Agreements in the accompanying condensed consolidated financial statements.~~

~~As of December 31, 2016, the Company owned a 0.9% interest in Central Petroleum Limited (ASX:CTP) ("Central"), a~~

Brisbane-based exploration and production company traded on the Australian Securities Exchange. The Company accounts for this investment as securities available-for-sale in the accompanying condensed consolidated financial statements.

As of December 31, 2016, the Company owned a 2.0% interest in UK Oil and Gas Investments, PLC (LSE:UKOG) ("UKOG"), a British oil and gas investment company traded on the Alternative Investment Market of the London Stock Exchange. The Company accounts for this investment as securities available-for-sale in the accompanying condensed consolidated financial statements.

~~Accounting for Business Combinations~~

~~At the closing~~completion of the Merger, to Tellurian Investments and its subsidiaries, and for periods following the ~~accounting acquirer will account for the Merger with Magellan as a business combination. At the closing~~completion of the Merger, ~~the adjustments~~ to ~~the consolidated financial statements~~Tellurian Inc. and the allocation of the purchase price will depend on a number of factors including the fair value of Magellan's common stock transfered and the estimated fair value of Magellan's assets and liabilities at the closing date.

~~Use of Estimates~~

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of oil and gas reserves and other assets and liabilities, together with disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses, including stock-based compensation expense, during the reporting periods. Actual results could differ from those estimates.

~~Foreign Currency Translation~~

The functional currency of our foreign subsidiaries is their local currency. Assets and liabilities of foreign subsidiaries are translated to US dollars at period-end exchange rates, and our unaudited condensed consolidated statements of operations and cash flows are translated at average exchange rates during the reporting periods. Resulting translation adjustments are recorded in accumulated other comprehensive income, a separate component of stockholders' equity. A component of accumulated other comprehensive income will be released into income when the Company executes a partial or complete sale of an investment in a foreign subsidiary or a group of assets of a foreign subsidiary considered a business and/or when the Company no longer holds a controlling financial interest in a foreign subsidiary or group of assets of a foreign subsidiary considered a business.

Transactions denominated in currencies other than the local currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in foreign currency transaction gains and losses that are reflected in results of operations as unrealized (based on period end translation) or realized (upon settlement of the transactions) and reported under general and administrative expenses in the consolidated statements of operations.

~~During the fiscal year ended June 30, 2015, the Company made a determination that it was no longer permanently invested in~~ its ~~foreign subsidiaries because (i) the Company had begun an effort to repay its intercompany balances through the repatriation of cash from these~~ subsidiaries and (ii) references to “Magellan” refer to Tellurian Inc. and its subsidiaries prior to the ~~Company was increasingly focusing on its US operations. As such,~~completion of the ~~Company recorded on its statement~~Merger.

Results of operations for the fiscal year ended June 30, 2015, an expense reclassification from accumulated other comprehensive loss arising from foreign currency exchange losses on its intercompany account balances. For all subsequent periods, including the sixthree and nine months ended September 30, 2017, are not necessarily indicative of the operating results that will be realized for the year ending December 31, ~~2016,~~2017.

NOTE 2 — MERGER AND ACQUISITION

The Merger

As discussed in Note 1, Background and Basis of Presentation, Tellurian Investments merged with a subsidiary of Magellan on February 10, 2017. The Merger has been accounted for as a “reverse acquisition," with Tellurian Investments being treated as the ~~Company has continued~~accounting acquirer using the acquisition method.

The total consideration exchanged was as follows (in thousands, except share and per-share amounts):

TELLURIAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(unaudited)



Number of shares of Magellan common stock outstanding ⁽¹⁾	5,985,042
Price per share of Magellan common stock ⁽²⁾	$	14.21
Aggregate value of Tellurian common stock issued			$	85,048
Fair value of stock options ⁽³⁾			2,821
Net purchase consideration to be allocated			$	87,869

(1) The number of shares of Magellan common stock issued and outstanding as of February 9, 2017.
(2) The closing price of Magellan common stock on the NASDAQ on February 9, 2017.
(3) The estimated fair value of Magellan stock options for pre-Merger services rendered.

We utilized estimated fair values at the Merger Date for the allocation of consideration to ~~record foreign currency exchange gains~~the net tangible and ~~losses arising from its intercompany account balances~~intangible assets acquired and liabilities assumed. The preliminary purchase price allocation to assets acquired and liabilities assumed in ~~its condensed consolidated statement~~the transaction was as follows (in thousands):



Fair Value of Assets Acquired:
Cash	$	56
Securities available-for-sale	1,111
Other current assets	93
Unproved properties	13,000
Wells in progress	332
Land, buildings and equipment, net	67
Other long-term assets	19
Total assets acquired	14,678
Fair Value of Liabilities Assumed:
Accounts payable and other liabilities	4,393
Notes payable	8
Total liabilities assumed	4,401
Total net assets acquired	10,277
Goodwill as a result of the Merger	$	77,592

We valued our interests acquired in unproved oil and gas properties using a market approach based on commercial negotiations and bids received for the interests (see Note 6, Property, Plant and Equipment, for more information about the properties). The fair value of ~~operations.~~

~~Securities Available-for-Sale~~

other property, plant and equipment and wells in progress was determined to be the carrying value of Magellan. Securities available-for-sale ~~are comprised of investments in publicly traded securities and are carried at~~were valued based on quoted market prices. ~~Unrealized gains~~The carrying values of cash, other current assets, accounts payable and ~~losses are excluded from earnings~~accrued liabilities and ~~recorded as a component of accumulated~~ other comprehensive loss in stockholders' equity (deficit), net of deferred income taxes. The Company recognizes gains or losses when securities are sold. On a quarterly basis, we perform an assessment to determine whether there have been any events or economic circumstances to indicate that a security with an unrealized loss has suffered an other-than-temporary impairment. The Company performed this analysis as of December 31, 2016, and concluded that no such events had occurred.

~~Assets and Liabilities Held for Sale~~

As a result of the Exchange Agreement executed on March 31, 2016 (see Note 3 - One Stone Exchange), the Company determined that a strategic shift occurred in its business that will have a major effect on the Company's future operations and financial results. Therefore, the Company adjusted thenon-current assets and liabilities ~~of NP to the lesser of their carrying value or~~approximated fair value ~~less costs to sell, which resulted in an impairment writedown of $11.3 million, and reclassified them~~at the Merger Date. The Company has determined that such fair value measures for the overall allocation are classified as ~~held for sale~~Level 3 in the condensed consolidated balance sheets effective March 31, 2016, and for all prior periods presented. The Company also reclassified the results of NP's operations to discontinued operations in the condensed consolidated statements of operations for

~~all periods presented. In addition, on June 10, 2016, the Company entered into the Weald Agreements (see Note 4 - Sale of Weald Basin Assets). The Company determined that no~~ fair value adjustments of the assets and liabilities disposed of pursuant to the Weald Agreements was necessary because the net assets were recorded at less than their fair value less costs to sell. The major classes of assets and liabilities transferred in the Exchange and sold pursuant to the Weald Agreements as well as the results of these discontinued operations are presented in Note 5 - Discontinued Operations. The closing of the Exchange took place on August 1, 2016, following its approval at the Company's annual and special meeting of stockholders on July 13, 2016. The closing of the transactions contemplated by the Weald Agreements took place on August 11, 2016.hierarchy.

~~Oil and Gas Exploration and Production Activities~~

The Company follows the successful efforts method of accounting for its oil and gas exploration and production activities. Under this method, all property acquisition costs, and costs of exploratory and development wells are capitalized until a determination is made that the well has found proved reserves or is deemed noncommercial. If an exploratory well is deemed to be noncommercial, the well costs are charged to exploration expense as dry hole costs. Exploration expenses include dry hole costs and geological and geophysical expenses. Noncommercial development well costs are charged to impairment expense if circumstances indicate that a decline in the recoverability of the carrying value may have occurred.

~~The Company records its proportionate share in joint venture operations in the respective classifications of assets, liabilities, and expenses. The cost of CO~~₂ ~~injection is capitalized until a production response is seen~~Goodwill initially recognized as a result of the ~~injection and it~~Merger totaled $77.6 million, none of which is deductible for income tax purposes. Subsequent to the Merger, the Company determined that there is no evidence that we will recover the value of this goodwill. For purposes of determining the goodwill impairment, we utilized qualitative factors as well ~~has found proved reserves. After oil production from~~as the ~~well begins, CO~~₂ ~~injection costs are expensed~~fair values determined when allocating consideration as ~~incurred.~~of the Merger Date.

~~Depreciation, depletion, and amortization ("DD&A")~~Parallax Services Acquisition

On April 9, 2016, Tellurian Investments acquired Parallax Services, which was renamed Tellurian Services, with equity consideration valued at $1 million. The transaction was accounted for using the acquisition method. As of ~~capitalized costs~~September 30, 2017, goodwill of $1.2 million on our Condensed Consolidated Balance Sheet was entirely related to ~~proved~~the acquisition of Parallax Services.

Pro Forma Results

The following table provides unaudited pro forma results for the three and nine months ended September 30, 2017 and 2016, as if the Merger occurred and Parallax Services had been acquired as of January 1, 2016 (in thousands, except per-share amounts):

TELLURIAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Pro forma net loss	$	(22,864	)	$	(45,874	)	$	(200,478	)	$	(80,086	)

Pro forma net loss per basic share	$	(0.12	)	$	(0.36	)	$	(1.07	)	$	(0.89	)
Pro forma basic and diluted weighted average common shares outstanding	192,411			126,641			187,127			90,492

The unaudited pro forma results include adjustments for the historical net loss of Magellan and Parallax Services as well as an increase in compensation expense associated with the addition of three new directors. The pro forma information is provided for informational purposes only and is not necessarily indicative of what Tellurian’s results of operation would have been if the Merger and acquisition of Parallax Services had occurred on January 1, 2016. Following the Merger Date, $0.6 million of net loss related to the acquired activities has been included in our Condensed Consolidated Financial Statements.

NOTE 3 — PREPAID AND OTHER CURRENT AND NON-CURRENT ASSETS

The components of prepaid expenses and other current assets consist of the following (in thousands):



	September 30, 2017		December 31, 2016
Subscriptions and deposits	$	1,018	$	968
Insurance	401		67
Prepaid rent	148		315
LNG vessel charges	651		—
Other	619		614
Total prepaid expenses and other current assets	$	2,837	$	1,964

The components of other non-current assets consist of the following (in thousands):



	September 30, 2017		December 31, 2016
Deposit for acquisition	$	8,515	$	—
Lease and purchase options	2,264		1,345
Other	434		556
Total other non-current assets	$	11,213	$	1,901

Deposit for Acquisition

The deposit for acquisition is in connection with a purchase and sale agreement (the “PSA”) with Rockcliff Energy Operating LLC (“Rockcliff”). See Note 6, Property, Plant and Equipment, for further information.

Land Lease and Purchase Options

Tellurian holds lease and purchase option agreements (the “Options”) for certain tracts of land and associated river frontage that provide for four or five-year terms. In addition to the Options, the Company holds a ground lease for a port facility adjacent to a tract of land that was acquired in March 2016. The lease provides for a four-year term, subject to a 20-year extension and six five-year renewals. The ground lease is accounted for as an operating lease, with rental payments accounted for using the straight-line method.

Upon exercise of the Options, the leases are subject to maximum terms of 60 years (inclusive of various renewals) at the option of the Company. Lease and purchase option payments have been capitalized in other non-current assets. Costs of the lease and purchase options will be amortized over the life of the lease once obtained, or capitalized into the land if purchased. If no lease or land is obtained, the Options cost will be expensed.

Office Leases

TELLURIAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(unaudited)

The Company holds a ten-year lease for its corporate headquarters located in Houston, Texas as well as leases for other offices in the U.S., England and Singapore. The leases are accounted for as operating leases, with rental payments accounted for using the straight-line method. Where payments exceed or are less than the amount of rent expense recognized, prepaid rent or accrued rent, respectively, is recognized by Tellurian on the Condensed Consolidated Balance Sheets.

NOTE 4 — DEFERRED ENGINEERING COSTS

Deferred engineering costs of $9.0 million represent detailed engineering services related to the Driftwood Project. Such costs will be deferred until construction commences on the Driftwood Project, at which time they will be transferred to construction in progress.

NOTE 5 — RELATED PARTIES

Accounts Receivable and Payable with Related Parties

Tellurian's accounts receivable due from related parties primarily consists of tax indemnities and amounts due from employees who received share-based compensation. The Company withholds amounts from wages if the tax liability with respect to such share-based compensation is not paid directly by the employees. The accounts payable due to related parties pertains to agreements with entities which are partially owned by Martin Houston, a major shareholder and Vice Chairman of the Company.

Non-current Note Receivable Due from Related Party

In July 2017, the $251 thousand non-current note receivable due from Mr. Houston was repaid in full, and the demand note evidencing the receivable was canceled.

Other

During the three and nine months ended September 30, 2017, the Company incurred zero and $651 thousand, respectively, in legal fees to a law firm for advice associated with a lawsuit that was settled in April 2017. A member of our board of directors is a partner at such law firm.

NOTE 6 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is comprised of fixed assets and oil and gas properties, as shown below (in thousands):



	September 30, 2017			December 31, 2016
Fixed Assets
Land	$	9,491		$	9,491
Buildings	549			549
Leasehold improvements	1,707			602
Computer, office equipment and fixtures	437			420
Accumulated depreciation	(300		)	(69		)
Total fixed assets, net	11,884			10,993

Oil and Gas Properties
Unproved	13,000			—
Wells in progress	332			—
Total oil and gas properties	13,332			—

Total property, plant and equipment, net	$	25,216		$	10,993

Property, plant and equipment, excluding land, is ~~calculated on a property-by-property basis~~depreciated using the ~~units-of-production method~~straight-line method. Depreciation expense of $92 thousand and $231 thousand for the three and nine months ended September 30, 2017, respectively, and $31 thousand and $55 thousand for the three and nine months ended September 30, 2016, respectively, is recorded within development or general and administrative expenses, based ~~upon proved reserves. The computation of DD&A takes into consideration restoration, dismantlement, and abandonment costs as well as~~on the ~~estimated proceeds from salvaging equipment. Because all~~nature of the ~~Company's proved oil and gas properties related to NP, DD&A has been reclassified to discontinued operations for all periods presented in~~asset, on the ~~accompanying condensed consolidated statements~~Condensed Consolidated Statement of operations. Effective with the classification of the assets and liabilities of NP to held for sale on March 31, 2016, including the proved oil and gas properties, the Company halted DD&A related to these assets, and no further DD&A has been recorded in the accompanying condensed consolidated financial statements for the period from April 1, 2016 through their dispositionOperations.

In February 2017, in connection with the ~~closing of~~Merger, the ~~Exchange on August 1, 2016.~~

~~The sale of a partial interest~~Company acquired interests in ~~a proved~~certain oil and gas property is accounted for as normal retirement, and no gain or loss is recognized as long as the treatment does not significantly affect the units-of-production depletion rate. A gain or loss is recognized for all other sales of producing properties. ~~The sale of a partial interest in an unproved oil and gas property is accounted for as a recovery of cost, with any excess of the proceeds over such cost or related carrying amount recognized as gain.~~

~~Impairment of Long-Lived Assets~~

~~The Company reviews the carrying amount of its oil and gas~~Unproved properties and unproved leaseholds for impairment annually or whenever events or changes in circumstances indicate that a decline in the recoverability of their carrying value may have occurred. The Company estimates the expected undiscounted future cash flows of its oil and gas properties and compares such undiscounted future cash flows to the carrying amount of the oil and gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust the carrying amount of the oil and gas properties to fair value. The factors used to determine fair value include, but are not limited to, recent sales prices of comparable properties, the present value of estimated future cash flows, net of estimated operating and development costs, using estimates of reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and various discount rates commensurate with the risk and current market conditions associated with realizing the expected cash flows projected. There were no significant changes in circumstances during the six months ended December 31, 2016, that would indicate that the carrying valuesconsist of oil and gas ~~properties were further impaired.~~interests in the Weald Basin, United Kingdom and the Bonaparte Basin, Australia. In the United Kingdom, Tellurian holds non-operating interests in two licenses which expire in June and September 2021, respectively.

~~Goodwill~~

TELLURIAN INC. AND SUBSIDIARIES

~~Goodwill represents the excess~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(unaudited)

In Australia, Tellurian holds an operating interest in an exploration permit due to expire on November 12, 2017. The Company has applied for an extension of the ~~purchase price over~~exploration permit to the ~~estimated fair value~~appropriate Australian regulatory authorities. There is no production and there are no reserves currently associated with any of our licenses. Accordingly, there is no depletion associated with them for the three and nine months ended September 30, 2017.

Purchase and Sale Agreement

Pursuant to and subject to the terms and conditions of the PSA, Tellurian has agreed to acquire from Rockcliff for $85.1 million in cash, subject to specified adjustments, certain assets ~~acquired net of the fair value of liabilities assumed~~ in ~~an acquisition. The goodwill recorded as of December 31, 2016 relates~~northern Louisiana, including, but not limited to, the Company's foreign subsidiaries. GAAP requires goodwill to be evaluated on an annual basis for impairment, or more frequently if events occur or circumstances change that could potentially result in impairment. For the six months ended December 31, 2016, based upon the Company's qualitative analysis, the Company determined that it was not more likely than not that the carrying value of its foreign operating units, including goodwill, were less than their carrying amounts at December 31, 2016.

~~Asset Retirement Obligations~~

~~The Company recognizes an estimated liability for future costs associated with the plugging and abandonment of its~~ oil and gas ~~properties. A liability for~~leases, mineral interests, wells, facilities and equipment (the “Asset Purchase”). Subject to the ~~fair value of an asset retirement obligation and corresponding increase in the carrying value~~closing of the ~~related long-lived asset are recorded at~~PSA, the time a well is acquired or the liability to plug is legally incurred. Assumptions and judgments made by management when assessing an asset retirement obligation include (i) the existence of a legal obligation; (ii) estimated probabilities, amounts, and timing of settlements; (iii) the credit-adjusted risk-free rateassets to be ~~used;~~purchased would include developed and ~~(iv) inflation rates. The Company depletes the amount added to proved oil~~undeveloped acreage and ~~gas property costs, net of estimated salvage values, and recognizes expense~~19 operated producing wells.

NOTE 7 — COMMITMENTS AND CONTINGENCIES

Vessel Charter

Tellurian entered into a charter agreement for an LNGvessel which will be used in connection with the ~~accretion of the discounted liability over the remaining estimated economic lives of the respective oil and gas properties.~~Company's LNG marketing activities. The Company's asset retirement obligations were classified as held for sale as of June 30, 2016 in the accompanying consolidated balance sheet, as they relate to NP, and the effects of changes therein have been reported in discontinued operations for all periods presented in the accompanying condensed consolidated financial statements.

~~Stock-Based Compensation~~

Stock option grants may contain time-based, market-based, or performance-based vesting provisions. Time-based options ("TBOs") are expensed on a straight-line basis over the vesting period. Market-based options ("MBOs") are expensed on a straight-line basis over the derived service period, even if the market condition is not achieved. Performance-based options ("PBOs") are amortized on a straight-line basis between the date upon which the achievement of the relevant performance condition is deemed probable and the date the performance conditiontotal commitment under this agreement is expected to be ~~achieved. Management re-assesses whether achievement~~approximately $5.0 million throughout the upcoming year.

Litigation

In July 2017, Tellurian Investments, Driftwood LNG LLC (“Driftwood LNG”), Martin Houston, and three other individuals were named as third-party defendants in a lawsuit filed in state court in Harris County, Texas between Cheniere Energy, Inc. and one of ~~performance conditions is probable at~~its affiliates, on the ~~end~~one hand (collectively, “Cheniere”), and Parallax Enterprises and certain of ~~each reporting period. If changes~~its affiliates (not including Parallax Services, n/k/a Tellurian Services) on the other hand (collectively, “Parallax”). In October 2017, Driftwood Pipeline LLC (“Driftwood Pipeline”) and Tellurian Services were also named by Cheniere as third-party defendants. Cheniere alleges that it entered into a note and a pledge agreement with Parallax. Cheniere claims that the third-party defendants tortiously interfered with the note and pledge agreement and aided in the ~~estimated outcome~~fraudulent transfer of Parallax assets. We believe that Cheniere’s claims against Tellurian Investments, Driftwood LNG, Driftwood Pipeline and Tellurian Services are without merit and do not expect the resolution of the ~~performance conditions affect the quantity of the awards expected to vest, the cumulative effect of the change is recognized in the period of the change.~~

The fair value of the stock options is determined on the grant date and is affected by our stock price and other assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, risk-free interest rates, expected dividends, and the expected option exercise term. The Company estimates the fair value of PBOs and time-based stock options using the Black-Scholes-Merton pricing model. The simplified method is used to estimate the expected term of stock options due to a lack of related historical data regarding exercise, cancellation, and forfeiture. For MBOs, the fair value is estimated using Monte Carlo simulation techniques.

~~Accumulated Other Comprehensive Income~~

Other comprehensive income (loss) is presented net of applicable income taxes in the accompanying condensed consolidated balance sheets and statements of stockholders' equity (deficit) and comprehensive loss. Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under GAAP are reported as separate components of stockholders' equity (deficit) instead of net loss.

~~Earnings (Loss) per Common Share~~

Income and losses per common share are based upon the weighted average number of common and common equivalent shares outstanding during the period. The effects of potentially dilutive securities in the determination of diluted earnings per share are the dilutive effect of stock options and the shares of Series A Preferred Stock.

The potentially dilutive impact of stock options is determined using the treasury stock method. The potentially dilutive impact of the shares of Series A Preferred Stock is determined using the if-converted method. In applying the if-converted method, conversion is not assumed for purposes of computing dilutive shares if the effect would be anti-dilutive. Until its redemption upon closing of the Exchange on August 1, 2016, the Series A Preferred Stock was convertible at a rate of one common share for one preferred share, multiplied by an applicable conversion ratio. We did not include any stock options nor common stock issuable upon the conversion of the Series A Preferred Stock in the calculation of diluted earnings (loss) per share for each of the three and six-month periods ended December 31, 2016, and December 31, 2015, as their effect would have been anti-dilutive due to net losses in those periods.

~~Segment Information~~

As of June 30, 2016, the Company determined, based on the criteria of Accounting Standards Codification Topic 280, that it operated in two segments, MPUK, and MPA, as well as a head office, Magellan ("Corporate"), which is treated as a cost center. As of December 31, 2016, these two operating segments met the minimum quantitative threshold to qualify for separate segment reporting.

The Company's chief operating decision maker is Antoine J. Lafargue (President, Chief Executive Officer, Chief Financial Officer, Treasurer and Corporate Secretary of the Company), who reviews the results and manages operations of the Company in the two reporting segments of MPUK, and MPA, as well as Corporate. The presentation of all segment information herein reflects the manner in which the Company's management monitors performance and allocates resources. For

~~information pertaining to our reporting segments, see~~ ~~Note 15 - Segment Information, and Part II, Item 8 of our 2016 Form 10-K~~.

~~Recently Issued Accounting Standards~~

In January 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2017-04, which removes step 2 from the goodwill impairment test. The standard will be effective for the Company for its first interim period in its fiscal year ending June 30, 2021, and early adoption is permitted. The Company does not expect that the adoption of this standard will have a significant impact on its condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This standard will be effective for the Company for its first interim period in its fiscal year ending June 30, 2019, and early application is permitted in certain circumstances. The Company does not expect that the adoption of this standard will have a significant impact on its condensed consolidated financial statements.

In December 2016, the FASB issued ASU No. 2016-19, which provides technical corrections and improvements to previously issued guidance. Most of the amendments in this standard are effective upon issuance of the update. The Company adopted this standard upon issuance and it did not have a significant impact on its condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, which is intended to reduce diversity in practice in reporting certain items in the statement of cash flows. This standard will be effective for the Company for its first interim period in its fiscal year ending June 30, 2019, and early adoption is permitted. The Company does not expect adoption of ASU 2016-15suit to have a material effect on ~~its condensed consolidated~~our results of operation or financial ~~statements.~~condition.

~~In March 2016, the FASB issued ASU No. 2016-09, which is intended to improve the accounting for employee share-based payments~~

NOTE 8 — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The components of accounts payable and ~~affects all organizations that issue share-based payment awards to their employees. Several aspects~~accrued liabilities consist of the accounting for share-based payment award transactions are simplified, including (a) income tax consequences; (b) classification of awards as either equity or liabilities; (c) classification on the statement of cash flows;following (in thousands):



	September 30, 2017		December 31, 2016
Project development activities	$	1,970	$	—
Front-end engineering and design	—		12,549
Payroll and compensation	16,043		6,311
Seismic survey cancellation	1,343		—
Accrued taxes	2,394		—
Professional services (e.g., legal, audit)	2,869		2,323
Other	2,570		3,220
Total accounts payable and accrued liabilities	$	27,189	$	24,403

Front-end Engineering and (d) accounting for forfeitures. This standard will be effective for the Company for its first interim period in its fiscal year ending June 30, 2018, and early adoption is permitted. The Company is evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.Design

In February 2016, Tellurian engaged Bechtel to perform a FEED study for the ~~FASB issued ASU No. 2016-02, which establishes~~Driftwood terminal, and in June 2016, Tellurian engaged Bechtel to perform a ~~right-of-use model that requires a lessee~~FEED study for the Driftwood pipeline. Accounts payable and accrued liabilities for FEED costs relate primarily to ~~record a right-of-use asset and a lease liability~~our contracts for FEED services with Bechtel as well as subcontractors working on the ~~balance sheet~~project. The FEED studies for ~~all leases with terms longer than 12 months, and provides revised guidance on lease classification as finance or operating, with classification affecting~~ the ~~pattern of expense recognition in the statement of operations or comprehensive loss,~~Driftwood pipeline and the ~~pattern~~Driftwood terminal were completed in March 2017 and June 2017, respectively.

Seismic Survey

On March 31, 2017, the Company executed an Operations Services Agreement (the “OSA”) with Santos Offshore Pty Ltd. (“Santos”). The OSA provides for Santos to perform certain services on behalf of ~~cash flow classification~~the Company associated with the Company’s exploration permit for our offshore block in Australia. On June 28, 2017, the ~~statement of cash flows. This standard~~Company executed a Cost Sharing Agreement (the “CSA”) with Santos and Origin Energy Resources Limited (“Origin”). The CSA provides the basis upon which costs and expenses will be ~~effective for~~shared among the Company, Santos, and Origin for ~~its first interim period in its fiscal year ending June 30, 2020. A modified retrospective transition approach is required for lessees for capital~~a 3-D seismic survey to be shot over our offshore block.

TELLURIAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(unaudited)

Pursuant to the OSA and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This standard will be effective for the Company for its first interim period in its fiscal year ending June 30, 2019, with earlier application not permittedCSA, with the ~~exception of certain specific provisions. The Company is evaluating~~Company’s consent, Santos applied for regulatory approval, designed the ~~impact of~~seismic survey and engaged a contractor to perform the ~~adoption of this standard on its condensed consolidated financial statements.~~

work. In November 2015, the FASB issued ASU No. 2015-17, which simplifies the presentation of deferred income taxes in the classified balance sheet, by removing the requirement to separate current and noncurrent deferred taxes and requiring deferred tax assets and liabilities to be classified as noncurrent. This standard will be effective for the Company for its first interim period in its fiscal year ending June 30, 2018, and early adoption is permitted. The Company does not expect adoption of ASU 2015-17 to have a material effect on its condensed consolidated financial statements.

In September 2015, the FASB issued ASU No. 2015-16, which simplifies the accounting for adjustments made to provisional amounts recognized at the acquisition date in a business combination, by eliminating the requirement to retrospectively account for such adjustments for which the accounting is incomplete by the end of the reporting period in which the combination occurs. This standard is effective for the Company for its first interim period in its fiscal year ending June 30, 2017. The Company has adopted this standard, which has not had a material impact on the Company's condensed consolidated financial statements for the six months ended December 31, 2016. The Company expects to account for such adjustments, if any, on a prospective basis.

In August 2014, the FASB issued ASU No. 2014-15, which provides guidance on management’s responsibility to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related

~~footnote disclosures. This standard is effective for the Company's fiscal year ending June 30,~~July 2017, ~~and annual and interim periods thereafter. The Company is evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.~~

In May 2014, the FASB issued ASU No. 2014-09, which clarifies the principles for revenue recognition and establishes a common standard for revenue recognition among GAAP and International Financial Reporting Standards ("IFRS"). Following the FASB's finalization of a one-year deferral of this standard, this standard will be effective for the Company for its first interim period in its fiscal year ending June 30, 2019, with early adoption permitted for its first interim period in its fiscal year ending June 30, 2018, and its principles shall be applied retrospectively. The Company does not produce revenue and therefore does not expect that the adoption of this standard will have a significant impact on its condensed consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, which changed the requirements for reporting discontinued operations and disclosures of disposals of components of an entity. ASU 2014-8 is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. The Company has adopted this standard and applied its guidance to its reporting and disclosure of the One Stone Exchange, the Weald ATA and the IoW ATA, and discontinued operations of NP and MPUK. (Notes 3, 4 and 5).

~~There are no other new significant accounting standards applicable to~~Santos informed the Company that ~~have been issued but not yet adopted by~~Santos was unable to obtain regulatory approval and canceled the seismic survey. While the Company ~~as of December 31, 2016.~~

~~Note 2 - Merger with Tellurian~~

~~On August 2, 2016, Magellan, Tellurian, and Merger Sub entered into the Merger Agreement. Pursuant~~remains a party to the ~~Merger Agreement, each outstanding share~~OSA and CSA, we are not currently committed to make any further expenditures under either agreement. A provision of common stock, par value $0.001 per share, of Tellurian will be exchanged for 1.300 shares of common stock, par value $0.01 per share, of Magellan, and Merger Sub will merge with and into Tellurian, with Tellurian continuing as the surviving corporation, a direct wholly owned subsidiary of Magellan, and the accounting acquirer. The Merger is expected to close$1.3 million has been included in ~~the first quarter of calendar year 2017.~~

The Merger Agreement and the Merger have been approved by the board of directors of each of Magellan and Tellurian. Stockholders of Magellan will be asked to vote on the approval of the transactions contemplated by the Merger Agreement at a special meeting that is expected to be held during the first quarter of calendar year 2017. The closing of the Merger is subject to customary closing conditions, including i) the receipt of Magellan and Tellurian stockholder approval; ii) all directors and officers of Magellan shall have resigned, except for any person(s) that might be designated by Tellurian; iii) a registration statement on Form S-4 to register the Magellan shares to be issued in the Merger shall have been declared effective by the SEC; and iv) shares of Magellan common stock to be issued in the Merger shall have been approved for listing on the NASDAQ.

The Merger Agreement also contains a non-solicitation provision pursuant to which Magellan may not, directly or indirectly, take certain actions to negotiate or otherwise facilitate an “Alternative Proposal,” a term generally defined as an inquiry, proposal or offer relating to a business combination with or acquisition of the assets of Magellan by a person or entity other than Tellurian. Magellan’s non-solicitation obligations are qualified by “fiduciary out” provisions which provide that Magellan may take certain otherwise prohibited actions with respect to an unsolicited Alternative Proposal if the Board of Directors determines that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties and certain other requirements are satisfied.

The Merger Agreement may be terminated under certain circumstances, including in specified circumstances in connection with receipt of a "Superior Proposal," as such term is defined in the Merger Agreement. In connection with a termination of the Merger Agreement in the event of a Superior Proposal, a breach by Magellan of the non-solicitation provision noted above, or following a change by the Board of Directors of its recommendation to stockholders, Magellan will be required to pay to Tellurian a termination fee for any and all third-party transaction fees and expenses incurred by Tellurian with the drafting, negotiation, execution and delivery of the Merger Agreement and related documents (including fees and expenses for attorneys, accountants and other advisors), subject to a maximum of $1 million in the aggregate. A termination fee may also be payable in some circumstances in which an Alternative Proposal is made, the transaction fails to close and Magellan subsequently agrees to an Alternative Proposal. If the Merger Agreement is terminated by either party as a result of the failure to obtain the requisite approval by Tellurian stockholders, or by Magellan because Tellurian does not use commercially reasonable efforts to secure the approval for listing the Magellan shares of common stock to be issued in the Merger, then Tellurian will be required to pay to Magellan a reverse termination fee of $1 million.

On November 23, 2016, Tellurian, Magellan and Merger Sub entered into an amendment to the merger agreement in order to, among other things, permit Tellurian to issue 5,467,851 shares of Tellurian Preferred Stock to GE Oil and Gas Inc. ("GE") for an aggregate purchase price of $25 million. If the merger is completed, the Tellurian Preferred Stock will remain outstanding as preferred stock of the surviving corporation in the merger that will be a subsidiary of Magellan. However, in that case, each share of Tellurian Preferred Stock will become convertible or exchangeable at any time into either (i) one share of Magellan common stock or (ii) one share of Magellan Series B Preferred Stock. See Note 12 - Preferred Stock. Also on November 23, 2016, Magellan and GE entered into a Guaranty and Support Agreement pursuant to which Magellan will, contingent on the closing of the Merger, guarantee to GE the performance of all of the obligations of Tellurianour Condensed Consolidated Financial Statements in connection with the ~~Preferred Stock Purchase Agreement~~cancellation.

NOTE 9 — SHARE-BASED COMPENSATION

Tellurian has granted fully vested and restricted stock to employees, outside directors, and consultants under the Amended and Restated Tellurian Investments Inc. 2016 Omnibus Incentive Plan (the ~~“Preferred SPA”~~“Legacy Plan”) ~~between GE~~ and ~~Tellurian.~~

On December 19, 2016, Tellurian entered into a common stock purchase agreement (the “SPA”) with TOTAL Delaware, Inc. (“TOTAL”), a Delaware corporation and subsidiary of TOTAL S.A., pursuant to which TOTAL will purchase, and Tellurian will sell and issue to TOTAL, 35,384,615 shares of Tellurian common stock (the “Tellurian Shares”) for an aggregate purchase price of $207 million. The transactions contemplated by the SPA closed on January 3, 2017. In connection with the SPA, Tellurian, Magellan and Merger Sub entered into a second amendment to the Merger agreement (the “Second Merger Agreement Amendment”). Among other things, the Second Merger Agreement Amendment (i) permits Tellurian to enter into the SPA and issue the Tellurian ~~Shares to TOTAL, (ii) increases~~Inc. 2016 Omnibus Incentive Compensation Plan, as amended (the “Omnibus Plan”). As of September 30, 2017, 14.9 million shares were granted under the Legacy Plan and 7.5 million shares were granted under the Omnibus Plan. At a special meeting of stockholders on February 9, 2017, Magellan stockholders approved the Omnibus Plan, which replaced the Legacy Plan. No further awards can be made under the Legacy Plan.

The maximum number of shares of Tellurian common stock ~~(or its equivalent) issuable to current and prospective employees~~authorized for issuance under the Omnibus Plan is 40 million shares of common stock. During any calendar year, no employee may be granted more than 10 million shares of Tellurian common stock, or with respect to a grant of cash, an amount equal to the value of 10 million shares of Tellurian common stock at the time of settlement. The Omnibus Plan provides that shares subject to awards of options or stock appreciation rights will be counted as 0.4 shares for every share granted. As a result of this provision, the Company could ultimately issue more than 40 million shares of Tellurian common stock pursuant to awards granted under the ~~Tellurian 2016~~ Omnibus ~~Incentive~~ Plan, ~~between August 2, 2016~~depending on the mix of common stock, options, stock appreciation rights, and other awards ultimately issued to participants.

During the ~~closing~~three and nine months ended September 30, 2017, the Company granted unrestricted, service-based, and performance-based awards. Most of the ~~Merger from 10 million to 13 million, (iii) requires Magellan to appoint one board designee of TOTAL to~~performance-based awards vest based on a final investment decision by the Company’s board of directors, ~~of Magellan effective upon the closing of the Merger, and (iv) extends the “Outside Date” (as~~as defined in the award agreements. A portion of the performance awards vest based on the achievement of certain project development activities.

During the three months ended September 30, 2017, the weighted average grant date fair value per share was $10.68 per share, and the total grant date fair value was $17.4 million for restricted awards. For the three and nine months ended September 30, 2017, Tellurian recognized $4.0 million and $22.0 million, respectively, as stock-based compensation expense for employees and directors, $2 million of which was issued in settlement of bonuses accrued at December 31, 2016. For the three and nine months ended September 30, 2016, Tellurian recognized $19.1 million and $24.2 million, respectively, as stock-based compensation expense for employees and directors.

NOTE 10 — SHARE-BASED PAYMENTS

For the three and nine months ended September 30, 2017, Tellurian recognized zero and $19.4 million, respectively, as share-based expense for vendors.

In February 2017, the Company issued 409,800 shares of Tellurian common stock, valued at $5.8 million, to a financial adviser in connection with the successful completion of the Merger. This cost has been included in general and administrative expenses in the Condensed Consolidated Statements of Operations. Additionally, on the Merger ~~Agreement)~~Date, the Company issued 90,350 shares of Tellurian common stock to settle a liability assumed in the Merger valued at $1.3 million.

In March 2017, the Company’s board of directors approved the issuance of 1 million shares that were purchased at a discount by a commercial development consultant under the Omnibus Plan. The terms of the share purchase agreement did not contain performance obligations or similar vesting provisions; accordingly, the full amount of $11.4 million, representing the aggregate difference between the purchase price of $0.50 per share and the fair value on the date of issuance of $11.88 per share, was recognized on the date of the share purchase and has been included in general and administrative expenses in the Condensed Consolidated Statements of Operations.

Also in March 2017, the Company issued 200,000 shares under a management consulting arrangement for specified services from March 2017 through May 2017. The services were valued at $11.34 per share on the date of issuance. The total cost of $2.3 million was amortized to general and administrative expenses on a straight-line basis over the three-month service period in the Condensed Consolidated Statements of Operations.

NOTE 11 — INCOME TAXES

As of September 30, 2017, the Company has net operating loss (“NOL”) carryforwards for federal, state and international income tax reporting purposes. The Company has established a full valuation allowance against its NOLs and has not recorded a net liability for federal or state income taxes in any of the periods included in the accompanying Condensed Consolidated Financial Statements.

TELLURIAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(unaudited)

The provision for income taxes recorded in the accompanying Condensed Consolidated Financial Statements is for foreign income taxes resulting from disposition proceeds on the Company’s sale of available-for-sale securities. The taxable gain on the disposition will be included in Company’s total profits chargeable to UK corporation income tax with no offsetting deduction for pre-trading expenditures as Tellurian has not yet become active or started trading for UK corporation income tax purposes.

Section 382 of the Internal Revenue Code (the “Code”) contains rules that limit the ability of a company that undergoes an ownership change to utilize its NOL carryforwards, tax credits, and certain built-in-losses or deductions existing as of the date of an ownership change. Prior to the Merger, Magellan had NOL carryforwards available to reduce U.S. federal and state taxable income in future tax years. The Company performed a Section 382 ownership change analysis for Magellan to determine if there were any Section 382 limitations on the utilization of Magellan’s pre-merger NOLs. Based on this analysis, the Company has determined that the Magellan pre-merger NOL carryforwards are subject to annual Section 382 limitations. Because of these limitations, it is expected that the vast majority of Magellan’s NOL carryforwards generated prior to the Merger will expire unused.

In addition, we experienced an ownership change (as that term is defined within Section 382 of the Code) on April 20, 2017. An analysis of the annual limitation on the utilization of our NOLs was performed in accordance with the Code. It was determined that Section 382 will not materially limit the use of our NOLs over the carryover period. We will continue to monitor activity in the Company’s shares which could cause an ownership change. If the Company experiences a Section 382 ownership change, it could further affect our ability to utilize our existing NOL carryforwards.

The Company remains subject to periodic audits and reviews by taxing authorities; however, we do not expect that these audits will have a material effect on the Company’s tax provision. Magellan’s federal tax returns for the years after June 30, 2014, remain open for examination.

NOTE 12 — STOCKHOLDERS’ EQUITY

At-the-Market Program

The Company maintains an at-the-market equity offering program pursuant to which Tellurian may sell shares of its common stock from time to time on the NASDAQ or any other market for the common stock in the U.S., through Credit Suisse Securities (USA) LLC acting as sales agent, for aggregate sales proceeds of up to $200 million. For the nine months ended September 30, 2017, the Company issued 1.0 million shares of common stock under this program, for proceeds of $10.3 million, net of $0.5 million in fees and commissions.

TOTAL Investment

In January ~~31,~~ 2017, pursuant to ~~February 28, 2017. Also on January 3,~~a common stock purchase agreement dated as of December 19, 2016, between Tellurian Investments and TOTAL Delaware, Inc. (“TOTAL”), TOTAL purchased, and Tellurian Investments sold and issued to TOTAL, approximately 35.4 million shares of Tellurian Investments common stock for an aggregate purchase price of $207 million, net of offering costs. In connection with the Merger, the shares purchased by TOTAL were exchanged for approximately 46 million shares of Tellurian common stock.

In May 2017, ~~Magellan~~Tellurian and TOTAL entered into a ~~Guaranty and Support Agreement,~~pre-emptive rights agreement pursuant to which ~~Magellan will, contingent~~TOTAL was granted a right to purchase its pro rata portion of any new equity securities that Tellurian may issue to a third party on the ~~closing~~same terms and conditions as such equity securities are offered and sold to such party, subject to certain excepted offerings (the “Pre-emptive Rights Agreement”). Pursuant to the common stock purchase agreement dated as of December 19, 2016, between Tellurian Investments and TOTAL, the terms and conditions of the ~~Merger, guarantee~~Pre-emptive Rights Agreement are similar to those contained in the pre-emptive rights agreement dated as of January 3, 2017, between Tellurian Investments and TOTAL, but the ~~performance~~Pre-emptive Rights Agreement is subject to additional excepted offerings.

Tellurian Preferred Stock

In March 2017, GE Oil & Gas, Inc. (now known as GE Oil & Gas, LLC) (“GE”), as the holder of all ~~of the obligations~~5.5 million outstanding shares of Tellurian ~~in connection with the SPA.~~

In connection with and following the consummation of the Merger, certain contingent items of Magellan will become due and payable by the combined company, including (i) transaction fees to Petrie, payable inInvestments Series A convertible preferred stock (the “Tellurian Investments Preferred Shares”), exchanged those shares of Magellan common stock; (ii) compensation to members of the Special Committee, payable in a combination of cash and Magellan common stock; (iii) transaction incentive compensation to Magellan's Chief Executive Officer, payable in cash and common stock, in exchange for a release of prior transaction incentive compensation; (iv) employee cash bonuses payable under the employee retention cash bonus plan; and (v) the release of Magellan's contingent production obligations related to the Poplar field, in exchange for the issuanceinto an equal number of shares of ~~Magellan common~~Tellurian Inc. Series B convertible preferred stockto the beneficiaries of such contingent obligations. In addition, the accelerated vesting provisions of the Company's remaining unvested stock options and unvested restricted stock are expected to be triggered, and these options and restricted stock are expected to become fully vested. Furthermore, upon the closing of the Merger, which constitutes a change in control, there is a risk that most of the Company's tax attributes may not be available to the Company to reduce the Company's potential US federal and state income taxes. For further information on these contingent items, refer to ~~Note 17 - Commitments and Contingencies~~,~~Note 19 - Employee Retention and Severance CostsandNote 10 - Income Taxes~~.

~~Note 3 - One Stone Exchange~~

On March 31, 2016, Magellan and One Stone entered into the Exchange Agreement. The Exchange Agreement provides, upon the terms and subject to the conditions set forth in the Exchange Agreement, for the transfer by One Stone to the Company of 100% of the outstanding shares of Magellan Series A (the “Series B Preferred Stock, in consideration for the assignment to and assumption by One Stone of 100% of the outstanding membership interests in Nautilus Poplar LLC, and 51% of the outstanding common units in Utah CO2 LLC, as adjusted by the Cash Amount (as defined in the Exchange Agreement and discussed further below).

On August 1, 2016, the Exchange closed and the Company received the Cash Amount, which amounted to $900 thousand. The Company recorded the excess of the proceeds, such proceeds consisting of (i) the carrying amount of the preferred stock; plus (ii) the Cash Amount; plus (iii) the principal amount of the secured promissory note, over the fair value of the net assets of the CO2 Business as a contribution to equity from One Stone, resulting in an increase to capital in excess of par value of approximately $9.9 million (Note 5). Transaction costs associated with the Exchange Agreement were charged to expense and recorded in discontinued operations and amounted to approximately $968 thousand in the aggregate.

~~The Exchange Agreement was given economic effect as of September 30, 2015 (the “Effective Date”~~Stock”). As such, at closing, One Stone was expected to pay the Company an amount in cash equal to i) any transaction costs One Stone had agreed to pay pursuant to the Exchange Agreement that had not been paid on or prior to closing, ii) minus (if positive) or plus (if negative) the net revenues and expenses attributable to NP after the Effective Date, plus iii) certain specified liabilities of NP actually paid by the Company or NP prior to closing, minus, (iv) the Loan Amount (the “Cash Amount”). The purpose of the Cash Amount was primarily to reimburse the Company for the funding of the operations of NP during the period between September 30, 2015, and the closing of the Exchange, which operations resulted in a loss in the aggregate for the period. At the end of June 2016, the Company provided One Stone with a preliminary estimate of the Cash Amount, which amounted to $1.2 million. On August 1, 2016, the final amount agreed between the parties and paid by One Stone to the Company was $900 thousand. In addition, Messrs. Israel and Gluzman, One Stone's representatives on the Company's Board of Directors, i) agreed to forgo the amount of director compensation, in cash and stock, owed to them and outstanding as of the closing date, which was estimated at approximately $174 thousand in the aggregate and ii) ceased serving as members of the Board effective as of August 1, 2016.

Pursuant to the Exchange Agreement, on April 15, 2016, Magellan and One Stone i) entered into a Secured Promissory Note (the “Note”) pursuant to which One Stone made a loan to Magellan in the aggregate amount of $625 thousand (the “Loan Amount”) and ii) simultaneously entered into a Pledge Agreement pursuant to which Magellan pledged, assigned and granted to One Stone a security interest in the Company’s interests in MPA, as collateral for the loan. The purpose of the Note was primarily to fund the payment of outstanding payables with certain vendors of the CO2 Business to maintain its ongoing operations between signing of the Exchange Agreement and closing of the Exchange. The Note did not bear interest up until closing of the Exchange, was expected to be forgiven upon closing of the Exchange, and if the Exchange had not closed, would have become due and payable on August 1, 2016, or, in the case of a breach of the Exchange Agreement by One Stone, on August 1, 2017, and would have borne interest from the date of termination of the Exchange Agreement at a rate of the prime rate of interest plus 1% (4.5% at August 1, 2016). Upon closing of the Exchange on August 1, 2016, the Loan Amount was deemed paid in full and no further amounts under the Note were owed by the Company. Also, One Stone assumed all assets and virtually all liabilities related to the CO2 Business, which included a term loan with West Texas State Bank and outstanding accounts payable related to the CO2 Business.

In addition, since the Exchange constituted a disposition of substantially all of the Company's US assets, the acceleration provisions of the grants of performance-based and market-based options made in October 2013 and October 2014 took effect, and these options became fully vested as of the closing of the Exchange. The remaining unamortized expense related to these

grants as of the closing date was expensed, which expense amounted to approximately $369 thousand, including release of forfeitures. Following the closing of the Exchange, the Company canceled all issued and outstanding shares of Series A Preferred Stock, including PIK dividends owing for the period between June 30, 2016 and August 1, 2016, which amounted to 22,815,748 shares, and eliminated its Series A Preferred Stock (Note 12).

~~Note 4 - Sale of Weald Basin Assets~~

On June 10, 2016, MPUK entered into three concurrent agreements, the Weald Agreements, which resulted in the disposal of its interests in four licenses in the UK and the settlement of all legal claims related to its dispute with Celtique.

On June 10, 2016, MPUK entered into i) an Asset Transfer Agreement relating to the sale to UK Oil & Gas Investments PLC ("UKOG") of MPUK's 50% interests in PEDLs 231, 234, and 243 (the "Weald ATA"), ii) an Asset Transfer Agreement relating to the sale to UKOG of MPUK's 22.5% interest in the Offshore Petroleum Licence P1916 (the "IoW ATA"), and iii) a Settlement Agreement (as defined below) with Celtique. The consideration payable by UKOG to MPUK for the Weald ATA amounted to £1.8 million in a combination of cash and shares in UKOG. The number and value of shares of UKOG was determined as of the time of execution of the Weald ATA and was based on the volume weighted average price of an ordinary share of UKOG for the ten business days prior to June 10, 2016. The consideration for the IoW ATA was the assumption of MPUK's outstanding payables of £16 thousand related to its interests in the Offshore Petroleum Licence P1916. Pursuant to the terms of the Settlement Agreement, MPUK was due to pay Celtique £500 thousand of the gross consideration, in a combination of cash and shares in UKOG pro rata to the consideration payable to MPUK for the Weald ATA.

With respect to the Settlement Agreement, MPUK entered into a settlement agreement with Celtique and its parent Celtique Energie Petroleum Limited (the "Settlement Agreement") which provided for the dismissal of all claims and counterclaims related to PEDLs 231, 234, and 243 between the parties. The Settlement Agreement also included a standstill provision among all parties until the completion of the Weald ATA.

On August 11, 2016, the transactions contemplated by all three agreements closed, with MPUK receiving net cash proceeds of £446 thousand and the net issuance to MPUK of approximately 50.9 million shares of UKOG, which shares were worth approximately £713 thousandand £992 thousand as of August 11, 2016, and December 31, 2016, respectively. Upon closing the transactions contemplated by the Weald Agreements during the six months ended December 31, 2016, the Company recognized a gain on disposal of discontinued operations, net of tax, of $1.1 million (Note 5).

In connection with the Weald ATA, IoW ATA, and Settlement Agreement, the Company accrued its liabilities to Celtique to the full amount of the consideration payable to Celtique of £500 thousand as of June 30, 2016, and classified its assets and liabilities related to PEDLs 231, 234, and 243, and P1916 to held for sale in the accompanying consolidated balance sheet as of June 30, 2016. The Company also classified the operations related to these licenses for the period from July 1, 2016 to closing on August 11, 2016, and for the three and six month periods ended December 31, 2015, to discontinued operations in the accompanying condensed consolidated statements of operations. For further information, refer to ~~Note 5 - Discontinued Operations~~.

~~Note 5 - Discontinued Operations~~

As discussed in detail in Note 3, on August 1, 2016, pursuant to the Exchange Agreement, the Company completed the Exchange of 100% of its interest in the CO2 Business for the redemption of 100% of its outstanding Series A Preferred Stock, as adjusted by the Cash Amount. The assets and liabilities of the CO2 Business constituted and were previously reported under the Company's former NP segment, and, following the Company's determination that the closing of the Exchange was probable, were recorded at their fair values, less the cost to sell, and were classified as held for sale as of June 30, 2016 in the accompanying consolidated balance sheet. Similarly, the results of operations of the CO2 Business have been reclassified to discontinued operations in the accompanying condensed consolidated statements of operations for all periods presented.

In addition, as discussed in detail in Note 4, on August 11, 2016, pursuant to the Weald Agreements, the Company completed the disposal of its interests in four licenses in the UK and the settlement of all legal claims related to its dispute with Celtique. The assets and liabilities related to the Weald Agreements were previously reported under the Company's MPUK segment, and were recorded at their fair values, less the cost to sell, and were classified as held for sale as of June 30, 2016 in the accompanying consolidated balance sheet. Similarly, the results of operations related to these licenses have been reclassified to discontinued operations in the accompanying condensed consolidated statements of operations for all periods presented.

Following is a reconciliation of the major classes of line items constituting the pretax income (loss) from discontinued operations to the after-tax income (loss) from discontinued operations in the condensed consolidated statements of operations:

SIX MONTHS ENDED
December 31,
2016 2015
CO2 Business Weald Basin Total CO2 Business Weald Basin Total
(In thousands)
Revenue $ 143
$ —
$ 143
$ 1,215
$ —
$ 1,215
Operating, exploration and general and administrative expenses 41
—
41
1,999
113
2,112
Depletion, depreciation, amortization and accretion —
—
—
404
—
404
Interest expense and other disposal costs 301
—
301
97
—
97
Total expenses 342
—
342
2,500
113
2,613
Non-controlling interest (36 ) —
(36 ) 25
—
25
Loss from discontinued operations before tax (235 ) —
(235 ) (1,260 ) (113 ) (1,373 )
Gain on disposal of discontinued operations before tax —
1,069
1,069
—
—
—
Income tax expense (benefit) —
—
—
—
—
—
Net income (loss) from discontinued operations, net of tax $ (235 ) $ 1,069
$ 834
$ (1,260 ) $ (113 ) $ (1,373 )

As of June 30, 2016, the Company recorded estimated transaction costs related to the Exchange of $690 thousand in loss from discontinued operations. Cumulative transaction costs related to the Exchange incurred through December 31, 2016 were $968 thousand. The additional transaction costs of $278 thousand are included in loss from discontinued operations for the six months ended December 31, 2016. Included in assets held for sale at June 30, 2016 were cash balances related to the CO2 Business of $141 thousand. At the closing of the Exchange, as a result of the settlement of the Cash Amount, the Company retained the cash of the CO2 Business and transferred to the CO2 Business a cash collateral account of $150 thousand securing certain surety bonds of Poplar.

Following is a reconciliation of the major classes of assets and liabilities of the disposal groups sold during the six months ended December 31, 2016, their carrying values at June 30, 2016, which represented the lesser of historical cost or fair value less costs to sell, and the calculation of the contribution to equity and gain on their disposal recorded at the time of closing of each respective transaction.

At Time of Closing June 30,
2016
CO2 Business Weald Basin Total CO2 Business Weald Basin Total
(In thousands)
Assets sold:
Cash $ —
$ —
$ —
$ 141
$ —
$ 141
Accounts receivable 198
—
198
249
—
249
Inventories 242
295
537
232
301
533
Other classes of current assets that are not major 38
—
38
34
—
34
Property and equipment, net 24,294
795
25,089
23,941
812
24,753
Other classes of assets that are not major 204
—
204
332
—
332
Total assets of the disposal groups $ 24,976
$ 1,090
$ 26,066
$ 24,929
$ 1,113
$ 26,042

Liabilities sold:
Accounts payable $ 1,469
$ 648
$ 2,117
$ 1,594
$ 670
$ 2,264
Note payable 5,500
—
5,500
5,500
—
5,500
Asset retirement obligations 2,818
—
2,818
2,818
—
2,818
Other classes of liabilities that are not major 55
—
55
56
—
56
Total liabilities of the disposal groups $ 9,842
$ 648
$ 10,490
$ 9,968
$ 670
$ 10,638

Consideration:
Series A Preferred Stock exchanged $ 23,501
$ —

Secured promissory note forgiven 625
—

Cash received 900
586

Stock of UKOG received —
925

Total consideration $ 25,026
$ 1,511

Contribution to equity from preferred stockholder $ 9,892

Gain on disposal of discontinued operations, net of tax
$ 1,069

~~Contingent Production Payments~~

The Company has retained potential future contingent production payments related to its September 2011 acquisition of NP. The contingent production payments are payable, up to a total of $5.0 million, if certain increased average daily production rates are achieved at the Poplar field. Based upon the latest reserves estimates available to the Company, the contingent production payments are unlikely to be paid, and therefore, are not recorded in the accompanying condensed consolidated financial statements. In addition, on September 30, 2016, the Company entered into an agreement with the beneficiaries of these contingent production payments to dispose of its obligations related to them. See ~~Note 17 - Commitments and Contingenciesfor further information.~~

~~Note 6 - Sale of Amadeus Basin Assets~~

On March 31, 2014 (the "Central Closing Date"), pursuant to the Share Sale and Purchase Deed dated February 17, 2014 (the "Sale Deed"), the Company sold its Amadeus Basin assets, the Palm Valley and Dingo gas fields ("Palm Valley" and "Dingo," respectively), to Central through the sale of the Company's wholly owned subsidiary, Magellan Petroleum (N.T.) Pty. Ltd ("MPNT"), to Central's wholly owned subsidiary, Central Petroleum PV Pty. Ltd ("Central PV"). In exchange for the assets, Central paid to Magellan (i) A$20 million, (ii) customary purchase price adjustments amounting to A$800 thousand; and (iii) 39.5 million newly issued shares of Central stock (ASX: CTP), equivalent to an ownership interest in Central of approximately 11%.

The Sale Deed also provides that the Company is entitled to receive 25% of the revenues generated at the Palm Valley gas field from gas sales when the volume-weighted gas price realized at Palm Valley exceeds A$5.00/Gigajoule and A$6.00/Gigajoule for the first 10 years following the Central Closing Date and for the following five years, respectively, with such prices to be escalated in accordance with the Australian consumer price index. Between the third and fifth anniversaries of the Central Closing Date, inclusive, the Company may seek from Central a one-time payment (the "Bonus Discharge Amount") corresponding to the present value, assuming an annual discount rate of 10%, of any expected remaining bonus payments in exchange for forgoing future bonus payments. If the Company receives the Bonus Discharge Amount, bonus payments and the Bonus Discharge Amount together may not exceed A$7 million.

The Company also retained its rights to receive any and all bonuses (the "Mereenie Bonus") payable by Santos Ltd ("Santos") and contingent upon production at the Mereenie oil and gas field achieving certain threshold levels. The Mereenie Bonus was established in fiscal year 2011 pursuant to the terms of the ~~asset swap agreement between the Company and Santos for the sale~~Tellurian Investments Certificate of ~~the Company's interest in Mereenie to Santos and the Company's purchase of the interests of Santos in the Palm Valley and Dingo gas fields.~~Incorporation (the “Preferred Share Exchange”). The ~~Company has historically not recognized a contingent asset related to the Bonus Discharge Amount or Mereenie Bonus, as such amounts are not reasonably assured.~~

On May 18, 2016, pursuant to a sale and purchase deed and deed of consent, with appropriate consent from Santos, the Company sold its rights in the Mereenie Bonus for A$3.5 million, which translated to $2.5 million on that date. Since no asset had previously been recorded related to the Mereenie Bonus, the Company recorded the entire sales price as a gain for the year ended June 30, 2016. ~~The Company’s ability to repatriate the proceeds from the sale of the Mereenie Bonus to the US was constrained by the~~ terms of the ~~Pledge Agreement the Company entered into in conjunction with the Note with One Stone, until closing of the Exchange on August 1, 2016.~~

~~Note 7 - Securities Available-for-Sale~~

~~The following table presents the amortized cost, gross unrealized gains, gross unrealized losses, and fair market value of available-for-sale equity securities:~~

December 31, 2016

Amortized
cost
Gross unrealized gains Gross unrealized losses
Fair
value
(In thousands)
Equity securities $ 1,335
$ 207
$ —
$ 1,542

June 30, 2016

Amortized
cost
Gross unrealized gains Gross unrealized losses
Fair
value
(In thousands)
Equity securities $ 885
$ —
$ (284 ) $ 601

On August 11, 2016, pursuant to the terms of the Weald Agreements and upon closing of the transactions contemplated thereby, the Company received approximately 50.9 million shares of UKOG common stock (AIM:UKOG) as partial consideration pursuant to the Weald ATA. The Company considers the shares of UKOG to be available-for-sale, and therefore records temporary fluctuations in the value of such shares in other comprehensive income (loss). Pursuant to the Weald ATA, the Company's shares in UKOG are subject to a six-month lock-up period on transfer, and the Company therefore may not sell its shares until February 10, 2017.

On April 15, 2016, pursuant to the Exchange Agreement, Magellan and One Stone entered into a Secured Promissory Note pursuant to which One Stone made a loan to Magellan in the aggregate amount of $625 thousand and simultaneously entered into a Pledge Agreement pursuant to which Magellan pledged, assigned and granted to One Stone a security interest in Magellan's interests in MPA, which in turn holds the Company's shareholdings of Central common stock, as collateral for the Note. Upon the closing of the Exchange on August 1, 2016, the Loan Amount was deemed paid in full and the Pledge Agreement was terminated, which restored the ability of the Company to sell its shares of Central common stock.

The Company monitors its investments in available-for-sale securities for indicators of other than temporary impairment. As of December 31, 2016, the Company determined that no such impairment had occurred.

~~Note 8 - Notes Payable~~

~~Insurance Premium Notes~~

Between January 2016 and September 2016, the Company entered into three separate insurance premium financing agreements (the "Premium Notes") to finance the insurance premiums related to the annual renewal of the Company's insurance policies. The Premium Notes have an aggregate original principal amount of $262 thousand, bear interest ranging between 6.25% and 7.75%, and have amortization terms ranging from eight to ten months. The aggregate principal and interest payments due monthly under the Premium Notes range between $23 thousand and $2 thousand, and are payable between January 2017 and May 2017.

~~Secured Promissory Note~~

Pursuant to the Exchange Agreement, on April 15, 2016, Magellan and One Stone i) entered into a Secured Promissory Note (the “Note”) pursuant to which One Stone made a loan to Magellan in the aggregate amount of $625 thousand (the “Loan Amount”) and ii) simultaneously entered into a Pledge Agreement pursuant to which Magellan pledged, assigned and granted to One Stone a security interest in the Company’s interests in MPA, as collateral for the loan. Magellan was required to use the borrowed amounts to satisfy transaction costs and pay certain outstanding accounts payable primarily related to the CO2 Business, to maintain its ongoing operations between signing of the Exchange Agreement and closing. The Note did not bear interest up until closing of the Exchange and was expected to be forgiven upon closing of the Exchange, and if the Exchange had not closed, would have become due and payable on August 1, 2016, or, in the case of a breach of the Exchange Agreement by One Stone, on August 1, 2017, and would have borne interest from the date of termination of the Exchange Agreement at a rate of the prime rate of interest plus 1% (amounting to approximately 4.5% at August 1, 2016). The Note is included in Notes Payable as of June 30, 2016in the accompanying consolidated balance sheet. Upon the closing of the Exchange on August 1, 2016, the Loan Amount was deemed paid in full and no further amounts under the Note were owed by the Company.

~~Note 9 - Fair Value Measurements~~

The Company follows authoritative guidance related to fair value measurement and disclosure, which establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement using market participant assumptions at the measurement date. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

~~Level 1: Quoted prices in active markets for identical assets.~~

Level 2: Significant other observable inputs – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

~~Level 3: Significant inputs to the valuation model that are unobservable inputs.~~

The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and the consideration of factors specific to the asset or liability. The Company's policy is to recognize transfers in or out of a fair value hierarchy as of the end of the reporting period for which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques discussed above for all periods presented. During the six months ended December 31, 2016, and 2015, there were no transfers in or out of Level 1, Level 2, or Level 3, except for the sale and acquisition of securities-available-for-sale, which securities are measured using Level 1 inputs consistently as discussed further below.

~~Assets and liabilities measured on a recurring basis~~

The Company's financial instruments exposed to concentrations of credit risk primarily consist of cash and cash equivalents and accounts receivable. The carrying values for cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and current portion of notes payable reflect these items' cost, which approximates fair value based on the timing of the anticipated cash flows and current market conditions.

~~Items required~~ to be measured at fair value on a recurring basis by the Company include securities available-for-sale and contingent consideration payable (as discussed further below). Within the valuation hierarchy, the Company measures the fair value of securities available-for-sale using Level 1 inputs, and the fair value of contingent consideration payable using Level 3 inputs. As of December 31, 2016, and June 30, 2016, the fair value of securities available-for-sale was $1.5 million and $601 thousand, respectively. As of both December 31, 2016, and June 30, 2016, the fair value of contingent consideration payable

~~was $0. The following table presents items required to be measured at fair value on a recurring basis as of the periods presented:~~

December 31, 2016
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Securities available-for-sale $ 1,542
$ —
$ —
$ 1,542

Liabilities:
Contingent consideration payable ⁽¹⁾
$ —
$ —
$ —
$ —

June 30, 2016
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Securities available-for-sale $ 601
$ —
$ —
$ 601

Liabilities:
Contingent consideration payable ⁽¹⁾
$ —
$ —
$ —
$ —

⁽¹⁾ ~~See~~ ~~Note 17 - Commitments and Contingencies~~ ~~below for additional information about this item.~~

~~The contingent consideration payable as discussed in~~ ~~Note 17 - Commitments and Contingencies~~- Contingent production payments is a potential standalone liability that is measured at fair value on a recurring basis for which there is no available quoted market price, principal market, or market participants. The inputs for this instrument are unobservable and therefore classified as Level 3 inputs. The calculation of this liability is a significant management estimate and uses drilling and production projections based in part on the Company's reserve report for NP to estimate future production bonus payments and a discount rate that is reflective of the Company's credit adjusted borrowing rate. The Company has retained future contingent production payments related to its September 2011 acquisition of NP following the closing of the Exchange with One Stone and has entered into an agreement with the beneficiaries to dispose of them upon closing of the Merger.

Inputs are reviewed by management on an annual basis or more frequently as deemed appropriate, and the potential liability is estimated by converting estimated future production bonus payments to a single net present value using a discounted cash flow model. Payments of future production bonuses are sensitive to the Poplar field's 60 days rolling gross production average. The contingent consideration payable would increase with significant production increases and/or a reduction in the discount rate.

The Company has previously recorded a liability and resulting accretion expense for the estimated fair value of the contingent consideration payable. Based upon the latest reserves estimates available to the Company, the contingent consideration payable is unlikely to be paid, and therefore, it is not recorded in the accompanying condensed consolidated financial statements.

~~Adjustments to the fair value of the contingent consideration payable are recorded in the unaudited condensed consolidated statements of operations under other income (expense).~~

~~Assets and liabilities measured on a nonrecurring basis~~

Effective March 31, 2016, in connection with the Exchange Agreement and related classification of the assets and liabilities of the CO2 Business to held for sale, the Company reviewed the recoverability of the carrying values of its assets and liabilities to be transferred to One Stone in the Exchange, and as a result of this review recorded an impairment of $11.3 million to adjust the carrying values of the exchanged assets and liabilities to their estimated fair values at March 31, 2016. The inputs used to determine such fair values were based in part on a fairness opinion provided by a third party in connection with the Exchange and in part on internally developed cash flow models and are classified within Level 3 in the hierarchy. The impairment recorded consisted of an amount identifiable to proved oil and gas properties of $7.8 million, an amount identifiable to accounts receivable of $100 thousand, and the remainder to wells in progress of $3.4 million. As of August 1, 2016, prior to disposition of these assets and liabilities in connection with closing the Exchange, their adjusted carrying values representing their carrying values less costs to sell continued to approximately equal their fair values less costs to sell as determined at March 31, 2016.

The Company, in connection with the reclassification of the Weald Basin exploration licenses as held for sale, also reviewed the recoverability of those assets at June 30, 2016, and determined that since the purchase price per the Weald ATA and IoW ATA was greater than the carrying values of the assets, the assets and liabilities were properly recorded at the lower of their fair values, less the cost to sell at June 30, 2016. As of August 11, 2016, prior to disposition of these assets in connection with closing of the transactions contemplated by the Weald Agreements, their adjusted carrying values representing their carrying values less costs to sell continued to approximately equal their fair values less costs to sell as determined at June 30, 2016.

The Company also utilizes fair value to perform an impairment test on its oil and gas properties and goodwill annually, or whenever events and circumstances indicate that a decline in the recoverability of their carrying values may have occurred. Fair value is estimated using expected discounted future cash flows from oil and gas properties. The inputs used to determine such fair value are primarily based upon internally developed cash flow models and are also classified within Level 3. For the six months ended December 31, 2016, the Company determined that no impairment to its remaining oil and gas properties and goodwill was necessary.

~~Note 10 - Income Taxes~~

The Company has estimated the applicable effective tax rate expected for the full fiscal year. The Company's effective tax rate used to estimate income taxes on a current year-to-date basis for each of the six-month periods ended December 31, 2016, and 2015, was 0%. Deferred tax assets ("DTAs") are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities and for operating losses and foreign tax credit carry forwards.

We review our DTAs and valuation allowance on a quarterly basis. As part of our review, we consider positive and negative evidence, including cumulative results in recent years. Consistent with the position at June 30, 2016, the Company maintains a full valuation allowance recorded against all DTAs. The Company therefore had no recorded DTAs as of December 31, 2016. We anticipate that we will continue to record a valuation allowance against our DTAs in all jurisdictions of the Company until such time as we are able to determine that it is "more-likely-than-not" that those DTAs will be realized.

The Company has reported losses on discontinued operations for the six-month periods ended December 31, 2016, and 2015, and because there is a full valuation allowance applied against the DTAs, the Company has not recorded any income tax benefit on discontinued operations in the condensed consolidated financial statements.

As a result of the closing of the Exchange, during the six months ended December 31, 2016, the Company may have had an ownership change as defined by Internal Revenue Code Section 382. The Company has not yet concluded its analysis to determine whether a Section 382 ownership change has occurred; however, there should be no financial statement impact if there is a Section 382 ownership change, since the Company has a full valuation allowance against the DTAs and has not utilized any net operating losses as of December 31, 2016.

During the fiscal year ended June 30, 2015, the Company made a determination that it was no longer permanently invested in its foreign subsidiaries. As of December 31, 2016, the Company has an overall deferred tax asset net of a deferred tax liability related to the basis difference in its foreign subsidiaries. A valuation allowance reduces DTAs to the estimated realizable value, which is the amount of DTAs management believes is "more-likely-than-not" to be realized in future periods.

~~The Company does not expect to pay any federal or state income taxes for the fiscal year ending June 30, 2017.~~

~~Note 11 - Stock-Based Compensation~~

~~The 2012 Stock Incentive Plan~~

On January 16, 2013, the Company's stockholders approved the Magellan Petroleum Corporation 2012 Omnibus Incentive Compensation Plan (the "2012 Stock Incentive Plan"). The 2012 Stock Incentive Plan replaced the Company's 1998 Stock Incentive Plan (the "1998 Stock Plan"). The 2012 Stock Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock and/or restricted stock units, performance shares and/or performance units, incentive awards, cash awards, and other stock-based awards to selected employees, including officers, directors, and consultants of the Company (or subsidiaries of the Company). The stated maximum number of shares of the Company's common stock authorized for awards under the 2012 Stock Incentive Plan is 625,000 shares plus the remaining number of shares under the 1998 Stock Plan immediately before the effective date of the 2012 Stock Incentive Plan, which was 36,054 as of January 15, 2013. The number of aggregate shares available for issuance will be reduced by one share for each share granted in the form of a stock option or stock appreciation right and two shares for each share granted in the form of any award that is not a stock option or stock appreciation right that is settled in stock. The maximum aggregate annual number of common shares or options that may

be granted to one participant is 125,000, and the maximum annual number of performance shares, performance units, restricted stock, or restricted stock units that may be granted to any one participant is 62,500. The maximum term of the 2012 Stock Incentive Plan is ten years.

During the six months ended December 31, 2016, 31,250 stock options previously granted under the 1998 Stock Plan expired without exercise. Pursuant to the terms of the 2012 Stock Incentive Plan, the unissued shares underlying these unexercised options were added to the shares available for issuance under the 2012 Stock Incentive Plan.

During the year ended June 30, 2016, 229,947 stock options previously granted under the 1998 Stock Plan expired without exercise. Pursuant to the terms of the 2012 Stock Incentive Plan, the unissued shares underlying these unexercised options were added to the shares available for issuance under the 2012 Stock Incentive Plan.

In October 2014, the Company repurchased 189,062 options from a former executive, which options were previously granted under the Company's 1998 Stock Plan. Pursuant to the terms of the 2012 Stock Incentive Plan, the unissued shares underlying these unexercised options were added to the shares available for issuance under the 2012 Stock Incentive Plan.

~~As of December 31, 2016, there were 99,138 shares available for issuance under the 2012 Stock Incentive Plan.~~

In connection with the Merger, the Company expects to experience a change in control as defined in the 2012 Stock Incentive Plan. The change in control will cause remaining unvested options and shares of restricted stock to immediately vest, such options and restricted shares amounting to 3,125 and 2,083, respectively, in the aggregate.

~~Stock Option Grants~~

Under the 2012 Stock Incentive Plan, stock option grants may contain vesting provisions such that options are TBOs, PBOs, or MBOs. During each of the six months ended December 31, 2016, and December 31, 2015, the Company granted no stock options.

~~Exercises~~

~~During each of the six months ended December 31, 2016, and December 31, 2015, no stock options were exercised.~~

~~Forfeitures / Cancellations~~

~~During the six months ended December 31, 2016, no stock options were forfeited or canceled. During the six months ended December 31, 2015, 13,958 stock options were forfeited or canceled.~~

~~Expirations~~

~~During the six months ended December 31, 2016, 31,667 stock options expired without exercise. During the prior year period, 246,612 stock options expired without exercise.~~

As of December 31, 2016, there were no MBOs and PBOs that had not vested. During the six months ended December 31, 2016, no options were issued outside of the 2012 Stock Incentive Plan. Stock options outstanding have expiration dates ranging from August 1, 2017 to January 12, 2025.

~~The following table summarizes the stock option activity for the six months ended December 31, 2016:~~

Number of
Shares

WAEPS ⁽¹⁾
Fiscal year opening balance 726,973
$11.32
Granted —
$0.00
Exercised —
$0.00
Forfeited/canceled —
$0.00
Expired (31,667 ) $8.64
Balance at December 31, 2016 695,306
$11.44
Weighted average remaining contractual term 3.49
years

⁽¹⁾ ~~Weighted average exercise price per share.~~

~~Stock Compensation Expense~~

The Company recorded $600 thousand and $307 thousand of related stock compensation expense for the six months ended December 31, 2016 and 2015, respectively. Stock compensation expense is included in general and administrative expense in the unaudited condensed consolidated statements of operations. The $600 thousand of stock compensation expense

for the six months ended December 31, 2016 consisted of expense amortization related to prior period awards of $390 thousand, including acceleration of expense related to the trigger of accelerated vesting provisions of certain awards and related release of forfeitures in connection with closing of the Exchange Agreement, and expense related to directors' stock awards as described below. As of December 31, 2016, and 2015, the unrecorded expected future compensation expense related to stock option awards was $25 thousand and $607 thousand, respectively.

~~Stock Awards~~

The Company's director compensation policy is designed to provide the Company's non-employee directors with a portion of their annual base Board service compensation in the form of equity with a value equal to $35 thousand, with the determination of the exact number of shares to be made on July 1, or on the date of the subsequent annual stockholders' meeting (the "Stock Award"). In either case, the number of shares to be awarded is determined using the fair value of the shares as of July 1. In addition, there is an annual cash award alternative to the annual Stock Award whereby a non-employee director may elect to receive $35 thousand in cash to exercise previously awarded options to acquire common stock, the exercise price of which is at least equal in value to the common stock eligible for receipt by the director pursuant to the Stock Award (with the difference in value of the options and $35 thousand to be paid in cash, referred to as the Make-Up Payment). On July 3, 2015, the Special Committee determined that the directors' annual stock award would be deferred and revisited after the strategic alternatives review process had advanced further and liquidity issues have been addressed. As of December 31, 2015, the Company had not made the Stock Award payment that is to be determined as of July 1, but had accrued a total of $175 thousand, representing the $35 thousand equity value of the Stock Award to each non-employee director.

On August 1, 2016, in connection with the closing of the Exchange with One Stone, Messrs. Israel and Gluzman, One Stone’s representatives on the Company’s Board of Directors, i) agreed to forgo the amount of director compensation, in cash and stock, owed to them and outstanding as of the closing date, which was estimated at approximately $174 thousand in the aggregate and ii) ceased serving as members of the Board effective as of August 1, 2016.

On August 2, 2016, pursuant to the Company's director compensation policy and the 2012 Omnibus Incentive Compensation Plan, a total of 119,505 shares of common stock were issued to the Company's non-employee directors, which represented the amount of stock compensation owed and outstanding to the remaining three directors of the Company, which were due to be issued on July 1, 2015 and 2016, and the Company recorded stock-based compensation expense related to these awards in the amount of $210 thousand. On September 6, 2016, the Company paid cash compensation owed and outstanding to the remaining three directors of the Company in the amount of $201 thousand.

On August 2, 2016, the Company's board of directors approved additional compensation for Messrs. MacMillan, Pettirossi, and West in consideration of i) their service as members of the Special Committee since its formation on June 5, 2015, which service had not been remunerated, and ii) the non-payment by the Company of their compensation as directors of the Company since July 2015, and agreed that this compensation would remain wholly contingent upon closing the transactions contemplated by the Merger Agreement and would amount to the issuance of 100,000 shares of the Company's common stock and the payment of $150 thousand in cash, each in the aggregate.

~~On October 12, 2015, as further discussed in~~ ~~Note 19 - Employee Retention and Severance Costs~~, the Company granted 62,500 shares of restricted stock, a potential cash award based on the market value of the Company's common stock, and a phantom stock award based on the value of 62,500 notional shares, payable in cash, to Antoine J. Lafargue, all subject to doubling in certain circumstances under an override bonus agreement, payable in cash, and all vesting upon completion of a qualifying transaction. No stock-based compensation expense related to these grants has been recorded in the accompanying condensed consolidated statement of operations, as the Company does not consider the future events to meet the definition of "probable" due to the nature of the events being contingent upon third parties outside of the Company's control.

~~On October 31, 2016, pursuant to the provisions of the underlying restricted stock award agreement, 2,083 shares of restricted stock held by the Chairman of the Board became fully vested.~~

~~Note 12 - Preferred Stock~~

~~Series B Convertible Preferred Stock~~

On November 22, 2016, the board of directors of Magellan, subject to the closing of the Merger, authorized the issuance of Series B Preferred Stock. On November 23, 2016, Tellurian issued to GE 5,467,851 shares of Tellurian Preferred Stock (the "Tellurian Preferred Stock") for an aggregate purchase price of $25 million. On the same day, Tellurian, Magellan, and Merger Sub entered into an amendment to the merger agreement in order to, among other things, permit Tellurian to issue the Tellurian Preferred Stock. If the Merger is completed, the Tellurian Preferred Stock will remain outstanding as preferred stock of the surviving corporation in the Merger that will be a subsidiary of Magellan. However, in that case, each share of Tellurian Preferred Stock will become convertible or exchangeable at any time into either (i) one share of Magellan common stock or (ii)

~~one share of Magellan~~ Series B Preferred Stock ~~which will have terms~~were substantially similar to those of the Tellurian Investments Preferred ~~Stock as summarized below (the Magellan~~Shares. The Series B Preferred Stock ~~and the Tellurian Preferred Stock being referred to below collectively as the “Preferred Stock”):~~

~~Voting rights. Holders~~were exchangeable at any time into shares of the Preferred Stock will generally be entitled to one vote for each share of Preferred Stock held by it, except that such holders will not be entitled to vote on the approval of the Merger or any other matter directly related to the Merger.

~~Conversion. Following the Merger, holders of the Tellurian Preferred Stock may convert all (but not less than all) of such shares for shares of Magellan~~Company’s common stock on a one-for-one basis. Alternatively, following the Merger, holders of the Tellurian Preferred Stock may convert all (but not less than all) of such shares for Magellan Preferred Stock on a one-for-one basis. If the holders of the Tellurian Preferred Stock (or, following a conversion, holders of the Magellan Preferred Stock) have not converted such shares for Magellan common stock on or before November 23, 2022, such shares will automatically be converted into Magellan common stock on a one-for-one basis. Each conversion ratio will bebasis, subject to ~~customary~~ anti-dilution ~~adjustments.~~

~~Dividends. The Preferred Stock does not have dividend rights. If~~adjustments in certain circumstances. In June 2017, GE, as the ~~Merger is consummated, Magellan will be prohibited from paying dividends on its common stock so long as any shares~~holder of ~~Preferred Stock remain outstanding.~~

Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of Tellurian or Magellan, as applicable, after payment or provision for payment of the debts and other liabilities of the relevant company, holders of the Preferred Stock will be entitled to receive an amount in cash equal to $4.57218 for each share of Preferred Stock held by it before any distribution is made to holders of shares of common stock.

In connection with the issuance of the Tellurian Preferred Stock, Tellurian and Magellan agreed (i) to provide holders of the Preferred Stock with certain registration rights relating to the Magellan common stock such holders may receive upon conversion of the Preferred Stock and (ii) that Tellurian or Magellan, as applicable, will consider purchasing certain equipment from GE for use in the development of Tellurian’s Driftwood LNG terminal.

~~Cancellation of Series A Preferred Stock~~

~~After closing of the Exchange with One Stone, the Company, having reacquired~~ all ~~of its~~5.5 million outstanding shares of Series AB Preferred Stock ~~filed a Certificate~~exercised its right to convert all such shares of ~~Elimination with the Delaware Secretary of State to remove the Certificate of Designations relating to the~~ Series AB Preferred Stock ~~from the Company’s Certificate~~into 5.5 million shares of ~~Incorporation, thereby eliminating the Company's Series A Preferred Stock.~~

~~One Stone Exchange~~

~~On March 31, 2016, Magellan~~Tellurian common stock pursuant to and ~~One Stone entered into the Exchange Agreement, as described further~~ in ~~Note 3 - One Stone Exchange~~. As a result of the execution of and conditions to the Exchange Agreement, the Company analyzed the redemption features of its Series A Preferred Stock and determined that as part of the Exchange, redemption of the Series A Preferred Stock in the near term was probable.

The Company reviewed the recoverability of the carrying values of its assets and liabilities to be transferred to One Stone in the Exchange, and as a result of this review recorded an impairment of $11.3 million in discontinued operations for the year ended June 30, 2016, in order to adjust the carrying values of the exchanged assets and liabilities to their estimated fair values. The Company then determined that the resultant fair value of the net assets expected to be transferred to redeem the Series A Preferred Stock in the Exchange was less than the carrying value of the Series A Preferred Stock. The Company accordingly adjusted the carrying amount of the Series A Preferred Stock to its original issue value of $23.5 million, reflecting a reduction in value for the year ended June 30, 2016, up to the amount of previously recorded increases in value for accumulated dividends paid-in-kind, such dividends totaling $4.2 million in the aggregate at June 30, 2016. For the period from July 1, 2016 through the closing of the Exchange on August 1, 2016, the Company again recorded a reduction in value in the carrying amount of the Series A Preferred Stock for recorded increases during that same period for accumulated dividends paid in kind of $162 thousand.

On August 1, 2016, the Exchange closed, resulting in the transfer of the CO2 Business to One Stone in exchange for the redemption of the Company's Series A Preferred Stock. The excess of the carrying value of the Series A Preferred Stock plus the cash received and loan forgiven in the Exchange over the fair value of the assets and liabilities of the CO2 Business transferred amounted to $9.9 million and was recorded as a contribution to capital in excess of par value from the preferred stockholder.

~~Series A Convertible Preferred Stock Financing~~

~~On May 10, 2013, the Company entered into a Series A Convertible Preferred Stock Purchase Agreement (the "Series A Purchase Agreement")~~accordance with ~~One Stone. Pursuant to~~ the terms of the Series ~~A Purchase Agreement, on May 17, 2013, the~~B Preferred Stock.

Embedded Derivative

TELLURIAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(unaudited)

~~Company issued~~The ability of GE to ~~One Stone 19,239,734~~exchange the Tellurian Investments Preferred Shares into shares of Series AB Preferred Stock par value $0.01 per share, at a purchase price of approximately $1.22149381 per share (the "Purchase Price"), for aggregate proceeds of approximately $23.5 million. Subject to certain conditions, the shares of Series A Preferred Stock and any related unpaid accumulated dividends were convertibleor into shares of ~~the Company's~~Tellurian common stock ~~par~~following the Merger required the fair value ~~$0.01 per share, using a face amount per share~~of such features to be bifurcated from the contract and recognized as an embedded derivative until the Merger Date.

The fair value of the ~~Series A Preferred Stock based on~~embedded derivative was determined through the ~~Purchase Price, and dividing by~~use of a ~~conversion~~model which utilizes certain observable inputs such as the price of ~~$9.77586545 per share, which conversion price has been adjusted to reflect the one share-for-eight shares reverse split of the Company's~~Magellan common stock ~~effective July 10, 2015. Please refer to Note 12 - Preferred Stock~~at various points in time and the volatility of ~~the Notes to the Consolidated Financial Statements in the Company's 2016 Form 10-K for further information regarding key terms~~Magellan common stock over an assumed half-year and ~~registration rights that were applicable to the Company's Series A Preferred Stock.~~

~~Preferred Stock Dividends~~

~~For the~~one-year holding period from ~~July 1,~~February 10, 2017 and December 31, 2016, ~~through~~respectively. At each valuation date, the ~~closing of the Exchange on August 1, 2016, the Company recorded preferred stock dividends of $162 thousand~~model also included (i) unobservable inputs related to the ~~Series A Preferred Stock, which dividends were payable in kind to One Stone. Accordingly, the value~~weighted probabilities of ~~these dividends of $162 thousand was recorded~~certain Merger-related scenarios and ~~added to the preferred stock balance on the Company's balance sheet at August 1, 2016, prior to the adjustment to redemption value as~~(ii) a result of the One Stone Exchange and the redemption discussed above. For the six months ended December 31, 2015, the Company recorded preferred stock dividends of $913 thousand related to the Series A Preferred Stock. The preferred stock dividendsdiscount for the ~~six months ended December 31, 2015, were also paid~~lack of marketability determined through the use of commonly accepted methods. We have therefore classified the fair value measurements of this embedded derivative as Level 3 inputs. On the Merger Date, the embedded derivative was reclassified to additional paid-in capital in ~~kind.~~accordance with U.S. GAAP.

~~The activity related to the Series A Preferred Stock for the six months ended December 31, 2016, and the fiscal year ended June 30, 2016, is as follows:~~

SIX MONTHS ENDED FISCAL YEAR ENDED
December 31, 2016 June 30, 2016
Number of shares Amount Number of shares Amount
(In thousands, except share amounts)
Fiscal year opening balance 22,683,428
$ 23,501
21,162,697
$ 25,850
PIK dividend shares issued 132,320
162
1,520,731
1,858
Adjustment to redemption value —
(162 ) —
(4,207 )
Redemption (22,815,748 ) (23,501 ) —
—
Balance at end of period —
$ —
22,683,428
$ 23,501

~~Note 13 - Stockholders' Equity~~

~~Reverse Stock Split~~

On July 10, 2015, pursuant to the Company's definitive proxy statement filed on June 8, 2015, the Company held a special meeting of stockholders to approve an amendment to its Restated Certificate of Incorporation to effect a reverse stock split of its common stock at a ratio to be determined by the Board of Directors within a specific range set forth in the proxy statement, without reducing the number of authorized shares. The Company's shareholders approved the proposed amendment to the Restated Certificate of Incorporation, and the Board of Directors selected a reverse split ratio of one-for-eight (1:8). As a result of the reverse stock split, as of the close of business on July 10, 2015, each eight shares of common stock were converted into one share of common stock with any fractional shares being settled in cash. Immediately preceding the reverse stock split, there were 55,313,647 shares of common stock issued, including 9,675,114 treasury shares. The number of shares of Series A Preferred Stock did not change as a result of the split; however, following the reverse stock split, the conversion price was adjusted to reflect the split from $1.22149381 to $9.77586545.

After the reverse stock split, there were 6,911,921 shares of common stock issued, including 1,209,389 treasury shares. All share and per share amounts relating to the common stock, stock options to purchase common stock, including the respective exercise prices of each such option, and the conversion ratio of the Series A Preferred Stock included in the financial statements and footnotes have been adjusted to reflect the reduced number of shares resulting from the reverse stock split. Market conditions tied to stock price targets contained within MBOs were similarly adjusted. The par value and the number of authorized, but unissued, shares remain unchanged following the reverse stock split.

~~Treasury Stock~~

On July 1, 2016, upon the vesting of 12,500 shares of restricted stock previously granted to executives of the Company and pursuant to the tax withholding provisions of the Company's restricted stock award agreements, the Company withheld on a cashless basis 2,529 shares to settle withholding taxes. The withheld shares were immediately canceled.

On December 31, 2015, upon the vesting of 7,500 shares of restricted stock previously granted to executives of the Company and pursuant to the tax withholding provisions of the Company's restricted stock award agreements, the Company withheld on a cashless basis 2,398 shares to settle withholding taxes. The withheld shares were immediately canceled.

On July 10, 2015, to effect the one share-for-eight shares reverse split of the Company's common stock, the Company paid cash in lieu of issuance of fractional shares totaling 2,284 post-split shares. The shares underlying the payment of cash in lieu were immediately canceled.

On July 1, 2015, upon the vesting of 12,500 shares of restricted stock previously granted to executives of the Company and pursuant to the tax withholding provisions of the Company's restricted stock award agreements, the Company withheld on a cashless basis 2,822 shares to settle withholding taxes. The withheld shares were immediately canceled.

~~All repurchased shares of common stock currently being held in treasury are being held at cost, including any direct costs of repurchase.~~ The following table summarizes the ~~Company's treasury stock activity as follows:~~changes in fair value for the embedded derivative (in thousands):

SIX MONTHS ENDED FISCAL YEAR ENDED
December 31, 2016 June 30, 2016
Number of shares Amount Number of shares Amount
(In thousands, except share amounts)
Fiscal year opening balance 1,209,389
$ 9,806
1,209,389
$ 9,806
Net shares repurchased for employee tax and option exercise price obligations related to the vesting of restricted stock and the exercise of employee stock options 2,529
3
5,220
11
Net shares repurchased to eliminate fractional shares in July 10, 2015 one share-for-eight shares reverse stock split —
—
2,284
6
Cancellation of shares repurchased (2,529 ) (3 ) (7,504 ) (17 )
Balance at end of period 1,209,389

$ 9,806
1,209,389
$ 9,806



	February 10, 2017			December 31, 2016
Fair value at the beginning of period and initial fair value, respectively	$	8,753		$	5,445
(Gain) loss on exchange feature	(2,209		)	3,308
Fair value at the end of the period and year, respectively	$	6,544		$	8,753

~~Note 14 - Earnings (Loss) Per Common Share~~NOTE 13 — NET LOSS PER SHARE

The following table summarizes the computation of basic and diluted ~~earnings (loss)~~loss per ~~share:~~share (in thousands, except per-share amounts):

THREE MONTHS ENDED SIX MONTHS ENDED
December 31, December 31,
2016
2015 2016 2015
(In thousands, except share and per share amounts)
Loss from continuing operations, net of tax $ (531 ) $ (1,007 ) $ (2,726 ) $ (3,046 )
Preferred stock dividend —
(460 ) (162 ) (913 )
Adjustment of preferred stock to redemption value (Note 12) —
—
162
—
Net loss from continuing operations, including preferred stock dividends and gain on redemption of preferred stock (531 ) (1,467 ) (2,726 ) (3,959 )
Net income (loss) from discontinued operations 4
(362 ) 834
(1,373 )
Net loss attributable to common stockholders $ (527 ) $ (1,829 ) $ (1,892 ) $ (5,332 )

Basic weighted average shares outstanding 5,879,610
5,757,533
5,858,177
5,730,157
Add: dilutive effects of convertible preferred stock —
—
—
—
Diluted weighted average common shares outstanding 5,879,610
5,757,533
5,858,177
5,730,157

Basic and diluted earnings (loss) per common share:
Net loss from continuing operations, including preferred stock dividends and adjustment to redemption value of preferred stock $(0.09) $(0.25) $(0.47) $(0.69)
Net income (loss) from discontinued operations $0.00 $(0.06) $0.14 $(0.24)
Net loss attributable to common stockholders $(0.09) $(0.32) $(0.32) $(0.93)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net loss	$	(22,864	)	$	(44,405	)	$	(196,736	)	$	(67,875	)
Basic weighted average common shares outstanding	192,405			120,128			186,143			83,979
Loss per share:
Basic and diluted	$	(0.12	)	$	(0.37	)	$	(1.06	)	$	(0.81	)

~~There is no dilutive effect on earnings (loss)~~Basic loss per share ~~in periods with net losses from continuing operations. Stock options and~~is based upon the weighted average number of shares of common stock ~~issuable upon~~outstanding during the ~~conversion~~period. As of September 30, 2017 and 2016, the ~~Series A Preferred Stock~~effect of 19.9 million and 6.6 million, respectively, of unvested restricted stock awards that could potentially dilute basic EPS in the future were not ~~considered~~included in the ~~calculations~~computation of diluted ~~weighted average common shares outstanding, as they~~EPS because to do so would ~~be anti-dilutive. Potentially dilutive securities excluded from~~have been antidilutive for the ~~calculation~~periods presented.

NOTE 14 — SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides supplemental disclosure of ~~diluted shares outstanding are as follows:~~cash flow information (in thousands):

THREE MONTHS ENDED SIX MONTHS ENDED
December 31, December 31,
2016 2015 2016 2015
In-the-money stock options —
—
—
—
Common shares issuable upon conversion of Series A Preferred Stock —
2,690,553
492,921
2,667,415
Total —
2,690,553
492,921
2,667,415

~~Note 15 - Segment Information~~

The Company conducts its operations through two wholly owned subsidiaries corresponding to the geographical areas in which the Company operates: MPUK, which includes the Company's continuing operations in the UK; and MPA, which includes the Company's operations in Australia. Oversight for these subsidiaries is provided by Corporate, which is treated as a cost center. The following table presents segment information for the Company's two reportable segments:

THREE MONTHS ENDED SIX MONTHS ENDED
December 31, December 31,
2016 2015 2016 2015
(In thousands)
Net (loss) income:
MPA $ 295
$ 59
$ 204
$ (276 )
MPUK (22 ) (119 ) $ (207 ) $ (117 )
Corporate (819 ) (951 ) (2,738 ) (2,661 )
Inter-segment elimination 15
4
15
8
Consolidated net loss from continuing operations $ (531 ) $ (1,007 ) $ (2,726 ) $ (3,046 )

December 31,
2016 June 30,
2016
(In thousands)
Total assets:
MPA $ 1,001
$ 1,194
MPUK 1,894
1,234
Corporate 59,453
61,315
Inter-segment elimination ⁽¹⁾
(57,332 ) (58,235 )
Total assets of continuing operations $ 5,016
$ 5,508

⁽¹⁾~~Asset inter-segment eliminations are primarily attributable to investments in subsidiaries.~~



	As of the Nine Months Ended
	2017		2016
Property, plant and equipment non-cash accruals	$	—	$	141
Land acquisition non-cash accruals	—		1,000
Net cash paid for income taxes	—		4

~~Note 16 - Oil and Gas Activities~~NOTE 15 — RECENT ACCOUNTING STANDARDS

The following table ~~presents the capitalized costs under the successful efforts method for oil and gas properties as of:~~

December 31,
2016 June 30,
2016
(In thousands)
Unproved oil and gas properties:
United Kingdom $ 29
$ 32
Total unproved oil and gas properties $ 29
$ 32

Wells in progress:
United Kingdom $ 332
$ 337
Total wells in progress $ 332
$ 337

~~In connection with the closing~~provides a description of the Exchange (Note 3), on August 1, 2016, the Company's oil and gas activities in the United States were disposed, and the related capitalized costs were classified as assets held for sale as of June 30, 2016, and therefore have been excluded from the above amounts. Similarly, in connection with the closing of the transactions contemplated by the Weald Agreements (Note 4) on August 11, 2016, the Company's oil and gas activities in the UK related to the subject assets of the Weald Agreements were disposed of, and the related capitalized costs were classified as assets held for sale as of June 30, 2016, and therefore have been excluded from the above amounts.

~~Note 17 - Commitments and Contingencies~~

~~Refer to Note 16 - Commitments and Contingencies of the Notes to the Consolidated Financial Statements in our 2016 Form 10-K for information on all commitments.~~

~~Tellurian Merger Agreement~~

The Merger Agreement may be terminated under certain circumstances, including in specified circumstances in connection with receipt of a "Superior Proposal," as such term is defined in the Merger Agreement. In connection with a termination of the Merger Agreement in the event of a Superior Proposal, a breach by Magellan of its non-solicitation obligation, or following a change by the Board of Directors of its recommendation to stockholders, Magellan will be required to pay to Tellurian a termination fee for any and all third-party transaction fees and expenses incurred by Tellurian with the drafting, negotiation, execution and delivery of the Merger Agreement and related documents (including fees and expenses for attorneys, accountants and other advisors), subject to a maximum of $1 million in the aggregate. A termination fee may also be payable in some circumstances in which an Alternative Proposal is made, the transaction fails to close and Magellan subsequently agrees to an Alternative Proposal. If the Merger Agreement is terminated by either party as a result of the failure to obtain the requisite approval by Tellurian stockholders, or by Magellan because Tellurian does not use commercially reasonable efforts to secure the approval for listing the Magellan shares of common stock to be issued in the Merger, then Tellurian will be required to pay to Magellan a reverse termination fee of $1 million. In addition, the Company's ability to dispose of its remaining assets is subject to Tellurian's consent, in accordance with the terms of the Merger Agreement.

On November 23, 2016, Magellan and GE entered into a Guaranty and Support Agreement pursuant to which Magellan will, contingent on the closing of the Merger, guarantee to GE the performance of all of the obligations of Tellurian in connection with the Preferred SPA. On January 3, 2017 Magellan and TOTAL entered into a Guaranty and Support Agreement, pursuant to which Magellan will, contingent on the closing of the Merger, guarantee to TOTAL the performance of all of the obligations of Tellurian in connection with the SPA.

~~Directors' Compensation~~

On August 2, 2016, the Company's board of directors approved additional compensation for Messrs. West, MacMillan, and Pettirossi in consideration of i) their service as members of the Special Committee since its formation on June 5, 2015, which servicerecent accounting standards that had not been ~~remunerated, and ii) the non-payment~~adopted by the Company of their compensation as directors of the Company since July 2015, and agreed that this compensation would remain wholly contingent upon closing the transactions contemplated by the Merger Agreement and would amount to the issuance of 100,000 shares of the Company's common stock and the payment of $150 thousand in cash, each in the aggregate.

~~Petrie Engagement~~

In June 2015, the Special Committee engaged Petrie Partners, LLC ("Petrie") to act as its financial advisor (the "Petrie Engagement"). Under the terms of the Petrie Engagement, as amended on March 14, 2016, and in relation to the Merger Agreement, the Company has agreed to pay Petrie a success fee. The remaining amount of the success fee is contingent upon the successful closing of the Merger and totals $500 thousand to be paid in stock of the Company, the number of which shares to be issued to Petrie being determined by the quotient of $500 thousand and the volume weighted average closing price of the Company’s common stock over the 10 trading days ending on the last trading day prior to the announcement of such corporate transaction. Upon closing of the Merger, Magellan expects to issue approximately 410 thousand shares of its common stock to Petrie as consideration for Petrie's remaining success fee. The Petrie Engagement may be terminated by either party with five days' written notice.

~~Contingent production payments~~

In ~~September 2011~~, the Company entered into a Purchase and Sale Agreement (the "Nautilus PSA") among the Company and the non-controlling interest owners of NP for the Company's acquisition of the sellers' interests in NP. The Nautilus PSA provides for potential future contingent production payments, payable in cash by the Company to the sellers, of up to a total of $5.0 million if certain increased average daily production rates for the underlying properties are achieved. J. Thomas Wilson, a director and chief executive officer of the Company until August 5, 2016, has an approximately 52% interest in such contingent production payments.

Following the closing of the Exchange Agreement, these contingent production payments remained an obligation of Magellan. On September 30, 2016, the Company entered into a purchase and sale agreement (the “Nautilus Tech PSA”) with the beneficial owners of these contingent production payments. Pursuant to the Nautilus Tech PSA, the Company has agreed to issue to the beneficial owners an aggregate of 90,350 shares of the Company’s common stock in exchange for all rights of the beneficial owners to the contingent production payments. The shares issuable under the Nautilus Tech PSA are to be issued, and the contingent production payment right terminated, promptly following, and subject to, the completion of the Merger.

~~Sopak Collateral Agreement~~

On January 14, 2013, the Company entered into a Collateral Purchase Agreement (the "Collateral Agreement") with Sopak AG, a Swiss subsidiary of Glencore International plc ("Sopak"), pursuant to which the Company agreed to purchase i) 1,158,080 shares of the Company's common stock and ii) a warrant granting Sopak the right to purchase from the Company an additional 543,478 shares of common stock. The Collateral Agreement was subsequently amended on January 15, 2013, and completed on January 16, 2013. The Company has estimated that there is the potential for a statutory liability of approximately $1.8 million and $1.8 million as of December 31, 2016, and June 30, 2016, respectively, related to US federal tax withholdings and related penalties and interest related to the Collateral Agreement. As a result, we have recorded a total liability of $1.8 million and $1.8 million as of December 31, 2016, and June 30, 2016, respectively, under accrued and other liabilities in the unaudited condensed consolidated balance sheets included in this report. The Company has a legally enforceable right to collect from Sopak any amounts owed to the IRS as a result of the Collateral Agreement. As a result, we have recorded a corresponding receivable of $1.8 million and $1.8 million as of December 31, 2016, and June 30, 2016, respectively, under prepaid and other assets in the unaudited condensed consolidated balance sheets..

~~NT/P82 Seismic Survey~~

In June 2016, the Australian Commonwealth-Northern Territory Offshore Petroleum Joint Authority and the National Offshore Petroleum Titles Administrator approved a variation in MPA's work program commitments under the NT/P82 permit in the Bonaparte Basin. The new work program commitment extended the term of the commitment to complete seismic to November 12, 2017, the cost of which commitment is estimated at A$9 million.

~~Engagement of RFC Ambrian as financial advisor for farmout of NT/P82~~

In July 2015, the Company engaged RFC Ambrian as its financial advisor to run a formal bid process for the farm-out of its 100% operating interest in the NT/P82 permit in the Bonaparte basin, offshore Australia, to fund future exploration costs and potentially recover back-costs incurred. In accordance with the terms of the engagement, RFC Ambrian will be owed a success fee upon completion of a legally binding agreement ranging from A$250 thousand to 5% of the farm-out value of the agreement to the Company.

~~NASDAQ Listing Requirements~~

On May 17, 2016, Magellan received a letter from the Listing Qualifications Department of the NASDAQ indicating that the Company’s stockholders’ equity as reported in the Company’s quarterly report on Form 10-Q for the period ended March 31, 2016 did not meet the minimum $2.5 million required for continued listing on the NASDAQ Capital Market pursuant to NASDAQ Stock Market Rule 5550(b)(1). On June 30, 2016, the Company submitted materials to NASDAQ describing a number of transactions that it believed would enable it to report stockholders’ equity of approximately $4.1 million on a pro forma basis, as of March 31, 2016, and that it was engaged in negotiations with a specific party to enter into a potential business combination transaction. On July 29, 2016, Magellan received a letter from the Listing Qualifications Department of NASDAQ indicating that it had determined to grant Magellan an extension until October 14, 2016 to regain compliance with Rule 5550(b). In the letter dated July 29, 2016, the Listing Qualifications Department indicated that any future business combination with a non-NASDAQ entity would likely be considered a “change of control” of Magellan, which would require the post-combination company to apply for initial listing on the NASDAQ Capital Market and meet all applicable initial listing criteria.

On October 18, 2016, Magellan received a letter from the Listing Qualifications Department of the NASDAQ indicating that based on the Form 10-K filed by Magellan for its fiscal year ended June 30, 2016, which included a pro forma consolidated balance sheet evidencing stockholders' equity of $3.7 million, the Company had regained compliance with NASDAQ Stock Market Rule 5550(b)(1), and that if the Company fails to evidence compliance upon filing its next periodic report, it may be subject to delisting. Based on the pro forma balance sheet as of September 30, ~~2016, included~~2017:

TELLURIAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(unaudited)



Standard	Description	Expected Date of Adoption	Effect on our Condensed Consolidated Financial Statements or Other Significant Matters
ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and subsequent amendments thereto	This standard amends existing revenue recognition guidance and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard may be early adopted beginning January 1, 2017, and may be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption.	January 1, 2018	The adoption of this new standard will not affect the amounts shown in our Condensed Consolidated Financial Statements and related disclosures as the Company currently has no revenues.
ASU 2016-02, Leases (Topic 842)	This standard requires a lessee to recognize leases on its balance sheet by recording a liability representing the obligation to make future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. A lessee is permitted to make an election not to recognize lease assets and liabilities for leases with a term of 12 months or less. The standard also modifies the definition of a lease and requires expanded disclosures. This standard may be early adopted and must be adopted using a modified retrospective approach with certain available practical expedients.	January 1, 2019	We are currently evaluating the impact of the provisions of this guidance on our Condensed Consolidated Financial Statements and related disclosures.

Additionally, the ~~registration statement on Form S-4 filed by Magellan on January 13, 2017, at the closing~~following table provides a description of ~~the Merger, pro forma stockholders’ equity is estimated to be approximately $312 million. Therefore, the Company believes~~recent accounting standards that ~~it will remain in compliance with Rule 5550 (b)(1) immediately following and subject to the closing of the Merger,.~~

~~One Stone Exchange Agreement~~

The Exchange Agreement was subject to termination under certain circumstances, including in specified circumstances in connection with receipt of a Superior Proposal, as such term is defined in the Exchange Agreement. In connection with a termination of the Exchange Agreement in the event of a Superior Proposal, a breachwere adopted by the Company ~~of its non-solicitation obligation, or following a change by~~during the Board of its recommendation to stockholders, the Company would have been required to pay to One Stone a termination fee of $750 thousand. Also, if the Exchange Agreement was terminated by either party as a result of the failure to obtain the requisite approval by Magellan stockholders, the Company would have been required to reimburse One Stone for all documented out-of-pocket fees and expenses incurred by One Stone in connection with the Exchange Agreement, subject to a maximum of $200 thousand in the aggregate. On August 1, 2016, the Exchange closed and the termination fee and out-of-pocket reimbursements potentially payable by the Company were not due.reporting period:



Standard	Description	Date of Adoption	Effect on our Condensed Consolidated Financial Statements or Other Significant Matters
ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business	This update clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses by providing a screen to determine when an integrated set of assets or activities is not a business.	January 1, 2017	The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements or disclosures.
ASU 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	This update eliminated Step 2 from the goodwill impairment test. Step 2 required entities to compute the implied fair value of goodwill if it was determined that the carrying amount of a reporting unit exceed its fair value. The goodwill impairment test now consists of comparing the fair value of a reporting unit with its carrying amount, and a company should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value.	January 1, 2017	The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements or disclosures.
ASU 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting	This update clarifies what changes to the terms and conditions of share-based awards require an entity to apply modification accounting. Modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions.	April 1, 2017	The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements or disclosures.
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash	This update requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.	April 1, 2017	The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements or disclosures.

~~Secured Promissory Note and Pledge Agreement~~

On April 15, 2016, the Company and One Stone entered into a Secured Promissory Note and a Pledge Agreement pursuant to which One Stone made a loan to Magellan in the aggregate amount of $625 thousand. On August 1, 2016, upon the closing of the Exchange, the Loan Amount was deemed paid in full and the Pledge Agreement was terminated, and no further amounts under the Note remain owed by the Company.

~~Poplar CO~~₂~~-EOR Pilot Bonus~~

~~Mi3 Petroleum Engineering, LLC ("Mi3") is a Golden, Colorado-based petroleum engineering firm that has provided advice to the Company with respect to its CO~~₂~~-EOR activities (See~~ ~~Note 18 - Related Party Transactions~~). Pursuant to the terms of a master services contract, as amended on November 4, 2015, Mi3 was entitled to a payment in the amount of $100 thousand, contingent upon the completion of a transaction resulting in the sale of the Poplar field to a third party, in addition to a fixed payment for certain services provided. Based upon the terms of the Exchange Agreement, which terms have been entered into between the Company and an affiliate of the Company rather than a third party, upon the closing of the Exchange, the contingent payment in the amount of $100 thousand was not due to Mi3.

~~Celtique Litigation~~

On June 10, 2016, MPUK reached a settlement with Celtique of its outstanding claims and counterclaims, whereby in connection with closing the transactions contemplated by the Weald ATA and the IoW ATA, Celtique would receive proceeds from the transfer of the Company's interests in the Central Weald assets of £500 thousand, payable at closing in a combination of cash of £179 thousand and shares of stock of UKOG valued at £321 thousand at the time of the agreed settlement (the "Settlement Agreement"). On August 11, 2016, upon closing the transactions contemplated by the Weald ATA and IoW ATA, the claims were settled in accordance with the Settlement Agreement, and the Company has no further obligations to Celtique.

~~Note 18 - Related Party Transactions~~

~~Devizes International Consulting Limited CP Exploration~~. A director of Celtique, with which the Company co-owned equally several licenses in the UK until their disposition upon closing the transactions contemplated by the Weald Agreements on August 11, 2016, is also the sole owner of Devizes International Consulting Limited ("Devizes") and CP Exploration. Devizes and CP Exploration perform consulting services for MPUK. The Company recorded $50 thousand of consulting fees related to CP Exploration during the six months ended December 31, 2016, and $31 thousand of consulting fees related to Devizes during the six months ended December 31, 2015.

~~Mervyn Cowie~~. Mervyn Cowie, a former employee of the Company's MPA subsidiary, currently serves both as a director of MPA and its subsidiaries and as a consultant to MPA. Since December 1, 2014, the recurring monthly fee payable to Mr. Cowie for his consulting services amounts to A$5,400.

~~Mi3 Petroleum Engineering. In connection with its purchase of an option to acquire CO~~₂ from Farnham Dome, on August 14, 2014, the Company formed a subsidiary, Utah CO2. On December 1, 2014, two other non-controlling interest owners became members of Utah CO2, one of which is Mi4 Oil and Gas, LLC ("Mi4"), a Colorado limited liability company majority owned by Mi3. Mi3 has performed consulting work for both Utah CO2 and other Magellan entities. During the six months ended December 31, 2016, and 2015, the Company recorded $0 and $292 thousand of consolidated expense related to fees payable to Mi3. During the six months ended December 31, 2016, and 2015, $0 and $292 thousand, respectively, of the related expense was included in discontinued operations in the accompanying condensed consolidated statements of operations.

~~One Stone Exchange.~~On March 31, 2016, the Company and its sole preferred stockholder entered into an Exchange Agreement providing for the exchange of 100% of the outstanding shares of Magellan Series A Preferred Stock for the assignment to the preferred stockholder of 100% of the Company's interest in the CO2 Business, subject to certain conditions including Magellan stockholder approval. The Exchange closed on August 1, 2016. Refer to ~~Note 3 - One Stone Exchangefor further information.~~

~~Note 19 - Employee Retention and Severance Costs~~

~~The Company is required to record charges for one-time employee severance benefits and other associated costs as incurred.~~

~~Incentive Agreements Executive Officer~~

On October 12, 2015, the Company entered into a series of incentive compensation agreements with Antoine J. Lafargue, as amended on July 13, 2016 (the "CFO Incentive Agreements"). The CFO Incentive Agreements include i) amendments to the provisions for severance payments available to Mr. Lafargue under his existing employment agreement dated October 31, 2014, to include provisions for the payment of up to two years' salary as severance in the event that Mr.

Lafargue's employment with the Company is terminated under certain circumstances within a period ending ten months after the date on which a Qualifying Transaction (as generally defined below) occurs, capped at $600 thousand; ii) a restricted stock award agreement whereby a restricted stock grant was made to Mr. Lafargue on October 12, 2015 totaling 62,500 shares of common stock that are to vest immediately prior to the completion of a Qualifying Transaction; iii) a potential cash award pursuant to a transaction incentive agreement, which cash award is contingent upon the completion of a Qualifying Transaction and would range from $0 to $1 million based on the market value of the Company's common stock reflected in the Qualifying Transaction, with the amount of cash award to be equal to $2,750 for each one cent of market value per share of the Company’s common stock reflected in the Qualifying Transaction above a minimum market value threshold of $1.60 per share, as adjusted for any applicable dividends; iv) a phantom stock award, also pursuant to the transaction incentive agreement, with payment contingent upon completion of a Qualifying Transaction and to be based on the value of 62,500 notional shares, payable in cash; and v) an override bonus agreement which provides for a potential cash bonus outside of the Company’s 2012 Omnibus Incentive Compensation Plan that would double the amounts payable under the awards available under ii, iii, and iv above, in certain circumstances.

For purposes of the CFO Incentive Agreements, a “Qualifying Transaction” shall mean either of the following occurring prior to December 31, 2017: i) any transaction or series of related transactions pursuant to which a person acquires at least 50% of the combined voting power of the then-outstanding voting securities of the Company, and ii) the stockholders of the Company approve a complete liquidation or dissolution of the Company, but only if such approval occurs coincident with or following the sale or other disposition of greater than 95%, as defined by gross market value on the October 12, 2015, of the gross assets of the Company.

No accrual has been made in the accompanying condensed consolidated financial statements for the CFO Incentive Agreements as amounts were contingent on the occurrence of future events and service. The Company does not consider the future events to meet the definition of "probable" due to the nature of the events being contingent upon third parties outside of the Company's control.

Additionally, as a condition precedent to the closing of the Merger with Tellurian, Mr. Lafargue shall have released any and all contractual or similar obligations payable to him from Magellan or its affiliates, or otherwise owed to him as a result of his services as an officer, director, agent or employee of Magellan or its affiliates, provided that such release (i) will be subject to receipt by Mr. Lafargue of an offer of employment by Magellan, effective as of the effective time of the Merger, providing for terms and conditions substantially similar to those set forth in the Tellurian disclosure schedule to the Merger Agreement and (ii) will not affect any right of Mr. Lafargue to indemnification and insurance as provided in the Merger Agreement. Such contractual or similar obligations include those provided by the CFO Incentive Agreements.

~~Employment Termination of Executive Officer~~

On and effective as of August 5, 2016, Mr. Wilson tendered his resignation as the Company’s President and CEO and as a member of the Company’s Board of Directors. In accordance with Mr. Wilson’s employment agreement dated as of October 14, 2014, as amended on February 11, 2015, Mr. Wilson will receive (i) monthly severance payments amounting to $300 thousand in the aggregate, for a period of 12 months, (ii) payment of his accrued vacation amounting to approximately $106 thousand (which was paid during the six months ended December 31, 2016), (iii) reimbursement of medical benefits for a period of up to 18 months, estimated to amount to approximately $35 thousand in the aggregate, and (iv) reimbursement of outstanding expenses. Mr. Wilson will also continue to be entitled to certain equity incentive awards, which were previously granted to Mr. Wilson, subject to the terms of these various awards. On August 9, 2016, Mr. Wilson executed a Termination, Voluntary Release, and Waiver of Rights Agreement with the Company.

~~Employee Retention Cash Bonus Plan~~

On June 5, 2015, the Compensation, Nominating and Governance Committee of the Board of Directors of the Company and the Board of Directors of the Company approved a cash bonus plan for the Company's non-executive officer employees for the purpose of retaining of certain key accounting, human resource, and administrative employees through certain key milestone events (the "Employee Retention Cash Bonus Plan"). The terms of the Employee Retention Cash Bonus Plan specify payment of retention bonuses for such employees upon the achievement of the milestones, which are i) the filing of the Company's annual report on Form 10-K for the fiscal year ended June 30, 2015 (which milestone occurred in October 2015), and ii) the completion of a strategic transaction resulting in a change in control or the sale of substantially all the assets of the Company. The maximum original bonus payable to the employees under each of the milestones is as follows: i) $168 thousand, and ii) $286 thousand, respectively. On July 15, 2016, the Company paid the portion of the retention bonus granted to certain of the Company's employees related to the completion of the June 30, 2015 annual report on Form 10-K, which amounted to $108 thousand. As of December 31, 2016, the Company has recorded an accrual in the amount of $346 thousand~~in the accompanying condensed consolidated financial statements for the Employee Retention Cash Bonus Plan.~~

~~Note 20 - Subsequent Events~~

~~Partial Sale of Central Investment~~

From January 1, 2017, through February 3, 2017, the Company sold approximately 1.4 million shares of Central in the open market and generated approximately A$277 thousand (USD $206 thousand) of proceeds. As of February 3, 2017, the Company continues to own approximately 2.4 million shares of Central, which at the closing per share market price as of February 3, 2017 of A$0.185 and foreign exchange rate of 0.766, represented approximately USD $343 thousand of potential liquidity.

ITEM ~~2 MANAGEMENT'S~~2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto contained herein and in our 2016 Form 10-K, along with~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~ contained in the 2016 Form 10-K. Any capitalized terms used but not defined in the following discussion have the same meaning given to them in the 2016 Form 10-K. Unless otherwise indicated, all references in this discussion to Notes are to the Notes to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this report. Our discussion and analysis includes forward-looking statements that involve risks and uncertainties and should be read in conjunction with the Risk Factors under Item 1A of Part II of this report and under Item 1A of the 2016 Form 10-K, along with the cautionary discussion about forward-looking statements at the end of this section, for information about the risks and uncertainties that could cause our actual results to be materially different from the results expressed or implied in our forward-looking statements.

~~OVERVIEW OF THE COMPANY~~

Magellan Petroleum Corporation (the "Company" or "Magellan" or "MPC" or "we") is an independent oil and gas exploration and production company. Subject to the closing of the announced merger with Tellurian Investments Inc. (“Tellurian”), Magellan will become a company focused on the development of liquefied natural gas (“LNG”) projects along the United States Gulf Coast and complementary business lines in the energy industry. Historically active internationally, Magellan also owns interests in the Horse Hill-1 well and related licenses in the Weald Basin, onshore UK, and an exploration block, NT/P82, in the Bonaparte Basin, offshore Northern Territory, Australia.Cautionary Information About Forward-Looking Statements

The Company conducts its operations through two wholly owned subsidiaries corresponding to the geographical areas in which the Company operates: Magellan Petroleum (UK) Limited ("MPUK") in the UK, and Magellan Petroleum Australia Pty Ltd ("MPA") in Australia. Following the closing of the merger with Tellurian, which is expected in the first quarter of calendar year 2017, the combined company will operate its LNG business in the US through its new wholly owned subsidiary, Tellurian.

We were founded in 1957 and incorporated in Delaware in 1967. The Company's common stock has been trading on the NASDAQ since 1972 under the ticker symbol "MPET". Upon the closing of the merger with Tellurian, the Company’s name will be changed to Tellurian Inc. The Company’s common stock will continue to trade on the NASDAQ and its ticker symbol will become “TELL”.

~~Our principal offices are located at 1775 Sherman Street, Suite 1950, Denver, Colorado, 80203, and our telephone number is (720) 484-2400.~~

~~SUMMARY RESULTS OF OPERATIONS~~

The Company has incurred losses from operations for the three months ended December 31, 2016, of $0.7 million. In addition, the Company's cash balance has decreased to $507 thousand as of December 31, 2016.

The Company continues to experience liquidity constraints. We believe there is substantial doubt about the Company's ability to continue as a going concern. Upon the closing of the merger with Tellurian, the combined company anticipates being better positioned to raise capital to fund the combined company's operations due to the attributes of Tellurian's business plan and management. Therefore, we believe that Magellan's ability to continue as a going concern in the short-term is subject to the closing of the merger with Tellurian. Should the merger with Tellurian not close, the Company will need to seek other alternatives in order to continue as a going concern.

~~Loss from continuing operations~~. For the three months ended December 31, 2016, loss from continuing operations totaled $531 thousand ($0.09 loss/basic share), compared to a loss from continuing operations, including preferred stock dividends of $1.5 million ($0.25 loss/basic share) in the same period of the prior year. The decrease in loss from continuing operations of $936 thousand was due to i) a reduction in general and administrative expenses of $482 thousand, ii) the elimination of preferred stock dividends in the current quarter due to the redemption of the preferred stock as a result of the

closing of the Exchange on August 1, 2016 (preferred stock dividends in the prior year period were $460 thousand) and iii) an increase in realized gains of $21 thousand on the sale of available-for-sale securities related to the Company's investment in Central Petroleum, which were partially offset by a reduction in other income of $45 thousand.

~~Cash~~. As of December 31, 2016, Magellan had $507 thousand in cash and cash equivalents, compared to $1.7 million at June 30, 2016. The decrease of $1.2 million was the result of i) net cash used in operating activities of $2.8 million, which consisted primarily of payment of transaction costs associated with the Exchange and the Merger, ii) net cash used in financing activities of $146 thousand, iii) net cash used in operating and investing activities of discontinued operations of $300 thousand, and iv) a net decrease in cash from the effect of exchange rate changes of $60 thousand, which were offset by net cash provided by investing activities of $2.1 million, primarily related to proceeds from the Exchange, the transactions contemplated by the Weald ATA, and sales of Central stock.

~~Securities available-for-sale.~~ As of December 31, 2016, Magellan had securities available for sale amounting to approximately $1.5 million, consisting of the Company's investment in shares of Central stock and UK Oil and Gas Investment Plc ("UKOG") stock amounting to approximately $550 thousand and $992 thousand, respectively.

~~CORPORATE EVENTS~~

~~Merger with Tellurian~~

On August 2, 2016, Magellan, Tellurian, and River Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Magellan (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, each outstanding share of common stock, par value $0.001 per share, of Tellurian will be exchanged for 1.300 shares of common stock, par value $0.01 per share, of Magellan, and Merger Sub will merge with and into Tellurian (the “Merger”), with Tellurian continuing as the surviving corporation, a direct wholly owned subsidiary of Magellan, and the accounting acquirer. The Merger Agreement was amended on November 23, 2016, in order to permit the issuance by Tellurian of 5,467,851 shares of Series A convertible preferred stock of Tellurian to GE Oil & Gas, Inc. ("GE"), and to revise certain related representations of Tellurian in the merger agreement. The Merger Agreement was further amended on December 19, 2016, in order (i) to permit the issuance of 35,384,615 shares of Tellurian common stock to TOTAL Delaware, Inc. (“TOTAL”), a Delaware corporation and subsidiary of TOTAL S.A. (the "TOTAL Investment"), and revise related representations; (ii) to increase the maximum number of shares of Tellurian common stock (or its equivalent) issuable to current and prospective employees of Tellurian under the Tellurian Investments 2016 Omnibus Incentive Plan between August 2, 2016 and the closing of the Merger from 10,000,000 to 13,000,000, (iii) to require Magellan to appoint one board designee of TOTAL to the board of directors of Magellan effective upon the closing of the merger, and (iv) to extend the “Outside Date” (as defined in the merger agreement) from January 31, 2017 to February 28, 2017, among other things. The TOTAL Investment was completed on January 3, 2017. Based on the number of shares of Magellan and Tellurian common stock as of December 31, 2016, the Company estimates that the combined company’s common stock outstanding following the Merger will amount to approximately 190.1 million shares. Please refer to the Note 1 of the Unaudited Pro Forma Condensed Consolidated Combined Financial Statements of the definitive proxy statement on Schedule 14A filed with the US Securities and Exchange Commission (the “SEC”) on January 13, 2017 for further information.

The Merger Agreement and the Merger have been approved by the board of directors of each of Magellan and Tellurian. Stockholders of Magellan have been asked to vote on the approval of the transactions contemplated by the Merger Agreement at a special meeting that is scheduled to be held on February 9, 2017. The consummation of the Merger is expected to occur promptly after the date of the special meeting.

In addition to the approval of the foregoing matters by the stockholders, the closing of the Merger is subject to customary closing conditions, including i) the receipt of Magellan and Tellurian stockholder approval; ii) all directors and officers of Magellan shall have resigned, except for any person(s) that might be designated by Tellurian; iii) a registration statement on Form S-4 to register the Magellan shares to be issued in the Merger shall have been declared effective by the SEC; and iv) shares of Magellan common stock to be issued in the Merger shall have been approved for listing on the NASDAQ.

termination of the Merger Agreement in the event of a Superior Proposal, a breach by Magellan of the non-solicitation provision noted above, or following a change by the Board of Directors of its recommendation to stockholders, Magellan will be required to pay to Tellurian a termination fee for any and all third-party transaction fees and expenses incurred by Tellurian with the drafting, negotiation, execution and delivery of the Merger Agreement and related documents (including fees and expenses for attorneys, accountants and other advisors), subject to a maximum of $1 million in the aggregate. A termination fee may also be payable in some circumstances in which an Alternative Proposal is made, the transaction fails to close and Magellan subsequently agrees to an Alternative Proposal. If the Merger Agreement is terminated by either party as a result of the failure to obtain the requisite approval by Tellurian stockholders, or by Magellan because Tellurian does not use commercially reasonable efforts to secure the approval for listing the Magellan shares of common stock to be issued in the Merger, then Tellurian will be required to pay to Magellan a reverse termination fee of $1 million.

On November 23, 2016, Magellan and GE entered into a Guaranty and Support Agreement pursuant to which Magellan will, contingent on the closing of the Merger, guarantee to GE the performance of all of the obligations of Tellurian in connection with the Stock Purchase Agreement between Tellurian and GE. On January 3, 2017, Magellan and TOTAL entered into a Guaranty and Support Agreement, pursuant to which Magellan will, contingent on the closing of the Merger, guarantee to TOTAL the performance of all of the obligations of Tellurian in connection with the Stock Purchase Agreement between Tellurian and TOTAL.

~~Post-Merger Strategy~~

Following the closing of the Merger with Tellurian, Magellan will become a Houston-based energy company focusing on the development of LNG projects along the United States Gulf Coast and complementary business lines in the energy industry.

Tellurian was founded by Charif Souki and Martin Houston, and is led by Meg Gentle, each of whom has led and/or founded several industry-leading companies, specifically in the LNG sector. Mr. Souki is the former founder, Chairman, and CEO of Cheniere Energy, Inc. ("Cheniere"), which is expected to operate in excess of 30 million tonne per annum (“mtpa”) of LNG export facilities. Mr. Houston retired in November 2013, as chief operating officer of BG Group plc (“BG”), after 30 years of service, during which he pioneered the development and optimization of BG’s global LNG portfolio. Meg Gentle will serve as CEO of the combined Company, following a career during which she held various executive roles at Cheniere, including CFO and executive vice president of marketing. Tellurian was formed in February 2016.

The combined company plans to own, develop and operate, through Tellurian LNG LLC, a Delaware limited liability company and wholly owned subsidiary of Tellurian (“Tellurian LNG”), natural gas liquefaction facilities, storage facilities and loading terminals (collectively, the “LNG Facilities”) at one or more sites along the United States Gulf Coast and plans to sell LNG produced at its LNG Facilities to creditworthy customers, and to pursue complementary business lines in the energy industry. The combined company plans to be a low-cost provider of LNG Facilities and plans to minimize construction costs through utilization of proven technology and a modular design process that reduces installation and interconnection costs throughout the facility. Tellurian LNG, through its wholly owned subsidiaries, Driftwood LNG LLC and Driftwood Pipeline LLC, is developing a 26 million tonnes per annum ("mtpa") LNG Facility and related pipeline in Calcasieu Parish, Louisiana, with estimated construction costs of $500 to $600 per tonne, before owners’ cost, pipeline cost, financing cost, and contingencies, and expects to begin producing LNG in 2022 (the “Driftwood LNG Project”). The combined company also plans to pursue business that is complementary to its LNG business. The combined company plans to purchase gas supply for its LNG Facilities from the North American natural gas market and contract for pipeline and storage services upstream of the LNG Facilities in order to maximize its access to low-cost gas supply.

Immediately following the closing of the transactions contemplated by the Merger Agreement, Magellan expects to file a certificate of amendment to Magellan’s Restated Certificate of Incorporation and to amend Magellan’s bylaws for the purpose of effecting a name change of the company from “Magellan Petroleum Corporation” to “Tellurian Inc.” Pursuant to Section 242(b)(1) of the General Corporation Law of Delaware and the bylaws of Magellan, the name change will not require stockholder approval but will need to be approved by the board of directors of the combined company. The name change will not affect the rights of Magellan’s existing stockholders.

~~HIGHLIGHTS OF OPERATIONAL ACTIVITIES~~

During the three months ended December 31, 2016, in parallel with the ongoing strategic alternatives review process and pending the closing of the merger, the Company continued to operate its projects to evaluate and determine the potential of its exploration and production properties.

~~United Kingdom~~

~~Horse Hill~~. Pursuant to a farmout agreement with Horse Hill Development, Ltd ("HHDL") dated as of December 20, 2013, the Company holds a 35% interest in PEDLs 137 and 246, where the Horse Hill-1 well ("HH-1") was drilled. In accordance with the farmout agreement, the Company’s costs in relation to these licenses are 100% carried by HHDL until production, including costs related to conducting flow tests. During the first quarter of calendar year 2016, HHDL conducted a successful flow test of several formations of HH-1, including the Portland sandstone and two Kimmeridge limestone formations. UKOG, one of the principal interest owners of HHDL, then reported that the flow tests measured a stable dry oil rate of 1,688 barrels of oil per day in aggregate from these formations. Although the duration of the flow tests of each formation was relatively short, we were very encouraged by these results.

On October 17, 2016, UKOG announced that HHDL informed UKOG that i) a planning application was submitted to Surrey County Council seeking permission to conduct further significant appraisal testing and drilling at PEDL 137, ii) subject to the required regulatory approvals, the first phase of the proposed development was planned to consist of the extended production testing of four zones, designed to confirm the commerciality of the discovery, and to examine a previously untested Kimmeridge limestone, and iii) the planning application also sought permission for a two-well drilling phase, contingent upon successful testing, to further appraise the extent of the oil accumulations and the field's production capabilities, which drilling phase would consist of a deviated sidetrack, HH-1z, to be drilled from the existing HH-1 borehole and a new well, Horse Hill-2. UKOG also reported that the normal local planning authority cycle for an application not requiring an Environmental Impact Assessment such as at Horse Hill takes approximately 13 weeks.

~~Australia~~

~~NT/P82~~. On June 29, 2016, the National Offshore Petroleum Titles Administrator (“NOPTA”) informed the Company that the Commonwealth-Northern Territory Offshore Petroleum Joint Authority approved the following variations of the term of the NT/P82 Exploration Permit in the Bonaparte Basin, offshore Northern Territory, Australia: i) the increase of the Year 6 minimum work requirement from 600 km² ~~of 3D seismic survey to 1,000 km~~² new seismic data acquisition and processing and geological and geophysical studies, ii) the suspension of Year 6 conditions of title for 18 months, and iii) the extension of the permit term by 18 months to allow the varied minimum work condition to be undertaken. As a result of these variations, the term of the license is now due to end on November 12, 2017.

During the six months ended December 31, 2016, the Company has focused its efforts on developing strategies to enable the Company to fund and conduct the seismic survey required under the terms of the permit during the summer of calendar year 2017, which strategies range from identifying farmin partners to gaining access to the required funds through the closing of the Merger. The Company believes that one of these strategies is likely to materialize in a timely manner and will enable the Company to meet its requirements under the terms of the permit. However, if the Company is not able to meet its requirements under the terms of the permit, the Company will likely be required to relinquish its interest in NT/P82.

~~CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES~~

During the six months ended December 31, 2016, the Company used $1.2 million in cash and, as of December 31, 2016, had $507 thousand in cash and cash equivalents on its balance sheet. Following the completion of the transactions contemplated by the Exchange Agreement and the Weald ATA, the Company does not have sources of revenue and continues to experience significant liquidity constraints in the short term. The Company’s expenses primarily relate to ongoing transaction expenses and public company costs. The Company’s remaining assets, consisting of the HH-1 well and NT/P82, have not generated, and in the short term are not expected to generate, substantial disbursements. The Company believes that following the closing of the Merger it will be able to access the capital markets to finance its ongoing activities and the development of the combined company's projects. Until the expected closing of the Merger, the Company is funding its operations through a combination of its cash on hand and the potential disposal of part or all of its shareholdings of Central. During the quarter ended December 31, 2016, the Company paid invoices of certain vendors, which were long outstanding as a result of the Company’s stringent cash disbursement management over the past several months. During the quarter ended December 31, 2016, the Company’s outstanding payables were reduced from $519 thousand to $478 thousand as the Company continued to incur expenses related to the closing of the transactions contemplated by the Merger. The Company believes its cash balances and potential proceeds from its remaining shareholdings of Central are sufficient to fund the Company’s activities until the expected completion of the merger, which completion is expected to occur shortly following the special meeting of the Company’s shareholders, scheduled on February 9, 2017. In addition, the Company's ability to dispose of its remaining assets is subject to Tellurian's consent, in accordance with the terms of the Merger Agreement.

However, the Company continues to experience significant liquidity constraints in the short term. We believe there is substantial doubt about the Company's ability to continue as a going concern. We believe that upon the closing of the Merger with Tellurian, the combined company will be able to raise capital to fund the combined company's operations due to the

attributes of Tellurian's business plan and management. Therefore, we believe that Magellan's ability to continue as a going concern in the short-term is subject to the closing of the Merger with Tellurian. Should the Merger with Tellurian not close, the Company will need to pursue other alternatives in order to continue as a going concern.

~~Uses of Funds~~

~~Capital Expenditure Plans.~~ ~~Due to the closing of the Exchange, the Company will no longer incur any capital expenditures in relation to the Poplar field.~~

In the UK in PEDLs 137 and 246, where HH-1 was drilled, the cost of the completed flow test and potential future extended flow test are due to be fully paid by HHDL in accordance with the terms of the farmout agreement between HHDL and MPUK.

In the Bonaparte Basin, offshore Australia, the Company holds a 100% interest in NT/P82. The Company has received an extension of the term of its permit to November 2017 and is reviewing its strategic alternatives in relation to its interests. In the event that the Company concludes that it is required to relinquish its interest in the license, the Company does not expect to incur any material financial obligation.

~~Contractual Obligations.~~ ~~Please refer to the contractual obligations table in Part II, Item 7 of our 2016 Form 10-K for~~ information ~~on all material contractual obligations as of June 30, 2016, and see~~ ~~Note 17 - Commitments and Contingenciesto the accompanying condensed consolidated financial statements included~~ in this report ~~for additional information.~~

~~Sources of Funds~~

~~Cash and Cash Equivalents.~~ On a consolidated basis, the Company had approximately $507 thousand of cash and cash equivalents as of December 31, 2016, compared to $1.7 million as of June 30, 2016, and $352 thousand as of February 3, 2017. The Company considers cash equivalents to be short term, highly liquid investments that are both readily convertible to known amounts of cash and so near to their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Due to the international components of its operations, the Company is exposed to foreign currency exchange rate risks and certain legal and tax constraints in matching the capital needs of its assets and its cash resources. To the extent that the Company repatriates cash amounts from MPUK or MPA to the US, the Company is potentially liable for incremental US federal and state income tax, which may be reduced by the US federal and state net operating loss and foreign tax credit carry forwards available to the Company at that time. However, upon the closing of the Merger, which constitutes a change in control, there is a risk that most of the Company's tax attributes may not be available to the Company to reduce the Company's potential US federal and state income taxes.

~~Central Shares.~~ ~~As of June 30, 2016, December 31, 2016, and February 3, 2017, the Company owned 8.2 million, 3.8 million and 2.4 million shares of Central, respectively.~~Based on the closing price on February 3, 2017, the shares of Central stock represent $343 thousand of additional potential liquidity. The Company is not subject to any restrictions in its ability to sell its remaining shares of Central.

On November 10, 2016, Central received an unsolicited, indicative, and non-binding proposal by Macquarie SCT Pty Ltd, a subsidiary of Macquarie Bank (“Macquarie”) to acquire 100% of the issued capital of Central at 17.5 cents per share. Central rejected the proposal and Macquarie is currently conducting due diligence with a view to considering another proposal. Since the end of the prior quarter ended September 30, 2016, the Company sold 5.8 million additional shares of Central stock to i) fund its ongoing activities until the closing of the Merger and ii) realize the increased value of its shareholding of Central following the announced proposal of Macquarie.

In the future, Magellan may decide to dispose of all or part of its position in Central stock to fund some of the Company's activities. Although the Company does not intend to hold its position in Central's stock over the long term, the Company believes that there could be certain commercial or operational developments related to Central’s assets, which could positively impact the price per share of Central in the medium term. Therefore, the Company intends to monitor the stock price performance of Central to determine the appropriate time to dispose of its position.

~~UKOG Shares.~~ On August 11, 2016, the Company received 50.9 million shares of UKOG, which are listed on the AIM market in the UK, as part of the consideration for the transactions contemplated by the Weald ATA. However, pursuant to the terms of the Weald ATA, which include a six-month lock-up period, the Company is precluded from selling its shares of UKOG until February 10, 2017. Considering the current volume of trading activity of UKOG shares, the Company believes that it will be able to dispose of its shareholdings effectively once it decides to monetize these shares. The Company does not consider its shareholdings in UKOG to constitute a core asset of the Company and will monitor the performance of the price per share of UKOG and the operational results of HH-1 and UKOG’s other assets to determine the appropriate time to dispose of its

~~shareholdings. Based on the price per share of UKOG as of February 3, 2017, the Company’s shareholdings in UKOG amounted to approximately $924 thousand.~~

~~Existing Credit Facilities.~~ ~~A summary of the Company's existing credit facilities is as follows:~~

December 31, 2016 June 30, 2016
(In thousands)
Outstanding borrowings:
Notes payable $ 31
$ 783
Total $ 31
$ 783

~~Insurance Premium Notes.~~ Between January 2016 and September 2016, the Company entered into three separate insurance premium financing agreements (the "Premium Notes") to finance the insurance premiums related to the annual renewal of the Company's insurance policies. The Premium Notes have an aggregate original principal amount of $262 thousand, bear interest ranging between 6.25% and 7.75%, and have amortization terms from eight to ten months. The aggregate principal and interest payments due monthly under the Premium Notes range between $23 thousand and $2 thousand, and are payable between January 2017 and May 2017.

~~Secured Promissory Note.~~ Pursuant to the Exchange Agreement, on April 15, 2016, Magellan and One Stone i) entered into a Secured Promissory Note (the “Note”) pursuant to which One Stone made a loan to Magellan in the aggregate amount of $625 thousand (the “Loan Amount”) and ii) simultaneously entered into a Pledge Agreement pursuant to which Magellan pledged, assigned and granted to One Stone a security interest in the Company’s interests in MPA, as collateral for the loan. The purpose of the Note was to finance certain ongoing operations at Poplar between signing of the Exchange Agreement and closing. The Note did not bear interest up until closing of the Exchange. The Note is included in Notes Payable at June 30, 2016in the accompanying consolidated balance sheet. Upon the closing of the Exchange on August 1, 2016, the Loan Amount was deemed paid in full and the Pledge Agreement was terminated, and no further amounts under the Note were owed by the Company.

~~Registered Equity Facility~~. On December 24, 2014, the Company implemented an "at-the-market" (ATM) facility under which the Company can raise up to $10 million through the issuance of new common shares into the market. The ATM facility is registered under the Company's "shelf" registration statement on Form S-3 (the "Shelf"), which was filed with the US Securities and Exchange Commission on November 17, 2014, and which went effective on December 3, 2014. The Shelf registered the issuance of up to $100 million in equity securities of the Company and is currently planned to be effective through December 2017.

Depending on various factors, including market conditions for the Company's equity securities, the Company may use the ATM facility and the Shelf on an as-needed basis for general corporate purposes. The Company has no immediate plans to issue shares pursuant to the ATM facility or the Shelf, which are intended to provide financial flexibility going forward. As of the date hereof, no securities have been issued under either the Shelf or the ATM facility.

~~Other Sources of Financing.~~ In addition to its existing liquid capital resources and the alternatives to address short-term liquidity issues discussed above, the Company could potentially receive funds through a bridge financing pending the closing of the Merger or the pledge of some of its remaining unencumbered assets or through equity issuances via a PIPE or follow-on offering.

~~Cash Flows~~

~~The following table presents the Company's cash flow information for the six months ended:~~

December 31,
2016 2015
(In thousands)
Cash (used in) provided by:
Operating activities $ (2,805 ) $ (1,449 )
Investing activities 2,138
1,442
Financing activities (146 ) 32
Discontinued operations (300 ) (426 )
Effect of exchange rate changes on cash and cash equivalents (60 ) (25 )
Net decrease in cash and cash equivalents $ (1,173 ) $ (426 )

Cash used in operating activities during the six months ended December 31, 2016, totaled $2.8 million, compared to cash used in operating activities of $1.4 million for the same period in 2015. The increase in cash used in operating activities was primarily due to the decrease in accounts payable and accrued liabilities in the current year period of $668 thousand and an increase in accounts payable and accrued liabilities in the prior year period of $893 thousand, which was offset by a decrease in general and administrative expenses, excluding non-cash stock-based compensation and foreign currency gains of $385 thousand.

Cash provided by investing activities during the six months ended December 31, 2016 amounted to $2.1 million, compared to cash provided by investing activities of $1.4 million for the same period in 2015. The increase in cash flows from investing activities was primarily due to cash proceeds from the closing of the Exchange of $950 thousand, and cash proceeds relating to the Weald Basin ATA of $586 thousand, which were offset by a reduction in proceeds from sales of Central stock of $840 thousand.

Cash used in financing activities during the six months ended December 31, 2016, amounted to $146 thousand, compared to cash used of $32 thousand in the prior year period. Cash used in financing activities in the current year period was primarily due to payments on the Company's insurance notes payable of $143 thousand. Cash used in the prior year period related to payments made for deferred financing costs of $24 thousand and cash payments for the repurchase of stock for settlement of taxes of $11 thousand.

Cash used in discontinued operations during the six months ended December 31, 2016, was $300 thousand, compared to $426 thousand in the prior year period. Cash used in discontinued operations in the current year period primarily related to transaction costs paid as a result of the Exchange of $278 thousand. Cash used in the prior year period primarily related to cash used in operations at the Poplar field of $269 thousand and at the Weald Basin of $112 thousand. Capital expenditures at the Poplar field in the prior year period amounted to $39 thousand, net of proceeds received on the sale of unproved property of $175 thousand.

During the six months ended December 31, 2016, the effect of changes in foreign currency exchange rates negatively impacted the translation of our foreign denominated cash and cash equivalent balances into US dollars and resulted in a decrease of $60 thousand in cash and cash equivalents, compared to a decrease of $25 thousand for the same period in 2015.

~~COMPARISON OF RESULTS BETWEEN THE THREE MONTHS ENDED DECEMBER 31, 2016 AND 2015~~

~~Operating Expenses~~

~~The following table presents operating expenses for the three months ended:~~

December 31,
2016 2015 Difference Percent change
(In thousands)
Selected operating expenses (USD):
Depreciation $ 9
$ 13
$ (4 ) (31 )%
Exploration $ 8
$ 22
$ (14 ) (64 )%
General and administrative $ 649
$ 1,131
$ (482 ) (43 )%

~~Depreciation Expense.~~ Depreciation expense decreased by $4 thousand to $9 thousand during the three months ended December 31, 2016, compared to $13 thousand in the prior year period, primarily due to certain assets becoming fully depreciated during the current year period.

~~Exploration Expenses.~~ Exploration expenses decreased by $14 thousand to $8 thousand during the three months ended December 31, 2016. The decrease was primarily the result of a reduction in expenditures related to the Company's activities in the UK in the current year period.

~~General and Administrative Expenses.~~ ~~The following table presents general and administrative expenses for the three months ended:~~

December 31,
2016 2015 Difference Percent change
(In thousands)
General and administrative (excluding stock-based compensation expense and foreign transaction gain) $ 861
$ 1,024
$ (163 ) (16 )%
Stock compensation expense 10
199
(189 ) (95 )%
Foreign transaction gains from investment in subsidiaries (222 ) (92 ) (130 ) 141 %
Total $ 649
$ 1,131
$ (482 ) (43 )%

~~General and administrative expenses decreased by $482 thousand, or 43%, to $649 thousand during the three months ended December 31, 2016~~, compared to the prior year period. General and administrative expenses, excluding stock-based compensation and foreign transaction gain, decreased by $163 thousand, or 16%, to $861 thousand. This decrease was primarily the result of a decrease in salaries and benefits of $45 thousand as a result of lower headcount, a reduction in director fees of $26 thousand, due a reduction in the number of directors, and reductions in general and administrative costs of our foreign subsidiaries of $190 thousand, which were partially offset by increases in professional fees of $91 thousand, related to the Merger and the strategic alternatives review process. Stock compensation expense decreased by $189 thousand as a result of the vesting of stock awards related to the Exchange in the prior quarter of the current year. Foreign transaction gains from investment in subsidiaries increased by $130 thousand, or 141%.

~~COMPARISON OF RESULTS BETWEEN THE SIX MONTHS ENDEDDECEMBER 31, 2016 AND 2015~~

~~Operating Expenses~~

~~The following table presents operating expenses for the six months ended:~~

December 31,
2016 2015 Difference Percent change
(In thousands)
Selected operating expenses (USD):
Depreciation $ 20
$ 32
$ (12 ) (38 )%
Exploration $ 163
$ 39
$ 124
318 %
General and administrative $ 2,677
$ 2,896
$ (219 ) (8 )%

~~Depreciation Expense.~~ Depreciation expense decreased by $12 thousand to $20 thousand during the six months ended December 31, 2016, compared to $32 thousand in the prior year period. The change was primarily due to certain assets becoming fully depreciated during the current year period.

~~Exploration Expenses.~~ Exploration expenses increased by $124 thousand to $163 thousand during the six months ended December 31, 2016. The increase was primarily the result of an increase in expenditures related to the Company's activities in the UK in the current year period.

~~General and Administrative Expenses.~~ ~~The following table presents general and administrative expenses for the six months ended:~~

December 31,
2016 2015 Difference Percent change
(In thousands)
General and administrative (excluding stock-based compensation expense and foreign transaction gain) $ 2,151
$ 2,536
$ (385 ) (15 )%
Stock compensation expense 600
307
293
95 %
Foreign transaction (gain) loss from investment in subsidiaries (74 ) 53
(127 ) (240 )%
Total $ 2,677
$ 2,896
$ (219 ) (8 )%

General and administrative expenses decreased by $219 thousand, or 8%, to $2.7 million during the six months ended December 31, 2016, compared to the prior year period. General and administrative expenses, excluding stock-based compensation and foreign transaction losses, decreased by $385 thousand, or 15%, to $2.2 million. This decrease was primarily the result of reductions in expenses related to corporate office salaries and benefits of $352 thousand, reductions in director expenses of $507 thousand, office rent of $69 thousand, and reductions in general and administrative expenses related to our foreign subsidiaries of $125 thousand, which were partially offset by an increase in professional fees of $622 thousand and investor relations fees of $21 thousand related to the Merger, and increase in insurance of $10 thousand. Stock compensation expense increased $293 thousand primarily due to the vesting of certain stock awards as a result of the Exchange. Foreign transaction gains increased by $127 thousand.

~~Net Loss From Discontinued Operations~~

Net income from discontinued operations for the six months ended December 31, 2016 of $834 thousand relates to the gain on disposal of the Company's Weald Basin assets in the UK of $1.1 million, which was partially offset by a loss on operations of the Company's former NP segment and transaction costs related to the Exchange of $235 thousand.

~~OFF-BALANCE SHEET ARRANGEMENTS~~

~~The Company does not use off-balance sheet arrangements, such as securitization of receivables, with any unconsolidated entities or other parties.~~

~~EFFECTS OF COMMODITY PRICES~~

Following the closing of the Exchange on August 1, 2016, the Company does not presently sell hydrocarbons from its properties and does not have estimated reserves associated with its remaining assets. However, the value of each of the Company’s remaining assets is intrinsically impacted by commodity prices, including the value of their potential monetization.

~~CRITICAL ACCOUNTING POLICIES AND ESTIMATES~~

Information regarding critical accounting policies and estimates is contained in Item 7 of our 2016 Form 10-K. There have been no changes to the Company's critical accounting policies during the six months ended December 31, 2016.

~~FORWARD-LOOKING STATEMENTS~~

~~This report contains forward-looking statements~~includes “forward-looking statements” within the meaning of Section 27A of the ~~Private~~ Securities ~~Litigation Reform~~ Act of ~~1995.~~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, ~~included in this report~~ that address ~~activities,~~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," "could," "estimate," "expect," "forecast," "initial," "intend," "may," "plan," "potential," "project," "should", "will," "would,"~~“anticipate,” “assume,” “believe,” “budget,” “estimate,” “expect,” “forecast,” “initial,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will,” “would” and similar expressions are intended to identify forward-looking statements.

These forward-looking statements ~~about the Company and its subsidiaries appear in a number of places in this report and may~~ relate to, statements about the Merger with Tellurian, including the terms of the Merger Agreement, the tax implications of the Merger, the closing of the transaction, the timing of such closing and the effects of closing; among other things:

our businesses and prospects; ~~our ability to continue as a going concern;~~

planned or estimated capital expenditures;

availability of liquidity and capital resources; ~~the disposition of oil and gas properties and related assets or other securities investments; the~~

our ability to ~~enter into acceptable farmout arrangements;~~ obtain additional financing as needed;

revenues, expenses and projected cash burn rates;

progress in developing ~~the Company's projects~~Tellurian’s principal project and the timing of that progress;

our pending natural gas property acquisition;

future values of ~~those projects~~the Company's principal project or other interests, operations or rights that ~~the Company~~Tellurian holds; ~~the listing of our common stock on the NASDAQ; borrowings; commodity prices;~~ and

government regulations, including our ability to obtain necessary governmental ~~permits;~~permits and approvals.

Our forward-looking statements are based on assumptions and analysis made by us in light of our experience, and our perception of historical trends, current conditions, expected future developments and other ~~matters~~factors that ~~involve~~we believe are appropriate under the circumstances. These statements are subject to a number of known and unknown risks and uncertainties, ~~that~~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 inby the forward-looking ~~statements. These risks and uncertainties~~statements include, but are not limited to, the following: ~~risks associated with our ability to complete the Merger with Tellurian on the terms anticipated or at all;~~

the uncertain nature of ~~oil~~demand for and ~~gas prices~~price of natural gas;

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 UKLNG industry, including environmental laws and ~~Australia, including uncertainties about the duration of the currently depressed oil commodity price environment~~regulations that impose significant compliance costs and ~~the related impact on our project developments and ability to obtain financing;~~ liabilities;

uncertainties regarding our ability to maintain sufficient liquidity and capital resources to implement our projects or otherwise continue as a going concern; uncertainties regarding the ability to realize the expected benefits from the sale of the Amadeus Basin assets to Central pursuant to the Sale Deed, including through the future value of Central stock; uncertainties regarding the value of Central stock; uncertainties regarding the ability to realize the expected benefits from the sale of the Weald assets to UKOG pursuant to the Weald Agreements, including through the future value of UKOG stock; uncertainties regarding the value of UKOG stock;

our limited operating history;

our ability to attract and retain key personnel; ~~our limited amount of control over activities on our non-operated properties;~~

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 to meet their contractual obligations; the uncertain nature of the anticipated value and underlying prospects of our UK acreage position; government regulation and oversight of drilling and completion activity in the UK; the uncertainty of drilling and completion conditions and results; the availability of drilling, completion, and operating equipment and services; the results and interpretation of 2-D and 3-D seismic data related to our NT/P82 interest in offshore Australia and our ability to obtain an attractive farmout arrangement for NT/P82; uncertainties regarding our ability to maintain the NASDAQ listing of our common stock, and the related potential impact on our ability to obtain financing;

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

development risks, operational hazards and regulatory approvals;

our ability to consummate our pending natural gas property acquisition; and

risks and uncertainties associated with litigation matters; and other matters referred to in the Risk Factors section of this report. For a more complete discussion of the risk factors that may apply to any forward-looking statements, you are directed to the discussion presented in Item 1A ("Risk Factors") of our 2016 Form 10-K. Any forward-looking statements in this report should be considered with these factors in mind. Anymatters.

The forward-looking statements in this report speak as of the ~~filing~~ date ~~of this report. The Company assumes no obligation~~hereof. Although we may from time to time voluntarily update ~~any~~our prior forward-looking statements, ~~contained in this report, whether as a result of new information, future events or otherwise,~~we disclaim any commitment to do so except as required by securities laws.

Explanatory Note

On February 10, 2017 (the “Merger Date”), Tellurian Inc., which was formerly known as Magellan Petroleum Corporation (“Magellan”), completed the merger (the “Merger”) contemplated by the previously announced Agreement and Plan of Merger, dated as of August 2, 2016, by and among Magellan, Tellurian Investments Inc. (“Tellurian Investments”) and River Merger Sub, Inc. (“Merger Sub”), as amended (the “Merger Agreement”). At the effective time of the Merger, Merger Sub merged with and into Tellurian Investments, with Tellurian Investments continuing as the surviving corporation and a subsidiary of Magellan. Immediately following the completion of the Merger, Magellan amended its certificate of incorporation and bylaws to change its name to “Tellurian Inc.” In connection with the Merger, each outstanding share of common stock of Tellurian Investments was exchanged for 1.300 shares of Magellan common stock. The Merger is accounted for as a “reverse acquisition” under U.S. GAAP. Therefore, Tellurian Investments is treated as the accounting acquirer in the Merger.

Except where the context indicates otherwise, (i) references to “we,” “us,” “our,” “Tellurian” or the “Company” refer, for periods prior to the completion of the Merger, to Tellurian Investments and its subsidiaries, and for periods following the completion of the Merger, to Tellurian Inc. and its subsidiaries and (ii) references to “Magellan” refer to Tellurian Inc. and its subsidiaries prior to the completion of the Merger.

Introduction

The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past development activities, current financial condition and outlook for the future organized as follows:

Our Business

Overview of Significant Events

Liquidity and Capital Resources

Capital Development Activities

Results of Operations

Off-Balance Sheet Arrangements

Summary of Critical Accounting Estimates

Recent Accounting Standards

Our Business

Tellurian intends to create value for shareholders by building a low-cost, global natural gas business, profitability delivering natural gas to customers worldwide. Tellurian is developing a portfolio of natural gas production, LNG trading, and infrastructure that includes an LNG terminal facility (the “Driftwood terminal”) and an associated pipeline (the “Driftwood pipeline”) in Southwest Louisiana (the Driftwood terminal and the Driftwood pipeline collectively, the “Driftwood Project”).

The proposed Driftwood Project will have a liquefaction capacity of approximately 27.6 mtpa, situated on approximately 1,000 acres in Calcasieu Parish, Louisiana. The proposed terminal facility will include up to 20 liquefaction Trains, three full containment LNG storage tanks and three marine berths. In February 2016, Tellurian engaged Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) to perform a FEED study for the Driftwood terminal, which was completed in June 2017. Based on such FEED study, Tellurian estimates construction costs for the Driftwood terminal of approximately $500 to $600 per tonne ($13 to $16 billion) before owners’ costs, financing costs and contingencies.

Tellurian is developing the proposed Driftwood pipeline, a new 96-mile large diameter pipeline which will interconnect with 13 existing interstate pipelines throughout Southwest Louisiana to secure adequate natural gas feedstock for the Driftwood terminal. The Driftwood pipeline will be comprised of 48-inch, 42-inch, 36-inch and 30-inch diameter pipeline segments and three compressor stations totaling approximately 270,000 horsepower, all as necessary to provide approximately 4.0 Bcf/d of average daily gas transportation service. In June 2016, Tellurian engaged Bechtel to perform a FEED study for the Driftwood pipeline, which was completed in March 2017. Based on such FEED study, Tellurian estimates construction costs for the Driftwood pipeline of approximately $1.6 to $2.0 billion before owners’ costs, financing costs and contingencies.

In addition, as described under “Overview of Significant Events —Haynesville Purchase and Sale Agreement,” Tellurian has recently entered into an agreement to acquire approximately 9,200 net acres of natural gas properties in Louisiana.

Overview of Significant Events

Significant corporate, developmental and capital events since January 1, 2017 and through the filing date of this Form 10-Q include the following:

TOTAL Investment.In January 2017, pursuant to a common stock purchase agreement (the “TOTAL SPA”) dated as of December 19, 2016, between Tellurian Investments and TOTAL Delaware, Inc. (“TOTAL”), TOTAL purchased, and Tellurian Investments sold and issued to TOTAL, approximately 35.4 million shares of Tellurian Investments common stock (the “TOTAL Shares”) for an aggregate purchase price of $207 million. In connection with the Merger, the TOTAL Shares were exchanged for approximately 46 million shares of Tellurian common stock. Tellurian and TOTAL entered into a pre-emptive rights agreement pursuant to which TOTAL was granted a right to purchase its pro rata portion of any new equity securities that Tellurian Investments may issue to a third party on the same terms and conditions as such equity securities are offered and sold to such party, subject to certain excepted offerings.

Development and Regulatory Events.

In February 2017, the DOE/FE issued an order authorizing Tellurian to export up to 27.6 mtpa of LNG to FTA countries, on its own behalf and as agent for others, for a term of 30 years. Our application for authority to export LNG to non-FTA countries is currently pending before the DOE/FE and is expected to be ruled upon in the first quarter of 2018.

In March 2017, Tellurian filed an application with FERC for authorization pursuant to Section 3 of the NGA to site, construct and operate the Driftwood terminal, and simultaneously sought authorization pursuant to Section 7 of the NGA for authorization to construct and operate interstate natural gas pipeline facilities. Each requested that FERC issue an order approving the facilities by the first quarter of 2018.

Also in March 2017, the Driftwood Project submitted permit applications to the USACE under regulatory Section 404 of the Clean Water Act, and Sections 10 and 14 of the Rivers and Harbors Act for activities within the waters of the U.S. including dredging and wetland mitigation. Also submitted in March was the Title V and PSD air permit to the Louisiana Department of Environmental Quality under the Clean Air Act for air emissions relating to the Driftwood Project. The regulatory review and approval process for the USACE permit as well as the Title V and PSD permits is expected to be completed in March 2018, concluding the major environmental permitting for the Driftwood Project.

The FEED studies for the Driftwood pipeline and the Driftwood terminal were completed in March 2017 and June 2017, respectively.

Deferred engineering costs of $9 million represent detailed engineering services related to the Driftwood Project. Such costs will be deferred until construction commences on the Driftwood Project, at which time they will be transferred to construction in progress.

Haynesville Purchase and Sale Agreement.On September 6, 2017, Tellurian entered into a purchase and sale agreement (the “PSA”) with Rockcliff Energy Operating LLC (“Rockcliff”). Pursuant to and subject to the terms and conditions of the PSA, Tellurian has agreed to acquire from Rockcliff for $85.1 million in cash (the “Base Purchase Price”), subject to specified adjustments, certain assets in northern Louisiana, including, but not limited to, oil and gas leases, mineral interests, wells, facilities and equipment (the “Rockcliff transaction” or the “Asset Purchase”). The assets to be purchased include approximately 9,200 net developed and undeveloped acres and 19 producing operated wells with net current production of approximately four million cubic feet per day of natural gas. The Asset Purchase will be given economic effect as of August 1, 2017 (the “Effective Date”). As a result, at closing, the Base Purchase Price will be subject to upward or downward adjustments based on certain revenues and costs attributable to the purchased assets prior to the closing date and after the Effective Date. Certain of the assets to be acquired are subject to preferential rights to purchase held by third parties and the purchase price and properties to be acquired could be adjusted as a result of such rights. Pursuant to the PSA, on the business day following the execution of the PSA, Tellurian made a cash deposit in the amount of $8.5 million (the “Deposit”), creditable against the amount required to be paid by it at the closing of the Asset Purchase. Rockcliff will retain the deposit if Tellurian fails to consummate, under certain conditions, the Asset Purchase.

Liquidity and Capital Resources

Capital Resources

The Company is currently funding the development of the Driftwood Project and general working capital needs through its cash on hand. Our current capital resources consist of approximately $138.0 million of cash and cash equivalents as of September 30, 2017 on a consolidated basis, which are primarily the result of issuances of common and preferred stock, including the issuance of preferred stock to GE in November 2016, the issuance of common stock to TOTAL in January 2017 and the issuance of common stock pursuant to our at-the-market program. Tellurian considers cash equivalents to be short-term, highly liquid

investments that are both readily convertible to known amounts of cash or so near to their maturity that they present insignificant risk of changes in value.

Sources and Uses of Cash

The following table summarizes the sources and uses of our cash and cash equivalents and costs and expenses for the periods presented (in thousands):



	Successor ⁽¹⁾										Predecessor ⁽¹⁾
	Nine Months Ended September 30,							Year Ended December 31, 2016			For the period from January 1, 2016 through April 9, 2016

	2017				2016
Operating cash flows:
Cash used in Driftwood Project activities	$	(48,977	)	—	$	(17,847	)	$	(30,675	)	$	—
Cash used for employee costs	(14,345		)		(2,433		)	(6,208		)	(64		)
Other net cash used in development activities	(22,845		)		(9,032		)	(13,547		)	(47		)
Cash used in operating activities	(86,167		)		(29,312		)	(50,430		)	(111		)

Investing cash flows:
Cash used in the acquisition of property, plant and equipment	(1,101		)		(9,199		)	(10,716		)	(268		)
Deposit for acquisition	(8,515		)		—			—			—
Deferred engineering costs	(9,000		)		—			—			—
Other net cash provided by investing activities	4,648				210			210			—
Cash used in investing activities	(13,968		)		(8,989		)	(10,506		)	(268		)

Financing cash flows:
Private placements	—				58,886			59,015			—
Issuance of Tellurian Investments Preferred Shares⁽²⁾	—				—			25,000			—
Issuance of common shares to TOTAL	207,000				—			—			—
Issued under equity compensation plan	500				—			—			—
Issued under at-the-market program	10,695				—			—			—
Tax payments for net share settlement of equity awards	(828		)		—			—			—
Offering costs	(607		)		(1,512		)	(1,681		)	—
Cash provided by financing activities	216,760				57,374			82,334			—

Effect of exchange rate changes on cash	—				8			—			—
Net increase (decrease) in cash and cash equivalents	116,625				19,081			21,398			(379		)
Cash and cash equivalents, beginning of the period	21,398				—			—			589
Cash and cash equivalents, end of the period	$	138,023			$	19,081		$	21,398		$	210

Net working capital (deficit)	$	116,091			$	1,777		$	17		$	(784	)

(1) On April 9, 2016, Tellurian Investments acquired Tellurian Services LLC (“Tellurian Services”), formerly known as Parallax Services LLC (“Parallax Services”). Parallax Services was primarily engaged in general and administrative support services. Under the financial reporting rules of the SEC, Parallax Services ("Predecessor") has been deemed to be the predecessor to Tellurian ("Successor") for financial reporting purposes.
(2) The Tellurian Investments Preferred Shares were exchanged in March 2017 for Series B Preferred Stock and the shares of Series B Preferred Stock were exchanged into common stock in June 2017, each in a cashless transaction.

Cash used in operating activities during the nine months ended September 30, 2017 and 2016 was $86.2 million and $29.3 million, respectively. The increase in cash used in operating activities in 2017 compared to 2016 primarily relates to one-time payments of $12 million related to EPC activities, $5 million of Merger-related expenses and $69 million of disbursements in the normal course of business. Disbursements in the normal course of business increased primarily due to the increased development activities relating to the Driftwood Project and a substantial increase in the number of Tellurian employees.

Capital Development Activities

We are primarily engaged in developing the Driftwood Project, which will require significant amounts of capital and is subject to risks and delays in completion. Even if successfully completed, the project will not begin to operate and generate significant cash flows until at least several years from now, which management currently anticipates being 2022. Construction of the Driftwood terminal and Driftwood pipeline facilities would begin after FERC issues an order granting the necessary authorizations under the NGA and once all required federal, state and local permits have been obtained. The Company expects to receive all regulatory approvals and commence construction in 2018, produce the first LNG in 2022 and achieve full operations in 2025. As a result, our business success will depend to a significant extent upon our ability to obtain the funding necessary to construct these LNG terminals, to bring them into operation on a commercially viable basis and to finance the costs of staffing, operating and expanding our company during that process.

Tellurian estimates construction costs of approximately $500 to $600 per tonne ($13 to $16 billion) for the Driftwood terminal and approximately $1.6 to $2.0 billion for the Driftwood pipeline, in each case before owners’ costs, financing costs and contingencies. In addition, the natural gas production activities Tellurian is pursuing will require considerable capital resources. We anticipate funding our more immediate liquidity requirements relative to the RFS and other developmental and general and administrative costs for the Driftwood Project through the use of cash from the completed equity issuances discussed above and future issuances of equity securities by us.

We currently expect that our long-term capital requirements will be financed by proceeds from future debt and equity offerings. In addition, part of our financing strategy is expected to involve seeking equity investments by LNG customers at a subsidiary level. If the types of financing we expect to pursue are not available, we will be required to seek alternative sources of financing, which may not be available on acceptable terms, if at all.

Results of Operations

Successor

The following table summarizes costs and expenses for the periods presented (in thousands):



	Three Months Ended September 30,									Nine Months Ended September 30,
	2017			2016			Change			2017			2016			Change
Total revenue	$	—		$	—		$	—		$	—		$	—		$	—
Development expenses	8,793			15,917			(7,124		)	44,998			30,422			14,576
General and administrative expenses	17,302			28,533			(11,231		)	80,125			37,737			42,388
Goodwill impairment	—			—			—			77,592			—			77,592
Loss from operations	(26,095		)	(44,450		)	18,355			(202,715		)	(68,159		)	(134,556		)
Gain on preferred stock exchange feature	—			—			—			2,209			—			2,209
Other income, net	3,800			49			3,751			4,339			118			4,221
Provision for income taxes	(569		)	(4		)	(565		)	(569		)	166			(735		)
Net loss	$	(22,864	)	$	(44,405	)	$	21,541		$	(196,736	)	$	(67,875	)	$	(128,861	)

Our consolidated net loss was $22.9 million, or $0.12 per share (basic and diluted), for the three months ended September 30, 2017, compared to a net loss of $44.4 million, or $0.37 per share (basic and diluted), for the three months ended September 30, 2016. This $21.5 million decrease in net loss was primarily a result of decreased development and general and administrative expenses discussed separately below.

Our consolidated net loss was $196.7 million, or $1.06 per share (basic and diluted), for the nine months ended September 30, 2017, compared to a net loss of $67.9 million, or $0.81 per share (basic and diluted), for the nine months ended September 30, 2016. This $128.9 million increase in net loss was primarily a result of (i) increased development and general and administrative expenses discussed separately below and (ii) an impairment charge of $77.6 million related to goodwill that was initially recognized as a result of the Merger in February 2017. The increase in net loss was partially offset by a gain of $2.2 million recognized in the first quarter of 2017 related to an exchange feature of the Tellurian Investments Preferred Shares and a $3.5 million gain on the sale of securities.

Development expenses for the three and nine months ended September 30, 2017 decreased $7.1 million and increased $14.6 million, respectively, compared to the same periods in 2016. The decrease of $7.1 million is primarily attributable to deferring engineering costs related to the Driftwood Project during three months ended September 30, 2017 when compared to the same period in 2016. The increase of $14.6 million is primarily attributable to an overall increase in activity associated with the Driftwood Project during the nine months ended September 30, 2017 when compared to the same period in 2016.

General and administrative expenses during the three and nine months ended September 30, 2017, decreased $11.2 million and increased $42.4 million, respectively, compared to the same periods in 2016. The decrease of $11.2 million is primarily attributable to a decrease in share-based compensation, partially offset by an increase in salary expense, during the three months ended September 30, 2017 when compared to the same period in 2016. The increase of $42.4 million is primarily attributable to non-cash share-based payment charges related to commercial development and management consulting contractors of $19.4 million which were not incurred in 2016. The remaining increase was driven by an increase in salaries and benefits due to a substantial increase in the number of employees and an increase in corporate marketing and investor development activities.

Successor vs. Predecessor

The following table summarizes costs and expenses of Parallax Services for the periods presented (in thousands):



	Nine Days Ended April 9, 2016			For the period from January 1, 2016 through April 9, 2016
	Nine Days Ended April 9, 2016			For the period from January 1, 2016 through April 9, 2016
Total revenue	$	—		$	31
Development expenses	—			52
General and administrative expenses	157			617
Net loss	$	(157	)	$	(638	)

Total expenses and the net loss for Tellurian (as “Successor”) were significantly greater than such items for Tellurian Services (formerly known as Parallax Services LLC, as “Predecessor”) during the periods shown above due primarily to the matters discussed above. Tellurian's activities related to the development of the Driftwood Project are significantly larger in scope than the administrative and development activities of Tellurian Services prior to our acquisition of Tellurian Services.

Off-Balance Sheet Arrangements

As of September 30, 2017, we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our consolidated financial position or operating results.

Summary of Critical Accounting Estimates

The preparation of financial statements requires the use of judgments and estimates. Our critical accounting policies are described below to provide a better understanding of how we develop our assumptions and judgments about future events and related estimations and how they can impact our financial statements. A critical accounting estimate is one that requires our most difficult, subjective or complex judgments and assessments and is fundamental to our results of operations. We identified our most critical accounting estimates to be:

purchase price allocation for acquired businesses;

valuations of long-lived assets, including intangible assets and goodwill;

share-based compensation issued prior to the Merger; and

forecasting our effective income tax rate, including the realizability of deferred tax assets.

We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We believe the following are the critical accounting policies used in the preparation of our condensed consolidated financial statements, as well as the significant estimates and judgments affecting the application of these policies. This discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and related notes included in this report.

Accounting for LNG Development Activities

As we have been in the preliminary stage of developing our LNG receiving terminals, substantially all of the costs to date related to such activities have been expensed. These costs primarily include professional fees associated with FEED studies and obtaining an order from FERC authorizing construction of our terminals and other required permitting for the Driftwood Project.

Costs incurred in connection with a project to develop a facility or a capital asset shall generally be treated as development expenses until the project has reached the Notice-to-Proceed State (“NTP State”) and the following criteria (the “NTP Criteria”) have been achieved: (i) regulatory approval has been received, (ii) financing for the project is available and (iii) management has committed to commence construction, and management instructs the EPC contractor to begin construction. In addition to the above, certain costs incurred prior to achieving the NTP State shall be capitalized even though the NTP Criteria have not been

met. Costs to be capitalized prior to achieving the NTP State include land purchase costs, land improvement costs, preparation for facility use costs and any fixed structure construction costs (e.g., fence, storage areas, drainage, etc.). Furthermore, activities directly associated with detailed engineering and/or facility designs shall be capitalized.

Fair Value

When necessary or required by U.S. GAAP, we estimate the fair value of (i) long-lived assets for impairment testing, (ii) reporting units for goodwill impairment testing, (iii) assets acquired and liabilities assumed in business combinations and (iv) prior to the Merger, share-based compensation. When we are required to measure fair value and there is not a market-observable price for the asset or liability or a similar asset or liability, we use the cost, income, or market valuation approach depending on the quality of information available to support management’s assumptions. The cost approach is based on management’s best estimate of the current asset replacement cost. The income approach is based on management’s best assumptions regarding expectations of projected cash flows and discounts the expected cash flows using a commensurate risk-adjusted discount rate. The market approach is based on management’s best assumptions regarding prices and other relevant information from market transactions involving comparable assets. Such evaluations involve significant judgment and the results are based on expected future events or conditions, such as sales prices, estimates of future LNG production, development, construction and operating costs and the timing thereof, future net cash flows, economic and regulatory climates and other factors, most of which are often outside of management’s control. However, assumptions used reflect a market participant’s view of long-term prices, costs and other factors, and are consistent with assumptions used in our business plans and investment decisions.

Goodwill

Goodwill represents the excess of cost over fair value of the net assets of businesses acquired. We test goodwill for impairment annually during the fourth quarter, or more frequently as circumstances dictate. The first step in assessing whether an impairment of goodwill is necessary is an optional qualitative assessment to determine the likelihood of whether the fair value of the reporting unit is greater than its carrying amount. If we conclude that it is more likely than not that the fair value of the reporting unit exceeds the related carrying amount, further testing is not necessary. If the qualitative assessment is not performed or indicates that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, we compare the estimated fair value of the reporting unit to which goodwill is assigned to the carrying amount of the associated net assets, including goodwill. An impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value is then recognized.

A lower fair value estimate in the future for our Driftwood reporting unit could result in impairment of goodwill. Factors that could trigger a lower fair value estimate include significant negative industry or economic trends, cost increases, disruptions to our business and regulatory or political environment changes or other unanticipated events.

Share-Based Compensation

The assumptions used in calculating the fair value of share-based payment awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future.

Through May 2016, Tellurian Investments determined the fair value of share-based compensation using the price paid for private placements of stock. Beginning in June 2016 and through the date of the Merger, the fair value of share-based compensation was determined through the use of a model which utilizes certain observable inputs such as the price of Magellan common stock at various points in time as well as unobservable inputs related to the weighted probabilities of certain Merger-related scenarios at each valuation date. Prior to the Merger, the Company's method also considered a discount for the lack of marketability of Tellurian Investments common stock, which was determined through the use of commonly accepted methods. As the Company has only restricted shares outstanding related to unvested share-based compensation, awards issued after the Merger are based on the quoted market prices for Tellurian shares.

See Note 9, Share-Based Compensation, of our Notes to Condensed Consolidated Financial Statements for additional information regarding our share-based compensation.

Income Taxes

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the Condensed Consolidated Financial Statements. Deferred tax assets and liabilities are included in the Condensed Consolidated Financial Statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the current period's provision for income taxes. A full valuation allowance equal to our net deferred tax asset balance has been established due to the uncertainty of realizing the tax benefits related to our net deferred tax assets.

Recent Accounting Standards

For descriptions of recently issued accounting standards, see Note 15, Recent Accounting Standards, of our Notes to Condensed Consolidated Financial Statements.

ITEM 33. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk in the form of foreign currency exchange rate risk, commodity price risk related to world prices for crude oil, and equity price risk related to investments in marketable securities. The exchange rates between the Australian dollar and the US dollar and the exchange rates between the British pound and US dollar have changed in recent periods, and may fluctuate substantially in the future. With respect to any net proceeds from the planned farmout of NT/P82 in Australia, any appreciation of the US dollar against the Australian dollar is expected to result in weaker operating results. With respect to any net expenditures for development in the UK, any material appreciation of the US dollar against the British pound could have a positive impact on our business, operating results, and financial condition.

At December 31, 2016, the fair value of our investments in securities available for sale was $1.5 million, with $550 thousand of that amount attributable to the 3.8 million shares held as of December 31, 2016 from the 39.5 million Central shares received initially as part of the consideration for the sale of the Amadeus Basin assets in March 2014. Central's stock is traded on the Australian Securities Exchange (the "ASX"), and we determined the fair value of our investment in Central using Central's closing stock price on the ASX on December 31, 2016, of A$0.200 per share, which translated to $0.144 per share in US dollars on that date. Due to the number of Central shares that we own and Central's general daily trading volumes, we may not be able to obtain the currently quoted market price in the event we elect to sell our Central shares. The remaining $992 thousand of the fair value of our investments in securities held for sale is attributable to 50.9 million shares of UKOG acquired as part of the consideration for the transactions contemplated by the Weald ATA, which closed on August 11, 2016. UKOG's stock is traded on the AIM market in the UK, and we determined the the fair value of our investment in UKOG using UKOG's closing stock price on December 31, 2016, of £0.016 per share, which translated to $0.020 per share in US dollars on that date. Pursuant to the terms of the Weald ATA, which include a six-month lock-up period, the Company may not sell its shares of UKOG until February 10, 2017. Considering the current volume of trading activity of UKOG shares, the Company believes that it will be able to dispose of its shareholdings effectively once it decides to monetize these shares. In addition, a 10% across-the-board change in the underlying equity market price per share for our investments would result in a $154 thousand change in the fair value of our investments.None.

ITEM 44. CONTROLS AND PROCEDURES

~~EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES~~

~~Under the supervision and with the participation~~We maintain a set of ~~certain members of the Company's management, including the Chief Executive and Financial Officer, the Company completed an evaluation of the effectiveness of the design and operation of its~~ disclosure controls and procedures (as defined in SEC Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, the Company's Chief Executive and Financial Officer concluded that ~~the disclosure controls and procedures were effective as of the end of the period covered by this report~~are designed to ~~provide reasonable assurance~~ensure that information required to be disclosed by us in the reports ~~the Company files or submits~~filed by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~SEC's~~SEC’s rules and ~~forms~~forms. As of the end of the period covered by this report, we evaluated, under the supervision and ~~is accumulated and communicated to~~with the ~~Company's~~participation of our management, including ~~the~~our Chief Executive Officer and our Chief Financial Officer, ~~as appropriate~~the effectiveness of our disclosure controls and procedures pursuant to ~~allow timely decisions regarding required disclosure.~~Rule 13a-15 of the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.

~~CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING~~

~~There~~Following the completion of the Merger, we have ~~not been any changes in the Company's~~undertaken a variety of efforts to adapt our internal control over financial reporting ~~(as such term is defined~~to the nature and scope of our company following the Merger, including through the hiring of additional personnel with control responsibilities and expertise and the implementation and testing of new controls. Other than these activities, there have been no material changes in ~~Rules 13a-15(f) and 15d-15(f) under the Exchange Act)~~internal controls during the ~~six months~~quarter ended ~~December 31, 2016, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.~~September 30, 2017.

PART ~~II -~~II. OTHER INFORMATION

ITEM 11. LEGAL PROCEEDINGS

~~The information required~~In July 2017, Tellurian Investments, Driftwood LNG, Martin Houston, and three other individuals were named as third-party defendants in a lawsuit filed in state court in Harris County, Texas between Cheniere Energy, Inc. and one of its affiliates, on the one hand (collectively, “Cheniere”), and Parallax Enterprises and certain of its affiliates (not including Parallax Services, n/k/a Tellurian Services) on the other hand (collectively, “Parallax”). In October 2017, Driftwood Pipeline and Tellurian Services were also named by ~~this Item is incorporated herein by reference from~~Cheniere as third-party defendants. Cheniere alleges that it entered into a note and a pledge agreement with Parallax. Cheniere claims that the ~~information set forth under "Celtique Litigation"~~third-party defendants tortiously interfered with the note and pledge agreement and aided in ~~Note 17 - Commitments~~the fraudulent transfer of Parallax assets. We believe that Cheniere’s claims against Tellurian Investments, Driftwood LNG, Driftwood Pipeline and ~~Contingencies~~Tellurian Services are without merit and do not expect the resolution of the ~~notes~~suit to ~~the condensed consolidated~~have a material effect on our results of operation or financial ~~statements included in Part I, Item 1 of this report.~~condition.

ITEM 1A. RISK FACTORS

The following risk factors should be carefully considered when evaluating an investment in us. These risk factors and other uncertainties may cause our actual future results or performance to differ materially from any future results or performance expressed or implied in the forward-looking statements contained in this report.

The risk factors in this report supersede the risk factors disclosed in Exhibit 99.1 to our Current Report on Form 8-K/A filed on March 15, 2017 and are grouped into the following categories:

Risks Relating to Financial Matters;

Risks Relating to Our Common Stock;

Risks Relating to Our LNG Business;

Risks Relating to Our Potential Natural Gas Production Activities; and

Risks Relating to Our Business in General.

Risks Relating to Financial Matters

Tellurian does not expect to generate sufficient cash to pay dividends until the completion of construction of the Driftwood Project.

Tellurian’s directly and indirectly held assets currently consist primarily of cash held for certain start-up and operating expenses, applications for permits from regulatory agencies relating to the Driftwood Project and certain real property interests related to that project. Tellurian’s cash flow, and consequently its ability to distribute earnings, is solely dependent upon the cash flow its subsidiaries receive from the Driftwood Project and its other operations. Tellurian’s ability to complete the Driftwood Project, as discussed further below, is dependent upon its subsidiaries’ ability to obtain necessary regulatory approvals and raise the capital necessary to fund the development of the project. We expect that cash flows from our operations will be reinvested in the business rather than used to fund dividends. Further, we expect that pursuing our strategy will require substantial amounts of capital, and that the required capital will exceed cash flows from operations for a significant period of time.

Tellurian’s ability to pay dividends in the future is uncertain and will depend on a variety of factors, including limitations on the ability of it or its subsidiaries to pay dividends under applicable law and/or the terms of debt or other agreements, and the judgment of the board of directors or other governing body of the relevant entity.

~~ITEM 1A RISK FACTORS~~

Tellurian will be required to seek additional debt and equity financing in the future to complete the Driftwood Project and to grow its other operations, and may not be able to secure such financing on acceptable terms, or at all.

~~Item 1A ("Risk Factors")~~Tellurian will be unable to generate any revenue from the Driftwood Project for multiple years, and expects cash flow from any other lines of business to be modest for an extended period of time as it focuses on the development and growth of these operations. Tellurian will therefore need substantial amounts of additional financing to execute its business plan.

There can be no assurance that Tellurian will be able to raise sufficient capital on acceptable terms, or at all. If such financing is not available on satisfactory terms, or is not available at all, Tellurian may be required to delay, scale back or eliminate the development of business opportunities, and its operations and financial condition may be adversely affected to a significant extent. Tellurian intends to pursue a variety of potential financing transactions, including sales of equity to purchasers of its LNG. We do not know whether, and to what extent, LNG purchasers and other potential sources of financing will find the terms we propose acceptable.

Debt financing, if obtained, may involve agreements that include liens on Tellurian’s assets and covenants limiting or restricting our ability to take specific actions, such as paying dividends or making distributions, incurring additional debt, acquiring or disposing of assets and increasing expenses. Debt financing would also be required to be repaid regardless of Tellurian’s operating results.

In addition, the ability to obtain financing for the proposed Driftwood Project may depend in part on Tellurian’s ability to enter into sufficient commercial agreements prior to the commencement of construction. To date, Tellurian has not entered into any definitive third-party agreements for the proposed Driftwood Project, and it may not be successful in negotiating and entering into such agreements.

We have no operating history and expect to incur losses for a significant period of time.

We have no current operations. Although Tellurian’s current directors, managers and officers have prior professional and industry experience, our businesses are in the early stages of their development, or in some cases are still in the planning stage. Accordingly, there is a limited prior history, track record and historical financial information upon which you may evaluate prospects.

Tellurian has not yet commenced the construction of the Driftwood Project. Accordingly, Tellurian expects to incur significant additional costs and expenses through completion of development and construction of the Driftwood Project. It also expects to devote substantial amounts of capital to the growth and development of its natural gas production activities and other complementary lines of business. Tellurian expects that operating losses will increase substantially in the remainder of 2017 and thereafter, and expects to continue to incur operating losses and to experience negative operating cash flow through at least 2022.

Tellurian’s exposure to the performance and credit risks of counterparties under agreements may adversely affect its operating results, liquidity and access to financing.

Our operations will involve our entering into various purchase and sale, hedging, supply and other transactions with numerous third parties. In such arrangements, we will be exposed to the performance and credit risks of our ~~2016 Form 10-K sets forth information~~counterparties, including the risk that one or more counterparties fails to perform its obligation to make deliveries of commodities, to make payments or to satisfy other obligations. Some of these risks may increase during periods of commodity price volatility. In some cases, we will be dependent on a single counterparty or a small group of counterparties, all of whom may be similarly affected by changes in economic and other conditions. Defaults by suppliers and other counterparties may adversely affect our operating results, liquidity and access to financing.

Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial condition, results of operations and liquidity.

We are subject to income taxes as well as non-income based taxes in the various jurisdictions in which we operate. Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of these audits to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes could have a material impact on our net income or financial condition.

Changes in tax laws or tax rulings could materially impact our effective tax rate. For example, the Trump Administration has called for substantial change to fiscal and tax policies, inclusive of proposed changes to the U.S. federal tax treatment of foreign operations, the current tax depreciation system and the deductibility of interest expense, in connection with comprehensive U.S. federal tax reform. Similarly, proposals are made from time to time in various jurisdictions to change tax rules applicable to natural gas production activities. If enacted, any change in law may affect our tax position, including the amount of taxes we are

required to pay, and could have a significant impact on our future results of operations, profitability and financial condition, including the size of our expected net operating losses. However, until we know what changes are enacted, we will not know whether in total we will benefit from, or be negatively affected by, the proposed changes.

Risks Relating to Our Common Stock

The price of our common stock has been and may continue to be highly volatile, which may make it difficult for shareholders to sell our common stock when desired or at attractive prices.

The market price of our common stock is highly volatile, and we expect it to continue to be volatile for the foreseeable future. Adverse events could trigger a significant decline in the trading price of our common stock, including, among others, failure to obtain necessary permits, unfavorable changes in commodity prices or commodity price expectations, adverse regulatory developments, loss of a relationship with a partner, litigation and departures of key personnel. Furthermore, general market conditions, including the level of, and fluctuations in, the trading prices of equity securities generally could affect the price of our stock. The stock markets frequently experience price and volume volatility that affects many companies’ stock prices, often in ways unrelated to the operating performance of those companies. These fluctuations may affect the market price of our common stock.

The market price of our common stock could be adversely affected by sales of substantial amounts of our common stock by us or our major shareholders.

Sales of a substantial number of shares of our common stock in the market by us or any of our major shareholders, or the perception that these sales may occur, could cause the market price of our common stock to decline. In addition, the sale of these shares in the public market, or the possibility of such sales, could impair our ability to raise capital through the sale of additional equity securities. Our insider trading policy permits our officers and directors, some of whom own substantial percentages of our outstanding common stock, to pledge shares of stock that they own as collateral for loans subject to certain requirements. Some of our officers and directors have pledged shares of stock in accordance with this policy. In some circumstances, such pledges could result in large amounts of shares of our stock being sold in the market in a short period of time, which would be expected to have a significant adverse effect on the trading price of the common stock. In addition, in the future, we may issue shares of our common stock in connection with acquisitions of assets or businesses. If we use our shares for this purpose, the issuances could have a dilutive effect on the market value of shares of our common stock, depending on market conditions at the time of an acquisition, the price we pay, the value of the business or assets acquired, our success in exploiting the properties or integrating the businesses we acquire and other factors.

Risks Relating to Our LNG Business

Various economic and political factors could negatively affect the development, construction and operation of LNG facilities, including the Driftwood Project, which could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

Commercial development of an LNG facility takes a number of years, requires substantial capital investment and may be delayed by factors such as:

increased construction costs;

economic downturns, increases in interest rates or other events that may affect the availability of sufficient financing for LNG projects on commercially reasonable terms;

decreases in the price of LNG, which might decrease the expected returns relating to ~~important risks~~investments in LNG projects;

the inability of project owners or operators to obtain governmental approvals to construct or operate LNG facilities; and ~~uncertainties that~~

political unrest or local community resistance to the siting of LNG facilities due to safety, environmental or security concerns.

Our failure to execute our business plan in a timely manner could materially adversely effect our business, financial condition, operating results, liquidity and prospects.

Tellurian’s estimated costs for the Driftwood Project may not be accurate and are subject to change due to various factors.

Tellurian currently estimates that construction costs will be between approximately (i) $13 and $16 billion for the Driftwood terminal and (ii) $2 and $3 billion for the Driftwood pipeline. However, cost estimates are only an approximation of the actual costs of construction and are before owners’ costs, financing costs and contingencies. Moreover, cost estimates may change due to various factors, such as the final terms of any definitive request for services with its EPC service provider, as well as cost overruns, change orders, delays in construction, legal and regulatory requirements, site issues, increased component and

material costs, escalation of labor costs, labor disputes, changes in commodity prices, increased spending to maintain Tellurian’s construction schedule and other factors.

Our failure to achieve our cost estimates could materially adversely affect our business, financial condition, operating results, liquidity and prospects.

If third-party pipelines and other facilities interconnected to our LNG facilities become unavailable to transport natural gas, this could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We will depend upon third-party pipelines and other facilities that will provide gas delivery options to our LNG facilities. If the construction of new or modified pipeline connections is not completed on schedule or any pipeline connection were to become unavailable for current or future volumes of natural gas due to repairs, damage to the facility, lack of capacity or any other reason, our ability to meet our LNG sale and purchase agreement obligations and continue shipping natural gas from producing regions or to end markets could be restricted, thereby reducing our revenues. This could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Tellurian’s ability to generate cash ~~flows.~~is substantially dependent upon it entering into contracts with third party customers and the performance of those customers under those contracts.

Tellurian has not yet entered into, and may never be able to enter into, satisfactory commercial arrangements with third-party customers for products and services at the Driftwood Project.

Tellurian’s business strategy may change regarding how and when the proposed Driftwood Project’s export capacity is marketed. Also, Tellurian’s business strategy may change due to an inability to enter into agreements with customers or based on a variety of factors including the future price outlook, supply and demand of LNG, natural gas liquefaction capacity, and worldwide regasification capacity. If our efforts to market the proposed Driftwood Project and the LNG it will produce are not successful, Tellurian’s business, results of operations, financial condition and prospects may be materially and adversely affected.

We may not be able to purchase, receive or produce sufficient natural gas to satisfy our delivery obligations under our LNG sale and purchase agreements, which could have an adverse effect on us.

Under LNG sale and purchase agreements with our customers, we will be required to make available to them a specified amount of LNG at specified times. However, we may not be able to purchase, receive or produce sufficient quantities of natural gas or LNG to satisfy those obligations, which may provide affected customers with the right to terminate their LNG sale and purchase agreements. Our failure to purchase, receive or produce sufficient quantities of natural gas or LNG in a timely manner could have an adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

The construction and operation of the Driftwood Project remains subject to further approvals, and some approvals may be subject to further conditions, review and/or revocation.

The design, construction and operation of LNG export terminals is a highly regulated activity. The approval of FERC under Section 3 of the Natural Gas Act, as well as several other material governmental and regulatory approvals and permits, is required in order to construct and operate an LNG terminal. Even if the necessary authorizations initially required to operate our proposed LNG facilities are obtained, such authorizations are subject to ongoing conditions imposed by regulatory agencies, and additional approval and permit requirements may be imposed.

Tellurian will be required to obtain governmental approvals and authorizations to implement its proposed business strategy, which includes the construction and operation of the Driftwood Project. In particular, authorization from FERC and DOE/FE is required to construct and operate our proposed LNG facilities. In addition to seeking approval for export to FTA countries, Tellurian will seek to obtain approval for export to non-FTA countries. There is no assurance that Tellurian will obtain and maintain these governmental permits, approvals and authorizations, and failure to obtain and maintain any of these permits, approvals or authorizations could have ~~been no~~a material adverse effect on its business, results of operations, financial condition and prospects.

Tellurian will be dependent on third-party contractors for the successful completion of the Driftwood Project, and these contractors may be unable to complete the Driftwood Project.

There is limited recent industry experience in the United States regarding the construction or operation of large-scale LNG facilities. The construction of the Driftwood Project is expected to take several years, will be confined to a limited geographic area and could be subject to delays, cost overruns, labor disputes and other factors that could adversely affect financial performance or impair Tellurian’s ability to execute its scheduled business plan.

Timely and cost-effective completion of the Driftwood Project in compliance with agreed-upon specifications will be highly dependent upon the performance of third-party contractors pursuant to their agreements. However, Tellurian has not yet entered into definitive agreements with certain of the contractors, advisors and consultants necessary for the development and construction of the Driftwood Project. Tellurian may not be able to successfully enter into such construction contracts on terms or at prices that are acceptable to it.

Further, faulty construction that does not conform to Tellurian’s design and quality standards may have an adverse effect on Tellurian’s business, results of operations, financial condition and prospects. For example, improper equipment installation may lead to a shortened life of Tellurian’s equipment, increased operations and maintenance costs or a reduced availability or production capacity of the affected facility. The ability of Tellurian’s third-party contractors to perform successfully under any agreements to be entered into is dependent on a number of factors, including force majeure events and such contractors’ ability to:

design, engineer and receive critical components and equipment necessary for the Driftwood Project to operate in accordance with specifications and address any start-up and operational issues that may arise in connection with the commencement of commercial operations;

attract, develop and retain skilled personnel and engage and retain third-party subcontractors, and address any labor issues that may arise;

post required construction bonds and comply with the terms thereof, and maintain their own financial condition, including adequate working capital;

adhere to any warranties the contractors provide in their EPC contracts; and

respond to difficulties such as equipment failure, delivery delays, schedule changes and failure to perform by subcontractors, some of which are beyond their control, and manage the construction process generally, including engaging and retaining third-party contractors, coordinating with other contractors and regulatory agencies and dealing with inclement weather conditions.

Furthermore, Tellurian may have disagreements with its third-party contractors about different elements of the construction process, which could lead to the assertion of rights and remedies under the related contracts, resulting in a contractor’s unwillingness to perform further work on the relevant project. Tellurian may also face difficulties in commissioning a newly constructed facility. Any significant project delays in the development of the Driftwood Project could materially and adversely affect Tellurian’s business, results of operations, financial condition and prospects.

Tellurian’s construction and operations activities are subject to a number of development risks, operational hazards, regulatory approvals and other risks, which could cause cost overruns and delays and could have a material adverse effect on its business, results of operations, financial condition, liquidity and prospects.

Siting, development and construction of the Driftwood Project will be subject to the risks of delay or cost overruns inherent in any construction project resulting from numerous factors, including, but not limited to, the following:

difficulties or delays in obtaining, or failure to obtain, sufficient debt or equity financing on reasonable terms;

failure to obtain all necessary government and third-party permits, approvals and licenses for the construction and operation of any of our proposed LNG facilities;

difficulties in engaging qualified contractors necessary to the construction of the contemplated Driftwood Project or other LNG facilities;

shortages of equipment, material or skilled labor;

natural disasters and catastrophes, such as hurricanes, explosions, fires, floods, industrial accidents and terrorism;

unscheduled delays in the delivery of ordered materials;

work stoppages and labor disputes;

competition with other domestic and international LNG export terminals;

unanticipated changes in domestic and international market demand for and supply of natural gas and LNG, which will depend in part on supplies of and prices for alternative energy sources and the discovery of new sources of natural resources;

unexpected or unanticipated need for additional improvements; and

adverse general economic conditions.

Delays beyond the estimated development periods, as well as cost overruns, could increase the cost of completion beyond the amounts that are currently estimated, which could require Tellurian to obtain additional sources of financing to fund the activities until the proposed Driftwood Project is constructed and operational (which could cause further delays). Any delay in completion of the Driftwood Project may also cause a delay in the receipt of revenues projected from the Driftwood Project or cause a loss of one or more customers. As a result, any significant construction delay, whatever the cause, could have a material adverse effect on Tellurian’s business, results of operations, financial condition, liquidity and prospects.

Technological innovation may render Tellurian’s anticipated competitive advantage or its processes obsolete.

Tellurian’s success will depend on its ability to create and maintain a competitive position in the natural gas liquefaction industry. In particular, although Tellurian plans to construct the Driftwood Project using proven technologies that it believes provide it with certain advantages, Tellurian does not have any exclusive rights to any of the technologies that it will be utilizing. In addition, the technology Tellurian anticipates using in the Driftwood Project may be rendered obsolete or uneconomical by legal or regulatory requirements, technological advances, more efficient and cost-effective processes or entirely different approaches developed by one or more of its competitors or others, which could materially and adversely affect Tellurian’s business, results of operations, financial condition, liquidity and prospects.

Cyclical or other changes in the ~~Risk~~demand for and price of LNG and natural gas may adversely affect Tellurian’s LNG business and the performance of our customers and could lead to reduced development of LNG projects worldwide.

Tellurian’s plans and expectations regarding its business and the development of domestic LNG facilities and projects are generally based on assumptions about the future price of natural gas and LNG and the conditions of the global natural gas and LNG markets. Natural gas and LNG prices have been, and are likely to remain in the future, volatile and subject to wide fluctuations that are difficult to predict. Such fluctuations may be caused by factors including, but not limited to, one or more of the following:

competitive liquefaction capacity in North America;

insufficient or oversupply of natural gas liquefaction or receiving capacity worldwide;

insufficient or oversupply of LNG tanker capacity;

weather conditions;

reduced demand and lower prices for natural gas;

increased natural gas production deliverable by pipelines, which could suppress demand for LNG;

decreased oil and natural gas exploration activities, which may decrease the production of natural gas;

cost improvements that allow competitors to offer LNG regasification services or provide natural gas liquefaction capabilities at reduced prices;

changes in supplies of, and prices for, alternative energy sources such as coal, oil, nuclear, hydroelectric, wind and solar energy, which may reduce the demand for natural gas;

changes in regulatory, tax or other governmental policies regarding imported or exported LNG, natural gas or alternative energy sources, which may reduce the demand for imported or exported LNG and/or natural gas;

political conditions in natural gas producing regions; and

cyclical trends in general business and economic conditions that cause changes in the demand for natural gas.

Adverse trends or developments affecting any of these factors could result in decreases in the price of LNG and/or natural gas, which could materially and adversely affect the performance of our customers, and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flows, liquidity and prospects.

Failure of exported LNG to be a competitive source of energy for international markets could adversely affect our customers and could materially and adversely affect our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

Operations of the Driftwood Project will be dependent upon the ability of our LNG sale and purchase agreement customers to deliver LNG supplies from the United States, which is primarily dependent upon LNG being a competitive source of energy internationally. The success of our business plan is dependent, in part, on the extent to which LNG can, for significant periods and in significant volumes, be supplied from North America and delivered to international markets at a lower cost than the cost of alternative energy sources. Through the use of improved exploration technologies, additional sources of natural gas may be discovered outside the United States, which could increase the available supply of natural gas outside the United States and could result in natural gas in those markets being available at a lower cost than that of LNG exported to those markets.

Additionally, our liquefaction projects will be subject to the risk of LNG price competition at times when we need to replace any existing LNG sale and purchase contract, whether due to natural expiration, default or otherwise, or enter into new LNG sale and purchase contracts. Factors ~~described~~relating to competition may prevent us from entering into a new or replacement LNG sale and purchase contract on economically comparable terms as prior LNG sale and purchase contracts, or at all. Factors which may negatively affect potential demand for LNG from our liquefaction projects are diverse and include, among others:

increases in worldwide LNG production capacity and availability of LNG for market supply;

increases in demand for LNG but at levels below those required to maintain current price equilibrium with respect to supply;

increases in the cost to supply natural gas feedstock to our liquefaction projects;

decreases in the cost of competing sources of natural gas or alternate sources of energy such as coal, heavy fuel oil, diesel, nuclear, hydroelectric, wind and solar energy;

decreases in the price of non-U.S. LNG, including decreases in price as a result of contracts indexed to lower oil prices;

increases in capacity and utilization of nuclear power and related facilities;

increases in the cost of LNG shipping; and

displacement of LNG by pipeline natural gas or alternate fuels in locations where access to these energy sources is not currently available.

Political instability in foreign countries that import natural gas, or strained relations between such countries and the United States, may also impede the willingness or ability of LNG suppliers, purchasers and merchants in such ~~Form 10-K. You should review~~countries to import LNG from the United States. Furthermore, some foreign purchasers of LNG may have economic or other reasons to obtain their LNG from non-U.S. markets or from our competitors’ liquefaction facilities in the United States.

As a result of these and ~~consider~~other factors, LNG may not be a competitive source of energy in the United States or internationally. The failure of LNG to be a competitive supply alternative to local natural gas, oil and other alternative energy sources in markets accessible to our customers could adversely affect the ability of our customers to deliver LNG from the United States on a commercial basis. Any significant impediment to the ability to deliver LNG from the United States generally, or from the Driftwood Project specifically, could have a material adverse effect on our customers and on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

There may be shortages of LNG vessels worldwide, which could have a material adverse effect on Tellurian’s business, results of operations, financial condition, liquidity and prospects.

The construction and delivery of LNG vessels requires significant capital and long construction lead times, and the availability of the vessels could be delayed to the detriment of Tellurian’s business and customers due to a variety of factors, including, but not limited to, the following:

an inadequate number of shipyards constructing LNG vessels and a backlog of orders at these shipyards;

political or economic disturbances in the countries where the vessels are being constructed;

changes in governmental regulations or maritime self-regulatory organizations;

work stoppages or other labor disturbances at the shipyards;

bankruptcies or other financial crises of shipbuilders;

quality or engineering problems;

weather interference or catastrophic events, such ~~Risk Factors~~as a major earthquake, tsunami, or fire; or

shortages of or delays in ~~making~~the receipt of necessary construction materials.

Any of these factors could have a material adverse effect on Tellurian’s business, results of operations, financial condition, liquidity and prospects.

We will rely on third-party engineers to estimate the future capacity ratings and performance capabilities of the Driftwood Project, and these estimates may prove to be inaccurate.

We will rely on third parties for the design and engineering services underlying our estimates of the future capacity ratings and performance capabilities of the Driftwood Project. Any of our LNG facilities, when actually constructed, may not have the capacity ratings and performance capabilities that we intend or estimate. Failure of any ~~investment decision~~of our LNG facilities to achieve our intended capacity ratings and performance capabilities could prevent us from achieving the commercial start dates under our future LNG sale and purchase agreements and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

The Driftwood Project will be subject to a number of environmental laws and regulations that impose significant compliance costs, and existing and future environmental and similar laws and regulations could result in increased compliance costs, liabilities or additional operating restrictions.

We will be subject to extensive federal, state and local environmental regulations and laws, including regulations and restrictions related to discharges and releases to the air, land and water and the handling, storage, generation and disposal of hazardous materials and solid and hazardous wastes in connection with the development, construction and operation of our LNG facilities. These regulations and laws, which include the Clean Air Act (“CAA”), the Oil Pollution Act, the Clean Water Act (“CWA”) and theResource Conservation and Recovery Act (“RCRA”), and analogous state and local laws and regulations, will restrict, prohibit or otherwise regulate the types, quantities and concentration of substances that can be released into the environment in connection with the construction and operation of our facilities. These laws and regulations, including the National Environmental Protection Act (“NEPA”), will require Tellurian to obtain and maintain permits with respect to our ~~securities. An investment~~LNG facilities, prepare environmental impact assessments, provide governmental authorities with access to its facilities for inspection and provide reports related to compliance. Federal and state laws impose liability, without regard to fault or the lawfulness of the original conduct, for the release of certain types or quantities of hazardous substances into the environment. As the owner and operator of the Driftwood Project, Tellurian could be liable for the costs of investigating and cleaning up hazardous substances released into the environment and for damage to natural resources. Violation of these laws and regulations could lead to substantial liabilities, fines and penalties, the denial or revocation of permits necessary for our operations, governmental orders to shut down our facilities or capital expenditures related to pollution control equipment or remediation measures that could have a material adverse effect on Tellurian’s business, results of operations, financial condition, liquidity and prospects.

Changes in legislation and regulations relating to the LNG industry could have a material adverse impact on Tellurian’s business, results of operations, financial condition, liquidity and prospects.

Future legislation and regulations, such as those relating to the transportation and security of LNG exported from our proposed LNG facilities through the Calcasieu Ship Channel, could cause additional expenditures, restrictions and delays in connection with the proposed LNG facilities and their construction, the extent of which cannot be predicted and which may require Tellurian to limit substantially, delay or cease operations in some circumstances. Revised, reinterpreted or additional laws and regulations that result in increased compliance costs or additional operating costs and restrictions could have a material adverse effect on Tellurian’s business, results of operations, financial condition, liquidity and prospects.

Our LNG operations will be subject to significant risks and hazards, one or more of which may create significant liabilities and losses that could have a material adverse effect on Tellurian’s business, results of operations, financial condition, liquidity and prospects.

We will face numerous risks in developing and conducting our LNG business. For example, the plan of operations for the proposed Driftwood Project is subject to the inherent risks associated with LNG operations, including explosions, pollution, release of toxic substances, fires, hurricanes and other adverse weather conditions, and other hazards, each of which could result in significant delays in commencement or interruptions of operations and/or result in damage to or destruction of the proposed Driftwood Project or damage to persons and property. In addition, operations at the proposed Driftwood Project and vessels of third parties on which Tellurian’s operations are dependent face possible risks associated with acts of aggression or terrorism.

In 2005, 2008 and 2017 hurricanes damaged coastal and inland areas located in the Gulf Coast area, resulting in disruption and damage to certain LNG terminals located in the area. Future storms and related storm activity and collateral effects, or other disasters such as explosions, fires, floods or accidents, could result in damage to, or interruption of operations at, the Driftwood Project or related infrastructure, as well as delays or cost increases in the construction and the development of the Driftwood Project or other facilities. Storms, disasters and accidents could also damage or interrupt the activities of vessels that we or third parties operate in connection with our LNG business. Changes in the global climate may have significant physical effects, such as increased frequency and severity of storms, floods and rising sea levels; if any such effects were to occur, they could have an adverse effect on our coastal operations.

Our LNG business will face other types of risks and liabilities as well. For instance, our LNG trading activities will expose us to possible financial losses and various regulatory risks.

Tellurian does not, nor does it intend to, maintain insurance against all of these risks and losses and many risks are not insurable. Tellurian may not be able to maintain desired or required insurance in the future at rates that it considers reasonable. The occurrence of a significant event not fully insured or indemnified against could have a material adverse effect on Tellurian’s business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

Risks Relating to Our Potential Natural Gas Production Activities

If the Rockcliff transaction is completed, our business would be subject to risks which may materially impact our results and create losses which may materially impact our results of operations and ability to finance the Driftwood Project. We plan to pursue

acquisitions of additional assets as part of our strategy to grow our natural gas production. Most or all of the risks described below will apply to future acquisitions as well.

If completed, the Rockcliff transaction may not achieve its intended results and may result in us assuming unanticipated liabilities. To date, we have conducted only limited diligence regarding the assets and liabilities we would assume in the transaction.

We expect that the Rockcliff transaction, if completed, will provide us with various benefits, growth opportunities and synergies. Achieving the anticipated benefits of the transaction is subject to a number of risks and uncertainties. Under the PSA, we have the opportunity to conduct customary environmental and title due diligence, but our diligence efforts have not been comprehensive. As a result, we may discover title defects or adverse environmental or other conditions of which we are currently unaware. Environmental, title and other problems could reduce the value of the properties to us, and, depending on the circumstances, we could have limited or no recourse to Rockcliff with respect to those problems. We would assume substantially all of the liabilities associated with the acquired properties and would be entitled to indemnification in connection with those liabilities in only limited circumstances and in limited amounts. We cannot assure that such potential remedies will be adequate for any liabilities we incur, and such liabilities could be significant. In addition, certain of the properties to be acquired are subject to consents to assign and preference rights. If all applicable waivers cannot be obtained, we may not be able to acquire certain properties as originally contemplated and our expected benefits of the acquisition may be adversely affected.

The success of the Rockcliff transaction will depend on, among other things, the accuracy of our assessment of the potential reserves and drilling locations associated with the acquired properties, future natural gas prices and operating costs and various other factors. These assessments are necessarily inexact. The drilling locations we acquire may be less productive than we expect or may cost more than we expect to drill or operate. As a result, we may not recover the purchase price of the acquisition from the sale of production from the property or recognize an acceptable return from such sales. The fact that substantially all of the properties to be acquired are currently undeveloped increases the risk that our operations on those properties will not be successful.

In addition, the integration of operations following the completion of the Rockcliff transaction will require the attention of our management and other personnel, which may distract their attention from our day-to-day business and operations and prevent us from realizing benefits from the transaction or from other opportunities. These issues may be particularly challenging for us because we have no current natural gas production. Further, our senior management will not be able to focus on the integration and development of our natural gas assets to the exclusion of our other operations. Completing the integration process may be more expensive than anticipated, and we cannot assure that we will be able to effect the integration of these operations smoothly or efficiently or that the anticipated benefits of the transaction will be achieved.

Natural gas prices fluctuate widely, and lower prices for an extended period of time may have a material adverse effect on the profitability of our natural gas production activities.

The revenues, operating results and profitability of natural gas production activites will depend significantly on the prices we receive for the natural gas we sell. We will require substantial expenditures to replace reserves, sustain production and fund our business plans. Low natural gas prices can negatively affect the amount of cash available for acquisitions and capital expenditures and our ability to raise additional capital and, as a result, could have a material adverse effect on our revenues, cash flow and reserves. In addition, low prices may result in ceiling test write-downs of our natural gas properties.

Historically, the markets for natural gas have been volatile, and they are likely to continue to be volatile. Wide fluctuations in natural gas prices may result from relatively minor changes in the supply of or demand for natural gas, market uncertainty and other factors that are beyond our control. The volatility of the energy markets makes it extremely difficult to predict future natural gas price movements and we will be unable to fully hedge our exposure to natural gas prices.

Significant capital expenditures will be required to grow our natural gas production activities in accordance with our plans.

Our planned development and acquisition activities will require substantial capital expenditures. We intend to fund our capital expenditures for our natural gas production activities through cash on hand and financing transactions that may include public or private debt or equity offerings or borrowings under a revolving credit facility. We currently have no cash flows from operations and expect to generate only modest cash flows for a significant period of time from the properties we may acquire in the Rockcliff transaction. Our ability to generate operating cash flow in the future will be subject to a number of risks and variables, such as the level of production from existing wells, the price of natural gas, our success in developing and producing new reserves and the other risk factors discussed herein. If we are unable to fund our capital expenditures for natural gas production activities as planned, we could experience a curtailment of our development activity and a decline in our ~~securities continues~~natural gas production, that could affect our ability to ~~involve a high degree~~pursue our overall strategy.

Drilling and producing operations can be hazardous and may expose us to liabilities.

Natural gas and oil operations are subject to many risks, including well blowouts, cratering and explosions, pipe failures, fires, formations with abnormal pressures, uncontrollable flows of ~~risk.~~oil, natural gas, brine or well fluids, leakages or releases of

high-sulphur (or “sour”) gas, severe weather, natural disasters, groundwater contamination and other environmental hazards and risks. Some of these risks or hazards could materially and adversely affect our revenues and expenses by reducing production from wells, causing wells to be shut in or otherwise negatively impacting the projected economic performance of our prospects. For our non-operated properties, we will be dependent on the operator for operational and regulatory compliance. If any of these risks occurs, we could sustain substantial losses as a result of:

injury or loss of life;

severe damage to or destruction of property, natural resources or equipment;

pollution or other environmental damage;

facility or equipment malfunctions and equipment failures or accidents, including acceleration of deterioration of our facilities and equipment due to the highly corrosive nature of sour gas we produce;

clean-up responsibilities;

regulatory investigations and administrative, civil and criminal penalties; and

injunctions resulting in limitation or suspension of operations.

A material event such as those described above could expose us to liabilities, monetary penalties or interruptions in our business operations. We may not maintain insurance against such risks, and some risks are not insurable. Even when we are insured, our insurance may not be adequate to cover casualty losses or liabilities. Also, in the future we may not be able to obtain insurance at premium levels that justify its purchase. The occurrence of a significant event against which we are not fully insured may expose us to liabilities.

Our natural gas production activities will be subject to complex laws and regulations relating to environmental protection that can adversely affect the cost, manner and feasibility of doing business, and further regulation in the future could increase costs, impose additional operating restrictions and cause delays.

Our natural gas production activities and properties will be subject to numerous federal, regional, state and local laws and regulations governing the release of pollutants or otherwise relating to environmental protection. These laws and regulations govern the following, among other things:

conduct of drilling, completion, production and midstream activities;

amounts and types of emissions and discharges;

generation, management, and disposition of hazardous substances and waste materials;

reclamation and abandonment of wells and facility sites; and

remediation of contaminated sites.

In addition, these laws and regulations may impose substantial liabilities for our failure to comply or for any contamination resulting from our operations, including the assessment of administrative, civil and criminal penalties; the imposition of investigatory, remedial, and corrective action obligations or the incurrence of capital expenditures; the occurrence of delays in the development of projects; and the issuance of injunctions restricting or prohibiting some or all of our activities in a particular area. Future environmental laws and regulations imposing further restrictions on the emission of pollutants into the air, discharges into state or U.S. waters, wastewater disposal and hydraulic fracturing, or the designation of previously unprotected species as threatened or endangered in areas where we operate, may negatively impact our natural gas production. We cannot predict the actions that future regulation will require or prohibit, but our business and operations could be subject to increased operating and compliance costs if certain regulatory proposals are adopted. In addition, such regulations may have an adverse impact on our ability to develop and produce our reserves.

Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.

Several states are considering adopting regulations that could impose more stringent permitting, public disclosure and/or well construction requirements on hydraulic fracturing operations. In addition to state laws, some local municipalities have adopted or are considering adopting land use restrictions, such as city ordinances, that may restrict or prohibit the performance of well drilling in general and/or hydraulic fracturing in particular. There are also certain governmental reviews either underway or being proposed that focus on deep shale and other formation completion and production practices, including hydraulic fracturing. These studies assess, among other things, the risks of groundwater contamination and earthquakes caused by hydraulic fracturing and other exploration and production activities. Depending on the outcome of these studies, federal and state legislatures and agencies may seek to further regulate or even ban such activities, as some state and local governments have already done. We cannot predict whether additional federal, state or local laws or regulations applicable to hydraulic fracturing will be enacted in the future and,

if so, what actions any such laws or regulations would require or prohibit. If additional levels of regulation or permitting requirements were imposed on hydraulic fracturing operations, our business and operations could be subject to delays, increased operating and compliance costs and process prohibitions. Among other things, this could adversely affect the cost to produce natural gas, either by us or by third-party suppliers, and therefore LNG.

If the Rockcliff transaction is completed, we expect to drill the locations we acquire over a multi-year period, making them susceptible to uncertainties that could materially alter the occurrence or timing of drilling.

Our management team has identified certain well locations on the properties we may acquire in the Rockcliff transaction. Our ability to drill and develop these locations depends on a number of uncertainties, including natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, gathering system and pipeline transportation constraints, access to and availability of water sourcing and distribution systems, regulatory approvals and other factors. Because of these factors, we do not know if the well locations we have identified will ever be drilled or if we will be able to produce natural gas from these or any other potential locations.

The unavailability or high cost of additional drilling rigs, equipment, supplies, personnel and services could adversely affect our ability to execute our development plans within budgeted amounts and on a timely basis.

The demand for qualified and experienced field and technical personnel to conduct our operations can fluctuate significantly, often in correlation with hydrocarbon prices. The price of services and equipment may increase in the future and availability may decrease. In addition, it is possible that oil prices could increase without a corresponding increase in natural gas prices, which could lead to increased demand and prices for equipment, facilities and personnel without an increase in the price at which we sell our natural gas to third parties. In this scenario, necessary equipment, facilities and services may not be available to us at economical prices. Any shortages in availability or increased costs could delay us or cause us to incur significant additional expenditures, which could have a material adverse effect on the competitiveness of the natural gas we sell and therefore on our business, financial condition or results of operations.

Our natural gas production may be adversely affected by pipeline and gathering system capacity constraints.

Our natural gas production activities will rely on third parties to meet our needs for midstream infrastructure and services. Capital constraints could limit the construction of new infrastructure by third parties. We may experience delays in producing and selling natural gas from time to time when adequate midstream infrastructure and services are not available. Such an event could reduce our production or result in other adverse effects on our business.

Risks Relating to Our Business in General

We are pursuing a strategy of participating in multiple aspects of the natural gas business, which exposes us to risks.

We plan to to develop, own and operate a global natural gas business and to deliver natural gas to customers worldwide. We may not be successful in executing our strategy in the near future, or at all. Our management will be required to understand and manage a diverse set of business opportunities, which may distract their focus and make it difficult to be successful in increasing value for shareholders.

Tellurian will be subject to risks related to doing business in, and having counterparties based in, foreign countries.

Tellurian may engage in operations or make substantial commitments and investments, or enter into agreements with counterparties, located outside the United States, which would expose Tellurian to political, governmental, and economic instability and foreign currency exchange rate fluctuations.

Any disruption caused by these factors could harm Tellurian’s business, results of operations, financial condition, liquidity and prospects. Risks associated with operations, commitments and investments outside of the United States include but are not limited to risks of:

currency fluctuations;

war or terrorist attack;

expropriation or nationalization of assets;

renegotiation or nullification of existing contracts;

changing political conditions;

changing laws and policies affecting trade, taxation, and investment;

multiple taxation due to different tax structures;

general hazards associated with the assertion of sovereignty over areas in which operations are conducted; and

the unexpected credit rating downgrade of countries in which Tellurian’s LNG customers are based.

Because Tellurian’s reporting currency is the United States dollar, any of the operations conducted outside the United States or denominated in foreign currencies would face additional risks of fluctuating currency values and exchange rates, hard currency shortages and controls on currency exchange. In addition, Tellurian would be subject to the impact of foreign currency fluctuations and exchange rate changes on its financial reports when translating its assets, liabilities, revenues and expenses from operations outside of the United States into U.S. dollars at then-applicable exchange rates. These translations could result in changes to the results of operations from period to period.

Tellurian Investments, Driftwood LNG, Driftwood Pipeline and Tellurian Services (collectively , the “Tellurian Defendants”) are defendants in a lawsuit that could result in equitable relief and/or monetary damages that could have a material adverse effect on Tellurian’s operating results and financial condition.

The Tellurian Defendants, along with Tellurian director Martin Houston and three other individuals as well as certain entities in which each of them owned membership interests, as applicable, have been named as defendants in a lawsuit. Although the Tellurian Defendants believe the plaintiffs’ claims are without merit, the Tellurian Defendants may not ultimately be successful and any potential liability they may incur is not reasonably estimable. Moreover, even if the Tellurian Defendants are successful in the defense of this litigation, they could incur costs and suffer both an economic loss and an adverse impact on their reputations, which could have a material adverse effect on their business. In addition, any adverse judgment or settlement of the litigation could have an adverse effect on our operating results and financial condition.

Potential legislative and regulatory actions addressing climate change could significantly impact us.

Various state governments and regional organizations have considered enacting new legislation and promulgating new regulations governing or restricting the emission of greenhouse gases from stationary sources such as oil and natural gas production equipment and facilities. At the federal level, the EPA has already made findings and issued regulations that will require us to establish and report an inventory of greenhouse gas emissions. Additional legislative and/or regulatory proposals for restricting greenhouse gas emissions or otherwise addressing climate change could require us to incur additional operating costs. The potential increase in our operating costs could include new or increased costs to obtain permits, operate and maintain our equipment and facilities, install new emission controls on our equipment and facilities, acquire allowances to authorize our greenhouse gas emissions, pay taxes related to our greenhouse gas emissions and administer and manage a greenhouse gas emissions program. Even without federal legislation or regulation of greenhouse gas emissions, states may pursue the issue either directly or indirectly.

In addition, the United States was actively involved in the United Nations Conference on Climate Change in Paris, which led to the creation of the Paris Agreement. The Paris Agreement will require countries to review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years. The Paris Agreement could further drive regulation in the United States. Restrictions on emissions of methane or carbon dioxide that have been or may be imposed in various states or at the federal level could adversely affect us. We note that some scientists have concluded that increasing concentrations of greenhouse gases in the Earth's atmosphere may produce climate changes that have significant physical effects, such as higher sea levels, increased frequency and severity of storms, droughts, floods, and other climatic events. If any such effects were to occur, they could have an adverse effect on our financial condition and results of operations.

A major health and safety incident relating to our business could be costly in terms of potential liabilities and reputational damage.

Tellurian will be subject to extensive federal, state and local health and safety regulations and laws. Health and safety performance is critical to the success of all areas of our business. Any failure in health and safety performance may result in personal harm or injury, penalties for non-compliance with relevant laws and regulations or litigation, and a failure that results in a significant health and safety incident is likely to be costly in terms of potential liabilities. Such a failure could generate public concern and have a corresponding impact on our reputation and our relationships with relevant regulatory agencies and local communities, which in turn could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

A terrorist attack, including cyberterrorism, or military incident could result in delays in, or cancellation of, construction or closure of our proposed LNG facilities or other disruption to our business.

A terrorist, including a cyberterrorist, incident or military incident could disrupt our business. For example, an incident involving an LNG carrier or LNG facility may result in delays in, or cancellation of, construction of new LNG facilities, including our proposed LNG facilities, which would increase Tellurian’s costs and decrease its cash flows. A terrorist incident may also result in temporary or permanent closure of Tellurian facilities or operations, which could increase costs and decrease cash flows, depending on the duration of the closure. Our operations could also become subject to increased governmental scrutiny that may result in additional security measures at a significant incremental cost. In addition, the threat of terrorism and the impact of military campaigns may lead to continued volatility in prices for natural gas that could adversely affect Tellurian’s business and customers,

including the ability of Tellurian’s suppliers or customers to satisfy their respective obligations under Tellurian’s commercial agreements.

Failure to retain and attract key executive officers, key advisors such as Tellurian’s Chairman, Vice Chairman or other skilled professional and technical employees could have an adverse effect on Tellurian’s business, results of operations, financial condition, liquidity and prospects.

The success of Tellurian’s business relies heavily on its executive officers and key advisors such as its Chairman and Vice Chairman. Should Tellurian’s executive officers be unable to perform their duties on behalf of Tellurian, or should Tellurian be unable to retain or attract other members of management, Tellurian’s business, results of operations, financial condition, liquidity and prospects could be materially impacted.

Additionally, we are dependent upon an available labor pool of skilled employees. We will compete with other energy companies and other employers to attract and retain qualified personnel with the technical skills and experience required to construct and operate our facilities and to provide our customers with the highest quality service. A shortage in the labor pool of skilled workers or other general inflationary pressures or changes in applicable laws and regulations could make it more difficult for us to attract and retain qualified personnel and could require an increase in the wage and benefits packages that we offer, thereby increasing our operating costs. Any increase in our operating costs could materially and adversely affect our business, financial condition, operating results, liquidity and prospects.

Competition is intense in the energy industry and some of Tellurian’s competitors have greater financial, technological and other resources.

Tellurian plans to operate in various aspects of the natural gas business and will face intense competition in each area. Depending on the area of operations, competition may come from independent, technology-driven companies, large, established companies and others.

For example, many competing companies have secured access to, or are pursuing development or acquisition of, LNG facilities to serve the North American natural gas market, including other proposed liquefaction facilities in North America. Tellurian may face competition from major energy companies and others in pursuing its proposed business strategy to provide liquefaction and export products and services at its proposed Driftwood Project. In addition, competitors have developed and are developing additional LNG terminals in other markets, which will also compete with our proposed LNG facilities.

As another example, our business will face competition in, among other things, buying and selling reserves and leases and obtaining goods and services needed to operate and market natural gas. Competitors include multinational oil companies, independent production companies and individual producers and operators.

Many of our competitors have longer operating histories, greater name recognition, larger staffs and substantially greater financial, technical and marketing resources than Tellurian currently possesses. The superior resources that some of these competitors have available for deployment could allow them to compete successfully against Tellurian, which could have a material adverse effect on Tellurian’s business, results of operations, financial condition, liquidity and prospects.

ITEM 22. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~SALES OF UNREGISTERED SECURITIES~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers

~~None.~~The following table summarizes the surrender to the Company of shares of common stock to pay withholding taxes in connection with the vesting of employee restricted stock:

~~ISSUER PURCHASES OF EQUITY SECURITIES~~

~~None.~~



	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share
July 2017	—	$	—
August 2017	50,304	7.76
September 2017	3,516	10.88
Total	53,820

(1) Reflects the surrender to the Company of shares of common stock to pay withholding taxes in connection with the vesting of restricted stock issued to employees pursuant to the Omnibus Plan.

ITEM 5. OTHER INFORMATION

Compliance Disclosure

Pursuant to Section 13(r) of the Exchange Act, if during the quarter ended September 30, 2017, we or any of our affiliates had engaged in certain transactions with Iran or with persons or entities designated under certain executive orders, we would be

required to disclose information regarding such transactions in our quarterly report on Form 10-Q as required under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “ITRSHRA”). Disclosure is generally required even if the activities were conducted outside the United States by non-U.S. entities in compliance with applicable law. During the quarter ended September 30, 2017, we did not engage in any transactions with Iran or with persons or entities related to Iran.

~~ITEM 6 EXHIBITS~~

TOTAL and TOTAL S.A. have beneficial ownership of over 20% of the outstanding Tellurian common stock. TOTAL has the right to designate for election one member of Tellurian’s board of directors, and Jean Jaylet is the current TOTAL designee. TOTAL will retain this right for so long as its percentage ownership of Tellurian voting stock is at least 10%. On March 17, 2017, TOTAL S.A. included information in its Annual Report on Form 20-F for the year ended December 31, 2016 (the “TOTAL 2016 Annual Report”) regarding activities during 2016 that require disclosure under the ITRSHRA. The ~~following exhibits~~relevant disclosures were reproduced in Exhibit 99.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 filed with the SEC on May 10, 2017 and are ~~filed or furnished with or~~ incorporated by reference ~~into this report:~~herein. We have no involvement in or control over such activities, and we have not independently verified or participated in the preparation of the disclosures made in the TOTAL 2016 Annual Report.

Amendment to Director Nomination Procedures

Effective September 20, 2017, the Company amended the advance notice provisions of its bylaws; as amended, the bylaws generally require a stockholder seeking to propose a candidate for election as a director or other business at an annual meeting of stockholders to provide notice to the Company not earlier than 120 days nor later than 90 days prior to the first anniversary of the preceding year’s annual meeting.

ITEM 6. EXHIBITS



~~2.1+~~Exhibit No.	~~First Amendment to~~	Description
2.1*		Purchase and Sale Agreement, ~~and Plan of Merger,~~ dated as of ~~November 23, 2016,~~September 6, 2017, by and ~~among Magellan Petroleum Corporation,~~between Rockcliff Energy Operating LLC and Tellurian ~~Investments~~Production LLC
3.1*		Amended and Restated Certificate of Incorporation of Tellurian Inc.,
3.2*		Amended and ~~River Merger Sub,~~Restated Bylaws of Tellurian Inc. ~~(filed as~~
10.1†		Amended and Restated Tellurian Inc. 2016 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit ~~2.1~~10.1 to the ~~registrant’s~~Company’s Current Report on Form 8-K filed on ~~November 29, 2016 and incorporated herein by reference)~~September 22, 2017)
~~2.2+~~ 10.2*†	~~Second Amendment to~~	2017 - 2021 Long Term Incentive Compensation Program (LTIP) under the Amended and Restated 2016 Tellurian Inc. 2016 Omnibus Incentive Compensation Plan
10.3*†		Form of Restricted Stock Agreement ~~and Plan of Merger, dated as of December 19, 2016, by and among Magellan Petroleum Corporation, Tellurian Investments Inc., and River Merger Sub, Inc. (filed as Exhibit 2.1~~pursuant to the ~~registrant’s Current Report on Form 8-K on December 21,~~Amended and Restated Tellurian Inc. 2016 ~~and incorporated herein by reference)~~Omnibus Incentive Compensation Plan (U.S. Selected Senior Management)
~~3.1~~ 10.4*†		Form of ~~Certificate of Designations of Series B Convertible Preferred~~Restricted Stock ~~of Magellan Petroleum Corporation (filed as Exhibit 3.1~~Agreement pursuant to the ~~registrant’s Current Report on Form 8-K on November 29,~~Amended and Restated Tellurian Inc. 2016 ~~and incorporated herein by reference)~~Omnibus Incentive Compensation Plan (U.S. Employees)
~~10.1~~ 10.5*†	~~Guaranty and Support~~	Form of Stock Option Grant Agreement ~~dated as of November 23, 2016, by and between Magellan Petroleum Corporation and GE Oil & Gas, Inc. (filed as Exhibit 10.1~~pursuant to the ~~registrant’s Current Report on Form 8-K on November 29,~~Amended and Restated Tellurian Inc. 2016 ~~and incorporated herein by reference)~~Omnibus Incentive Compensation Plan (U.S. Selected Senior Management)
~~10.2~~ 10.6*†	~~Guaranty and Support~~	Form of Stock Option Grant Agreement ~~dated as of January 3, 2017, by and between Magellan Petroleum Corporation and TOTAL Delaware, Inc. (filed as Exhibit 10.1~~pursuant to the ~~registrant’s Current Report on Form 8-K on January 5, 2017~~Amended and ~~incorporated herein by reference)~~Restated Tellurian Inc. 2016 Omnibus Incentive Compensation Plan (U.S. Employees)
~~10.3~~ 10.7*†	~~Voting~~	Form of Indemnification Agreement dated as of January 3, 2017, by and among Magellan Petroleum Corporation, Tellurian Investments Inc., TOTAL Delaware, Inc., Charif Souki, the Souki Family 2016 Trust and Martin Houston (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K on January 5, 2017 and incorporated herein by reference)(Officers)
31.1 * 31.1*		Certification ofby Chief Executive Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
31.2*		Certification by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
32.1**		Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section ~~302~~906 of the Sarbanes-Oxley Act of ~~2002.~~2002
32.1 32.2		Certification ~~of Chief Executive Officer and~~by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002
101.INS *99.1		Section 13(r) Disclosure (incorporated by reference to Exhibit 99.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017)
101.INS*		XBRL Instance Document
101.SCH 101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF 101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB 101.LAB		XBRL Taxonomy Extension ~~Label~~Labels Linkbase Document
101.PRE 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document



*	Filed herewith.


**	Furnished herewith.

†
+	Pursuant to Item 6.01(b)(2) of Regulation S-K, the Company has omitted certain schedules to the exhibit. The Company agrees to supplementally furnish a copy of any omitted schedule to the SEC upon request.Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



				~~MAGELLAN PETROLEUM CORPORATION~~
		~~(Registrant)~~TELLURIAN INC.

Date:	~~February 8,~~November 9, 2017	By:	/s/ Antoine J. Lafargue
			Antoine J. Lafargue
			Senior Vice President ~~Chief Executive Officer,~~and Chief Financial Officer ~~Treasurer, and Corporate Secretary~~
			(as Principal ~~Executive,~~ Financial ~~and~~Officer)
			Tellurian Inc.

Date:	November 9, 2017	By:	/s/ Khaled Sharafeldin
			Khaled Sharafeldin
			Chief Accounting Officer
			(as Principal Accounting Officer)
			Tellurian Inc.



	December 31, 2016		June 30, 2016
			(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	507	$	1,680
Securities available-for-sale	1,542		601
Accounts receivable	58		16
Prepaid and other assets	1,960		2,087
Current assets held for sale (Note 5)	—		26,042
Total current assets	4,067		30,426

PROPERTY AND EQUIPMENT, NET (SUCCESSFUL EFFORTS METHOD):
Unproved oil and gas properties	29		32
Wells in progress	332		337
Land, buildings, and equipment (net of accumulated depreciation of $536 and $517 as of December 31, 2016, and June 30, 2016, respectively)	69		86
Net property and equipment	430		455

OTHER NON-CURRENT ASSETS:
Goodwill, net	500		500
Other long-term assets	19		169
Total other non-current assets	519		669
Total assets	$	5,016	$	31,550

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	478	$	791
Accrued and other liabilities	2,538		2,826
Notes payable	31		783
Current liabilities held for sale (Note 5)	—		10,638
Total current liabilities	3,047		15,038

COMMITMENTS AND CONTINGENCIES (Note 17)

PREFERRED STOCK (Note 3 and Note 12):
Series A convertible preferred stock (par value $0.01 per share): Authorized 0 and 28,000,000 shares as of December 31, 2016 and June 30, 2016, respectively, issued 0 and 22,683,428 shares as of December 31, 2016, and June 30, 2016, respectively; liquidation preference of $0 and $29,093 as of December 31, 2016, and June 30, 2016, respectively	—		23,501
Total preferred stock	—		23,501



STOCKHOLDERS' EQUITY (DEFICIT):
Common stock (par value $0.01 per share): Authorized 300,000,000 shares, issued 7,088,999 and 6,972,023 shares as of December 31, 2016, and June 30, 2016, respectively	71			70
Treasury stock (at cost): 1,209,389 shares as of December 31, 2016, and June 30, 2016	(9,806		)	(9,806		)
Capital in excess of par value	104,557			94,069
Accumulated deficit	(98,126		)	(96,234		)
Accumulated other comprehensive income	5,273			4,912
Total stockholders' equity (deficit)	1,969			(6,989		)
Total liabilities, preferred stock and stockholders' equity (deficit)	$	5,016		$	31,550



	THREE MONTHS ENDED						SIX MONTHS ENDED
	December 31,						December 31,
	2016			2015			2016			2015
OPERATING EXPENSES:
Depreciation	$	9		$	13		$	20		$	32
Exploration	8			22			163			39
General and administrative	649			1,131			2,677			2,896
Total operating expenses	666			1,166			2,860			2,967

Loss from operations	(666		)	(1,166		)	(2,860		)	(2,967		)

OTHER INCOME (EXPENSE):
Gain (loss) on investment in securities	138			117			138			(143		)
Other income (expense)	(3		)	42			(4		)	64
Total other income (expense)	135			159			134			(79		)

Loss from continuing operations, before tax	(531		)	(1,007		)	(2,726		)	(3,046		)

Income tax expense	—			—			—			—
Loss from continuing operations, net of tax	(531		)	(1,007		)	(2,726		)	(3,046		)

DISCONTINUED OPERATIONS (Notes 3, 4 and 5):
Income (loss) from discontinued operations, net of tax	4			(362		)	(235		)	(1,373		)
Gain on disposal of discontinued operations, net of tax	—			—			1,069			—
Net income (loss) from discontinued operations	4			(362		)	834			(1,373		)

Net loss	(527		)	(1,369		)	(1,892		)	(4,419		)

Preferred stock dividends	—			(460		)	(162		)	(913		)
Adjustment of preferred stock to redemption value (Note 12)	—			—			162			—

Net loss attributable to common stockholders	$	(527	)	$	(1,829	)	$	(1,892	)	$	(5,332	)

Earnings (loss) per common share (Note 14):
Weighted average number of basic shares outstanding	5,879,610			5,757,533			5,858,177			5,730,157
Weighted average number of diluted shares outstanding	5,879,610			5,757,533			5,858,177			5,730,157

Basic and diluted earnings (loss) per common share:
Net loss from continuing operations, including preferred stock dividends and adjustment to redemption value of preferred stock	$(0.09)			$(0.25)			$(0.47)			$(0.69)
Net income (loss) from discontinued operations	$0.00			$(0.06)			$0.14			$(0.24)
Net loss attributable to common stockholders	$(0.09)			$(0.32)			$(0.32)			$(0.93)



	Common Stock		Treasury Stock			Capital in Excess of Par Value			Accumulated Deficit			Accumulated Other Comprehensive Income		Total Stockholders' Equity (Deficit)
June 30, 2016	$	70	$	(9,806	)	$	94,069		$	(96,234	)	$	4,912	$	(6,989	)
Net loss	—		—			—			(1,892		)	—		$	(1,892	)
Other comprehensive income, net of tax	—		—			—			—			361		$	361
Stock and stock-based compensation	1		—			599			—			—		$	600
Net shares repurchased for employee tax costs upon vesting of restricted stock	—		—			(3		)	—			—		$	(3	)
Preferred stock dividend	—		—			—			(162		)	—		$	(162	)
Adjustment of preferred stock to redemption value (Note 12)	—		—			—			162			—		$	162
Contribution to equity upon redemption of preferred stock (Notes 3, 5 and 12)	—		—			9,892			—			—		$	9,892
December 31, 2016	$	71	$	(9,806	)	$	104,557		$	(98,126	)	$	5,273	$	1,969



Supplemental schedule of non-cash activities:
Unrealized holding gain (loss) and foreign currency translation gain (loss) on securities available-for-sale	$	338		$	(32	)
Securities available-for-sale received as proceeds on sale of Weald Basin assets (Notes 4 and 5)	$	(925	)	$	—
Increase in both accrued or other liabilities and prepaid or other assets related to Sopak	$	54		$	54
Purchase of insurance policies financed with notes payable	$	16		$	108
Forgiveness of notes payable upon closing of Exchange (Notes 3 and 5)	$	625		$	—
Adjustment of preferred stock to redemption value	$	(162	)	$	—
Preferred stock dividends paid in kind	$	162		$	913
Contribution to equity upon redemption of preferred stock (Notes 3, 5 and 12)	$	9,892		$	—

Non-cash activities of discontinued operations:
Change in accounts payable and accrued liabilities related to property and equipment of discontinued operations	$	293		$	(86	)



	At Time of Closing						June 30, 2016
	CO2 Business		Weald Basin		Total		CO2 Business		Weald Basin		Total
	(In thousands)
Assets sold:
Cash	$	—	$	—	$	—	$	141	$	—	$	141
Accounts receivable	198		—		198		249		—		249
Inventories	242		295		537		232		301		533
Other classes of current assets that are not major	38		—		38		34		—		34
Property and equipment, net	24,294		795		25,089		23,941		812		24,753
Other classes of assets that are not major	204		—		204		332		—		332
Total assets of the disposal groups	$	24,976	$	1,090	$	26,066	$	24,929	$	1,113	$	26,042

Liabilities sold:
Accounts payable	$	1,469	$	648	$	2,117	$	1,594	$	670	$	2,264
Note payable	5,500		—		5,500		5,500		—		5,500
Asset retirement obligations	2,818		—		2,818		2,818		—		2,818
Other classes of liabilities that are not major	55		—		55		56		—		56
Total liabilities of the disposal groups	$	9,842	$	648	$	10,490	$	9,968	$	670	$	10,638

Consideration:
Series A Preferred Stock exchanged	$	23,501	$	—
Secured promissory note forgiven	625		—
Cash received	900		586
Stock of UKOG received	—		925
Total consideration	$	25,026	$	1,511

Contribution to equity from preferred stockholder	$	9,892
Gain on disposal of discontinued operations, net of tax			$	1,069



	December 31, 2016
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In thousands)
Equity securities	$	1,335	$	207	$	—		$	1,542

	June 30, 2016
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In thousands)
Equity securities	$	885	$	—	$	(284	)	$	601



	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Securities available-for-sale	$	1,542	$	—	$	—	$	1,542

Liabilities:
Contingent consideration payable ⁽¹⁾	$	—	$	—	$	—	$	—

	June 30, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Securities available-for-sale	$	601	$	—	$	—	$	601

Liabilities:
Contingent consideration payable ⁽¹⁾	$	—	$	—	$	—	$	—



	Number of Shares			WAEPS ⁽¹⁾
Fiscal year opening balance	726,973			$11.32
Granted	—			$0.00
Exercised	—			$0.00
Forfeited/canceled	—			$0.00
Expired	(31,667	)		$8.64
Balance at December 31, 2016	695,306			$11.44
Weighted average remaining contractual term	3.49		years



	SIX MONTHS ENDED					FISCAL YEAR ENDED
	December 31, 2016					June 30, 2016
	Number of shares		Amount			Number of shares	Amount
	(In thousands, except share amounts)
Fiscal year opening balance	22,683,428		$	23,501		21,162,697	$	25,850
PIK dividend shares issued	132,320		162			1,520,731	1,858
Adjustment to redemption value	—		(162		)	—	(4,207		)
Redemption	(22,815,748	)	(23,501		)	—	—
Balance at end of period	—		$	—		22,683,428	$	23,501