~~TELLURIAN INC. AND SUBSIDIARIES~~Tellurian Inc. and Subsidiaries

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements (unaudited)

~~(unaudited)~~

NOTE 1 — ~~BACKGROUND AND BASIS OF PRESENTATION~~General

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

Nature of Operations

We plan to develop, own and operate a global natural gas business and to deliver natural gas to customers worldwide. ~~Tellurian is establishing~~We have begun to establish a portfolio of natural gas production, LNG ~~trading,~~marketing, and infrastructure including an LNG terminal facility (the “Driftwood terminal”) and an associated pipeline (the “Driftwood pipeline”) in ~~Southwest~~southwest Louisiana (the Driftwood terminal and the Driftwood pipeline collectively, the “Driftwood Project”). We intend to develop the Driftwood pipeline as part of what we refer to as the “Pipeline Network.” In addition to the Driftwood pipeline, the Pipeline Network is expected to include two pipelines, the Haynesville Global Access Pipeline and the Permian Global Access Pipeline, both of which are currently in the early stages of development.

Basis of Presentation

The accompanying unaudited ~~Condensed Consolidated Financial Statements of Tellurian as of and for the period ended September 30, 2017,~~consolidated financial statements have been prepared in accordance with ~~U.S.~~ GAAP for interim financial information and ~~with Rule 10-01~~the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain notes and other information have been condensed or omitted. The accompanying interim financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of our Condensed Consolidated Financial ~~Statements do not include all of the information and footnotes required by U.S. GAAP for complete~~Statements. These interim financial ~~statements. In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation, have been included.~~

~~The information included herein~~statements should be read in conjunction with the consolidated financial statements and ~~the~~ accompanying notes ~~of Tellurian Investments Inc. (“Tellurian Investments”) as of and~~included in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, 2016. Such information was included in Tellurian’s Current Report on Form 8-K/A filed with the SEC on March 15, 2017 following the 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 Merger.2017.

The Merger was accounted for as a “reverse acquisition,” with Tellurian Investments being treated as the accounting acquirer. As such, the historical condensed consolidated comparative information as of and for all periods 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 continues to operate as a single operating segment for financial reporting purposes.

In connection with the Merger, each issued and outstanding share of Tellurian Investments common stock was exchanged for 1.3 shares of Magellan common stock. All share and per share amounts in the Condensed Consolidated Financial Statements and related notes have been retroactively adjusted for all periods presented to 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 SEC, Parallax Services (“Predecessor”) has been deemed to be the predecessor to Tellurian (“Successor”) for financial reporting purposes.

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.

~~Results of operations for the three 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, 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 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 the net tangible and intangible assets acquired and liabilities assumed. The preliminary purchase price allocation to assets acquired and liabilities assumed in 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 other property, plant and equipment and wells in progress was determined to be the carrying value of Magellan. Securities available-for-sale were valued based on quoted market prices. The carrying values of cash, other current assets, accounts payable and accrued liabilities and other non-current assets and liabilities approximated fair value at the Merger Date. The Company has determined that such fair value measures for the overall allocation are classified as Level 3 in the fair value hierarchy.

Goodwill initially recognized as a result of the 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 as the fair values determined when allocating consideration as of the Merger Date.

~~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 September 30, 2017, goodwill of $1.2 million on our Condensed Consolidated Balance Sheet was entirely related to 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 is2018 are not necessarily indicative of ~~what Tellurian’s results~~future financial results. Further, although we have commenced operations, we are still subject to significant risks and uncertainties, including failing to secure additional funding to construct the Driftwood Project.

Use of ~~operation would have been if~~Estimates

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

New Accounting Standards Issued and Adopted

ASU 2014-09, Revenue from Contracts with Customers (Topic 606), amended the previous revenue recognition guidance and required us 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. We adopted the new standard on January 1, 2018, utilizing the modified retrospective approach. We developed an accounting policy, implemented changes to the relevant business processes and the control activities within them, and evaluated the disclosure requirements as a result of the provisions of this ASU. Adoption of the ASU did not require an adjustment to the opening stockholders’ equity and did not change our amount and timing of revenues. We have elected to exclude all taxes from the measurement of transaction price.

For the sale of commodities, we consider the delivery of each unit (MMBtu) to be a separate performance obligation that is satisfied upon delivery. These contracts are either fixed price contracts or contracts with a fixed differential to an index price, both of which are considered fixed consideration. The fixed consideration is allocated to each performance obligation and represents the relative standalone selling price basis.

Purchases and sales of inventory with the same counterparty that are entered into in contemplation of one another (including buy/sell arrangements) are combined and recorded on a net basis and reported in “LNG sales” on the Condensed Consolidated Statements of Operations. For such LNG sales, we require payment within 10 days from delivery. Other LNG revenue represents revenue earned from sub-charter agreements and is accounted for outside of this ASU and in line with Accounting Standards Codification 840, Leases.

In our judgment, the performance obligations for the sale of natural gas and LNG are satisfied at a point in time because the customer obtains control and legal title of the asset when the natural gas or LNG is delivered to the designated sales point.

Because our performance obligations have been satisfied and an unconditional right to consideration exists as of the balance sheet date, we have recognized amounts due from contracts with customers of $0.3 million as accounts receivable within the Condensed Consolidated Balance Sheet as of September 30, 2018.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

New Accounting Standards Issued But Not Yet Adopted

ASU 2016-02, Leases (Topic 842),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. While we are still evaluating the provisions of the ASU to determine how we will be affected, based on our preliminary assessment, we will record assets and liabilities for current operating leases related to our office spaces.

NOTE 2 — PROPERTY, PLANT AND EQUIPMENT

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



	September 30, 2018			December 31, 2017
Land	$	13,276		$	9,491
Proved properties	88,349			90,869
Unproved properties	10,000			13,000
Wells in progress	6,511			345
Corporate and other	2,265			2,693
Total property, plant and equipment at cost	120,401			116,398
Accumulated DD&A	(1,402		)	(542		)
Total property, plant and equipment, net	$	118,999		$	115,856

Land

We own land in Louisiana for the purposes of constructing the Driftwood Project.

Proved Properties

We own producing and non-producing acreage in northern Louisiana. In September 2018, we identified indicators of impairment related to certain non-producing acreage and, as a result of an impairment test performed, we have written off approximately $2.7 million of carrying value associated with those assets.

Unproved Properties

We own interests in unproved properties in the Weald Basin, United Kingdom through our holding of non-operating interests in two licenses which expire in June and September 2021. We previously held an operating interest in an exploration permit in the Bonaparte Basin, Australia; however, in May 2018, we transferred the permit to a third party for consideration of approximately $0.2 million in cash and the release of approximately $1.3 million in liabilities incurred in connection with a canceled 2017 seismic survey. As a result, we have recognized, within our Condensed Consolidated Statement of Operations, a loss on the transfer of the permit of approximately $1.0 million during the nine months ended September 30, 2018.

NOTE 3 — ~~PREPAID AND~~DEFERRED ENGINEERING COSTS

Deferred engineering costs of approximately $56.6 million as of September 30, 2018 represent detailed engineering services related to the Driftwood terminal. Such costs will be deferred until construction commences on the Driftwood terminal, at which time they will be transferred to construction in progress.

NOTE 4 — 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~~Other non-current assets consist of the following (in thousands):


	September 30, 2017		December 31, 2016		September 30, 2018		December 31, 2017
Deposit for acquisition	$	8,515	$	—
Lease and purchase options	2,264		1,345
Land lease and purchase options					$	3,453	$	2,948
Permitting costs					6,720		4,708
Goodwill					1,190		1,190
Other	434		556		46		430
Total other non-current assets	$	11,213	$	1,901	$	11,409	$	9,276

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~In July~~There have been no material changes to the legal proceedings disclosed in Part I, Item 3, of our Annual Report on Form 10-K for the fiscal year ended December 31, 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 Cheniere as third-party defendants. Cheniere alleges that it entered into a note and a pledge agreement with Parallax. Cheniere claimsexcept that the third-party defendants tortiously interfered with the note and pledge agreement and aided in the 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 suit to have a material effect on our results of operation or financial condition.trial has been set for June 2019.

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~~There have been no material changes 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~~Part I, Item 1A, of our ~~Current~~Annual Report on Form ~~8-K/A filed on March 15,~~10-K for the fiscal year ended December 31, 2017, ~~and are grouped into~~except for 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~~risk factors discussed below.

Tellurian ~~does not expect~~Production Holdings LLC and Tellurian Inc. may be unable to ~~generate sufficient cash to pay dividends until~~fulfill their obligations under the ~~completion~~credit agreement and related guarantee.

As described in “Management’s Discussion and Analysis of ~~construction~~Financial Condition and Results of ~~the Driftwood Project.~~

~~Tellurian’s directly and indirectly held assets currently consist primarily~~Operation - Overview of ~~cash held for certain start-up and operating expenses, applications for permits from regulatory agencies~~Significant Events,” in September 2018, Tellurian Production Holdings LLC (“Production Holdings”) entered into a credit agreement relating to the ~~Driftwood Project~~Term Loan, and ~~certain real property interests related~~Tellurian Inc. entered into a parent guarantee pursuant to ~~that project. Tellurian’s cash flow, and consequently its~~which it guaranteed the obligations of Production Holdings relating to the Term Loan. Production Holdings’ 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 exceedmaintain cash flows from operations ~~for a significant period of time.~~

~~Tellurian’s ability~~sufficient to pay ~~dividends in the future is uncertain~~interest and principal on its indebtedness 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.~~

~~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.~~

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 operationsoperating performance and financial condition and the availability of refinancing indebtedness, which will be affected by prevailing commodity prices and economic conditions and financial, business and other factors, many of which are beyond its control. If Production Holdings is unable to satisfy its obligations under the Term Loan, Tellurian Inc. may be ~~adversely affected~~obligated 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 findpay interest and/or principal on 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~~indebtedness pursuant to the ~~commencement of construction. To date, Tellurian has not entered into any definitive third-party agreements for the proposed Driftwood Project,~~parent guarantee, and it may not ~~be successful in negotiating and entering into such agreements.~~

We have ~~no operating history and expect~~the financial resources to ~~incur losses for a significant period~~do so. Tellurian Inc. does not currently have any material sources 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~~flows other transactions with numerous third parties. In such arrangements, we will be exposed to the performance and credit risks of our 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 madethan dividends 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 effectProduction Holdings. Accordingly, an inability on the ~~trading price~~part 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 investments in LNG projects;~~

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

~~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~~Production Holdings to generate ~~cash 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 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 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 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 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 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 as a major earthquake, tsunami, or fire; or~~

~~shortages of or delays in 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 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 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 natural gas production, that could affect our ability to 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 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~~overall business plan, and ~~on a timely basis.~~we could be required to sell assets, reduce our capital expenditures or seek refinancing indebtedness to satisfy the requirements of the Term Loan and the parent guarantee. These alternative measures may be unavailable or inadequate and may themselves adversely affect our overall business strategy.

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 increaseRestrictions 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~~credit agreement could limit the ~~construction~~growth and operations of ~~new infrastructure by third parties. We~~Production Holdings.

The credit agreement governing the Term Loan contains restrictions on Production Holdings’ activities, certain of which are described in Note 9, Long-Term Borrowings, of our Notes to Condensed Consolidated Financial Statements included in this report. These covenants may ~~experience delays~~prevent Production Holdings from taking actions that it believes would be 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~~the best interest 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~~its 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 for it to ~~be successful in increasing value for shareholders.~~

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

~~Tellurian may engage in operations~~strategy or ~~make substantial commitments and investments, or enter into agreements~~effectively compete 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 butcompanies that 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.similarly restricted.

In addition, the ~~United States was actively involved~~credit agreement requires Production Holdings to maintain a commodity hedge position that covers at least a specified minimum, but does not cover more than a specified maximum, of its anticipated future production, and these requirements may limit Production Holdings’ ability to pursue its preferred hedging strategy. In addition, the entire amount of the Term Loan is currently deemed to be outstanding, but Production Holdings is generally prohibited from using the borrowed funds except pursuant to a specified plan of development approved by the lenders. Accordingly, there could be circumstances in which Production Holdings is required to incur interest on funds borrowed but is unable to use those funds in the ~~United Nations Conference on Climate Change in Paris, which led~~way it believes is most appropriate for its business.

If Production Holdings is unable to comply with the ~~creation of the Paris Agreement. The Paris Agreement will require countries to review~~restrictions and ~~“represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years. The Paris Agreement could further drive regulation~~covenants in the ~~United States. Restrictions on emissions of methane or carbon dioxide that have been or may be imposed in various states or at~~credit agreement governing 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~~Term Loan, there 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~~a default under 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,agreement, 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~~an acceleration of payment of funds borrowed under the agreement.

The credit agreement contains financial covenants. If Production Holdings is unable to satisfy these covenants, it would be in ~~or cancellation of, construction or closure of our proposed LNG facilities or other disruption~~default under the agreement, and the lenders could elect 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 costsdeclare all the funds borrowed thereunder to be due and ~~decrease~~payable, together with accrued and unpaid interest, and institute foreclosure proceedings with respect to 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 operationsassets. The lenders could also ~~become subject~~seek to ~~increased governmental scrutiny that~~enforce the parent guarantee against Tellurian Inc., which 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~~not have sufficient funds, or the ability ~~of Tellurian’s suppliers~~ to obtain sufficient funds, to repay the amounts then due. In those circumstances, Production Holdings and/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~~Inc. 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 workersforced into bankruptcy 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.liquidation.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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:

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.



	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share
July 2018	—	$	—
August 2018	9,838	7.10
September 2018	—	—
Total	9,838

(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 2016 Plan.

ITEM 5. OTHER INFORMATION

Compliance Disclosure

Pursuant to Section 13(r) of the Exchange Act, if during the quarter ended September 30, ~~2017,~~2018, 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~~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,~~2018, we did not engage in any transactions with Iran or with persons or entities related to Iran.

TOTAL Delaware, Inc. (“TOTAL”) and TOTAL S.A. have beneficial ownership of ~~over 20%~~approximately 19% 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,~~16, 2018, TOTAL S.A. included information in its Annual Report on Form 20-F for the year ended December 31, ~~2016~~2017 (the “TOTAL ~~2016~~2017 Annual Report”) regarding activities during ~~2016~~2017 that require disclosure under the ITRSHRA. The relevant disclosures were reproduced in Exhibit 99.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2017~~2018, filed with the SEC on May ~~10, 2017~~9, 2018 and are incorporated by reference herein. On May 16, 2018, TOTAL S.A. announced its intent to discontinue the South Pars 11 project in Iran and to unwind related operations, disclosure of which was included in Exhibit 99.9 to the TOTAL S.A. report on Form 6-K filed with the SEC on June 1, 2018 and under the heading “US withdrawal from the JCPOA: TOTAL’s position related to the South Pars 11 project in Iran” in Exhibit 99.2 to the TOTAL S.A. report on Form 6-K filed with the SEC on July 27, 2018. 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~~2017 Annual ~~Report.~~

~~Amendment to Director Nomination Procedures~~

~~Effective September 20, 2017,~~Report or 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.TOTAL S.A. reports on Form 6-K.

ITEM 6. EXHIBITS



Exhibit No.		Description
2.110.1		~~Purchase and Sale~~Credit Agreement, dated ~~as of~~ September ~~6, 2017,~~28, 2018, by and ~~between Rockcliff Energy Operating LLC and~~among Tellurian Production Holdings LLC, as borrower, the lender parties thereto, Goldman Sachs Lending Partners LLC, as administrative agent, and J. Aron & Company LLC, as collateral agent
3.110.2		~~Amended~~Parent Guaranty, dated September 28, 2018, by and ~~Restated Certificate of Incorporation of~~between Tellurian Inc., as guarantor, and J. Aron & Company LLC, as collateral agent
3.2*		~~Amended and Restated Bylaws of Tellurian Inc.~~
~~10.1†~~		~~Amended and Restated Tellurian Inc. 2016 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 22, 2017)~~
~~10.2*†~~		~~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 pursuant to the Amended and Restated Tellurian Inc. 2016 Omnibus Incentive Compensation Plan (U.S. Selected Senior Management)~~
~~10.4*†~~		~~Form of Restricted Stock Agreement pursuant to the Amended and Restated Tellurian Inc. 2016 Omnibus Incentive Compensation Plan (U.S. Employees)~~
~~10.5*†~~		~~Form of Stock Option Grant Agreement pursuant to the Amended and Restated Tellurian Inc. 2016 Omnibus Incentive Compensation Plan (U.S. Selected Senior Management)~~
~~10.6*†~~		~~Form of Stock Option Grant Agreement pursuant to the Amended and Restated Tellurian Inc. 2016 Omnibus Incentive Compensation Plan (U.S. Employees)~~
~~10.7*†~~		~~Form of Indemnification Agreement (Officers)~~
31.1*		Certification by 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 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification 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
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)~~2018)
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document



*	Filed herewith.
**	Furnished herewith.
†	~~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.



		TELLURIAN INC.

Date:	November ~~9, 2017~~7, 2018	By:	/s/ Antoine J. Lafargue
			Antoine J. Lafargue
			Senior Vice President and Chief Financial Officer
			(as Principal Financial Officer)
			Tellurian Inc.

Date:	November ~~9, 2017~~7, 2018	By:	/s/ Khaled Sharafeldin
			Khaled Sharafeldin
			Chief Accounting Officer
			(as Principal Accounting Officer)
			Tellurian Inc.

3719



Delaware		06-0842255
(State or other jurisdiction of of incorporation or organization)		(I.R.S. Employer Identification No.)

1201 Louisiana Street, Suite 3100, Houston, TX		77002
(Address of principal executive offices)		(Zip Code)
(832) 962-4000
(Registrant’s telephone number, including area code)



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



			Page
~~Definitions~~Part I — Financial Information (Unaudited)
Item 1.	Condensed Consolidated Financial Statements
		Condensed Consolidated Balance Sheets	1

	~~Part I. Financial Information~~

~~Item 1.~~	Condensed Consolidated ~~Financial~~ Statements
	~~Condensed Consolidated Balance Sheets~~ of Operations	2
		Condensed Consolidated ~~Statements~~Statement of ~~Operations~~Changes in Stockholders’ Equity	3
		Condensed Consolidated Statements of ~~Changes in Stockholders’ Equity~~Cash Flows	4
		Notes to Condensed Consolidated Financial Statements ~~of Cash Flows~~	5
	~~Notes to Condensed Consolidated Financial Statements~~	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1511

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		2215
Item 4.	Controls and Procedures		15
~~Item 4.~~				~~Controls and Procedures~~	22Part II — Other Information
Item 1.
Legal Proceedings	~~Part II. Other Information~~

~~Item 1.~~	~~Legal Proceedings~~	2216

Item 1A.	Risk Factors		~~Risk Factors~~	2216

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		3416
Item 5.	Other Information		17
Item 6.	Exhibits		18

~~Item 5.~~ Signatures	~~Other Information~~	34

~~Item 6.~~	~~Exhibits~~	36

	~~Signatures~~	3719



~~Bcf/d~~ASU		Accounting Standards Update
Bcf		Billion cubic feet of natural gas
Bcf/d		Bcf per day
~~DOE/FE~~DD&A	~~U.S. Department of Energy, Office of Fossil Energy~~	Depreciation, depletion and amortization
EPC		Engineering, procurement and construction
FEED		Front-End Engineering and Design
FERC		U.S. Federal Energy Regulatory Commission
~~FTA countries~~GAAP	~~Countries with which~~	Generally accepted accounting principles in the U.S. ~~has a free trade agreement providing for national treatment for trade in~~
LNG		Liquefied natural gas
~~LNG~~LSTK	~~Liquefied natural gas, a form~~	Lump sum turnkey
Mcf		Thousand cubic feet of natural gas ~~consisting primarily of methane (CH4) that is in liquid form at near atmospheric pressure~~
~~LSTK~~MMBtu	~~Lump Sum Turnkey~~	Million British thermal unit
MMcf		Million cubic feet of natural gas
MMcf/d		MMcf per day
MMcfe		Million cubic feet of gas equivalent volumes using a ratio of 6 Mcf to 1 barrel of liquid
Mtpa		Million tonnes per annum
~~NASDAQ~~Nasdaq	~~NASDAQ~~	Nasdaq Capital Market
~~NGA~~SEC	~~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
U.S.		United States
USACE		U.S. Army Corps of Engineers
~~U.S.~~	~~United States~~
~~U.S. GAAP~~	~~Generally accepted accounting principles in the U.S.~~

														TELLURIAN INC. AND SUBSIDIARIES	CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(in thousands, except share and per share amounts)								(in thousands, except share and per share amounts)
(unaudited)
	September 30,				December 31,
	2017				2016			September 30, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	138,023			$	21,398		$	172,317		$	128,273
Accounts receivable	75				48
Accounts receivable, net of allowance for doubtful accounts of $11 and $0, respectively								440			583
Accounts receivable due from related parties	2,668				1,333			1,316			1,377
Prepaid expenses and other current assets	2,837				1,964			2,438			3,458
Total current assets	143,603				24,743			176,511			133,691

Property, plant and equipment, net	25,216				10,993			118,999			115,856
Deferred engineering costs	9,000				—			56,550			18,000
Goodwill	1,190				1,190
Note receivable due from related party	—				251
Non-current restricted cash								57,440			—
Other non-current assets	11,213				1,901			11,409			9,276
Total assets	$	190,222			$	39,078		$	420,909		$	276,823

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	27,189			$	24,403
Accounts payable due to related parties	323				323
Accounts payable								$	4,458		$	11,462
Accrued liabilities								33,848			39,101
Other current liabilities								—			1,735
Total current liabilities	27,512				24,726			38,306			52,298

Embedded derivative	—				8,753
Long-term liabilities:
Senior secured term loan								56,780			—
Asset retirement obligation								670			638
Total long-term liabilities								57,450			638

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		)		—
Preferred stock, $0.01 par value, 100,000,000 authorized: 6,123,782 and zero shares outstanding, respectively								58			—
Common stock, $0.01 par value, 400,000,000 authorized: 240,511,126 and 222,749,220 shares outstanding, respectively								2,193			2,043
Additional paid-in capital	454,986				102,148			745,245			549,958
Accumulated deficit	(293,391		)		(96,655		)	(422,343		)	(328,114		)
Total stockholders’ equity	162,710				5,599			325,153			223,887
Total liabilities and stockholders’ equity	$	190,222			$	39,078		$	420,909		$	276,823



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



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

																															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,
	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			2018			2017			2018			2017
	2017			2016			2017			2016
Revenue	$	—		$	—		$	—		$	—		$	—		$	—
Revenue, related party	—			—			—			—			—			31
Revenues
Natural gas sales																			$	799		$	—		$	2,551		$	—
LNG sales																			—			—			2,689			—
Other LNG revenue																			—			—			3,174			—
Total revenue	—			—			—			—			—			31			799			—			8,414			—

Costs and expenses:
Operating costs and expenses
Cost of sales																			723			—			5,383			—
Development expenses	8,793			15,917			44,998			30,422			—			52			11,004			8,785			32,871			44,975
General and administrative	17,302			28,533			80,125			37,737			157			617
DD&A																			315			92			1,034			231
General and administrative expenses																			20,437			17,218			61,046			79,917
Impairment charge and loss on transfer of assets																			2,704			—			4,513			—
Goodwill impairment	—			—			77,592			—			—			—			—			—			—			77,592
Total costs and expenses	26,095			44,450			202,715			68,159			157			669

Total operating costs and expenses																			35,183			26,095			104,847			202,715
Loss from operations	(26,095		)	(44,450		)	(202,715		)	(68,159		)	(157		)	(638		)	(34,384		)	(26,095		)	(96,433		)	(202,715		)

Gain on preferred stock exchange feature	—			—			2,209			—			—			—
Gain on Series A preferred stock exchange feature																			—			—			—			2,209
Interest income, net																			924			438			1,863			724
Other income, net	3,800			49			4,339			118			—			—			79			3,362			151			3,615

Loss before income taxes	(22,295		)	(44,401		)	(196,167		)	(68,041		)	(157		)	(638		)	(33,381		)	(22,295		)	(94,419		)	(196,167		)
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:
Income tax benefit (expense)																			190			(569		)	190			(569		)
Net loss																			$	(33,191	)	$	(22,864	)	$	(94,229	)	$	(196,736	)
Net loss per common share⁽¹⁾
Basic and diluted																			$	(0.15	)	$	(0.12	)	$	(0.45	)	$	(1.06	)
Weighted-average shares outstanding
Basic and diluted	$	(0.12	)	$	(0.37	)	$	(1.06	)	$	(0.81	)							217,380			192,405			209,607			186,143

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

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



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



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

	Preferred Stock		Common Stock		Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Equity
BALANCE AT JANUARY 1, 2018	$	—	$	2,043	$	549,958	$	(328,114	)	$	223,887
Issuance of common stock	—		135		129,575		—			129,710
Issuance of Series C preferred stock	58		—		47,458		—			47,516
Share-based compensation⁽¹⁾	—		15		18,254		—			18,269
Net loss	—		—		—		(94,229		)	(94,229		)
BALANCE AT SEPTEMBER 30, 2018	$	58	$	2,193	$	745,245	$	(422,343	)	$	325,153


(1) Includes settlement of 2017 bonus that was accrued for in December 2017.

																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			Nine Months Ended September 30,
	2017			2016						2018			2017
Cash flows from operating activities:
Net loss	$	(196,736	)	$	(67,875	)	$	(638	)	$	(94,229	)	$	(196,736	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	231			55			8
DD&A										1,034			231
Goodwill impairment	77,592			—			—			—			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 Series A preferred stock exchange feature										—			(2,209		)
Gain on sale of securities	(3,481		)	—			—			—			(3,481		)
Share-based compensation	21,963			24,230			—			3,279			21,963
Share-based payments	19,397			—			—			—			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		)	—
Impairment charge and loss on transfer of assets										4,513			—
Net changes in working capital (Note 11)										10,591			(2,924		)
Net cash used in operating activities	(86,167		)	(29,312		)	(111		)	(74,812		)	(86,167		)

Cash flows from investing activities:
Cash received in acquisition	56			210			—			—			56
Deposit for acquisition	(8,515		)	—			—			—			(8,515		)
Purchase of natural gas properties										(255		)	—
Deferred engineering costs	(9,000		)	—			—			—			(9,000		)
Purchase of property - land	—			(8,491		)	—
Purchase of property and equipment	(1,101		)	(708		)	(268		)
Proceeds from sale of asset										167			—
Purchase of property, plant and equipment										(4,814		)	(1,101		)
Proceeds from sale of available-for-sale securities	4,592			—			—			—			4,592
Net cash used in investing activities	(13,968		)	(8,989		)	(268		)	(4,902		)	(13,968		)

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		)	—			—
Proceeds from borrowing under term loan										59,400			—
Payments of term loan financing costs										(2,179		)	—
Proceeds from issuance of common stock										133,800			218,195
Tax payments for net share settlement of equity awards (Note 11)										(5,733		)	(828		)
Equity offering costs	(607		)	(1,512		)	—			(4,090		)	(607		)
Net cash provided by financing activities	216,760			57,374			—			181,198			216,760

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
Net increase in cash, cash equivalents and restricted cash										101,484			116,625
Cash, cash equivalents and restricted cash, beginning of period										128,273			21,398
Cash, cash equivalents and restricted cash, end of period										$	229,757		$	138,023



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.



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



	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



	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



	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



	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



	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



~~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.~~



~~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.~~



	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.



	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 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.