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 June 30, ~~2021~~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

~~NASDAQ~~NYSE

~~Capital Market~~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 July ~~30, 2021,~~28, 2022, there were ~~430,469,705~~568,620,208 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

1317

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

1621

Item 4.

Controls and Procedures

1621

Part II — Other Information

Item 1.

Legal Proceedings

1621

Item 1A.

Risk Factors

1621

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

1622

Item 5.

Other Information

1722

Item 6.

Exhibits

1723

Signatures

1825

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
~~FOB~~						~~Free on board~~
FID						Final investment decision as it pertains to the Driftwood Project
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
~~Nasdaq~~NYSE American						~~Nasdaq Capital Market~~NYSE American LLC
~~OTC~~Phase 1						~~Over-the-counter~~
~~SEC~~						~~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)

		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	111,858	$	78,297	Cash and cash equivalents	$	823,522	$	305,496
Accounts receivable	Accounts receivable	4,102		4,500		Accounts receivable	31,975		9,270
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,232		2,105		Prepaid expenses and other current assets	22,210		12,952
Total current assets	Total current assets	117,192		84,902		Total current assets	877,707		327,718
Property, plant and equipment, net	Property, plant and equipment, net	68,459		61,257		Property, plant and equipment, net	409,150		150,545
Deferred engineering costs	Deferred engineering costs	110,025		110,499		Deferred engineering costs	—		110,025
Non-current restricted cash		0		3,440
Other non-current assets	Other non-current assets	32,489		32,897		Other non-current assets	54,085		33,518
Total assets	Total assets	$	328,165	$	292,995	Total assets	$	1,340,942	$	621,806

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	25,621	$	23,573	Accounts payable	$	5,123	$	2,852
Accounts payable due to related parties		0		910

Accrued and other liabilities	Accrued and other liabilities	30,173		22,003		Accrued and other liabilities	69,970		85,946
Borrowings	Borrowings	0		72,819		Borrowings	162,848		—
Total current liabilities	Total current liabilities	55,794		119,305		Total current liabilities	237,941		88,798
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Borrowings	Borrowings	0		38,275		Borrowings	381,072		53,687
Finance lease liabilities						Finance lease liabilities	50,034		50,103
Other non-current liabilities	Other non-current liabilities	25,352		26,325		Other non-current liabilities	18,161		10,917
Total long-term liabilities	Total long-term liabilities	25,352		64,600		Total long-term liabilities	449,267		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: 427,856,156 and 354,315,739 shares outstanding, respectively		4,048		3,309
Common stock, $0.01 par value, 800,000,000 authorized: 568,620,208 and 500,453,575 shares outstanding, respectively						Common stock, $0.01 par value, 800,000,000 authorized: 568,620,208 and 500,453,575 shares outstanding, respectively	5,454		4,774
Additional paid-in capital	Additional paid-in capital	1,116,815		922,042		Additional paid-in capital	1,645,920		1,344,526
Accumulated deficit	Accumulated deficit	(873,905)		(816,322)		Accumulated deficit	(997,701)		(931,060)
Total stockholders’ equity	Total stockholders’ equity	247,019		109,090		Total stockholders’ equity	653,734		418,301
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	328,165	$	292,995	Total liabilities and stockholders’ equity	$	1,340,942	$	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 June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenues:										Revenues:
Natural gas sales	Natural gas sales	$	5,578	$	6,329	$	14,284	$	14,546	Natural gas sales	$	61,350	$	5,578	$	87,339	$	14,284
LNG sales	LNG sales	19,776		0		19,776		0		LNG sales	—		19,776		120,951		19,776
Total revenue		25,354		6,329		34,060		14,546
Total revenues										Total revenues	61,350		25,354		208,290		34,060

Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Cost of sales		25,367		2,409		27,773		5,288
LNG cost of sales										LNG cost of sales	—		22,847		131,663		22,847
Operating expenses										Operating expenses	5,943		2,520		10,108		4,926
Development expenses	Development expenses	9,363		9,123		17,504		20,306		Development expenses	17,687		9,363		35,352		17,504
Depreciation, depletion and amortization	Depreciation, depletion and amortization	2,333		4,995		4,985		10,827		Depreciation, depletion and amortization	5,854		2,333		9,875		4,985
General and administrative expenses	General and administrative expenses	17,426		15,369		32,537		32,608		General and administrative expenses	23,514		17,426		55,839		32,537
Impairment charges		0		81,065		0		81,065
Severance and reorganization charges		0		854		0		6,359
Related party charges		0		7,357		0		7,357
Total operating costs and expenses	Total operating costs and expenses	54,489		121,172		82,799		163,810		Total operating costs and expenses	52,998		54,489		242,837		82,799
Loss from operations		(29,135)		(114,843)		(48,739)		(149,264)
Income (loss) from operations										Income (loss) from operations	8,352		(29,135)		(34,547)		(48,739)
Interest expense, net	Interest expense, net	(829)		(11,195)		(6,721)		(17,591)		Interest expense, net	(4,566)		(829)		(6,846)		(6,721)
(Loss) gain on extinguishment of debt, net	(Loss) gain on extinguishment of debt, net	(152)		0		1,422		0		(Loss) gain on extinguishment of debt, net	—		(152)		—		1,422
Other expense, net	Other expense, net	(482)		(2,808)		(3,545)		(2,725)		Other expense, net	(3,821)		(482)		(25,249)		(3,545)
Loss before income taxes	Loss before income taxes	(30,598)		(128,846)		(57,583)		(169,580)		Loss before income taxes	(35)		(30,598)		(66,642)		(57,583)
Income taxes		0		0		0		0
Income tax										Income tax	—		—		—		—
Net loss	Net loss	$	(30,598)	$	(128,846)	$	(57,583)	$	(169,580)	Net loss	$	(35)	$	(30,598)	$	(66,642)	$	(57,583)
Net loss per common share(1):	Net loss per common share(1):									Net loss per common share(1):
Basic and diluted	Basic and diluted	$	(0.08)	$	(0.53)	$	(0.16)	$	(0.73)	Basic and diluted	$	0.00	$	(0.08)	$	(0.13)	$	(0.16)
Weighted-average shares outstanding:	Weighted-average shares outstanding:									Weighted-average shares outstanding:
Basic and diluted	Basic and diluted	386,045		245,364		371,442		233,321		Basic and diluted	534,521		386,045		515,338		371,442

(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 June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Total shareholders’ equity, beginning balance	Total shareholders’ equity, beginning balance	$	181,906	$	146,644	$	109,090	$	166,285	Total shareholders’ equity, beginning balance	$	524,655	$	181,906	$	418,301	$	109,090

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

Common stock:	Common stock:									Common stock:
Beginning balance	Beginning balance	3,779		2,344		3,309		2,211		Beginning balance	5,229		3,779		4,774		3,309
Common stock issuances	Common stock issuances	251		173		638		196		Common stock issuances	223		251		677		638
Share-based compensation, net~~(1)~~	Share-based compensation, net~~(1)~~	18		10		41		10		Share-based compensation, net~~(1)~~	2		18		2		41
Severance and reorganization charges		—		7		—		7
Settlement of Final Payment Fee		—		—		—		110
Borrowings principal repayment		—		93		—		93

Share-based payment										Share-based payment	—				1
Warrant exercises	Warrant exercises	—		—		60		—		Warrant exercises	—		—		—		60
Ending balance	Ending balance	4,048		2,627		4,048		2,627		Ending balance	5,454		4,048		5,454		4,048

Additional paid-in capital:	Additional paid-in capital:									Additional paid-in capital:
Beginning balance	Beginning balance	$	1,021,373	$	790,599	$	922,042	$	769,639	Beginning balance	1,517,031		1,021,373		1,344,526		922,042
Common stock issuances	Common stock issuances	92,950		22,606		181,726		35,844		Common stock issuances	127,859		92,950		299,063		181,726
Share-based compensation, net(1)		2,492		1,636		5,148		2,320
Severance and reorganization charges		—		777		—		777
Share-based compensation, net										Share-based compensation, net	811		2,492		1,716		5,148

Share-based payments	Share-based payments	—		113		—		224		Share-based payments	219		—		616		—
Settlement of Final Payment Fee		—		—		—		9,036
Warrants issued in connection with Borrowings		—		19,005		—		16,896
Borrowings principal repayment		—		13,695		—		13,695

Warrant exercises	Warrant exercises	—		—		8,117		—		Warrant exercises	—		—		—		8,117
Warrant cancellation	Warrant cancellation	—		—		(218)		—		Warrant cancellation	—		—		—		(218)
Ending balance	Ending balance	$	1,116,815	$	848,431	$	1,116,815	$	848,431	Ending balance	1,645,920		1,116,815		1,645,920		1,116,815

Accumulated deficit:	Accumulated deficit:									Accumulated deficit:
Beginning balance	Beginning balance	$	(843,307)	$	(646,360)	$	(816,322)	$	(605,626)	Beginning balance	(997,666)		(843,307)		(931,059)		(816,322)
Net loss	Net loss	(30,598)		(128,846)		(57,583)		(169,580)		Net loss	(35)		(30,598)		(66,642)		(57,583)
Ending balance	Ending balance	$	(873,905)	$	(775,206)	$	(873,905)	$	(775,206)	Ending balance	(997,701)		(873,905)		(997,701)		(873,905)

Total shareholders’ equity, ending balance	Total shareholders’ equity, ending balance	$	247,019	$	75,913	$	247,019	$	75,913	Total shareholders’ equity, ending balance	$	653,734	$	247,019	$	653,734	$	247,019

(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)

		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(57,583)	$	(169,580)	Net loss	$	(66,642)	$	(57,583)
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	4,985		10,827		Depreciation, depletion and amortization	9,875		4,985
Amortization of debt issuance costs, discounts and fees	Amortization of debt issuance costs, discounts and fees	3,061		10,330		Amortization of debt issuance costs, discounts and fees	580		3,061
Share-based compensation	Share-based compensation	3,129		1,244		Share-based compensation	1,718		3,129
Severance and reorganization charges		0		784

Share-based payments	Share-based payments	0		224		Share-based payments	616		—
Interest elected to be paid-in-kind	Interest elected to be paid-in-kind	508		1,338		Interest elected to be paid-in-kind	—		508
Loss on financial instruments not designated as hedges	Loss on financial instruments not designated as hedges	927		1,696		Loss on financial instruments not designated as hedges	13,472		927
Impairment charges		0		81,065

Net gain on extinguishment of debt	Net gain on extinguishment of debt	(1,422)		0		Net gain on extinguishment of debt	—		(1,422)
Other	Other	562		993		Other	555		562
Net changes in working capital (Note 15)	Net changes in working capital (Note 15)	14,879		13,487		Net changes in working capital (Note 15)	(43,672)		14,879
Net cash used in operating activities	Net cash used in operating activities	(30,954)		(47,592)		Net cash used in operating activities	(83,498)		(30,954)

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	(6,139)		(386)		Development of natural gas properties	(66,500)		(6,139)
Purchase of property, plant and equipment		(611)		0
Driftwood Project construction costs						Driftwood Project construction costs	(68,725)		—
Land purchases and land improvements						Land purchases and land improvements	(17,425)		(611)
Investment in unconsolidated entity						Investment in unconsolidated entity	(6,089)		—
Net cash used in investing activities	Net cash used in investing activities	(6,750)		(386)		Net cash used in investing activities	(158,739)		(6,750)

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	188,040		36,815		Proceeds from common stock issuances	309,021		188,040
Equity issuance costs	Equity issuance costs	(5,677)		(775)		Equity issuance costs	(9,281)		(5,677)
Borrowing proceeds	Borrowing proceeds	0		50,000		Borrowing proceeds	501,178		—
Borrowing issuance costs	Borrowing issuance costs	0		(2,387)		Borrowing issuance costs	(11,488)		—
Borrowing principal repayments	Borrowing principal repayments	(119,725)		(10,600)		Borrowing principal repayments	—		(119,725)
Tax payments for net share settlement of equity awards (Note 15)	Tax payments for net share settlement of equity awards (Note 15)	(2,990)		0		Tax payments for net share settlement of equity awards (Note 15)	—		(2,990)
Proceeds from warrant exercises	Proceeds from warrant exercises	8,177		0		Proceeds from warrant exercises	—		8,177
Other	Other	(1)		(1,776)		Other	(3,063)		(1)
Net cash provided by financing activities	Net cash provided by financing activities	67,824		71,277		Net cash provided by financing activities	786,367		67,824

Net increase in cash, cash equivalents and restricted cash	Net increase in cash, cash equivalents and restricted cash	30,120		23,299		Net increase in cash, cash equivalents and restricted cash	544,130		30,120
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	$	111,858	$	91,781	Cash, cash equivalents and restricted cash, end of period	$	851,404	$	111,858
Supplementary disclosure of cash flow information:	Supplementary disclosure of cash flow information:					Supplementary disclosure of cash flow information:
Interest paid	Interest paid	$	3,099	$	5,397	Interest paid	$	4,928	$	3,099

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 ~~including~~that includes an LNG terminal facility (the “Driftwood terminal”) ~~and~~, an associated pipeline (the “Driftwood pipeline”), other related pipelines, ~~(the “Pipeline Network”).~~and upstream natural gas assets. The Driftwood terminal and the ~~Pipeline Network and required natural gas assets~~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~~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 cover our future operating costs and obligations 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 ~~our~~its obligations and fund ~~working capital needs.~~

~~We are planning to generate proceeds from our at-the-market program and have determined that it is probable that such proceeds will satisfy our obligations and fund our~~its working capital needs for at least twelve months following the date of issuance of the ~~financial statements. We also continue~~Condensed Consolidated Financial Statements. The Company has the ability to ~~evaluate generating~~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~~the Driftwood terminal and ~~debt securities, or similar transactions~~continuing to ~~fund~~expand our ~~obligations and working capital needs.~~

~~Use of Estimates~~

NOTE 2 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

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


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Prepaid expenses	Prepaid expenses	$	1,079	$	1,156	Prepaid expenses	$	454	$	605
Deposits	Deposits	100		100		Deposits	18,719		3,589
Derivative asset		0		843
Restricted cash						Restricted cash	3,000		—
Derivative assets, net current						Derivative assets, net current	—		8,693
Other current assets	Other current assets	53		6		Other current assets	37		65
Total prepaid expenses and other current assets	Total prepaid expenses and other current assets	$	1,232	$	2,105	Total prepaid expenses and other current assets	$	22,210	$	12,952

Deposits

Margin deposits posted with a third-party financial institution related to our financial instrument contracts were approximately $17.6 million and $2.1 million as of June 30, 2022 and December 31, 2021, respectively.

Restricted Cash

Restricted cash as of June 30, 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 finance leases, as shown below~~the following (in thousands):


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Land		$	14,860	$	13,808
Upstream natural gas assets:						Upstream natural gas assets:
Proved properties	Proved properties	62,978		62,227		Proved properties	$	156,105	$	96,297
Wells in progress	Wells in progress	11,035		492		Wells in progress	13,115		17,653
Corporate and other		3,477		3,476
Total property, plant and equipment at cost		92,350		80,003
Accumulated DD&A	Accumulated DD&A	(43,709)		(38,764)		Accumulated DD&A	(58,270)		(48,638)
Right of use asset — finance leases		19,818		20,018
Total upstream natural gas assets, net						Total upstream natural gas assets, net	110,950		65,312

Driftwood Project assets:						Driftwood Project assets:
Land and land improvements						Land and land improvements	49,169		25,222
Driftwood terminal construction in progress						Driftwood terminal construction in progress	189,980		—
Finance lease assets, net of accumulated DD&A						Finance lease assets, net of accumulated DD&A	57,295		57,883
Buildings and other assets, net of accumulated DD&A						Buildings and other assets, net of accumulated DD&A	356		371
Total Driftwood Project, net						Total Driftwood Project, net	296,800		83,476

Fixed assets and other:						Fixed assets and other:
Leasehold improvements and other assets						Leasehold improvements and other assets	2,928		3,104
Accumulated DD&A						Accumulated DD&A	(1,528)		(1,347)
Total fixed assets and other, net						Total fixed assets and other, net	1,400		1,757

Total property, plant and equipment, net	Total property, plant and equipment, net	$	68,459	$	61,257	Total property, plant and equipment, net	$	409,150	$	150,545

Land

We own land in Louisiana intended for the ~~purpose~~construction of ~~constructing~~ the Driftwood Project.

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 and commenced 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. During the six months ended June 30, 2022, we capitalized approximately $66.6 million of directly identifiable project costs as construction in progress.

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 June 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):


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Land lease and purchase options	Land lease and purchase options	$	6,138	$	5,831	Land lease and purchase options	$	825	$	6,368
Permitting costs	Permitting costs	13,374		13,092		Permitting costs	—		13,408
Right of use asset — operating leases	Right of use asset — operating leases	11,044		11,884		Right of use asset — operating leases	12,872		10,166
Restricted cash						Restricted cash	24,882		1,778
Investment in unconsolidated entity						Investment in unconsolidated entity	6,089		—
Driftwood pipeline materials						Driftwood pipeline materials	5,229		—
Other	Other	1,933		2,090		Other	4,188		1,798
Total other non-current assets	Total other non-current assets	$	32,489	$	32,897	Total other non-current assets	$	54,085	$	33,518

Land Lease and Purchase Options

~~We hold lease~~During the first quarter of 2022, we exercised the final land purchase options related to the Driftwood terminal. Land purchase options held by the Company as of June 30, 2022 are related to the Driftwood pipeline 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.other related pipelines.

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 to Bechtel in March 2022. 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 June 30, 2022 and December 31, 2021, represents cash collateralization of letters 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

Natural Gas Financial Instruments

~~As part~~During the fourth quarter of 2021, we began entering into natural gas financial futures contracts 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 June 30, 2022, had notional volumes of 5.9 Bcf, with maturities extending through March 2023.

LNG Financial Instruments

During the three months ended December 31, 2021, ~~(see Note 9,~~ ~~Borrowings, for further information),~~we entered into LNG financial futures contracts to reduce our exposure to commodity price fluctuations, and to achieve more predictable cash flows relative to 2 LNG cargos that we were ~~required~~committed to ~~enter into~~purchase from and ~~maintain certain hedging transactions. As a result, we used derivative financial instruments, namely OTC commodity swap instruments (“commodity swaps”),~~sell to ~~maintain compliance with that covenant. We do not hold or issue derivative financial instruments for trading purposes.~~

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 exposure to the risk of geographic disparities in commodity prices, as was required by a negative covenantunrelated third-party LNG merchants in the ~~2018 Term Loan. The fair value~~normal course of ~~our commodity swaps was classified as Level 2~~business in ~~the fair value hierarchy~~January and ~~was based on standard industry income approach~~April 2022. As of June 30, 2022, there were no open LNG financial instrument positions.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

~~models~~The following table summarizes the effect of the Company’s financial futures contracts which are included within Other expense, net on the Condensed Consolidated Statements of Operations (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Natural gas financial futures contracts:
Realized loss	$	10,536	$	548	$	11,251	$	1,202
Unrealized gain (loss)	6,790		—		(8,311)		—
LNG financial futures contracts:
Realized gain	—		—		3,532		—
Unrealized loss	—		—		5,161		—

The following table presents the classification of the Company’s financial derivative assets and liabilities that ~~use significant observable inputs, including but not limited~~are required to ~~New York Mercantile Exchange (NYMEX) natural gas forward curves 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~~be measured at fair value on a ~~net~~recurring basis on the Company’s Condensed Consolidated Balance Sheets (in thousands):


	June 30, 2022		December 31, 2021
Current assets:
LNG financial futures contracts	—		$	8,693
Current liabilities:
Natural gas financial futures contracts	$	8,311	—

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. See Note 9,~~ ~~Borrowings, for further information.~~

~~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 income, net, in the Condensed Consolidated Statements of Operations. For the three and six months ended June 30, 2021, we recognized a realized loss of approximately $0.5 million and approximately $1.2 million, respectively, 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 June 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):


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Project development activities		$	7,871	$	3,228
Upstream accrued liabilities						Upstream accrued liabilities	$	25,498	$	26,421

Payroll and compensation	Payroll and compensation	15,023		9,454		Payroll and compensation	18,685		50,243
Accrued taxes	Accrued taxes	979		1,057		Accrued taxes	569		991
Professional services (e.g., legal, audit)		2,871		1,004
Warrant liabilities		0		3,774
Driftwood Project development activities						Driftwood Project development activities	6,719		435
Lease liabilities	Lease liabilities	2,048		1,950		Lease liabilities	2,609		2,279
Current derivative liabilities						Current derivative liabilities	8,311		—
Other	Other	1,381		1,536		Other	7,579		5,577
Total accrued and other liabilities	Total accrued and other liabilities	$	30,173	$	22,003	Total accrued and other liabilities	$	69,970	$	85,946

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 98 — BORROWINGS

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

June 30, 2021
Principal repayment obligation
Unamortized DFC and discounts Carrying value
2018 Term Loan, due September 2021 $ 0 $ 0 $ 0
2019 Term Loan, due March 2022 0 0 0
2020 Unsecured Note 0 0 0
Total borrowings $ 0 $ 0 $ 0
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.


	June 30, 2022
	Principal repayment obligation		Unamortized DFC		Carrying value
Senior Secured Convertible Notes, current	$	166,666	$	(3,818)	$	162,848
Senior Secured Convertible Notes, non-current	333,334		(7,194)		326,140
Senior Notes due 2028	57,678		(2,746)		54,932
Total borrowings	$	557,678	$	(13,758)	$	543,920


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

Senior Secured Convertible Notes due 2025

On June 3, 2022, we issued and sold $500.0 million aggregate principal amount of 6.00% Senior Secured Convertible Notes due May 1, 2025 (the “Convertible Notes”). Net proceeds from the Convertible Notes were approximately $488.7 million after deducting fees and expenses. The Convertible Notes have quarterly interest payments due on February 1, May 1, August 1, and November 1 of each year and on the maturity date. Debt issuance costs of approximately $11.5 million were capitalized and are being amortized over the full term of the Convertible Notes using the effective interest rate method.

The holders of the Convertible Notes have the right to convert the Convertible Notes into shares of our common stock at an initial conversion rate of 174.703 shares per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately $5.724 per share of common stock) (the “Conversion Price”), subject to adjustment in certain circumstances. Holders of the Convertible Notes may force the Company to redeem the Notes for cash upon (i) a fundamental change or (ii) an event of default. The Company will force the holders of the Notes to convert all of the Convertible Notes if the trading price of our common stock closes above 200% of the Conversion Price for 20 consecutive trading days and certain other conditions are satisfied. The Company may provide written notice to each holder of the Convertible Notes calling all of such holder’s Convertible Notes for a cash purchase price equal to 120% of the principal amount being redeemed, plus accrued and unpaid interest (the “Optional Redemption”), and each holder will have the right to accept or reject such Optional Redemption. On each of May 1, 2023 and May 1, 2024, the holders of the Convertible Notes may redeem up to $166.6 million of the initial principal amount of the Convertible Notes at par, plus accrued and unpaid interest (the “Redemption Amount”). The Company classified the Redemption Amount in respect of May 1, 2023 as a current borrowing on the Condensed Consolidated Balance Sheet as of June 30, 2022.

Our borrowing obligations under the Convertible Notes are collateralized by a first priority lien on the Company’s equity interests in Tellurian Production Holdings, LLC (“Tellurian Production Holdings”), a wholly owned subsidiary of Tellurian Inc. Tellurian Production Holdings owns all of the Company’s upstream natural gas assets described in Note 3, Property, Plant and Equipment. Upon the Company’s compliance with its obligations in respect of an Optional Redemption (regardless of whether holders accept or reject the redemption), the lien on the equity interests in Tellurian Production Holdings will be automatically released. The Convertible Notes contain a minimum cash covenant and non-financial covenants. As of June 30, 2022, we remained in compliance with all covenants under the Convertible Notes.

As of June 30, 2022, the estimated fair value of the Convertible Notes, was approximately $465.3 million. The Level 3 fair value was estimated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and inputs that are not observable in the market.

Senior 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 Senior Notes within 30 days. On December 7, 2021, the underwriter exercised the option and purchased an additional

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

$6.5 million of the 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. As of June 30, 2022, the Company was in compliance with all covenants under the indenture governing the Senior Notes. The Senior Notes are traded on the NYSE American under the symbol “TELZ,” and are classified as Level 1 within the fair value hierarchy. As of June 30, 2022, the closing market price per Senior Note was $21.85.

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 six months ended June 30, 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.

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 ~~throughout~~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, ~~for the six months ended June 30, 2021,~~ which was recognized within ~~(Loss) gain~~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~~was included in the computation of the gain onfrom the extinguishment of the 2019 Term Loan.

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.

~~Full Repayment of the 2020 Unsecured Note~~

On March 31, 2021, we made the final contractually required amortization payment of $4.0 million under the terms of the 2020 Unsecured Note, thereby satisfying all financial obligations under the 2020 Unsecured Note.

~~Extinguishment of the~~ 2018 Term Loan

On September 28, 2018, Tellurian Production Holdings 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 approximately $43.0 million of the 2018 Term Loan outstanding principal balance. Then, on April 23, 2021, we voluntarily repaid the remaining outstanding principal balance of $17.0 million.

These voluntary repayments resulted in losses of approximately $0.2 million and $0.7 million for the three and six months ended June 30, 2021, respectively, which were recognized within (Loss) gain on extinguishment of debt, net, on our Condensed Consolidated Statements of Operations.

~~Covenant Compliance~~Trade Finance Credit Line

~~We maintained compliance~~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 of LNG 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 June 30, 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 is required to pay a cancellation fee of approximately $1.0 million for all ~~covenants~~3 LNG cargos. As of June 30, 2022, a balance of approximately $690.0 thousand remains outstanding and is included within Accrued and other liabilities on our Condensed Consolidated Balance Sheet. The Company does not have any further commitments or obligations under this LNG SPA.

Related Party Contractor Service Fees and Expenses

The Company entered into a one-year independent contractor agreement, effective January 1, 2022, with Mr. Martin Houston, who serves as Vice Chairman and a member of the ~~2018 Term Loan through our final repayment on April 23, 2021.~~Company’s Board of Directors. Pursuant to the terms and conditions of this agreement, the Company pays Mr. Houston a monthly fee of $50.0 thousand plus approved expenses. For the three and six months ended June 30, 2022, the Company paid Mr. Houston $150.0 thousand and $325.0 thousand, respectively, for contractor service fees and expenses. As of June 30, 2022, there were no balances due to Mr. Houston.

810

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 10 — ~~COMMITMENTS AND CONTINGENCIES~~

~~Port Lease~~

On June 29, 2021, we exercised our lease option and entered into a non-cancellable lease for a tract of land that will be utilized for the construction of the Driftwood terminal. This non-cancellable lease became effective on July 1, 2021, and has an initial contractual term of 20 years. We have the ability, at our sole discretion, to exercise options and extend the lease for an additional 30 years.

~~As of June 30, 2021, our annual commitments in connection with the non-cancellable portion of this lease are as follows (in thousands):~~

2021 $ 1,117
2022 1,861
2023 1,861
2024 1,861
2025 1,861
Thereafter 35,251
Total commitment $ 43,812

~~LNG Purchases~~

On April 23, 2019, we entered into a master LNG SPA and related confirmation notices with an unrelated third-party LNG merchant. Pursuant to this SPA, we committed to purchase one cargo of LNG per quarter through October 2022. 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. The price of each cargo will be based on the JKM price in effect at the time of each purchase.

~~NOTE 11 —~~ STOCKHOLDERS’ EQUITY

At-the-Market ~~Program~~Equity Offering Programs

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 on ~~Nasdaq. For~~the NYSE American. During the six months ended June 30, ~~2021,~~2022, we issued ~~63.8~~67.7 million shares of our common stock under our at-the-market ~~program~~equity offering programs for net proceeds of approximately ~~$182.4~~$299.7 million. As of June 30, ~~2021,~~2022, we had remaining availability under ~~the~~such at-the-market ~~program~~programs to raise aggregate gross sales proceeds of up to approximately ~~$345.8~~$323.7 million. ~~See Note 16,~~ ~~Subsequent Events, for further information.~~

Common Stock Purchase Warrants

2019 Term Loan

During the first quarter of 2021, the lender of the 2019 Term Loan ~~purchased~~exercised warrants to purchase approximately 6.0 million shares of our common stock for total proceeds of approximately $8.2 million. As discussed in Note 9,8, 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 in the computation 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

~~Tellurian Inc. and Subsidiaries~~

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

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 June 30, ~~2021,~~2022, there was no Restricted Stock that would be required to be settled in cash.

As of June 30, ~~2021,~~2022, we had approximately ~~30.0~~31.9 million shares of primarily performance-based Restricted Stock outstanding, of which approximately ~~19.3~~19.2 million shares will vest entirely at FID, as defined in the award agreements, and approximately ~~9.7~~11.7 million shares will vest in one-third increments at FID and the first and second anniversaries of FID. The remaining shares of primarily performance-based Restricted Stock, totaling approximately 1.0 million shares, will vest based on other criteria. As of June 30, ~~2021, 0~~2022, no expense had been recognized in connection with performance-based Restricted Stock.

For the three and six months ended June 30, ~~2021,~~2022, the recognized share-based compensation expenses related to all share-based awards totaled approximately ~~$1.5~~$0.8 million and ~~$3.1~~$1.7 million, respectively. As of June 30, ~~2021,~~2022, unrecognized compensation expenses, based on the grant date fair value, for all share-based awards totaled approximately ~~$201.3.~~$204.2 million. Further, ~~the~~ approximately ~~30.0~~31.9 million shares of primarily performance-based Restricted Stock, as well as approximately ~~11.2~~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.

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

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 June 30, 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	19,332	$	3.09
Vested	(6,444)	3.38
Forfeited	(110)	3.34
Unvested balance at June 30, 2022	12,778	$	2.98

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 and six months ended June 30, 2022, we recognized approximately $1.6 million and $14.3 million, respectively, 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 June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Accordingly, we have not recorded a provision for federal, state or foreign income taxes during the three and six months ended June 30, ~~2021.~~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.

NOTE 14 — LEASES

~~Finance 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 June 30, 2021,~~Our office space leases are classified as operating leases and include one or more options to extend the ~~weighted-average remaining~~ lease term ~~for~~up to 10 years, at our ~~financing leases was approximately fifty years.~~sole discretion. As ~~none of our finance leases provide an implicit rate,~~ we ~~have determined our own discount rate, which, on a weighted-average basis at June 30, 2021, was approximately 13%.~~

As of June 30, 2021, our financing leases had a corresponding right of use asset of approximately $19.8 million, which is recognized within Property, plant and equipment, net, and a total lease liability of approximately $13.5 million, which is recognized in Other non-current liabilities. For the three and six months ended June 30, 2021 and 2020, our finance lease costs, which are associated with the interest on our lease liabilities, were approximately $0.5 million and $0.5 million, respectively, and $0.9 million and $0.8 million, respectively. For the six months ended June 30, 2021, we paid approximately $0.8 million in required finance lease payments which are primarily presented within the operating section of the Condensed Consolidated Statements of Cash Flows. For the six months ended June 30, 2020, we paid approximately $1.8 million in required finance lease payments which are presented within the financing section of the Condensed Consolidated Statements of Cash Flows.not reasonably certain that those

1012

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

~~Operating Leases~~

Our office space leases are classified as operating leases and include 1 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 June 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 June 30, 2021, was approximately 8%.~~rate.

The following table shows the classification and location of ~~June 30, 2021,~~ our ~~operating leases had a corresponding right of use asset of approximately $11.0 million, which is recognized within Other non-current~~right-of-use assets and ~~a total~~ lease ~~liability of approximately $12.7 million which is~~liabilities on our Consolidated Balance Sheets (in thousands):


Leases	Consolidated Balance Sheets Classification	June 30, 2022		December 31, 2021
Right of use asset
Operating	Other non-current assets	$	12,872	$	10,166
Finance	Property, plant and equipment, net	57,295		57,883
Total leased assets		$	70,167	$	68,049
Liabilities
Current
Operating	Accrued and other liabilities	$	2,473	$	2,147
Finance	Accrued and other liabilities	136		132
Non-Current
Operating	Other non-current liabilities	11,910		9,563
Finance	Finance lease liabilities	50,034		50,103
Total leased liabilities		$	64,553	$	61,945

Lease costs recognized ~~within Accrued and other liabilities (approximately $2.0 million) and Other non-current liabilities (approximately $10.7 million). For the three and six months ended June 30, 2021 and 2020,~~in our operating lease costs were $0.7 million and $0.7 million, respectively, and $1.4 million and $1.4 million, respectively. For the six months ended June 30, 2021 and 2020, we paid approximately $1.4 million and $1.4 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):


	Six months ended
Lease Costs	2022		2021
Operating lease cost	$	1,452	$	1,448
Finance lease cost
Amortization of lease assets	587		201
Interest on lease liabilities	1,990		911
Finance lease cost	$	2,577	$	1,112
Total lease cost	$	4,029	$	2,560

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


	June 30, 2022
Lease term and discount rate
Weighted average remaining lease term (years)
Operating lease	5.0
Finance lease	48.9
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):


	Six Months Ended June 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,494	$	724
Operating cash flows from finance leases	$	—	$	—
Financing cash flows from finance leases	$	2,668	$	—

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 June 30, ~~2021~~2022 (in thousands):


Maturity of lease liability		Operating		Finance
2021		$	1,488	$	913
							Operating		Finance
2022	2022	3,006		1,826		2022	$	1,614	$	2,055
2023	2023	3,044		1,826		2023	3,316		4,111
2024	2024	3,081		1,826		2024	3,359		4,111
2025	2025	3,119		1,826		2025	3,401		4,111
Thereafter		1,861		82,368
2026						2026	3,423		4,111
After 2026						After 2026	1,633		182,222
Total lease payments	Total lease payments	$	15,599	$	90,585	Total lease payments	$	16,746	$	200,721
Less: discount	Less: discount	2,893		77,076		Less: discount	2,362		150,551
Present value of lease liability	Present value of lease liability	$	12,706	$	13,509	Present value of lease liability	$	14,384	$	50,170

NOTE 15 — ADDITIONAL CASH FLOW INFORMATION

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


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Accounts receivable	Accounts receivable	$	398	$	2,331	Accounts receivable	$	(22,705)	$	398
Prepaid expenses and other current assets		(350)		(396)
Prepaid expenses and other current assets 1						Prepaid expenses and other current assets 1	(11,454)		(350)
Accounts payable	Accounts payable	2,048		4,494		Accounts payable	2,271		2,048
Accounts payable due to related parties	Accounts payable due to related parties	(910)		2,300		Accounts payable due to related parties	—		(910)
Accrued liabilities		14,439		6,375
Accrued liabilities 1						Accrued liabilities 1	(12,585)		14,439
Other, net	Other, net	(746)		(1,617)		Other, net	801		(746)
Net changes in working capital	Net changes in working capital	$	14,879	$	13,487	Net changes in working capital	$	(43,672)	$	14,879

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

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


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Non-cash accruals of property, plant and equipment and other non-current assets	Non-cash accruals of property, plant and equipment and other non-current assets	$	5,367	$	7,955	Non-cash accruals of property, plant and equipment and other non-current assets	$	(3,551)	$	5,367
Non-cash settlement of withholding taxes associated with the 2019 bonus and vesting of certain awards	Non-cash settlement of withholding taxes associated with the 2019 bonus and vesting of certain awards	2,990		0		Non-cash settlement of withholding taxes associated with the 2019 bonus and vesting of certain awards	—		2,990
Non-cash settlement of the 2019 bonus	Non-cash settlement of the 2019 bonus	5,430		1,086		Non-cash settlement of the 2019 bonus	—		5,430
Non-cash settlement of Final Payment Fee		0		8,539

1114

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

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):


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Cash and cash equivalents	Cash and cash equivalents	$	111,858	$	88,314	Cash and cash equivalents	$	823,522	$	111,858
Current restricted cash						Current restricted cash	3,000		—
Non-current restricted cash	Non-current restricted cash	0		3,467		Non-current restricted cash	24,882		—
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	$	111,858	$	91,781	Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	851,404	$	111,858

NOTE 16 — DISCLOSURE ABOUT SEGMENTS AND RELATED INFORMATION

During the quarter ended June 30, 2022, the Company commenced construction of the Driftwood terminal under the Phase 1 EPC Agreement with Bechtel while continuing to increase its natural gas presence in the Haynesville Shale basin in northern Louisiana and expanding its natural gas marketing activities. The Company’s Chief operating decision maker (“CODM”) determined to place additional emphasis and visibility on operating cash flows generated by our upstream and natural gas marketing business activities. Consequently, we identified the Upstream, Midstream and Marketing & Trading components as the Company’s operating segments.

These functions have been defined as the operating segments of the Company because (1) they are engaged in business activities from which revenues are recognized and expenses are incurred, (2) their operating results are regularly reviewed by the Company’s CODM to make decisions about resources to be allocated to the segment and to assess its performance, and (3) they are segments for which discrete financial information is available.

Factors used to identify these operating segments are based on the nature of the business activities that are undertaken by each component. The Upstream segment is organized and operates to produce natural gas. The Midstream segment is organized to develop, construct and operate LNG terminals and pipelines. The Marketing & Trading segment is organized and operates to purchase and sell natural gas, market the Driftwood terminal’s LNG production capacity and trade LNG. These operating segments represent the Company’s reportable segments. The Company’s CODM does not currently assess segment performance or allocate resources based on a measure of total assets. Accordingly, a total asset measure has not been provided for segment disclosure.

The remainder of our business is presented as “Corporate,” and consists of corporate costs and intersegment eliminations.


Three Months Ended June 30, 2022	Upstream		Midstream		Marketing & Trading		Corporate		Consolidated
Revenues from external customers (1)	$	—	$	—	$	61,350	$	—	$	61,350
Intersegment revenues (purchases) (2)	61,352		(230)		(59,404)		(1,718)		—
Segment operating profit (loss) (3)	38,505		(20,016)		(4,292)		(5,845)		8,352
Interest expense, net	—		(995)		—		(3,571)		(4,566)
Other income (loss), net	—		—		(3,746)		(75)		(3,821)
Consolidated loss before tax									$	(35)


Three Months Ended June 30, 2021	Upstream		Midstream		Marketing & Trading		Corporate		Consolidated
Revenues from external customers (1)	$	—	$	—	$	25,354	$	—	$	25,354
Intersegment revenues (purchases) (2)	5,578		—		(5,578)		—		—
Segment operating profit (loss) (3)	(6,310)		(10,740)		(8,876)		(3,209)		(29,135)
Interest expense, net	(382)		(456)		—		9		(829)
Gain (loss) on extinguishment of debt	(152)		—		—		—		(152)
Other income (loss), net	(548)		—		—		66		(482)
Consolidated loss before tax									$	(30,598)

Tellurian Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)


Six Months Ended June 30, 2022	Upstream		Midstream		Marketing & Trading		Corporate		Consolidated
Revenues from external customers (1)	$	—	$	—	$	208,290	$	—	$	208,290
Intersegment revenues (purchases) (2)	87,341		(230)		(77,115)		(9,996)		—
Segment operating profit (loss) (3)	43,101		(37,800)		(16,583)		(23,265)		(34,547)
Interest expense, net	—		(1,990)		(454)		(4,402)		(6,846)
Other income (loss), net	—		—		(25,758)		509		(25,249)
Consolidated loss before tax									$	(66,642)


Six Months Ended June 30, 2021	Upstream		Midstream		Marketing & Trading		Corporate		Consolidated
Revenues from external customers (1)	$	—	$	—	$	34,060	$	—	$	34,060
Intersegment revenues (purchases) (2)	14,274		—		(14,274)		—		—
Segment operating loss (3)	(8,034)		(16,013)		(12,712)		(11,980)		(48,739)
Interest expense, net	(1,635)		(2,730)		—		(2,356)		(6,721)
Gain (loss) on extinguishment of debt	(665)		2,087		—		—		1,422
Other (loss) income, net	(1,202)		(2,493)		—		150		(3,545)
Consolidated loss before tax									$	(57,583)

(1) The Company's Marketing & Trading operating segment purchases and sells all of the Company's Upstream natural gas production to third party-purchasers. Intersegment revenues are eliminated at consolidation.

(2) Intersegment revenues related to our Marketing & Trading operating segment are a result of intersegment revenues and cost allocations using a cost plus transfer pricing methodology. Intersegment revenues are eliminated at consolidation.

(3) Operating profit (loss), is defined as operating revenues less operating costs and allocated corporate costs.


	Six months ended June 30,
Capital expenditures	2022		2021
Upstream	$	66,500	$	6,139
Midstream	86,150		611
Marketing & Trading	—		—
Total capital expenditures for reportable segments	152,650		6,750
Corporate capital expenditures	—		—
Consolidated capital expenditures	$	152,650	$	6,750

NOTE 17 — SUBSEQUENT EVENTS

~~At-the-Market Program~~Asset Acquisition

~~Subsequent to June 30, 2021, and through~~On July 13, 2022, the date of this filing, we issued approximately 2.6 million shares of common stock under our at-the-market equity offering program for net proceeds of approximately $10.9 million. As of July 30, 2021, we have remaining capacity under our at-the-market program to raise aggregate gross sales proceeds of approximately $334.6 million.

~~Trade Finance Credit Line~~

~~Subsequent to June 30, 2021, we~~Company entered into an uncommitted trade finance credit line for up to $30.0 million that is intended to be used for advances, guarantees or the issuances of letters of credit, or standby letters of credit, to finance thea purchase and sale agreement for the acquisition of ~~LNG cargoes for ultimate resale~~certain natural gas assets in the ~~normal course~~Haynesville Shale for $125 million in cash subject to customary adjustments upon closing and an additional contingent cash payment of ~~business. This facility has not yet been utilized.~~$7.5 million based on future natural gas prices.

1216

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”) ~~and~~, an associated pipeline (the “Driftwood pipeline”), other related pipelines, ~~(the “Pipeline Network”). We refer to the Driftwood terminal, the Pipeline Network~~ and ~~required~~upstream natural gas assets (collectively referred to as the “Business”). The Driftwood terminal and the Driftwood pipeline are collectively referred to as the “Driftwood Project.” ~~Our~~As of June 30, 2022, our existing natural gas assets ~~consist~~consisted of ~~9,704~~14,876 net acres and interests in 7284 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 have recently entered into LNG SPAs with three purchasers, completing the planned sales for plants one and two of the Driftwood Project (“Phase 1”).acreage. We are currently focused on the financing ~~the~~and construction of ~~Phase 1.~~the Driftwood terminal and continuing to expand our upstream activities.

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

~~Debt Reductions~~Limited Notice to Proceed

~~During~~On March 24, 2022, the ~~six months ended June 30, 2021, we repaid~~Company issued a ~~total of approximately $119.7 million in outstanding principal balance of~~limited notice to proceed to Bechtel Energy Inc., formerly known as Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”), under our ~~borrowing obligations and ended the quarter with zero debt obligations.~~

~~LNG Sale and Purchase Agreements~~

~~Driftwood LNG LLC, a wholly owned subsidiary~~LSTK EPC agreement for Phase 1 of the Driftwood terminal dated as of November 10, 2017 (the “Phase 1 EPC Agreement”). The Company (“commenced construction of Phase 1 of the Driftwood ~~LNG”), has entered into LNG SPAs with three purchasers for the total sale~~terminal on April 4, 2022.

Senior Secured Convertible Notes due 2025

On June 3, 2022, we issued and sold $500.0 million aggregate principal amount of ~~9.0 Mtpa~~6.00% Senior Secured Convertible Notes due May 1, 2025 (the “Convertible Notes”). Net proceeds from the ~~Driftwood terminal. The LNG SPAs~~Convertible Notes were ~~entered into as follows:~~approximately $488.7 million after deducting fees and expenses.

•~~On May 27, 2021, Driftwood LNG entered into an LNG SPA with Gunvor Singapore Pte Ltd (“Gunvor”) for the purchase of 3.0 Mtpa;~~

•~~On June 2, 2021, Driftwood LNG entered into an LNG SPA with Vitol Inc. (“Vitol”) for the purchase of 3.0 Mtpa; and~~

•~~On July 29, 2021, Driftwood LNG entered into two LNG SPAs with Shell NA LNG LLC (“Shell”) for the purchase of 3.0 Mtpa.~~

The price for LNG sold under the LNG SPAs with Gunvor and Vitol will be a blended average based on the JKM index price and the TTF futures contract price, in each case minus a transportation netback. The price for LNG sold under each LNG SPA with Shell 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.

~~Tellurian Inc. and Subsidiaries~~

~~Management's Discussion and Analysis of Financial Condition and Results of 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.~~hand and cash generated from our upstream natural gas sales. Our current capital resources consist of approximately ~~$111.9~~$823.5 million of cash and cash equivalents as of June 30, ~~2021.~~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 availability to raise aggregate gross sales proceeds of approximately ~~$334.6 million. Since January 1, 2021,~~$522.6 million under these programs.

Tellurian Inc. and ~~through July 30, 2021, we have sold approximately 66.4 million shares~~Subsidiaries

Management's Discussion and Analysis of ~~common stock under our at-the-market program for net proceeds~~Financial Condition and Results of ~~approximately $193.3 million.~~Operations

As of June 30, ~~2021,~~2022, we had total indebtedness of approximately $557.7 million, of which approximately $166.7 million is subject to redemption at the sole discretion of holders of the Senior Secured Convertible Notes due 2025 within the next twelve months. We also had contractual obligations associated with our finance and operating leases totaling ~~$150.0~~approximately $217.5 million, of which ~~$5.9~~approximately $7.4 million is scheduled to be paid within the next twelve months.

~~We are planning~~The Company has sufficient cash on hand and available liquidity to ~~generate proceeds from our at-the-market program and have determined that it is probable that such proceeds will~~ satisfy ~~our~~its obligations and fund ~~our~~its working capital needs for at least twelve months following the date of issuance of the consolidated financial statements. ~~We also continue~~The Company has the ability to ~~evaluate generating~~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~~the Driftwood terminal and ~~debt securities, or similar transactions~~continuing to ~~fund~~expand our ~~obligations and working capital needs.~~upstream activities.

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):


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Cash used in operating activities	Cash used in operating activities	$	(30,954)	$	(47,592)	Cash used in operating activities	$	(83,498)	$	(30,954)
Cash used in investing activities	Cash used in investing activities	(6,750)		(386)		Cash used in investing activities	(158,739)		(6,750)
Cash provided by financing activities	Cash provided by financing activities	67,824		71,277		Cash provided by financing activities	786,367		67,824

Net increase in cash, cash equivalents and restricted cash	Net increase in cash, cash equivalents and restricted cash	30,120		23,299		Net increase in cash, cash equivalents and restricted cash	544,130		30,120
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	$	111,858	$	91,781	Cash, cash equivalents and restricted cash, end of the period	$	851,404	$	111,858

Net working capital	Net working capital	$	61,398	$	(3,762)	Net working capital	$	639,766	$	61,398

Cash used in operating activities for the six months ended June 30, ~~2021 decreased~~2022 increased by approximately ~~$16.6~~$52.5 million due to an overall increase in disbursements in the normal course of business. The increase was partially offset by an approximately $22.7 million increase in accounts receivable for the six months ended June 30, 2022 due to the positive impact of increased natural gas prices and production volumes, as compared to the same period in ~~2020 due to an overall decrease in disbursements as a result of the successful reorganization in the first quarter of 2020.~~2021.

Cash used in investing activities for the six months ended June 30, ~~2021~~2022 increased by approximately ~~$6.4~~$152.0 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 approximately $66.5 million, Driftwood Project construction costs of approximately $68.7 million, Driftwood Project land purchases and land improvements of approximately $17.4 million, and an investment of approximately $6.1 million in an unconsolidated entity, as compared to the same period in 2021.

Cash provided by financing activities for the six months ended June 30, ~~2021 decreased~~2022 increased by approximately ~~$3.5~~$718.5 million compared to the same period in ~~2020.~~2021. This ~~decrease~~increase is primarily ~~relates~~due to ~~the following:~~

•~~Decrease of~~ approximately ~~$47.6~~$489.7 million in net ~~borrowings~~ proceeds ~~due to the absence of these activities during~~from borrowing issuances in the current ~~period.~~

•~~Increase of~~period, as compared to approximately ~~$109.1~~$119.7 million in principal repayments of ~~our~~ borrowings ~~compared to~~in the prior period.

•~~Increase of~~ The increase is also due to approximately ~~$154.5~~$299.7 million in net proceeds from equity issuances ~~and proceeds from warrant exercises~~as compared to approximately $182.4 million in the prior period.

Borrowings

As of June 30, 2022, we had total indebtedness of approximately $557.7 million. See Note 9,8, Borrowings,~~and Note 11,~~ ~~Stockholders’ Equity~~,~~of our Notes to the Condensed Consolidated Financial Statements~~ for further ~~information about our financing activities.~~information.

~~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 ~~Project~~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 initiated certain owner construction activities necessary to proceed under the Phase 1 EPC Agreement with Bechtel and increased our upstream development activities. In March 2022, we issued a limited notice to proceed to Bechtel under our Phase 1 EPC Agreement and commenced the construction of Phase 1 of the Driftwood terminal in April 2022.

Tellurian Inc. and Subsidiaries

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

We currently estimate the total cost of the Driftwood Project as well as related pipelines and upstream natural gas assets to be approximately ~~$24.7 billion, with Phase 1 comprising approximately $10.6~~$25.0 billion, including owners’ costs, transaction costs and contingencies but excluding interest costs incurred during construction ~~of the Driftwood terminal~~ 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, in 2021.~~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,~~activities, 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.~~

Results of Operations

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Total revenue		$	25,354	$	6,329	$	34,060	$	14,546
Cost of sales		25,367		2,409		27,773		5,288
Natural gas sales										Natural gas sales	$	61,350	$	5,578	$	87,339	$	14,284
LNG sales										LNG sales	—		19,776		120,951		19,776
Total revenues										Total revenues	61,350		25,354		$	208,290	34,060
LNG cost of sales										LNG cost of sales	—		22,847		131,663		22,847
Operating expenses										Operating expenses	5,943		2,520		10,108		4,926
Development expenses	Development expenses	9,363		9,123		17,504		20,306		Development expenses	17,687		9,363		35,352		17,504
Depreciation, depletion and amortization	Depreciation, depletion and amortization	2,333		4,995		4,985		10,827		Depreciation, depletion and amortization	5,854		2,333		9,875		4,985
General and administrative expenses	General and administrative expenses	17,426		15,369		32,537		32,608		General and administrative expenses	23,514		17,426		55,839		32,537
Impairment charge		—		81,065		—		81,065
Severance and reorganization charges		—		854		—		6,359
Related party charges		—		7,357		—		7,357
Loss from operations		(29,135)		(114,843)		(48,739)		(149,264)
Income (loss) from operations										Income (loss) from operations	8,352		(29,135)		(34,547)		(48,739)
Interest expense, net	Interest expense, net	(829)		(11,195)		(6,721)		(17,591)		Interest expense, net	(4,566)		(829)		(6,846)		(6,721)
Gain on extinguishment of debt, net		(152)		—		1,422		—
(Loss) gain on extinguishment of debt, net										(Loss) gain on extinguishment of debt, net	—		(152)		—		1,422
Other expense, net	Other expense, net	(482)		(2,808)		(3,545)		(2,725)		Other expense, net	(3,821)		(482)		(25,249)		(3,545)
Income tax benefit	Income tax benefit	—		—		—		—		Income tax benefit	—		—		—		—
Net loss	Net loss	$	(30,598)	$	(128,846)	$	(57,583)	$	(169,580)	Net loss	$	(35)	$	(30,598)	$	(66,642)	$	(57,583)

~~Our consolidated net loss was approximately $30.6 million~~The most significant changes affecting our results of operations for the three months ended June 30, ~~2021,~~2022 compared to ~~a net loss of approximately $128.8 million during~~ the same period in ~~2020. The decrease in net loss~~2021, on a consolidated basis and by segment, are the following:

Upstream

•Increase of approximately ~~$98.2~~$55.8 million ~~is primarily~~in Natural gas sales as a result of increased realized natural gas prices and increased production volumes attributable to newly drilled and completed wells during the ~~following:~~second quarter of 2022.

•~~Decreases~~Increase of approximately ~~$81.1~~$3.5 million in ~~impairment charges,~~Operating expenses as a result of increased production volumes attributable to newly drilled and completed wells during the second quarter of 2022.

•Increase of approximately ~~$0.9~~$3.5 million in ~~severance and reorganization charges and approximately $7.4 million~~DD&A primarily attributable to a higher net book value utilized in ~~related party charges~~the calculation of DD&A due to ~~the absence of such activities~~increased capital expenditures and production volumes during the current period.

Tellurian Inc. and Subsidiaries

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

Marketing & Trading

•~~Decrease~~Decreases of approximately ~~$10.4~~$19.8 million and approximately $22.8 million in ~~interest expense due to the lack of interest charges associated with our borrowing obligations, which have been fully repaid. See Note 9,~~ ~~Borrowings~~,~~of our Notes to the Condensed Consolidated Financial Statements for further information.~~

~~The increases of approximately $19.0 million in total revenues~~LNG sales and ~~$23.0 million in~~LNG cost of sales, ~~were primarily related to~~respectively, as a result of the ~~purchase and~~ sale of an LNG cargo during the ~~current period.~~three months ended June 30, 2021.

~~Our~~Midstream

•Increase of approximately $8.3 million in Development expenses primarily attributable to approximately $6.2 million in the cost of land and roads donated for public use in the state of Louisiana and an approximately $2.0 million increase in technical and engineering services associated with pipeline development activities.

Primarily as a result of the foregoing, our consolidated ~~net~~Net loss was approximately ~~$57.6~~$35.0 thousand for the three months ended June 30, 2022, compared to a Net loss of approximately $30.6 million during the same period in 2021.

The most significant changes affecting our results of operations for the six months ended June 30, 2022 compared to the same period in 2021, on a consolidated basis and by segment, are the following:

Upstream

•Increase of approximately $73.1 million in Natural gas sales as a result of increased realized natural gas prices and increased production volumes attributable to newly drilled and completed wells during the six months ended June 30, 2022.

•Increase of approximately $5.1 million in Operating expenses as a result of increased production volumes attributable to newly drilled and completed wells during the second quarter of 2022.

•Increase of approximately $4.9 million in DD&A primarily attributable to a higher net book value utilized in the calculation of DD&A due to increased capital expenditures and production volumes during the current period.

Marketing & Trading

•Increases of approximately $101.2 million and approximately $108.8 million in LNG sales and LNG cost of sales, respectively, as a result of increased realized sales and purchase prices of an LNG cargo sold during the first quarter of 2022, as compared to the realized price of an LNG cargo sold during the second quarter of 2021.

•Increase of approximately $21.7 million in Other expense, net primarily attributable to an approximately $13.5 million unrealized loss on financial instruments due to changes in the fair value of the Company’s derivative instruments during the current period and approximately $11.3 million of realized loss on the settlement of natural gas financial instruments, as compared to the same period in 2021. The losses on financial instruments were partially offset by approximately $3.5 million of realized gain on the settlements of LNG financial instruments in the current period.

Midstream

•Increase of approximately $17.8 million in Development expenses primarily attributable to approximately $6.2 million in the cost of land and roads donated for public use in the state of Louisiana, an approximately $2.2 million increase in technical and engineering services associated with pipeline development activities, and an approximately $9.4 million increase in compensation expenses and other development expenses associated with the Driftwood Project.

Consolidated

•Increase of approximately $23.3 million in General and administrative expenses primarily attributable to activities in the normal course of business.

Primarily as a result of the foregoing, our consolidated Net loss was approximately $66.6 million for the six months ended June 30, ~~2021,~~2022, compared to a ~~net~~Net loss of approximately ~~$169.6~~$57.6 million during the same period in ~~2020. The decrease in net loss of approximately $112.0 million is primarily a result of the following:~~

•Decreases of approximately $81.1 million in impairment charges, approximately $6.4 million in severance and reorganization charges and approximately $7.4 million in related party charges due to the absence of such activities during the current period.

•~~Decrease of approximately $10.9 million in interest expense due to the lack of interest charges associated with our borrowing obligations, which have been fully repaid. See Note 9,~~ ~~Borrowings~~,~~of our Notes to the Condensed Consolidated Financial Statements for further information.~~

•~~Decrease of approximately $5.8 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 $19.5 million in total revenues and $22.5 million in cost of sales were primarily related to the purchase and sale of an LNG cargo during the current period.~~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 ~~six~~three months ended June 30, ~~2021.~~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.

Tellurian Inc. and Subsidiaries

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

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 June 30, ~~2021.~~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,~~2021, except for the risk factors discussed below.

If the conditions precedent to any of our LNG sale and purchase agreements (the “LNG SPAs”) cannot be satisfied or extended on acceptable terms, or at all, such LNG SPAs may be terminated.

In 2021, Driftwood LNG LLC (“Driftwood LNG”) entered into an LNG SPA with each of Vitol Inc. (“Vitol”) and Gunvor Singapore Pte Ltd (“Gunvor”) and two LNG SPAs with Shell NA LLC (“Shell”). Conditions precedent to each party’s obligation to consummate the transactions contemplated by each LNG SPA include (i) Driftwood LNG having issued to Bechtel Oil, Gas and Chemicals, Inc. an unconditional full notice to proceed for the construction of the first two plants of the Driftwood terminal and (ii) Driftwood LNG or an affiliate thereof having secured the necessary financing arrangements to construct such plants and having achieved financial close under such arrangements. The LNG SPAs with Vitol and Shell have a conditions precedent deadline of July 31, 2022, and the LNG SPA with Gunvor has a conditions precedent deadline of December 31, 2022. If the conditions precedent to the applicable LNG SPA are not satisfied by such conditions precedent deadline, either party to the SPA can terminate such SPA, subject to each SPA’s notice requirements. There can be no assurance that we will be able to satisfy or extend the conditions precedent deadlines on acceptable terms, or at all. The termination of any LNG SPAs could negatively affect our ability to secure additional equity and/or debt financing to complete the Driftwood Project on acceptable terms, or at all.

If completed, our proposed Acquisition (as defined below) may not achieve its intended results and may result in us assuming unanticipated liabilities. To date, we have conducted only limited diligence regarding the assets and liabilities we would assume in the Acquisition.

On July 13, 2022, we entered into a purchase and sale agreement (the “Acquisition Agreement”) pursuant to which we expect to acquire certain natural gas assets in the Haynesville Shale for $125 million in cash, subject to customary closing conditions and purchase price adjustments (the “Acquisition”), with the expectation that the Acquisition would result in various benefits, growth opportunities and synergies. Achieving the anticipated benefits of the Acquisition is subject to a number of risks and uncertainties. For example, under the Acquisition Agreement, we have the opportunity to conduct customary environmental and title due diligence following the execution of the agreement, but our diligence efforts to date have been limited. As a result, we may discover title defects or adverse environmental or other conditions of which we are currently unaware. Environmental, title and other problems could reduce the value of the properties to us, and, depending on the circumstances, we could have limited or no recourse with respect to those problems. We would assume substantially all of the liabilities associated with the acquired properties and would be entitled to indemnification in connection with those liabilities in only limited circumstances and in limited amounts. We cannot assure you that such potential remedies will be adequate for any liabilities we incur, and such liabilities could be significant. In addition, certain of the properties to be acquired are subject to consents to assign and preference rights. If all applicable waivers cannot be obtained, we may not be able to acquire certain properties as ~~amended.~~originally contemplated and our expected benefits of the acquisition may be adversely affected. Also, it is uncertain whether our existing operations and the acquired properties and assets can be integrated in an efficient and effective manner.

As with other acquisitions, the success of the Acquisition depends on, among other things, the accuracy of our assessment of the reserves and drilling locations associated with the acquired properties, future commodity prices and operating

costs and various other factors. These assessments are necessarily inexact. As a result, we may not recover the purchase price for the Acquisition from the sale of production from the properties or recognize acceptable rates of return from such sales.

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

Recent Sales of Unregistered Securities

None that occurred during the three months ended June 30, ~~2021 that have not already been reported in a Current Report on Form 8-K.~~

2022.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None that occurred during the three months ended June 30, ~~2021.~~2022.

ITEM 5. OTHER INFORMATION

~~None.~~LNG SPAs

On August 1, 2022, Driftwood LNG entered into an amendment (the “Shell Amendment”) to the two previously announced LNG SPAs with Shell NA LNG LLC (“Shell”) dated July 29, 2021. Among other things, the Shell Amendment amended the LNG SPAs with Shell to provide that (i) either party may terminate either LNG SPA immediately (whereas the LNG SPAs had previously provided that such a termination required 45 days’ notice) and (ii) Driftwood LNG must provide Shell with five days’ prior written notice of the date that all of the conditions precedent are satisfied. The foregoing description of the Shell Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Shell Amendment, which is attached as Exhibit 10.6 to this report and incorporated herein by reference.

On August 2, 2022, Driftwood LNG entered into an amendment (the “Vitol Amendment”) to the previously announced LNG SPA with Vitol Inc. (“Vitol”) dated June 2, 2021. Among other things, the Vitol Amendment amended the LNG SPA with Vitol to provide that Driftwood LNG must provide Vitol with five days’ prior written notice of the date that all of the conditions precedent are satisfied. The foregoing description of the Vitol Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Vitol Amendment, which is attached as Exhibit 10.7 to this report and incorporated herein by reference.

ITEM 6. EXHIBITS


Exhibit No.						Description
1.1						Amendment to Distribution ~~Agency~~ Agreement, dated as of ~~May 5, 2021, among~~April 7, 2022, by and between Tellurian ~~Inc., Raymond James & Associates,~~ Inc. and T.R. Winston & Company, LLC (incorporated by reference to Exhibit 1.2 to the Company’s Current Report on Form 8-K filed on April 7, 2022)
1.2						Placement Agent Agreement, dated as of June 1, 2022, by and between Tellurian Inc. and Roth Capital Partners, LLC (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on ~~May 5, 2021)~~June 3, 2022)
~~10.1††‡~~1.3						~~LNG Sale and Purchase~~Placement Agent Agreement, dated as of June 1, 2022, by and between ~~Driftwood LNG LLC~~Tellurian Inc. and ~~Gunvor Singapore Pte Ltd,~~Citigroup Global Markets Inc. (incorporated by reference to Exhibit 1.2 to the Company’s Current Report on Form 8-K filed on June 3, 2022)
4.1						Indenture, dated as of June 3, 2022, by and between Tellurian Inc., as issuer, and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 3, 2022)
4.2						First Supplemental Indenture, dated as of June 3, 2022, by and among Tellurian Inc., as issuer, Wilmington Trust, National Association, as trustee, and the collateral agent named therein, relating to the 6.00% Senior Secured Convertible Notes due 2025 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 3, 2022)
4.3*						Second Supplemental Indenture, dated as of July 18, 2022, by and between Tellurian Inc., as issuer, and Wilmington Trust, National Association, as trustee, relating to the 6.00% Senior Secured Convertible Notes due 2025
4.4						Form of 6.00% Senior Secured Convertible Note due 2025 (included as Exhibit A to Exhibit 4.2)
10.1†‡						Retirement Agreement and General Release, dated as of May ~~27, 2021~~13, 2022, by and between Tellurian Inc. and R. Keith Teague (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May ~~27, 2021)~~16, 2022)
10.2††‡						~~LNG Sale and Purchase~~Consulting Agreement, dated as of May 13, 2022, by and between ~~Driftwood LNG LLC~~Tellurian Inc. and ~~Vitol Inc.,~~R. Keith Teague (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 16, 2022)
10.3‡						Securities Purchase Agreement, dated as of June ~~2, 2021~~1, 2022, by and between Tellurian Inc. and the investor named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 3, ~~2021)~~2022)
~~10.3†~~10.4††‡						~~LNG~~Purchase and Sale ~~and Purchase~~ Agreement, ~~1 by and between Driftwood LNG LLC and Shell NA LNG LLC,~~ dated as of July ~~29, 2021~~13, 2022, by and between Tellurian Production LLC, EnSight IV Energy Partners, LLC and EnSight Haynesville Partners, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July ~~29, 2021)~~13, 2022)
~~10.4††‡~~10.5‡*						Change Order CO-009, dated as of July 15, 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 Energy Inc. (formerly known as Bechtel Oil, Gas and Chemicals, Inc.)
10.6 *						Amendment No. 1, dated as of August 1, 2022, of LNG Sale and Purchase ~~Agreement~~Agreements 1 & 2 by and between Driftwood LNG LLC and Shell NA LNG LLC
10.7 *						Amendment No. 1, dated as of ~~July 29, 2021 (incorporated~~August 2, 2022, of LNG Sale and Purchase Agreement by ~~reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 29, 2021)~~and between Driftwood LNG LLC and Vitol Inc.
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


Exhibit No.						Description
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 June 30, ~~2021,~~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.

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

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

1825


	June 30, 2021
	Principal repayment obligation		Unamortized DFC and discounts		Carrying value
2018 Term Loan, due September 2021	$	0	$	0	$	0
2019 Term Loan, due March 2022	0		0		0
2020 Unsecured Note	0		0		0
Total borrowings	$	0	$	0	$	0

	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.


2021	$	1,117
2022	1,861
2023	1,861
2024	1,861
2025	1,861
Thereafter	35,251
Total commitment	$	43,812