UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


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

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


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

For the transition period from to

Commission File Number 001-5507

Tellurian Inc.

(Exact name of registrant as specified in its charter)

Delaware

06-0842255

(State or other jurisdiction of
incorporation or organization)

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

1201 Louisiana Street,

Suite 3100,

Houston,

77002

(Address of principal executive offices)

(Zip Code)

(832) 962-4000

(Registrant’s telephone number, including area code)

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

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

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock, par value $0.01 per share

TELL

NYSE

American LLC

8.25% Senior Notes due 2028

TELZ

NYSE

American LLC

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

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

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

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

Large accelerated filer

☐☒

Accelerated filer

☐

Non-accelerated filer

☒☐

Smaller reporting company

☒☐

Emerging growth company

☐

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

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

Yes ☐ No x

As of ~~October 22, 2021,~~April 25, 2022, there were ~~479,005,062~~568,227,494 shares of common stock, $0.01 par value, issued and outstanding.

Tellurian Inc.

TABLE OF CONTENTS

Page

Part I — Financial Information (Unaudited)

Item 1.

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Operations

Condensed Consolidated Statement of Changes in Stockholders’ Equity

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

Item 2.

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

1215

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

1519

Item 4.

Controls and Procedures

1519

Part II — Other Information

Item 1.

Legal Proceedings

1519

Item 1A.

Risk Factors

1519

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

1519

Item 5.

Other Information

1619

Item 6.

Exhibits

1620

Signatures

1721

Cautionary Information About Forward-Looking Statements

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

•our businesses and prospects and our overall strategy;

•planned or estimated costs or capital expenditures;

•~~our ability to grow our upstream operations;~~

•availability of liquidity and capital resources;

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

•revenues and expenses;

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

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

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

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

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

•risks related to shortages of LNG vessels worldwide;

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

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

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

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

•uncertainties regarding our ability to maintain sufficient liquidity and attract sufficient capital resources to implement our projects;

•our limited operating history;

•our ability to attract and retain key personnel;

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

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

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

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

•~~the potential discontinuation of LIBOR;~~our ability to maintain compliance with our debt arrangements;

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

•development risks, operational hazards and regulatory approvals;

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

•risks related to pandemics or disease outbreaks;

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

•risks and uncertainties associated with litigation matters.

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

DEFINITIONS

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


Bcf						Billion cubic feet of natural gas
~~Bcf/d~~						~~Bcf per day~~
DD&A						Depreciation, depletion and amortization
~~DES~~						~~Delivered ex-ship~~
DFC						Deferred financing costs
EPC						Engineering, procurement and construction
FID						Final investment decision as it pertains to the Driftwood Project
~~FOB~~						~~Free on board~~
GAAP						Generally accepted accounting principles in the U.S.
~~JKM~~						~~Platts Japan Korea Marker index price for LNG~~
LNG						Liquefied natural gas
LSTK						Lump sum turnkey
~~MMBtu~~						~~Million British thermal units~~
Mtpa						Million tonnes per annum
~~OTC~~NYSE American						~~Over-the-counter~~NYSE American LLC
~~SEC~~Phase 1						~~U.S. Securities~~Plants one and ~~Exchange Commission~~
~~SPA~~						~~Sale and purchase agreement~~two of the Driftwood terminal
Train						An industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into ~~LNG~~
~~TTF~~						~~Platts Dutch Title Transfer Facility index price for~~ LNG
U.S.						United States
USACE						U.S. Army Corps of Engineers

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


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

		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	210,812	$	78,297	Cash and cash equivalents	$	295,728	$	305,496
Accounts receivable	Accounts receivable	13,056		4,500		Accounts receivable	14,666		9,270
Prepaid expenses and other current assets	Prepaid expenses and other current assets	467		2,105		Prepaid expenses and other current assets	25,387		12,952
Total current assets	Total current assets	224,335		84,902		Total current assets	335,781		327,718
Property, plant and equipment, net	Property, plant and equipment, net	117,118		61,257		Property, plant and equipment, net	351,132		150,545
Deferred engineering costs	Deferred engineering costs	110,025		110,499		Deferred engineering costs	—		110,025
Non-current restricted cash		—		3,440
Other non-current assets	Other non-current assets	32,399		32,897		Other non-current assets	45,293		33,518
Total assets	Total assets	$	483,877	$	292,995	Total assets	$	732,206	$	621,806

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	27,861	$	23,573	Accounts payable	$	7,802	$	2,852
Accounts payable due to related parties		—		910

Accrued and other liabilities	Accrued and other liabilities	35,203		22,003		Accrued and other liabilities	76,536		85,946
Borrowings	Borrowings	—		72,819		Borrowings	—		—
Total current liabilities	Total current liabilities	63,064		119,305		Total current liabilities	84,338		88,798
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Borrowings	Borrowings	—		38,275		Borrowings	54,891		53,687
Other non-current liabilities	Other non-current liabilities	61,612		26,325		Other non-current liabilities	68,322		61,020
Total long-term liabilities	Total long-term liabilities	61,612		64,600		Total long-term liabilities	123,213		114,707

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 authorized: 6,123,782 and 6,123,782 shares outstanding, respectively	Preferred stock, $0.01 par value, 100,000,000 authorized: 6,123,782 and 6,123,782 shares outstanding, respectively	61		61		Preferred stock, $0.01 par value, 100,000,000 authorized: 6,123,782 and 6,123,782 shares outstanding, respectively	61		61
Common stock, $0.01 par value, 800,000,000 authorized: 470,813,044 and 354,315,739 shares outstanding, respectively		4,477		3,309
Common stock, $0.01 par value, 800,000,000 authorized: 545,890,311 and 500,453,575 shares outstanding, respectively						Common stock, $0.01 par value, 800,000,000 authorized: 545,890,311 and 500,453,575 shares outstanding, respectively	5,229		4,774
Additional paid-in capital	Additional paid-in capital	1,244,500		922,042		Additional paid-in capital	1,517,031		1,344,526
Accumulated deficit	Accumulated deficit	(889,837)		(816,322)		Accumulated deficit	(997,666)		(931,060)
Total stockholders’ equity	Total stockholders’ equity	359,201		109,090		Total stockholders’ equity	524,655		418,301
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	483,877	$	292,995	Total liabilities and stockholders’ equity	$	732,206	$	621,806

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


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

		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Revenues:										Revenues:
Natural gas sales	Natural gas sales	$	15,638	$	7,272	$	29,922	$	21,818	Natural gas sales	$	25,989	$	8,706
LNG sales	LNG sales	—		6,993		19,776		6,993		LNG sales	120,951		—
Total revenue	Total revenue	15,638		14,265		49,698		28,811		Total revenue	146,940		8,706

Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Cost of sales	Cost of sales	3,068		9,241		30,841		14,529		Cost of sales	135,827		2,406
Development expenses	Development expenses	8,823		5,799		26,327		26,105		Development expenses	17,665		8,141
Depreciation, depletion and amortization	Depreciation, depletion and amortization	3,735		3,474		8,720		14,301		Depreciation, depletion and amortization	4,021		2,652
General and administrative expenses	General and administrative expenses	14,528		10,734		47,065		43,342		General and administrative expenses	32,325		15,111
Impairment charges		—		—		—		81,065
Severance and reorganization charges		—		—		—		6,359
Related party charges		—		—		—		7,357
Total operating costs and expenses	Total operating costs and expenses	30,154		29,248		112,953		193,058		Total operating costs and expenses	189,838		28,310
Loss from operations	Loss from operations	(14,516)		(14,983)		(63,255)		(164,247)		Loss from operations	(42,898)		(19,604)
Interest expense, net	Interest expense, net	(968)		(15,973)		(7,689)		(33,564)		Interest expense, net	(2,280)		(5,892)
Gain on extinguishment of debt, net	Gain on extinguishment of debt, net	—		—		1,422		—		Gain on extinguishment of debt, net	—		1,574
Other (expense) income, net		(448)		1,490		(3,993)		(1,235)
Other expense, net										Other expense, net	(21,428)		(3,063)
Loss before income taxes	Loss before income taxes	(15,932)		(29,466)		(73,515)		(199,046)		Loss before income taxes	(66,606)		(26,985)
Income taxes		—		—		—		—
Income tax										Income tax	—		—
Net loss	Net loss	$	(15,932)	$	(29,466)	$	(73,515)	$	(199,046)	Net loss	$	(66,606)	$	(26,985)
Net loss per common share(1):	Net loss per common share(1):									Net loss per common share(1):
Basic and diluted	Basic and diluted	$	(0.04)	$	(0.10)	$	(0.19)	$	(0.79)	Basic and diluted	$	(0.14)	$	(0.08)
Weighted-average shares outstanding:	Weighted-average shares outstanding:									Weighted-average shares outstanding:
Basic and diluted	Basic and diluted	427,204		291,409		390,233		252,825		Basic and diluted	491,337		356,676

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

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


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

		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Total shareholders’ equity, beginning balance	Total shareholders’ equity, beginning balance	$	247,019	$	75,913	$	109,090	$	166,285	Total shareholders’ equity, beginning balance	$	418,301	$	109,090

Preferred stock	Preferred stock	$	61	$	61	$	61	$	61	Preferred stock	61		61

Common stock:	Common stock:									Common stock:
Beginning balance	Beginning balance	4,048		2,627		3,309		2,211		Beginning balance	4,774		3,309
Common stock issuances	Common stock issuances	428		371		1,066		567		Common stock issuances	454		387
Share-based compensation, net~~(1)~~	Share-based compensation, net~~(1)~~	1		23		42		33		Share-based compensation, net~~(1)~~	1		23
Severance and reorganization charges		—		15		—		22
Settlement of Final Payment Fee		—		—		—		110
Borrowings principal repayment		—		—		—		93

Warrant exercises	Warrant exercises	—		—		60		—		Warrant exercises	—		60
Ending balance	Ending balance	4,477		3,036		4,477		3,036		Ending balance	5,229		3,779

Additional paid-in capital:	Additional paid-in capital:									Additional paid-in capital:
Beginning balance	Beginning balance	$	1,116,815	$	848,431	$	922,042	$	769,639	Beginning balance	1,344,526		922,042
Common stock issuances	Common stock issuances	126,313		34,483		308,039		70,327		Common stock issuances	171,204		88,776
Share-based compensation, net~~(1)~~	Share-based compensation, net~~(1)~~	1,372		3,299		6,520		5,619		Share-based compensation, net~~(1)~~	906		2,656
Severance and reorganization charges		—		1,890		—		2,667

Share-based payments	Share-based payments	—		113		—		337		Share-based payments	395		—
Settlement of Final Payment Fee		—		—		—		9,036
Warrants issued in connection with Borrowings		—		—		—		16,896
Borrowings principal repayment		—		—		—		13,695

Warrant exercises	Warrant exercises	—		—		8,117		—		Warrant exercises	—		8,117
Warrant cancellation	Warrant cancellation	—		—		(218)		—		Warrant cancellation	—		(218)
Ending balance	Ending balance	$	1,244,500	$	888,216	$	1,244,500	$	888,216	Ending balance	1,517,031		1,021,373

Accumulated deficit:	Accumulated deficit:									Accumulated deficit:
Beginning balance	Beginning balance	$	(873,905)	$	(775,206)	$	(816,322)	$	(605,626)	Beginning balance	(931,060)		(816,322)
Net loss	Net loss	(15,932)		(29,466)		(73,515)		(199,046)		Net loss	(66,606)		(26,985)
Ending balance	Ending balance	$	(889,837)	$	(804,672)	$	(889,837)	$	(804,672)	Ending balance	(997,666)		(843,307)

Total shareholders’ equity, ending balance	Total shareholders’ equity, ending balance	$	359,201	$	86,641	$	359,201	$	86,641	Total shareholders’ equity, ending balance	$	524,655	$	181,906

(1) Includes settlement of 2019 bonus that was accrued for in 2019.

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


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

		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(73,515)	$	(199,046)	Net loss	$	(66,606)	$	(26,985)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization	Depreciation, depletion and amortization	8,720		14,301		Depreciation, depletion and amortization	4,021		2,652
Amortization of debt issuance costs, discounts and fees	Amortization of debt issuance costs, discounts and fees	3,061		22,467		Amortization of debt issuance costs, discounts and fees	61		3,061
Share-based compensation	Share-based compensation	4,577		2,184		Share-based compensation	906		1,571
Severance and reorganization charges		—		2,689

Share-based payments	Share-based payments	—		338		Share-based payments	396		—
Interest elected to be paid-in-kind	Interest elected to be paid-in-kind	508		2,431		Interest elected to be paid-in-kind	—		508
Loss on financial instruments not designated as hedges		927		4,624
Impairment charges		—		81,065
Unrealized loss on financial instruments not designated as hedges						Unrealized loss on financial instruments not designated as hedges	20,262		1,080

Net gain on extinguishment of debt	Net gain on extinguishment of debt	(1,422)		—		Net gain on extinguishment of debt	—		(1,574)
Other	Other	800		485		Other	231		(80)
Net changes in working capital (Note 15)	Net changes in working capital (Note 15)	17,174		11,728		Net changes in working capital (Note 15)	(41,850)		9,292
Net cash used in operating activities	Net cash used in operating activities	(39,170)		(56,734)		Net cash used in operating activities	(82,579)		(10,475)

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Development of natural gas properties	Development of natural gas properties	(23,416)		(389)		Development of natural gas properties	(25,305)		(1,130)
Purchase of property, plant and equipment		(1,000)		—
Payment of LNG construction costs						Payment of LNG construction costs	(24,500)		—
Land purchases and land improvements						Land purchases and land improvements	(19,064)		(270)
Investment in unconsolidated entity						Investment in unconsolidated entity	(6,089)		—
Net cash used in investing activities	Net cash used in investing activities	(24,416)		(389)		Net cash used in investing activities	(74,958)		(1,400)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from common stock issuances	Proceeds from common stock issuances	319,998		73,986		Proceeds from common stock issuances	176,974		91,929
Equity issuance costs	Equity issuance costs	(10,893)		(3,091)		Equity issuance costs	(5,316)		(2,766)
Borrowing proceeds	Borrowing proceeds	—		50,000		Borrowing proceeds	1,178		—
Borrowing issuance costs	Borrowing issuance costs	—		(2,612)		Borrowing issuance costs	(35)		—
Borrowing principal repayments	Borrowing principal repayments	(119,725)		(45,600)		Borrowing principal repayments	—		(102,725)
Tax payments for net share settlement of equity awards (Note 15)	Tax payments for net share settlement of equity awards (Note 15)	(3,064)		(878)		Tax payments for net share settlement of equity awards (Note 15)	—		(2,305)
Proceeds from warrant exercises	Proceeds from warrant exercises	8,177		—		Proceeds from warrant exercises	—		8,177
Other	Other	(1,833)		(1,776)		Other	(32)		(1)
Net cash provided by financing activities		192,660		70,029
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	172,769		(7,691)

Net increase in cash, cash equivalents and restricted cash		129,074		12,906
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	15,232		(19,566)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	81,738		68,482		Cash, cash equivalents and restricted cash, beginning of period	307,274		81,738
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	210,812	$	81,388	Cash, cash equivalents and restricted cash, end of period	$	322,506	$	62,172
Supplementary disclosure of cash flow information:	Supplementary disclosure of cash flow information:					Supplementary disclosure of cash flow information:
Interest paid	Interest paid	$	3,299	$	7,956	Interest paid	$	1,057	$	2,116

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

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 1 — GENERAL

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

Nature of Operations

~~We plan~~Tellurian is developing and plans to ~~develop,~~ own and operate ~~a global natural gas business and to deliver natural gas to customers worldwide. Tellurian is developing~~ a portfolio of natural gas, LNG marketing, and infrastructure assets that includes an LNG terminal facility (the “Driftwood terminal”), an associated pipeline (the “Driftwood pipeline”), other related pipelines, and upstream natural gas assets. The Driftwood terminal and the Driftwood pipeline are collectively referred to as the “Driftwood ~~Project”.~~Project.”

Basis of Presentation

The accompanying unaudited ~~consolidated financial statements~~Condensed Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and ~~the instructions to Form 10-Q and Article 10~~with Rule 10-01 of Regulation S-X. Accordingly, ~~certain notes~~they do not include all of the information and ~~other information have been condensed or omitted. The accompanying interim~~footnotes required by GAAP for complete 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. These interim financial statementsand should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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

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

Liquidity

Our Condensed Consolidated Financial Statements ~~were~~have been prepared in accordance with GAAP, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business as well as the Company’s ability to continue as a going concern. As of the date of the Condensed Consolidated Financial Statements, we have generated losses and negative cash flows from operations, and have an accumulated deficit. We have not yet established an ongoing source of revenues that is sufficient to ~~satisfy~~cover our future operating costs and obligations ~~and fund working capital needs.~~as they become due during the twelve months following the issuance of the Condensed Consolidated Financial Statements.

The Company has sufficient cash on hand and available liquidity to satisfy its obligations and fund its working capital needs for at least twelve months following the date of issuance of the ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements. The Company has the ability to generate additional proceeds from various other potential financing ~~transactions, such as issuances~~transactions. We are currently focused on the financing and construction of ~~equity, equity-linked and debt securities, or similar transactions to fund our obligations and working capital needs.~~

~~Use of Estimates~~

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

NOTE 2 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

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


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Prepaid expenses	Prepaid expenses	$	280	$	1,156	Prepaid expenses	$	413	$	605
Deposits	Deposits	150		100		Deposits	21,897		3,589
Derivative asset		—		843
Restricted cash						Restricted cash	3,000		—
Derivative asset, net current						Derivative asset, net current	—		8,693
Other current assets	Other current assets	37		6		Other current assets	77		65
Total prepaid expenses and other current assets	Total prepaid expenses and other current assets	$	467	$	2,105	Total prepaid expenses and other current assets	$	25,387	$	12,952

Deposits

Margin deposits posted with a third-party financial institution related to our financial instrument contracts were approximately $20.2 million and $2.1 million as of March 31, 2022 and December 31, 2021, respectively.

Restricted Cash

Restricted cash as of March 31, 2022, represents funds held in escrow under the terms of an agreement to purchase land for the Driftwood Project.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 3 — PROPERTY, PLANT AND EQUIPMENT

~~Property,~~The components of property, plant and equipment ~~is comprised~~consist of ~~fixed assets, proved oil and natural gas properties and financing leases, as shown below~~the following (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Land and land improvement		$	15,284	$	13,808
Upstream natural gas assets						Upstream natural gas assets
Proved properties	Proved properties	76,406		62,227		Proved properties	$	117,336	$	96,297
Wells in progress	Wells in progress	11,200		492		Wells in progress	25,497		17,653
Corporate and other		3,476		3,476
Total property, plant and equipment at cost		106,366		80,003
Accumulated DD&A	Accumulated DD&A	(47,424)		(38,764)		Accumulated DD&A	(52,539)		(48,638)
Right of use asset — financing leases		58,176		20,018
Total upstream natural gas assets, net						Total upstream natural gas assets, net	90,294		65,312

Driftwood Project						Driftwood Project
Land and land improvements						Land and land improvements	50,950		25,222
Driftwood terminal construction in progress						Driftwood terminal construction in progress	148,930		—
Finance lease assets, net of accumulated DD&A						Finance lease assets, net of accumulated DD&A	57,589		57,883
Buildings and other assets, net of accumulated DD&A						Buildings and other assets, net of accumulated DD&A	363		371
Total Driftwood Project, net						Total Driftwood Project, net	257,832		83,476

Fixed assets and other						Fixed assets and other
Leasehold improvements and other assets						Leasehold improvements and other assets	4,443		3,104
Accumulated DD&A						Accumulated DD&A	(1,437)		(1,347)
Total fixed assets and other, net						Total fixed assets and other, net	3,006		1,757

Total property, plant and equipment, net	Total property, plant and equipment, net	$	117,118	$	61,257	Total property, plant and equipment, net	$	351,132	$	150,545

Land

We own land in Louisiana intended for the ~~purpose~~construction of ~~constructing~~ the Driftwood ~~terminal.~~Project. During the three months ended March 31, 2022, we acquired land essential for the construction of the Driftwood Project at a total cost of $19.0 million, inclusive of capitalized land purchase options of approximately $5.5 million.

Driftwood Terminal Construction in Progress

During the year ended December 31, 2021, the Company initiated certain owner construction activities necessary to proceed under our LSTK EPC agreement with Bechtel Energy Inc., formerly known as Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”), for Phase 1 of the Driftwood terminal dated as of November 10, 2017 (the “Phase 1 EPC Agreement”). On March 24, 2022, the Company issued a limited notice to proceed to Bechtel under the Phase 1 EPC Agreement to commence construction of Phase 1 of the Driftwood terminal on April 4, 2022. As the Company commenced construction activities, Deferred engineering costs and Permitting Costs of approximately $110.0 million and $13.4 million, respectively, were transferred to construction in progress as of March 31, 2022. The Company capitalizes all directly identifiable project costs as construction in progress until the constructed assets are placed in service.

NOTE 4 — DEFERRED ENGINEERING COSTS

Deferred engineering costs ~~of approximately $110.0 million represent detailed engineering services~~ related to the planned construction of the Driftwood terminal ~~as of September 30, 2021. The balance in this account will be~~were transferred to construction in progress upon ~~reaching an affirmative FID by~~issuing the ~~Company’s Board of Directors.~~limited notice to proceed to Bechtel in March 2022. See Note 3, Property, Plant and Equipment, for further information.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 5 — OTHER NON-CURRENT ASSETS

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


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Land lease and purchase options	Land lease and purchase options	$	6,363	$	5,831	Land lease and purchase options	$	799	$	6,368
Permitting costs	Permitting costs	13,497		13,092		Permitting costs	—		13,408
Right of use asset — operating leases	Right of use asset — operating leases	10,610		11,884		Right of use asset — operating leases	13,437		10,166
Restricted cash						Restricted cash	23,778		1,778
Investment in unconsolidated entity						Investment in unconsolidated entity	6,089		—
Other	Other	1,929		2,090		Other	1,190		1,798
Total other non-current assets	Total other non-current assets	$	32,399	$	32,897	Total other non-current assets	$	45,293	$	33,518

Land Lease and Purchase Options

We hold lease and purchase option agreements (the “Options”) for certain tracts of land and associated river frontage. Upon exercise of the Options, the leases are subject to maximum terms of 50 years (inclusive of various renewals, at the option of the Company). Costs of the Options will be amortized over the life of the lease once obtained, or capitalized into the cost of land if purchased. During the three months ended March 31, 2022, we capitalized land purchase options of approximately $5.5 million related to purchases for the Driftwood Project. Land purchase options held by the Company as of March 31, 2022 are related to the Driftwood pipeline.

Permitting Costs

Permitting costs primarily ~~represent~~represented the purchase of wetland credits in connection with our permit application to the USACE in 2017 and 2018. These wetland credits were transferred to construction in progress upon issuing the limited notice to proceed in March 2022 to Bechtel. See Note 3, Property, Plant and Equipment, for further information. These wetland credits will be applied to our permit in accordance with the Clean Water Act and the Rivers and Harbors Act, which ~~may~~ require us to mitigate the potential impact to Louisiana wetlands that might be caused by the construction of the Driftwood Project. ~~In May 2019, we received~~

Restricted Cash

Restricted cash as of March 31, 2022 and December 31, 2021, represents cash collateralization of a letter of credit associated with a finance lease.

Investment in unconsolidated entity

On February 24, 2022, the ~~USACE permit.~~Company purchased 1.5 million ordinary shares of an unaffiliated entity engaged in renewable energy services for a total cost of approximately $6.1 million. This investment does not provide the Company with a controlling financial interest in or significant influence over the operating or financial decisions of the unaffiliated entity. The ~~permitting costs will be transferred to construction in progress upon reaching an affirmative FID by the~~ Company’s ~~Board of Directors.~~investment was recorded at cost.

NOTE 6 — FINANCIAL INSTRUMENTS

~~As part~~Natural Gas Financial Instruments

During the fourth quarter of ~~entering~~2021, we entered into natural gas financial instruments to economically hedge the ~~2018 Term Loan, which was repaid in full in April~~commodity price exposure of a portion of our natural gas production. The Company’s open positions as of March 31, 2022, had notional volumes of 9.2 Bcf, with maturities extending through March 2023.

LNG Financial Futures

During the three months ended December 31, 2021, we ~~were required~~entered into LNG financial future contracts to enter into and maintain certain hedging transactions. As a result, we used derivative financial instruments, namely OTC commodity swap instruments (“commodity swaps”), to maintain compliance with that covenant.

~~Commodity swap agreements involve payments to or receipts from counterparties based on the differential between two prices for the commodity and include basis swaps to protect earnings from undue~~reduce our exposure to ~~the risk of geographic disparities in~~ commodity ~~prices. The fair value of our commodity swaps was classified as Level~~price fluctuations, and to achieve more predictable cash flows relative to 2 LNG cargos that we were committed to purchase from and sell to unrelated third-party LNG merchants in the ~~fair value hierarchy~~normal course of business in January and ~~was based on standard industry income approach models that use significant observable inputs, including but not limited to~~April 2022. As of March 31, 2022, there were no open LNG financial futures positions.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

~~New York Mercantile Exchange (NYMEX) natural gas forward curves~~The following table summarizes the effect of the Company’s financial instruments on the Condensed Consolidated Statements of Operations (in thousands):


	Three Months Ended March 31,
	2022		2021
Natural gas financial instruments:
Realized (loss) gain	$	(715)	$	426
Unrealized loss	15,101		1,080
LNG financial futures:
Realized gain	3,532		—
Unrealized loss	5,161		—

The following table presents the classification of the Company’s financial derivative assets and ~~basis forward curves, all of which were validated against external sources at least monthly.~~

~~We recognized all derivative instruments as either assets or~~ liabilities that are required to be measured at fair value on a ~~net~~recurring basis on the Company’s Condensed Consolidated Balance Sheets (in thousands):


	March 31, 2022		December 31, 2021
Current assets:
LNG financial futures	—		$	8,693
Current liabilities:
Natural gas financial instruments	$	15,101	—

The Company’s natural gas and LNG financial instruments are valued using quoted prices in active exchange markets as ~~they were with a single counterparty~~of the balance sheet date and ~~subject to a master netting arrangement. In April 2021, we net settled our derivative instruments when we voluntarily repaid the 2018 Term Loan in full.~~

~~We did not apply hedge accounting for our commodity swaps; therefore, all changes in~~are classified as Level 1 within the fair value of our derivative instruments were recognized within Other (expenses) income, net, in the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2021, we recognized a realized loss of approximately $1.2 million in our Condensed Consolidated Statements of Operations. Derivative contracts which result in physical delivery of a commodity expected to be used or sold by the Company in the normal course of business are designated as normal purchases and sales and are exempt from derivative accounting. OTC arrangements require settlement in cash. Settlements of commodity derivative instruments are reported as a component of cash flows from operations in the Condensed Consolidated Statements of Cash Flows.hierarchy.

NOTE 7 ~~— RELATED PARTY TRANSACTIONS~~

In conjunction with the dismissal of prior litigation, we agreed to reimburse the Vice Chairman of our Board of Directors, Martin Houston, for reasonable attorneys’ fees and expenses he incurred during the litigation. As of September 30, 2021, all amounts owed to Mr. Houston were fully settled.

~~NOTE 8~~ — ACCRUED AND OTHER LIABILITIES

The components of accrued and other liabilities consist of the following (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Project development activities		$	11,380	$	3,228
Upstream accrued liabilities						Upstream accrued liabilities	$	32,535	$	26,421

Payroll and compensation	Payroll and compensation	15,512		9,454		Payroll and compensation	14,525		50,243
Accrued taxes	Accrued taxes	1,047		1,057		Accrued taxes	498		991
Professional services (e.g., legal, audit)		2,764		1,004
Warrant liabilities		—		3,774
Driftwood Project development activities						Driftwood Project development activities	5,163		435
Lease liabilities	Lease liabilities	2,287		1,950		Lease liabilities	2,499		2,279
Current derivative liability						Current derivative liability	15,101		—
Accounts payable due to related parties						Accounts payable due to related parties	175		—
Other	Other	2,213		1,536		Other	6,040		5,577
Total accrued and other liabilities	Total accrued and other liabilities	$	35,203	$	22,003	Total accrued and other liabilities	$	76,536	$	85,946

Accounts payable due to related parties

The Company entered into a one-year independent contractor agreement with Mr. Martin Houston, who serves as Vice Chairman and Director of the Company’s Board of Directors, effective January 1, 2022. Pursuant to the terms and conditions of this agreement, the Company will pay Mr. Houston a monthly fee of $50.0 thousand plus approved expenses. As of March 31, 2022, a balance of approximately $175.0 thousand was owed to Mr. Houston for contractor service fees and expenses.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 98 — BORROWINGS

The following tables summarize the Company’s borrowings as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020~~2021 (in thousands):

September 30, 2021
Principal repayment obligation
Unamortized DFC and discounts Carrying value
2018 Term Loan, due September 2021 $ — $ — $ —
2019 Term Loan, due March 2022 — — —
2020 Unsecured Note — — —
Total borrowings $ — $ — $ —
December 31, 2020
Principal repayment obligation Unamortized DFC and discounts Carrying value
2018 Term Loan, due September 2021 $ 60,000 $ (805) $ 59,195
2019 Term Loan, due March 2022 (a)
43,217 (4,942) 38,275
2020 Unsecured Note 16,000 (2,376) 13,624
Total borrowings $ 119,217 $ (8,123) $ 111,094
(a) Includes paid-in-kind interest on the 2019 Term Loan of $3.3 million.


	March 31, 2022
	Principal repayment obligation		Unamortized debt issuance costs and discounts		Carrying value
Senior Notes due 2028	$	57,678	$	(2,787)	$	54,891
Total borrowings	$	57,678	$	(2,787)	$	54,891

~~Full Repayment~~


	December 31, 2021
	Principal repayment obligation		Unamortized debt issuance costs and discounts		Carrying value
Senior Notes due 2028	$	56,500	$	(2,813)	$	53,687
Total borrowings	$	56,500	$	(2,813)	$	53,687

Senior Notes due 2028

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

~~Over~~Senior Notes within 30 days. On December 7, 2021, the ~~course~~underwriter exercised the option and purchased an additional $6.5 million of the ~~current~~Senior Notes resulting in net proceeds of approximately $6.2 million after deducting fees. The Senior Notes have quarterly interest payments due on January 31, April 30, July 31, and October 31 of each year and on the maturity date.

At-the-Market Debt Offering Program

On December 17, 2021, we entered into an at-the-market debt offering program under which the Company may offer and sell from time to time on the NYSE American up to an aggregate principal amount of $200.0 million of additional Senior Notes. For the three months ended March 31, 2022, we sold approximately $1.2 million aggregate principal amount of additional Senior Notes for total proceeds of approximately $1.1 million after fees and commissions under our at-the-market debt offering program. See Note 16, Subsequent Events, for further information.

Extinguishment of the 2019 Term Loan

On May 23, 2019, Driftwood Holdings LP, a wholly owned subsidiary of the Company, entered into a senior secured term loan agreement (the “2019 Term Loan”) to borrow an aggregate principal amount of $60.0 million. On March 12, 2021 (the “Extinguishment Date”), we finalized a voluntary repayment of the remaining outstanding principal balance of the 2019 Term Loan. A total of approximately $43.7 million was repaid to the lender during the first quarter of 2021 to satisfy the outstanding borrowing obligation. The extinguishment of the 2019 Term Loan resulted in an approximately $2.1 million gain, which was recognized within Gain on extinguishment of debt, net, on our Condensed Consolidated Statements of Operations.

As a result of repaying the outstanding balance prior to its contractual maturity, an approximately $4.4 million in unamortized DFC and discount were included in the computation of the gain from the extinguishment of the 2019 Term Loan as of March 31, 2021.

The holder of the 2019 Term Loan held approximately 3.5 million unvested warrants that had a fair value of approximately $6.3 million as of the Extinguishment Date. Due to the extinguishment of the 2019 Term Loan, all the unvested warrants were contractually terminated (the “Terminated Warrants”), and their respective fair value was included in the computation of the gain on extinguishment of the 2019 Term Loan. The fair value of the Terminated Warrants was determined using a Black-Scholes option pricing model.

2018 Term Loan

On September 28, 2018, Tellurian Production Holdings LLC, a wholly owned subsidiary of Tellurian Inc., entered into a three-year senior secured term loan credit agreement (the “2018 Term Loan”) in an aggregate principal amount of $60.0 million. On February 18, 2021, we voluntarily repaid ~~all borrowing obligations that were outstanding under~~approximately $43.0 million of the 2018 Term Loan outstanding principal balance. As a result of this voluntary repayment, we recognized an approximately $0.5 million loss, which was netted

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

against the gain on extinguishment of the 2019 Term Loan, and ~~2020 Unsecured Note.~~ presented within Gain on extinguishment of debt, net, on our Condensed Consolidated Statements of Operations on this partial extinguishment due to the pro-rata recognition of the unamortized DFC and discount associated with the 2018 Term Loan.

Covenant Compliance

As of ~~September 30, 2021, our total borrowing obligation~~March 31, 2022, the Company was ~~zero.~~in compliance with all covenants under the indenture governing the Senior Notes.

Trade Finance Credit Line

On July 19, 2021, we entered into an uncommitted trade finance credit line for up to $30.0 million that is intended to finance the purchase ~~and sale~~ of LNG ~~cargoes~~cargos for ultimate resale in the normal course of business. On December 7, 2021, the uncommitted trade finance credit line was amended and increased to $150.0 million. As of ~~the period ended September 30, 2021,~~March 31, 2022, no amounts were drawn under this credit line.

NOTE 9 — COMMITMENTS AND CONTINGENCIES

On January 26, 2022, our wholly owned subsidiary Tellurian Trading UK Ltd entered into an agreement to cancel 3 LNG cargos that the Company was committed to purchase in April, July and October 2022 under a master LNG sale and purchase agreement (“LNG SPA”) we entered into in April 2019 with an unrelated third-party LNG merchant. The Company will be required to pay a cancellation fee of approximately $1.0 million for all 3 LNG cargos. The Company does not have ~~been drawn.~~any further commitments or obligations under this LNG SPA.

NOTE 10 — ~~COMMITMENTS AND CONTINGENCIES~~

~~LNG Purchases~~

In connection with our LNG trading activities, we have previously entered into agreements with unrelated third-party LNG merchants pursuant to which we are obligated to purchase 1 cargo of LNG per quarter through October 2022 at a price based on then-prevailing JKM prices. The volume of each cargo is expected to range from 3.3 to 3.6 million MMBtu, and each cargo will be purchased under DES terms.

~~NOTE 11 —~~ STOCKHOLDERS’ EQUITY

~~Common Stock Issuance~~At-the-Market Equity Offering Programs

On August 6, 2021, we sold 35.0 million shares of our common stock in an underwritten public offering at a price of $3.00 per share. Net proceeds from this offering, after deducting fees and expenses, were approximately $100.8 million. The underwriters were granted an option to purchase up to an additional 5.3 million shares of common stock within 30 days. On August 31, 2021, the underwriters exercised this option, which generated net proceeds, after deducting fees, of approximately $15.1 million.

~~At-the-Market Program~~

We maintain anmultiple at-the-market equity offering ~~program~~programs pursuant to which we may sell shares of our common stock from time to ~~time. For~~time on the ~~nine~~NYSE American. During the three months ended ~~September 30, 2021,~~March 31, 2022, we issued ~~66.4~~45.4 million shares of our common stock under our at-the-market ~~program~~equity offering programs for net proceeds of approximately ~~$193.3~~$171.7 million. As of ~~September 30, 2021,~~March 31, 2022, we had remaining availability under ~~the~~such at-the-market ~~program~~programs to raise aggregate gross sales proceeds of up to approximately ~~$334.6~~$255.8 million. See Note 16, Subsequent Events, for further information.

Common Stock Purchase Warrants

~~Tellurian Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

2019 Term Loan

During the first quarter of 2021, the lender ~~under~~of the 2019 Term Loan ~~purchased~~exercised warrants to purchase approximately 6.0 million shares of our common stock ~~pursuant to the exercise of warrants~~ for total proceeds of approximately $8.2 million. ~~On March 12, 2021, we repaid~~As discussed in Note 8, Borrowings, the 2019 Term Loan has been repaid in full and the lender no longer holds any warrants.

~~2020 Unsecured Note~~

In conjunction with the issuance of the 2020 Unsecured Note, we issued a warrant providing the lender with the right to purchase up to 20.0 million shares of our common stock at $1.542 per share (the “2020 Warrant”). The 2020 Warrant vested immediately and will expire in October 2025. The 2020 Warrant has been excluded from the computation of diluted loss per share because including it would have been antidilutive for the periods presented.

Preferred Stock

In March 2018, we entered into a preferred stock purchase agreement with BDC Oil and Gas Holdings, LLC (“Bechtel Holdings”), a Delaware limited liability company and an affiliate of Bechtel, ~~Oil, Gas and Chemicals, Inc., a Delaware corporation,~~ pursuant to which we sold to Bechtel Holdings approximately 6.1 million shares of our Series C convertible preferred stock (the “Preferred Stock”).

The holders of the Preferred Stock do not have dividend rights but do have a liquidation preference over holders of our common stock. The holders of the Preferred Stock may convert all or any portion of their shares into shares of our common stock on a 1-for-one basis. At any time after “Substantial Completion” of “Project 1,” each as defined in and pursuant to the ~~LSTK~~Phase 1 EPC Agreement, ~~for the Driftwood LNG Phase 1 Liquefaction Facility, dated as of November 10, 2017,~~ or at any time after March 21, 2028, we have the right to cause all of the Preferred Stock to be converted into shares of our common stock on a 1-for-one basis. The Preferred Stock has been excluded from the computation of diluted loss per share because including it in the computation would have been antidilutive for the periods presented.

NOTE 1211 — SHARE-BASED COMPENSATION

We have granted restricted stock and restricted stock units (collectively, “Restricted Stock”), as well as unrestricted stock and stock options, to employees, directors and outside consultants (collectively, the “grantees”) under the Tellurian Inc. 2016 Omnibus Incentive Compensation Plan, as amended (the “2016 Plan”), and the Amended and Restated Tellurian Investments Inc. 2016 Omnibus Incentive Plan (the “Legacy Plan”). The maximum number of shares of Tellurian common stock authorized for issuance under the 2016 Plan is 40 million shares of common stock, and no further awards can be granted under the Legacy Plan.

Upon the vesting of restricted stock, shares of common stock will be released to the grantee. Upon the vesting of restricted stock units, the units will be converted into either cash, stock, or a combination thereof. As of March 31, 2022, there was no Restricted Stock that would be required to be settled in cash.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

As of ~~September 30, 2021,~~March 31, 2022, we had approximately ~~30.2~~31.0 million shares of performance-based Restricted Stock outstanding, of which approximately 19.2 million shares will vest entirely at FID, as defined in the award agreements, and approximately ~~10.2~~11.2 million shares will vest in one-third increments at FID and the first and second anniversaries of FID. The remaining shares of performance-based Restricted Stock, totaling approximately ~~0.8~~0.6 million shares, will vest based on other criteria. As of ~~September 30, 2021,~~March 31, 2022, no expense had been recognized in connection with performance-based Restricted Stock.

For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, the recognized share-based compensation expenses related to all share-based awards totaled approximately ~~$1.5 million and $4.6 million, respectively.~~$0.9 million. As of ~~September 30, 2021,~~March 31, 2022, unrecognized compensation expenses, based on the grant date fair value, for all share-based awards totaled approximately ~~$200.5~~$201.3 million. Further, the approximately ~~30.2~~31.0 million shares of performance-based Restricted Stock, as well as approximately 11.1 million stock options outstanding, have been excluded from the computation of diluted loss per share because including them in the computation would have been antidilutive for the periods presented.

NOTE 12 — INCENTIVE COMPENSATION PROGRAM

On November 18, 2021, the Company’s Board of Directors approved the adoption of the Tellurian Incentive Compensation Program (the “Incentive Compensation Program” or “ICP”). The ICP allows the Company to award short-term and long-term performance and service-based incentive compensation to full-time employees of the Company. ICP awards may be earned with respect to each calendar year and are determined based on guidelines established by the Compensation Committee of the Board of Directors, as administrator of the ICP.

Long-term incentive awards

Long-term incentive (“LTI”) awards under the ICP were granted in January 2022 in the form of “tracking units,” at the discretion of the Company’s Board of Directors (the “2021 LTI Award”). Each such tracking unit has a value equal to 1 share of Tellurian common stock and entitles the grantee to receive, upon vesting, a cash payment equal to the closing price of our common stock on the trading day prior to the vesting date. These tracking units will vest in 3 equal tranches at grant date, and the first and second anniversaries of the grant date. Non-vested tracking unit awards as of March 31, 2022 and awards granted during the period were as follows:


	Number of Tracking Units (in thousands)	Price per Tracking Unit
Balance at January 1, 2022	—	—
Granted	19,309	$	3.09
Vested	(6,436)	3.38
Forfeited	(76)	2.70
Unvested balance at March 31, 2022	12,797	$	5.30

We recognize compensation expense for awards with graded vesting schedules over the requisite service periods for each separately vesting portion of the award as if each award was in substance multiple awards. Compensation expense for the first tranche of the 2021 LTI Award that vested at the grant date was recognized over the performance period when it was probable that the performance condition was achieved. Compensation expense for the second and third tranches of the 2021 LTI Award is recognized on a straight-line basis over the requisite service period. Compensation expense for unvested tracking units is subsequently adjusted each reporting period to reflect the estimated payout levels based on changes in the Company’s stock price and actual forfeitures. For the three months ended March 31, 2022, we recognized approximately $12.7 million in compensation expense for the second and third tranches of the 2021 LTI Award.

NOTE 13 — INCOME TAXES

Due to our cumulative loss position, historical net operating losses (“NOLs”), and other available evidence related to our ability to generate taxable income, we have recorded a full valuation allowance against our net deferred tax assets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Accordingly, we have not recorded a provision for federal, state or foreign income taxes during the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022.

We experienced ownership changes as defined by Internal Revenue Code (“IRC”) Section 382 in 2017, and an analysis of the annual limitation on the utilization of our NOLs was performed at that time. It was determined that IRC Section 382 will not limit the use of our NOLs over the carryover period. We will continue to monitor trading activity in our shares that may cause an additional ownership change, which may ultimately affect our ability to fully utilize our existing NOL carryforwards.

911

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 14 — LEASES

~~Financing Leases~~

Our land leases are classified as ~~financing~~finance leases and include 1one or more options to extend the lease term for up to 40 years, as well as to terminate the lease within five years, at our sole discretion. We are reasonably certain that those options will be exercised, and that our termination rights will not be exercised, and we have, therefore, included those assumptions within our right of use assets and corresponding lease liabilities. As of September 30, 2021, the weighted-average remaining lease term for our financing leases was approximately fifty years. As none of our financing leases provide an implicit rate, we have determined our own discount rate, which, on a weighted-average basis was approximately 9% at September 30, 2021.

As of September 30, 2021, our financing leases had a right of use asset of approximately $58.2 million, which is recognized within Property, plant and equipment, net, and a corresponding lease liability of approximately $50.3 million, most of which is recognized within Other non-current liabilities. For the three and nine months ended September 30, 2021 and 2020, our financing lease costs, which are associated with the interest on our lease liabilities, were approximately $1.0 million and $0.5 million, respectively, and $1.9 million and $1.2 million, respectively. For the nine months ended September 30, 2021, we paid approximately $1.0 million in required finance lease payments which are presented within the operating section of the Condensed Consolidated Statements of Cash Flows. For each of the nine months ended September 30, 2021 and 2020, we paid approximate $1.8 million, in required financing lease payments which are presented within the financing section of the Condensed Consolidated Statements of Cash Flows.

~~Operating Leases~~

Our office space leases are classified as operating leases and include 1one or more options to extend the lease term ~~for~~ up to 10 years, at our sole discretion. As we are not reasonably certain that those options will be exercised, none are recognized as part of our right of use assets and lease liabilities. As ~~of September 30, 2021, our weighted-average remaining lease term for our operating leases was approximately five years. As~~ none of our ~~operating~~ leases provide an implicit rate, we have determined our own discount ~~rate, which, on a weighted-average basis at September 30, 2021, was approximately 8%.~~rate.

AsThe following table shows the classification and location of ~~September 30, 2021,~~ our ~~operating leases had a corresponding right of use asset of approximately $10.6 million, which is recognized within Other non-current~~right-of-use assets and ~~a total~~ lease ~~liability of approximately $12.2 million which is~~liabilities on our Consolidated Balance Sheets (in thousands):


Leases	Consolidated Balance Sheets Classification	March 31, 2022		December 31, 2021
Right of use asset
Operating	Other non-current assets	$	13,437	$	10,166
Finance	Property, plant and equipment, net	57,589		57,883
Total leased assets		$	71,026	$	68,049
Liabilities
Current
Operating	Accrued and other liabilities	$	2,365	$	2,147
Finance	Accrued and other liabilities	134		132
Non-Current
Operating	Other non-current liabilities	12,553		9,563
Finance	Other non-current liabilities	50,068		50,103
Total leased liabilities		$	65,120	$	61,945

Lease costs recognized ~~within Accrued and other liabilities (approximately $2.1 million) and Other non-current liabilities (approximately $10.1 million). For the three and nine months ended September 30, 2021 and 2020,~~in our operating lease costs were $0.7 million and $0.7 million, respectively, and $2.1 million and $2.1 million, respectively. For the nine months ended September 30, 2021 and 2020, we paid approximately $2.1 million and $2.1 million, respectively, in required operating lease payments, which are presented within the operating section of the Condensed Consolidated Statements of ~~Cash Flows.~~Operations is summarized as follows (in thousands):


	Three months ended
Lease Costs	2022		2021
Operating lease cost	$	685	$	724
Finance lease cost
Amortization of lease assets	294		100
Interest on lease liabilities	994		456
Finance lease cost	$	1,288	$	556
Total lease cost	$	1,973	$	1,280

Other information about lease amounts recognized in our Consolidated Financial Statements is as follows:


	March 31, 2022
Lease term and discount rate
Weighted average remaining lease term (years)
Operating lease	5.2
Finance lease	49.2
Weighted average discount rate
Operating lease	6.1	%
Finance lease	9.4	%

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

The following table includes other quantitative information for our operating and finance leases (in thousands):


	Three months ended March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	743	$	724
Operating cash flows from finance leases	$	—	$	—
Financing cash flows from finance leases	$	—	$	—

The table below presents a maturity analysis of our lease liability on an undiscounted basis and reconciles those amounts to the present value of the lease liability as of ~~September 30, 2021~~March 31, 2022 (in thousands):


Maturity of lease liability		Operating Leases		Financing Leases
2021		$	745	$	1,028
							Operating		Finance
2022	2022	3,006		4,111		2022	$	2,350	$	3,083
2023	2023	3,044		4,111		2023	3,316		4,111
2024	2024	3,081		4,111		2024	3,359		4,111
2025	2025	3,119		4,111		2025	3,401		4,111
Thereafter		1,860		186,333
2026						2026	3,423		4,111
After 2026						After 2026	1,633		182,222
Total lease payments	Total lease payments	$	14,855	$	203,805	Total lease payments	$	17,482	$	201,749
Less: discount	Less: discount	2,641		153,477		Less: discount	2,564		151,547
Present value of lease liability	Present value of lease liability	$	12,214	$	50,328	Present value of lease liability	$	14,918	$	50,202

NOTE 15 — ADDITIONAL CASH FLOW INFORMATION

The following table provides information regarding the net changes in working capital (in thousands):


	Three Months Ended March 31,
	2022		2021
Accounts receivable	$	(5,396)	$	916
Prepaid expenses and other current assets 1	(14,595)		5
Accounts payable	4,950		1,674
Accounts payable due to related parties	175		(460)
Accrued liabilities 1	(27,810)		7,669
Other, net	826		(512)
Net changes in working capital	$	(41,850)	$	9,292

1 Excludes changes in the Company’s derivative assets and liabilities.

The following table provides supplemental disclosure of cash flow information (in thousands):


	Three Months Ended March 31,
	2022		2021
Non-cash accruals of property, plant and equipment and other non-current assets	$	10,931	(356)
Non-cash settlement of withholding taxes associated with the 2019 bonus and vesting of certain awards	—		2,305
Non-cash settlement of the 2019 bonus	—		3,258

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Nine Months Ended September 30,
2021 2020
Accounts receivable $ (8,556) $ 1,991
Prepaid expenses and other current assets 412 6,995
Accounts payable 4,288 (25)
Accounts payable due to related parties (910) 1,360
Accrued liabilities 23,030 3,155
Other, net (1,090) (1,748)
Net changes in working capital $ 17,174 $ 11,728

~~The following table provides supplemental disclosure of cash flow information (in thousands):~~

Nine Months Ended September 30,
2021 2020
Non-cash accruals of property, plant and equipment and other non-current assets $ 38,509 $ 7,955
Non-cash settlement of withholding taxes associated with the 2019 bonus and vesting of certain awards 3,064 878
Non-cash settlement of the 2019 bonus 5,430 4,344
Non-cash settlement of Final Payment Fee — 8,539

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash and cash equivalents	Cash and cash equivalents	$	210,812	$	77,947	Cash and cash equivalents	$	295,728	$	58,729
Current restricted cash						Current restricted cash	3,000		—
Non-current restricted cash	Non-current restricted cash	—		3,441		Non-current restricted cash	23,778		3,443
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	210,812	$	81,388	Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	322,506	$	62,172

NOTE 16 — SUBSEQUENT EVENTS

At-the-Market Programs

Subsequent to ~~September 30, 2021,~~March 31, 2022, and through the date of this filing, we ~~issued~~sold approximately ~~8.2~~22.3 million shares of common stock for total proceeds of approximately $128.1 million, net of approximately $4.0 million in fees and commissions, under our at-the-market equity offering ~~program for net~~programs. We did not sell any Senior Notes under the at-the-market debt offering program. On April 7, 2022, the Company increased the maximum aggregate sales proceeds of ~~approximately $29.0~~one of our at-the-market equity offering programs from $200.0 million to $400.0 million. As of ~~October 22, 2021,~~the date of this filing, we have remaining ~~capacity under our at-the-market program~~availability to raise aggregate gross sales proceeds of approximately ~~$304.7 million.~~$522.6 million under our at-the-market debt and equity offering programs.

~~Effective November 2, 2021, the listing of our common stock was transferred from the Nasdaq Capital Market to the NYSE American. The stock continues to trade under the symbol “TELL”.~~

1114

Tellurian Inc. and Subsidiaries

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

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

Introduction

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

•Our Business

•Overview of Significant Events

•Liquidity and Capital Resources

•Capital Development Activities

•Results of Operations

•Recent Accounting Standards

Our Business

Tellurian Inc. (“Tellurian,” “we,” “us,” “our,” or the “Company”) ~~intends~~, a Delaware corporation, is a Houston-based company that is developing and plans to ~~create value for shareholders by building a low-cost, global natural gas business, profitably delivering natural gas to customers worldwide (the “Business”). We are developing~~operate a portfolio of natural gas, LNG marketing, and infrastructure assets that includes an LNG terminal facility (the “Driftwood terminal”), an associated pipeline (the “Driftwood pipeline”), other related pipelines, and upstream natural gas ~~assets.~~assets (collectively referred to as the “Business”). The Driftwood terminal and the Driftwood pipeline are collectively referred to as the “Driftwood Project”. Our existing ~~upstream~~ natural gas assets consist of ~~9,750~~13,521 net acres and interests in 7482 producing wells located in the Haynesville Shale trend of northern Louisiana. Our Business may be developed in phases.

As part of our execution strategy, which includes increasing our asset base, we will consider ~~partnering~~various commercial arrangements with third parties across the natural gas value chain. We are also pursuing activities such as direct sales of LNG to global counterparties, trading of LNG, the acquisition of additional upstream acreage ~~the~~and drilling of new wells on our existing or newly acquired upstream acreage and trading LNG. As discussed in “Overview of Significant Events – LNG Sale and Purchase Agreements” below, we entered into four LNG SPAs with three unrelated purchasers, completing the planned sales for plants one and two of the Driftwood terminal (“Phase 1”).acreage. We are currently focused on ~~securing~~the financing ~~for the~~and construction of ~~Phase 1.~~the Driftwood terminal.

We continue to evaluate ~~and discuss with potential partners,~~ the scope and other aspects of our Business in light of the evolving economic environment, needs of potential ~~partners~~counterparties and other factors. How we execute our Business will be based on a variety of factors, including the results of our continuing analysis, changing business conditions and market feedback.

Overview of Significant Events

~~LNG Sale~~Limited Notice to Proceed

On March 24, 2022 the Company issued a limited notice to proceed to Bechtel Energy Inc., formerly known as Bechtel Oil, Gas and ~~Purchase Agreements~~

~~Subsequent to entering into LNG SPAs with Gunvor Singapore Pte Ltd and Vitol~~Chemicals, Inc. (“Bechtel”), under our LSTK EPC agreement for ~~the purchase of a total of 6.0 Mtpa during the second quarter of this year, on July 29, 2021, Driftwood LNG LLC, a wholly owned subsidiary~~Phase 1 of the Driftwood terminal dated as of November 10, 2017 (the “Phase 1 EPC Agreement”).

Land purchases

In January 2022, the Company ~~has entered into two LNG SPAs with Shell NA LNG LLC (“Shell”) for~~exercised and capitalized land options of approximately $5.5 million to purchase land essential to the ~~purchase~~construction of 3.0 Mtpa at a price that will be based on the JKM index price or the TTF futures contract price, in each case minus a transportation netback. Each LNG SPA has a ten-year term from the date of first commercial delivery from the Driftwood ~~terminal.~~Project for approximately $12.0 million.

~~Public Equity Offering~~LNG Trading Activities

On August 6, 2021, we sold 35.0 million shares of our common stock in an underwritten public offering at a price of $3.00 per share. Net proceeds from this offering, after deducting fees and expenses, were approximately $100.8 million. The ~~underwriters were granted an option~~Company does not have any further commitments or obligations to purchase upLNG cargos under its existing master LNG sale and purchase agreement. Refer to ~~an additional 5.3 million shares~~Note 9, Commitments and Contingencies, for further information.

Tellurian Inc. and Subsidiaries

Management's Discussion and Analysis of ~~common stock within 30 days. On August 31, 2021, the underwriters exercised this option, which generated net proceeds, after deducting fees,~~Financial Condition and Results of ~~approximately $15.1 million.~~Operations

Liquidity and Capital Resources

Capital Resources

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We are currently funding our operations, development activities and general working capital needs through our cash on hand. Our current capital resources consist of approximately ~~$210.8~~$295.7 million of cash and cash equivalents as of ~~September 30, 2021.~~March 31, 2022. We currently maintain an at-the-market debt and equity offering ~~program under~~programs pursuant to which aswe sell our Senior Notes and common stock from time to time. As of the date of this filing, we have remaining

~~Tellurian Inc. and Subsidiaries~~

~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

availability to raise aggregate gross sales proceeds of approximately ~~$304.7 million. Since January 1, 2021, and through October 22, 2021, we have sold approximately 74.6~~$522.6 million ~~shares of common stock~~ under ~~our at-the-market program for net proceeds of approximately $222.3 million.~~these programs.

As of ~~September 30, 2021,~~March 31, 2022, we had total indebtedness of $57.7 million, none of which is scheduled to be repaid within the next twelve months. We also had contractual obligations associated with our ~~financing~~finance and operating leases totaling ~~$218.7~~$219.2 million, of which ~~$7.1~~$7.3 million is scheduled to be paid within the next twelve months.

In connection with our LNG trading activities, we have previously entered into agreements with unrelated third-party LNG merchants pursuant to which we are obligated to purchase one cargo of LNG per quarter through October 2022 at a price based on then-prevailing JKM prices. We may be required to use cash on hand as well as trade financing arrangements to finance the purchase of these cargoes.

The Company has sufficient cash on hand and available liquidity to satisfy its obligations and fund its working capital needs for at least twelve months following the date of issuance of the ~~condensed~~ consolidated financial statements. The Company has the ability to generate additional proceeds from various other potential financing ~~transactions, such as issuances~~transactions. We are currently focused on the financing and construction of ~~equity, equity-linked and debt securities, or similar transactions to fund our obligations and working capital needs.~~the Driftwood terminal.

Sources and Uses of Cash

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


							Three Months Ended March 31,
		Nine Months Ended September 30,
		2021		2020			2022		2021
Cash used in operating activities	Cash used in operating activities	$	(39,170)	$	(56,734)	Cash used in operating activities	$	(82,579)	$	(10,475)
Cash used in investing activities	Cash used in investing activities	(24,416)		(389)		Cash used in investing activities	(74,958)		(1,400)
Cash provided by financing activities		192,660		70,029
Cash provided by (used in) financing activities						Cash provided by (used in) financing activities	172,769		(7,691)

Net increase in cash, cash equivalents and restricted cash		129,074		12,906
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	15,232		(19,566)
Cash, cash equivalents and restricted cash, beginning of the period	Cash, cash equivalents and restricted cash, beginning of the period	81,738		68,482		Cash, cash equivalents and restricted cash, beginning of the period	307,274		81,738
Cash, cash equivalents and restricted cash, end of the period	Cash, cash equivalents and restricted cash, end of the period	$	210,812	$	81,388	Cash, cash equivalents and restricted cash, end of the period	$	322,506	$	62,172

Net working capital	Net working capital	$	161,271	$	(58,741)	Net working capital	$	251,443	$	1,282

Cash used in operating activities for the ~~nine~~three months ended ~~September 30, 2021 decreased~~March 31, 2022 increased by approximately ~~$17.6~~$72.1 million ~~compared to the same period in 2020~~ due to an overall ~~decrease~~increase in disbursements ~~as a result of the reorganization~~ in the ~~first quarter~~normal course of ~~2020.~~business.

Cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 increased by approximately ~~$24.0~~$73.6 million compared to the same period in ~~2020. This increase is predominantly driven by~~2021 primarily related to increased natural gas development ~~activities.~~activities of $25.3 million, land purchases and land improvements of $19.1 million, the payment of LNG construction costs of $24.5 million and an investment of $6.1 million in an unconsolidated entity, as compared to the same period in 2021.

Cash provided by (used in) financing activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 increased by approximately ~~$122.6~~$180.5 million compared to the same period in ~~2020.~~2021. This increase is primarily ~~relates~~due to ~~the following:~~

•~~Increase of~~ approximately ~~$246.4~~$171.7 million in net proceeds from equity issuances ~~and warrant exercises.~~

•~~Decrease of approximately $47.4~~as compared to $89.2 million in ~~net borrowings proceeds due to~~ the ~~absence of these activities during the current period.~~

•~~Increase of~~prior period as well as approximately ~~$74.1~~$102.7 million in principal repayments of our borrowings ~~compared to~~in the prior period.

Borrowings

As of March 31, 2022, we had total indebtedness of approximately $57.7 million, and we were in compliance with the covenants under the indentures governing the Senior Notes. See Note 8, Borrowings, for further information.

~~See Note 11,~~

~~Stockholders’ Equity~~

,~~of our Notes to the Condensed Consolidated Financial Statements for further information about our financing activities.~~

1316

Tellurian Inc. and Subsidiaries

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

Capital Development Activities

The activities we have proposed will require significant amounts of capital and are subject to risks and delays in completion. We have received all ~~major~~ regulatory approvals for the construction of Phase 1 of the Driftwood terminal and, as a result, our business success will depend to a significant extent upon our ability to obtain the funding necessary to construct assets on a commercially viable basis and to finance the costs of staffing, operating and expanding our company during that process. We ~~have~~ initiated certain owner construction activities necessary to proceed under the Phase 1 EPC Agreement and increased our upstream development activities. In March 2022, we issued a limited notice to proceed to Bechtel under our Phase 1 EPC Agreement to commence the construction of Phase 1 of the Driftwood terminal.

We currently estimate the total cost of the Driftwood Project as well as related pipelines and upstream natural gas assets to be approximately $25.0 billion, including owners’ costs, transaction costs and contingencies but excluding interest costs incurred during construction and other financing costs. We have entered into four LSTK EPC agreements currently totaling $15.5 billion, or $561 per tonne, with Bechtel ~~Oil, Gas and Chemicals, Inc. (“Bechtel”)~~ for construction of the Driftwood terminal. The proposed Driftwood terminal will have a liquefaction capacity of up to approximately 27.6 Mtpa and will be situated on approximately ~~1,000~~1,200 acres in Calcasieu Parish, Louisiana. The proposed Driftwood terminal will include up to 20 liquefaction Trains, three full containment LNG storage tanks and three marine berths.

~~In addition, part of our~~Our strategy involves acquiring additional natural gas properties, including properties in the Haynesville shale trend. We intend to pursue potential acquisitions of such assets, or public or private companies that own such assets. We would expect to use stock, cash on hand, or cash raised in financing transactions to complete an acquisition of this type.

We anticipate funding our more immediate liquidity requirements relative to the ~~detailed engineering work and other developmental costs,~~commencement of construction of the Driftwood terminal, natural gas development costs, and general and administrative ~~costs~~expenses through the use of cash on hand, proceeds from operations, and proceeds from completed and future issuances of securities by us. Investments in the construction of the Driftwood terminal and natural gas development may be significant in 2022, but the size of those investments will depend on, among other things, commodity prices, Driftwood Project financing developments and other liquidity considerations, and our continuing analysis of strategic risks and opportunities. Consistent with our overall financing strategy, the Company has considered, and in some cases discussed with investors, various potential financing transactions, including issuances of debt, equity and equity-linked securities or similar transactions, to support its short- and medium-term capital requirements. The Company will continue to evaluate its cash needs and business outlook, and it may execute one or more transactions of this type in the future.

~~We currently expect that our long-term capital requirements will be financed by proceeds from future debt, equity and/or equity-linked transactions.~~

Tellurian Inc. and Subsidiaries

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

Results of Operations

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Total revenue	Total revenue	$	15,638	$	14,265	$	49,698	$	28,811	Total revenue	$	146,940	$	8,706
Cost of sales	Cost of sales	3,068		9,241		30,841		14,529		Cost of sales	135,827		2,406
Development expenses	Development expenses	8,823		5,799		26,327		26,105		Development expenses	17,665		8,141
Depreciation, depletion and amortization	Depreciation, depletion and amortization	3,735		3,474		8,720		14,301		Depreciation, depletion and amortization	4,021		2,652
General and administrative expenses	General and administrative expenses	14,528		10,734		47,065		43,342		General and administrative expenses	32,325		15,111
Impairment charge		—		—		—		81,065
Severance and reorganization charges		—		—		—		6,359
Related party charges		—		—		—		7,357

Loss from operations	Loss from operations	(14,516)		(14,983)		(63,255)		(164,247)		Loss from operations	(42,898)		(19,604)
Interest expense, net	Interest expense, net	(968)		(15,973)		(7,689)		(33,564)		Interest expense, net	(2,280)		(5,892)
Gain on extinguishment of debt, net	Gain on extinguishment of debt, net	—		—		1,422		—		Gain on extinguishment of debt, net	—		1,574
Other (expense) income, net		(448)		1,490		(3,993)		(1,235)
Other expense, net										Other expense, net	(21,428)		(3,063)
Income tax benefit	Income tax benefit	—		—		—		—		Income tax benefit	—		—
Net loss	Net loss	$	(15,932)	$	(29,466)	$	(73,515)	$	(199,046)	Net loss	$	(66,606)	$	(26,985)

Our consolidated ~~net~~Net loss was approximately ~~$15.9~~$66.6 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to a ~~net~~Net loss of approximately ~~$29.5~~$27.0 million during the same period in ~~2020.~~2021. The ~~decrease~~increase in net loss of approximately ~~$13.5~~$39.6 million is primarily a result of the following:

•~~Decrease~~Increase of approximately ~~$15.0~~$138.2 million in ~~interest~~Total revenue compared to the same period in 2021 attributable to a $17.3 million increase in Natural gas sales revenues as a result of increased realized natural gas prices and production volumes and a $121.0 million increase in LNG sales revenues from the sale of an LNG cargo in January 2022.

•Increase of approximately $133.4 million in Cost of sales primarily attributable to the purchase of an LNG cargo in January 2022.

•Increase of approximately $9.5 million in Development expenses primarily attributable to a $5.1 million increase in compensation expenses and a $4.4 million increase in professional services, engineering services and other development expenses associated with the Driftwood Project.

•Increase of approximately $17.2 million in General and administrative expenses primarily attributable to a $9.4 million increase in compensation expenses and a $7.8 million increase in professional services and other expenses.

•Increase of approximately $18.4 million in Other expense, net primarily attributable to a $20.3 million Unrealized loss on financial instruments due to changes in the ~~decline~~fair value of the Company’s derivative instruments. The Unrealized loss on financial instruments was partially offset by a $3.5 million realized gain on LNG financial futures settlements, which was partially offset by a $0.7 million realized loss on natural gas financial instruments settlements, as compared to the same period in ~~interest charges associated with our borrowing obligations, which were fully repaid during~~ 2021.

Tellurian Inc. and Subsidiaries

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

•~~Decrease of $6.2 million in cost of sales primarily because we did not execute any purchases and sales of LNG cargos during the current period.~~

The decreases were partially offset by an approximately $6.8 million increase in General and administrative and Development expenses as a result of an increase in spending activities primarily associated with the Driftwood Project.

Our consolidated net loss was approximately $73.5 million for the nine months ended September 30, 2021, compared to a net loss of approximately $199.0 million during the same period in 2020. The decrease in net loss of approximately $125.5 million is primarily a result of the following:

•Absence of upstream impairment charges, severance and reorganization costs, and related party expenses of approximately $81.1 million, $6.4 million, and $7.4 million respectively, that were incurred during 2020.

•~~Decrease of approximately $25.9 million in interest expense due to the decline in interest charges associated with our borrowing obligations, which were fully repaid during 2021.~~

•~~Decrease of approximately $5.6 million in DD&A due to the lower net book value utilized in the calculation as a result of the impairment charge that occurred during the prior period.~~

~~The increases of approximately $20.9 million in total revenues and $16.3 million in cost of sales were primarily related to the purchase and sale of an LNG cargo in April 2021.~~

Recent Accounting Standards

We do not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our Condensed Consolidated Financial Statements or related disclosures.

Critical Accounting Estimates

There were no changes made by management to the critical accounting policies in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Please refer to the Summary of Critical Accounting Estimates section within ~~MD&A~~Management’s Discussion and Analysis and Note 12 to the ~~consolidated financial statements~~Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 for a discussion of our critical accounting estimates and accounting policies.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not believe that we hold, or are party to, instruments that are subject to market risks that are material to our Business.

ITEM 4. CONTROLS AND PROCEDURES

As indicated in the certifications in Exhibits 31.1 and 31.2 to this report, our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of ~~September 30, 2021.~~March 31, 2022. Based on that evaluation, these officers have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to them in a manner that allows for timely decisions regarding required disclosures and are effective in ensuring that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There were no changes during our last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020, as amended.~~2021.

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

Recent Sales of Unregistered Securities

None that occurred during the three months ended ~~September 30, 2021.~~March 31, 2022.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None that occurred during the three months ended ~~September 30, 2021.~~

March 31, 2022.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit No.						Description
~~10.1††‡~~1.1						~~LNG Sale and Purchase~~Amendment to Distribution Agreement, 1dated as of April 7, 2022, by and between ~~Driftwood LNG~~Tellurian Inc. and T.R. Winston & Company, LLC ~~and Shell NA LNG LLC, dated asof July 29, 2021~~ (incorporated by reference to Exhibit ~~10.1~~1.2 to the Company’s Current Report on Form 8-K filed on ~~July 29, 2021)~~April 7, 2022)
~~10.2††‡~~10.1†						~~LNG Sale~~Form of Omnibus Amendment to Outstanding Restricted Stock Agreement under Tellurian Inc. Amended and ~~Purchase Agreement 2 by and between Driftwood LNG LLC and Shell NA LNG LLC, dated asof July 29, 2021 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-Kfiled on July 29, 2021)~~
~~10.3†‡~~						~~Executive Chairman Employment Agreement,~~Restated 2016 Omnibus Incentive Compensation Plan, effective as of ~~October 1, 2021, by and between Tellurian Inc.and Charif Souki (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-Kfiled on October 4, 2021)~~
~~10.4†‡~~						~~President and Chief Executive Officer Employment Agreement, effective as of October 1, 2021, by and between Tellurian Inc. and Octávio Simões~~January 6, 2022 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on ~~October 4, 2021)~~January 6, 2022)
10.5†*10.2†						Form of Omnibus Amendment to Outstanding Restricted Stock ~~Unit~~ Agreement ~~pursuant to the Amended and Restated~~under Tellurian Investments Inc. 2016 Omnibus Incentive Plan, effective as of January 6, 2022 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on January 6, 2022)
10.3†						Tellurian Inc. Incentive Compensation ~~Plan~~Program, effective as of November 18, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 6, 2022)
10.4†						Form Long Term Incentive Award Agreement under the Tellurian Inc. Incentive Compensation Program (U.S. Selected Senior Management) ~~(Milestone-Based Vesting)~~(incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on January 6, 2022)
10.5†						Tellurian Inc. Executive Severance Plan, effective as of January 6, 2022 (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on January 6, 2022)
10.6††*						Change Order CO-007, dated as of March 24, 2022, to the Lump Sum Turnkey Agreement for the Engineering, Procurement and Construction of the Driftwood LNG Phase 1 Liquefaction Facility, dated as of November 10, 2017, by and between Driftwood LNG LLC and Bechtel Oil, Gas and Chemicals, Inc.
10.7††*						Change Order CO-008, dated as of March 30, 2022, to the Lump Sum Turnkey Agreement for the Engineering, Procurement and Construction of the Driftwood LNG Phase 1 Liquefaction Facility, dated as of November 10, 2017, by and between Driftwood LNG LLC and Bechtel Oil, Gas and Chemicals, Inc.
10.8*						Independent Contractor Agreement, dated as of March 30, 2022, by and between Tellurian Inc. and Martin Houston
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
101.INS*						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*						Inline XBRL Taxonomy Extension Schema Document
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2021,~~March 31, 2022, formatted in Inline XBRL


*			Filed herewith.
**			Furnished herewith.
†			Management contract or compensatory plan or arrangement.
††			Portions of this exhibit have been omitted in accordance with Item 601(b)(2) or 601(b)(10) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the registrant if publicly disclosed. The registrant hereby agrees to furnish supplementally an unredacted copy of this exhibit to the Securities and Exchange Commission upon request.
‡			Certain schedules or similar attachments to this exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The registrant hereby agrees to furnish supplementally to the Securities and Exchange Commission upon request a copy of any omitted schedule or attachment to this exhibit.

1620

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 3, 2021~~May 4, 2022	By:	/s/ L. Kian Granmayeh
			L. Kian Granmayeh
			Chief Financial Officer
			(as Principal Financial Officer)
			Tellurian Inc.

Date:	~~November 3, 2021~~May 4, 2022	By:	/s/ Khaled A. Sharafeldin
			Khaled A. Sharafeldin
			Chief Accounting Officer
			(as Principal Accounting Officer)
			Tellurian Inc.

1721


	September 30, 2021
	Principal repayment obligation		Unamortized DFC and discounts		Carrying value
2018 Term Loan, due September 2021	$	—	$	—	$	—
2019 Term Loan, due March 2022	—		—		—
2020 Unsecured Note	—		—		—
Total borrowings	$	—	$	—	$	—

	December 31, 2020
	Principal repayment obligation		Unamortized DFC and discounts		Carrying value
2018 Term Loan, due September 2021	$	60,000	$	(805)	$	59,195
2019 Term Loan, due March 2022 (a)	43,217		(4,942)		38,275
2020 Unsecured Note	16,000		(2,376)		13,624
Total borrowings	$	119,217	$	(8,123)	$	111,094


(a) Includes paid-in-kind interest on the 2019 Term Loan of $3.3 million.