Tellurian Inc.

For the Fiscal Yr Ended December 31, 2021

TABLE OF CONTENTS

Cautionary Info About Ahead-Trying Statements

The knowledge on this report contains “forward-looking statements” throughout the which means of Part 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Part 21E of the Securities Alternate Act of 1934, as amended (the “Alternate Act”). All statements, aside from statements of historic details, that tackle exercise, occasions, or developments with respect to our monetary situation, outcomes of operations, or financial efficiency that we anticipate, imagine or anticipate will or might happen sooner or later, or that tackle plans and targets of administration for future operations, are forward-looking statements. The phrases “anticipate,” “assume,” “imagine,” “finances,” “ponder,” “proceed,” “might,” “estimate,” “anticipate,” “forecast,” “preliminary,” “intend,” “possible,” “might,” “plan,” “doable,” “potential,” “predict,” “challenge,” “proposed,” “ought to,” “will,” “would” and related phrases, phrases, and expressions are supposed to determine forward-looking statements. These forward-looking statements relate to, amongst different issues:

Our forward-looking statements are based mostly on assumptions and analyses made by us in mild of our expertise and our notion of historic developments, present circumstances, anticipated future developments and different elements that we imagine are applicable below the circumstances. These statements are topic to quite a lot of identified and unknown dangers and uncertainties, which can trigger our precise outcomes and efficiency to be materially totally different from any future outcomes or efficiency expressed or implied by the forward-looking statements. Components that would trigger precise outcomes and efficiency to vary materially from any future outcomes or efficiency expressed or implied by the forward-looking statements embrace, however will not be restricted to, the next:

The forward-looking statements on this report communicate as of the date hereof. Though we might once in a while voluntarily replace our prior forward-looking statements, we disclaim any dedication to take action besides as required by securities legal guidelines.

DEFINITIONS

All outlined phrases below Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings when used on this report. As used on this doc, the phrases listed beneath have the next meanings:

With respect to the data regarding our possession in wells or acreage, “web” oil and fuel wells or acreage is set by multiplying gross wells or acreage by our working curiosity therein. Until in any other case specified, all references to wells and acres are gross.

PART I

AND 2. OUR BUSINESS AND PROPERTIES

Overview

Tellurian Inc. (“Tellurian,” “we,” “us,” “our,” or the “Firm”), a Delaware company, is a Houston-based firm that intends to create worth for shareholders by constructing a low-cost, world pure fuel enterprise, profitably delivering pure fuel to clients worldwide (the “Enterprise”). We’re growing a portfolio of pure fuel, LNG advertising and marketing, and infrastructure property that features an LNG terminal facility (the “Driftwood terminal”), an related pipeline (the “Driftwood pipeline”), different associated pipelines, and upstream pure fuel property. The Driftwood terminal and the Driftwood pipeline are collectively known as the “Driftwood Mission”. Our current pure fuel property encompass 11,060 web acres and pursuits in 78 producing wells situated within the Haynesville Shale pattern of northern Louisiana. Our Enterprise could also be developed in phases.

As a part of our execution technique, which incorporates growing our asset base, we are going to contemplate varied business preparations with third events throughout the pure fuel worth chain. We’re additionally pursuing actions equivalent to direct gross sales of LNG to world counterparties, buying and selling of LNG, the acquisition of further upstream acreage and drilling of latest wells on our current or newly acquired upstream acreage. As mentioned in “Overview of Important Occasions – LNG Sale and Buy Agreements” beneath, in 2021 we entered into 4 LNG SPAs with three unrelated purchasers, finishing the deliberate gross sales for crops one and two of the Driftwood terminal (“Section 1”). We’re at present centered on securing financing for the development of Section 1.

We handle and report our operations in three reportable segments. The Upstream phase is organized and operates to provide and collect pure fuel. The Midstream phase is organized to develop, assemble and function LNG terminals and pipelines. The Advertising and marketing & Buying and selling phase is organized and operates to buy and promote pure fuel, market the Driftwood terminal’s LNG manufacturing capability and commerce LNG.

We proceed to judge the scope and different features of our Enterprise in mild of the evolving financial surroundings, wants of potential counterparties and different elements. How we execute our Enterprise might be based mostly on a wide range of elements, together with the outcomes of our persevering with evaluation, altering enterprise circumstances and market suggestions.

Overview of Important Occasions

LNG Sale and Buy Agreements

Driftwood LNG LLC (“Driftwood LNG”), an entirely owned subsidiary of the Firm, entered into the next SPAs with three purchasers for the acquisition of a complete of 9.0 Mtpa of LNG:

The value for LNG offered below the SPAs with Gunvor and Vitol might be a blended common based mostly on the JKM index value and the TTF futures contract value, in every case minus a transportation netback. The value for LNG offered below every SPA with Shell might be based mostly on the JKM index value or the TTF futures contract value, in every case minus a transportation netback. Every SPA has a ten-year time period from the date of first business supply from the Driftwood terminal.

Initiated Proprietor Development Actions

Through the 12 months ended December 31, 2021 we initiated proprietor development actions essential to proceed below our LSTK EPC agreements with Bechtel Oil, Gasoline and Chemical substances, Inc. (“Bechtel”).

Driftwood Land Lease Settlement

On July 1, 2021, we entered right into a long-term floor lease settlement with the Lake Charles Harbor and Terminal District to safe property important for the development of the Driftwood terminal.

Environmental, Social, Governance Practices

Through the 12 months ended December 2021, the Firm started a partnership with the Nationwide Forest Basis on a five-year plan for reforestation and different forest administration tasks totaling $25 million throughout the US. One of many first recognized tasks is to re-plant 300,000 timber within the Kisatchie Nationwide Forest, situated close to Alexandria, Louisiana, the place practically 40,000 acres of native timber had been misplaced as a result of excessive climate occasions throughout the previous few years.

Upstream Drilling Actions

Through the 12 months ended December 31, 2021, we accomplished the drilling of and put in manufacturing 4 new Haynesville operated pure fuel wells. We additionally participated within the drilling of six Haynesville non-operated pure fuel wells. Our 2021 drilling actions elevated our proved developed reserves by roughly 51 Bcfe as of December 31, 2021.

Compensation of Borrowing Obligations

Through the 12 months ended December 31, 2021, we repaid all borrowing obligations that had been excellent on the finish of December 31, 2020. For additional info relating to the reimbursement of our borrowing obligations, see Observe 10 – Borrowings, of our Notes to the Consolidated Monetary Statements.

Fairness Providing

On August 6, 2021, we offered 35.0 million shares of our frequent inventory in an underwritten public providing at a value of $3.00 per share. Web proceeds from this providing, after deducting charges and bills, had been roughly $100.8 million. The underwriters had been granted an choice to buy as much as an extra 5.3 million shares of frequent inventory inside 30 days. On August 31, 2021, the underwriters exercised this selection, which generated web proceeds, after deducting charges, of roughly $15.1 million.

8.25% Senior Notes due 2028

On November 10, 2021, we offered $50.0 million mixture principal quantity of 8.25% Senior Notes due November 30, 2028 (the “Senior Notes”) in a registered public providing. Web proceeds from the sale of the Senior Notes had been roughly $47.5 million after deducting charges. The underwriter was granted an choice to buy as much as an extra $7.5 million of the Senior Notes inside 30 days. On December 7, 2021, the underwriter exercised the choice and bought an extra $6.5 million of the Senior Notes, which generated web proceeds of roughly $6.2 million after deducting charges.

At-the-Market Debt Providing Program

On December 17, 2021, we entered into an at-the-market debt providing program below which the Firm might provide and promote, once in a while on the NYSE American, as much as an mixture principal quantity of $200.0 million of further Senior Notes. Through the 12 months ended December 31, 2021, we didn’t promote any further Senior Notes below the at-the-market debt providing program.

Pure Gasoline Properties

Reserves

Our pure fuel property encompass 11,060 web acres and pursuits in 78 producing wells situated within the Haynesville Shale pattern of north Louisiana. For the 12 months ended December 31, 2021, our common web manufacturing was roughly 39.2 MMcf/d. All of our proved reserves had been related to these properties as of December 31, 2021. Proved reserves are the estimated portions of pure fuel and condensate which geological and engineering knowledge show with cheap certainty to be recoverable in future years from identified

reservoirs below current financial and working circumstances (i.e., prices as of the date the estimate is made). Proved reserves are categorized as both developed or undeveloped.

Our reserves as of December 31, 2021 had been estimated by Netherland, Sewell & Associates, Inc. (“NSAI”), an impartial petroleum engineering agency, and are set forth within the following desk. Per SEC guidelines, NSAI based mostly its estimates on the 12-month unweighted arithmetic common of the first-day-of-the-month value of pure fuel for every month from January by means of December 2021. Costs embrace consideration of modifications in current costs offered for below contractual preparations, however not on escalations or reductions based mostly upon future circumstances. The value used for the reserve estimates as of December 31, 2021 was $3.60 per MMBtu of pure fuel, adjusted for vitality content material, transportation charges and market differentials.

The next desk reveals our proved reserves as of December 31, 2021:

As of December 31, 2021, the standardized measure of discounted future web money circulate from our proved reserves (the “standardized measure”) was roughly $364.2 million.

Through the 12 months ended December 31, 2021, we didn’t have any materials capital expenditures associated to the event of our undeveloped reserves and thus didn’t convert any significant portions from proved undeveloped to proved developed reserves. As of December 31, 2021, we don’t anticipate to have any proved undeveloped reserves that may stay undeveloped for greater than 5 years from the date that they had been initially booked.

Seek advice from Supplemental Disclosures About Pure Gasoline Producing Actions, beginning on web page 47, for added particulars.

Controls Over Reserve Report Preparation, Technical {Qualifications} and Applied sciences Used

Our December 31, 2021 reserve report was ready by NSAI in accordance with pointers established by the SEC. Reserve definitions adjust to the definitions offered by Regulation S-X of the SEC. NSAI ready the reserve report based mostly upon a overview of property pursuits being appraised, manufacturing from such properties, present prices of operation and improvement, present costs for manufacturing, agreements regarding present and future operations and sale of manufacturing, geoscience and engineering knowledge, and different info we offered to them. This info was reviewed by educated members of our Firm for accuracy and completeness previous to submission to NSAI. A letter that identifies the skilled {qualifications} of the person at NSAI who was accountable for overseeing the preparation of our reserve estimates as of December 31, 2021, has been filed as an addendum to Exhibit 99.1 to this report and is integrated by reference herein.

Internally, a Senior Vice President is accountable for overseeing our reserves course of. Our Senior Vice President has over 20 years of expertise within the oil and pure fuel trade, with nearly all of that point in reservoir engineering and asset administration. She is a graduate of Virginia Polytechnic Institute and State College with twin levels in Chemical Engineering and French, and a graduate of the College of Houston with a Masters of Enterprise Administration diploma. Throughout her profession, she has had a number of tasks in technical and management roles, together with reservoir engineering and reserves administration, manufacturing engineering, planning, and asset administration for a number of U.S. onshore and worldwide tasks. She can also be a licensed Skilled Engineer within the State of Texas.

Manufacturing

For the years ended December 31, 2021, 2020 and 2019, we produced 14,302 MMcf, 16,893 MMcf and 13,901 MMcf of pure fuel at a median gross sales value of $3.52, $1.74 and $2.07 per Mcf, respectively. Pure fuel and condensate manufacturing and working prices for the durations ended December 31, 2021, 2020 and 2019 had been $0.48, $0.28 and $0.25 per Mcfe, respectively.

Drilling Exercise

The desk beneath reveals the variety of web productive and dry improvement wells drilled throughout the previous three years. The knowledge within the desk beneath shouldn’t be thought-about indicative of future efficiency, nor ought to it’s assumed that there’s essentially any correlation among the many variety of productive wells drilled, portions of reserves discovered, or financial worth. A dry effectively is an exploratory, improvement, or extension effectively that proves to be incapable of manufacturing both oil or fuel in adequate portions to justify completion as an oil or fuel effectively. A productive effectively is an exploratory, improvement, or extension effectively that’s not a dry effectively. Completion refers to set up of everlasting gear for manufacturing of oil or fuel, or, within the case of a dry effectively, to reporting to the suitable authority that the effectively has been deserted. The variety of wells drilled refers back to the variety of wells accomplished at any time throughout the fiscal 12 months, no matter when drilling was initiated.

We had no exploratory wells drilled throughout any of the durations offered.

Wells and Acreage

As of December 31, 2021, we owned working pursuits in 65 gross (28 web) productive pure fuel wells. We’ve 4,419 gross (4,100 web) developed leasehold acres which are held by manufacturing. Moreover, we maintain 7,448 gross (6,960 web) undeveloped leasehold acres. As of December 31, 2021, there have been seven gross (3.33 web) in course of wells.

Of the entire gross and web undeveloped acreage, 1,995 gross and 1,901 web acres will not be held by manufacturing, of which no acres are set to run out in 2022.

Quantity Commitments

We aren’t at present topic to any materials quantity commitments.

Gathering, Processing and Transportation

As a part of our acquisitions of pure fuel properties, we additionally acquired sure gathering methods that ship the pure fuel we produce into third-party gathering methods. We imagine that these methods and different accessible midstream services and providers within the Haynesville Shale pattern are ample for our present operations and near-term progress.

Authorities Laws

Our operations are and might be topic to intensive federal, state and native statutes, guidelines, laws, and legal guidelines that embrace, however will not be restricted to, the NGA, the Vitality Coverage Act of 2005 (“EPAct 2005”), the Oil Air pollution Act, the Nationwide Environmental Coverage Act (“NEPA”), the Clear Air Act (the “CAA”), the Clear Water Act (the “CWA”), the Useful resource Conservation and Restoration Act (“RCRA”), the Pipeline Security Enchancment Act of 2002 (the “PSIA”), and the Coastal Zone Administration Act (the “CZMA”). These statutes cowl areas associated to the authorization, development and operation of LNG services, pure fuel pipelines and pure fuel producing properties, together with discharges and releases to the air, land and water, and the dealing with, era, storage and disposal of hazardous supplies and strong and dangerous wastes because of the improvement, development and operation of the services. These legal guidelines are administered and enforced by governmental companies together with however not restricted to FERC, the U.S. Environmental Safety Company (the “EPA”), DOE/FE, the U.S. Division of Transportation (“DOT”), the Pipeline and Hazardous Supplies Security Administration (“PHMSA”), the Louisiana Division of Environmental High quality and the Louisiana Division of Pure Sources. Moreover, quite a few different governmental and regulatory permits and approvals might be required to construct and function our Enterprise, together with, with respect to the development and operation of the Driftwood Mission, consultations and approvals by the Advisory Council on Historic Preservation, USACE, U.S. Division of Commerce, Nationwide Marine Fisheries Service, U.S. Division of the Inside, U.S. Fish and Wildlife Service, and U.S. Division of Homeland Safety. For instance, all through the lifetime of our liquefaction challenge, we are going to

be topic to common reporting necessities to FERC, PHMSA and different federal and state regulatory companies relating to the operation and upkeep of our services.

Failure to adjust to relevant federal, state, and native legal guidelines, guidelines, and laws might lead to substantial administrative, civil and/or felony penalties and/or failure to safe and retain needed authorizations.

We’ve acquired regulatory permits and approvals in reference to the Driftwood terminal and Driftwood pipeline, together with the next:

Federal Vitality Regulatory Fee

The design, development and operation of liquefaction services and pipelines, the export of LNG and the transportation of pure fuel are extremely regulated actions. With a purpose to website, assemble and function the Driftwood Mission, we obtained authorizations from FERC below Part 3 and Part 7 of the NGA in addition to a number of different materials governmental and regulatory approvals and permits as detailed within the desk above. With a purpose to achieve regulatory certainty with respect to sure potential business transactions, on November 13, 2020, Driftwood Holdings LP (“Driftwood Holdings”), an entirely owned subsidiary of the Firm, and Driftwood LNG (collectively, “Driftwood”) filed a Petition with FERC requesting, amongst different issues, a potential restricted waiver of FERC’s purchase/promote prohibition in addition to some other potential waivers essential to allow Driftwood to buy pure fuel from doubtlessly affiliated upstream suppliers that could be resold to a distinct affiliate below a long-term contract for export as LNG in international commerce. On

January 19, 2021, FERC issued an order granting a potential restricted waiver of the prohibition on purchase/promote preparations for future proposed transactions wherein Driftwood enters into: (1) an settlement to buy pure fuel from a doubtlessly affiliated provider; and (2) an settlement to promote LNG to associates in international commerce.

EPAct 2005 amended Part 3 of the NGA to ascertain or make clear FERC’s unique authority to approve or deny an utility for the siting, development, growth or operation of LNG terminals, though besides as particularly offered in EPAct 2005, nothing within the statute is meant to have an effect on in any other case relevant legislation associated to some other federal company’s authorities or tasks associated to LNG terminals.

In 2002, FERC concluded that it will apply light-handed regulation to the charges, phrases and circumstances agreed to by events for LNG terminalling providers, such that LNG terminal house owners wouldn’t be required to offer open-access service at non-discriminatory charges or preserve a tariff or price schedule on file with FERC, as distinguished from the necessities utilized to FERC-regulated interstate pure fuel pipelines. Though EPAct 2005 codified FERC’s coverage, these provisions expired on January 1, 2015. Nonetheless, we see no indication that FERC intends to switch its longstanding coverage of light-handed regulation of LNG terminal operations.

A certificates of public comfort and necessity from FERC is required for the development and operation of services utilized in interstate pure fuel transportation, together with pipeline services, along with different required governmental and regulatory approvals. On this regard, in April 2019, we obtained a certificates of public comfort and necessity to assemble and function the Driftwood pipeline. On June 17, 2021, Driftwood Pipeline LLC, an entirely owned subsidiary of the Firm, filed an utility pursuant to Part 7(c) of the NGA in FERC Docket No. CP21-465-000 requesting that FERC grant a certificates of public comfort and necessity and associated approvals to assemble, personal and function twin 42-inch diameter pure fuel pipelines, an roughly 211,200 horsepower compressor station and appurtenant services to be situated in Beauregard and Calcasieu Parishes, Louisiana, which would offer a most seasonal capability of 5.7 Bcf of pure fuel per day. The applying is at present pending.

FERC’s jurisdiction below the NGA typically extends to the transportation of pure fuel in interstate commerce, to the sale in interstate commerce of pure fuel for resale for final consumption for home, business, industrial or some other use and to pure fuel corporations engaged in such transportation or sale. FERC’s jurisdiction doesn’t lengthen to the manufacturing, gathering, native distribution or export of pure fuel.

Particularly, FERC’s authority to control interstate pure fuel pipelines contains:

As well as, FERC has the authority to approve, and if needed set, “simply and cheap charges” for the transportation or sale of pure fuel in interstate commerce. Relatedly, below the NGA, our proposed pipelines is not going to be permitted to unduly discriminate or grant undue choice as to charges or the phrases and circumstances of service to any shipper, together with our personal associates.

EPAct 2005 amended the NGA to make it illegal for any entity, together with in any other case non-jurisdictional producers, to make use of any misleading or manipulative machine or contrivance in reference to the acquisition or sale of pure fuel or the acquisition or sale of transportation providers topic to regulation by FERC, in contravention of guidelines prescribed by FERC. The anti-manipulation rule doesn’t apply to actions that relate solely to intrastate or different non-jurisdictional gross sales, gathering or manufacturing, however does apply to actions

of in any other case non-jurisdictional entities to the extent the actions are carried out “in reference to” pure fuel gross sales, purchases or transportation topic to FERC jurisdiction. EPAct 2005 additionally offers FERC authority to impose civil penalties for violations of the NGA or Pure Gasoline Coverage Act of as much as $1 million per violation.

Transportation of the pure fuel we produce, and the costs we pay for such transportation, might be considerably affected by the foregoing legal guidelines and laws.

U.S. Division of Vitality, Workplace of Fossil Vitality Export License

Beneath the NGA, exports of pure fuel to FTA international locations are “deemed to be in keeping with the general public curiosity,” and authorization to export LNG to FTA international locations shall be granted by the DOE/FE “with out modification or delay.” FTA international locations at present able to importing LNG embrace however will not be restricted to Canada, Chile, Colombia, Jordan, Mexico, Singapore, South Korea and the Dominican Republic. Exports of pure fuel to Non-FTA international locations are approved except the DOE/FE “finds that the proposed exportation” “is not going to be in keeping with the general public curiosity.” We’ve authorization from the DOE/FE to export LNG in a quantity as much as the equal of 1,415.3 Bcf per 12 months of pure fuel to FTA international locations for a time period of 30 years and to Non-FTA international locations for a time period by means of December 31, 2050.

Pipeline and Hazardous Supplies Security Administration

The Pure Gasoline Pipeline Security Act of 1968 (the “NGPSA”) authorizes DOT to control pipeline transportation of pure (flammable, poisonous, or corrosive) fuel and different gases, in addition to the transportation and storage of LNG. Amendments to the NGPSA embrace the Pipeline Security Act of 1979, which addresses liquids pipelines, and the PSIA, which governs the areas of testing, training, coaching, and communication.

PHMSA administers pipeline security laws for jurisdictional fuel gathering, transmission, and distribution methods below minimal federal security requirements. PHMSA additionally establishes and enforces security laws for onshore LNG services, that are outlined as pipeline services used for the transportation or storage of LNG topic to such security requirements. These laws tackle necessities for siting, design, development, gear, operations, personnel qualification and coaching, fireplace safety, and safety of LNG services. The Driftwood terminal might be topic to such PHMSA laws.

The Driftwood pipeline and different associated pipelines may also be topic to regulation by PHMSA, together with these below the PSIA. The PHMSA Workplace of Pipeline Security administers the PSIA, which requires pipeline corporations to carry out intensive integrity assessments on pure fuel transportation pipelines that exist in excessive inhabitants density areas designated as “excessive consequence areas.” Pipeline corporations are required to carry out the integrity assessments on a seven-year cycle. The danger scores are based mostly on quite a few elements, together with the inhabitants density within the geographic areas served by a specific pipeline, in addition to the age and situation of the pipeline and its protecting coating. Testing consists of hydrostatic testing, inner digital testing, or direct evaluation of the piping. Along with the pipeline integrity assessments, pipeline corporations should implement a qualification program to make sure that workers are correctly educated. Pipeline operators additionally should develop integrity administration applications for pure fuel transportation pipelines, which requires pipeline operators to carry out ongoing assessments of pipeline integrity; determine and characterize relevant threats to pipeline segments that would impression a excessive consequence space; enhance knowledge assortment, integration and evaluation; restore and remediate the pipeline, as needed; and implement preventive and mitigative actions.

On December 27, 2020, the Defending our Infrastructure of Pipelines and Enhancing Security Act (PIPES Act) of 2020 was signed into legislation as a part of the Consolidated Appropriations Act of 2021. The laws reauthorizes the PHMSA pipeline security program by means of fiscal 12 months 2023 and supplies for advances to enhance pipeline security. The laws features a directive to PHMSA to replace its present laws for large-scale LNG services.

On January 11, 2021, PHMSA revealed a last rule within the Federal Register amending the Federal Pipeline Security Laws to scale back regulatory burdens and provide better flexibility with respect to the development, upkeep, and operation of fuel transmission, distribution, and gathering pipeline methods, together with updates to corrosion management necessities and check necessities for strain vessels. Necessary compliance with this rule began October 1, 2021. This rule is topic to overview for doable modification pursuant to government orders signed by President Biden on or shortly after January 20, 2021.

On November 15, 2021, PHMSA revealed a last rule within the Federal Register revising the Federal Pipeline Security Laws to enhance the security of onshore fuel gathering pipelines. The rule extends reporting necessities to all fuel gathering operators and applies a set of minimal security necessities to sure fuel gathering pipelines with giant diameters and excessive working pressures. This rule goes into impact on Could 16, 2022.

The Driftwood pipeline and different associated pipelines might be topic to regulation below PHMSA, which is able to contain capital and working prices for compliance-related gear and operations. We’ve no cause to imagine that these compliance prices might be materials to our monetary efficiency, however the significance of such prices will depend upon future occasions and our skill to realize and preserve compliance all through the lifetime of the Driftwood Mission or associated pipelines.

Pure Gasoline Pipeline Security Act of 1968

Louisiana administers federal pipeline security requirements below the NGPSA, which requires sure pipelines to adjust to security requirements in establishing and working the pipelines and topics the pipelines to common inspections. Failure to adjust to the NGPSA might outcome within the imposition of administrative, civil and felony sanctions.

Different Governmental Permits, Approvals and Authorizations

The development and operation of the Driftwood terminal and Driftwood pipeline are topic to federal permits, orders, approvals and consultations required by different federal and state companies, together with DOT, the Advisory Council on Historic Preservation, USACE, U.S. Division of Commerce, Nationwide Marine Fisheries Service, U.S. Division of the Inside, U.S. Fish and Wildlife Service, the EPA and the U.S. Division of Homeland Safety. The required permits required for development have been obtained and might be maintained for the Driftwood terminal and Driftwood pipeline. Equally, further permits, orders, approvals and consultations might be required for different associated pipelines.

Three important permits that apply to the Driftwood terminal and Driftwood pipeline are the USACE Part 404 of the CWA/Part 10 of the Rivers and Harbors Act Allow, the CAA Title V Working Allow and the Prevention of Important Deterioration Allow, of which the latter two permits are issued by the Louisiana Division of Environmental High quality. Every of the Driftwood terminal and Driftwood pipeline has acquired its allow from USACE, together with a overview and approval by USACE of the findings and circumstances set forth in an Environmental Influence Assertion and File of Determination issued for the Driftwood terminal and Driftwood pipeline pursuant to the necessities of NEPA. The Louisiana Division of Environmental High quality has issued the Prevention of Important Deterioration allow, which is required to begin development of the Driftwood terminal in addition to the Title V Working Allow. These materials approvals could also be required for different associated pipelines.

Environmental Regulation

Our operations are and might be topic to varied federal, state and native legal guidelines and laws regarding the safety of the surroundings and pure assets, the dealing with, era, storage and disposal of hazardous supplies and strong and dangerous wastes and different issues. These environmental legal guidelines and laws, which may limit or prohibit impacts to the surroundings or the kinds, portions and focus of drugs that may be launched into the surroundings, would require important expenditures for compliance, can have an effect on the fee and output of operations, might impose substantial administrative, civil and/or felony penalties for non-compliance and can lead to substantial liabilities. The statutes, laws and allow necessities imposed below environmental legal guidelines are modified incessantly, generally retroactively. Such modifications are troublesome to foretell or put together for, and will impose materials prices for brand new permits, capital funding or operational limitations or modifications.

The Biden Administration has issued quite a lot of government orders that direct federal companies to take actions that will change laws and steerage relevant to our enterprise.

Govt Order 14008, “Tackling the Local weather Disaster at Residence and Overseas,” 86 FR 7619 (January 27, 2021), establishes a coverage “selling the circulate of capital towards climate-aligned investments and away from high-carbon investments.” It additionally requires the heads of companies to determine any fossil gasoline subsidies offered by their respective companies, and to hunt to get rid of fossil gasoline subsidies from the finances request for fiscal 12 months 2022 and thereafter.

Govt Order 13990, “Defending Public Well being and the Atmosphere and Restoring Science to Sort out the Local weather Disaster,” 86 FR 7037 (January 20, 2021) directs companies to overview laws and insurance policies adopted by the Trump Administration and to “confront the local weather disaster.” It particularly directs the EPA to think about suspending, revising or rescinding sure laws, together with restrictions on emissions from the oil and fuel sector. As well as, Govt Order 13990 establishes a federal inter-agency working group to suggest strategies for companies to include the “social price of carbon” into their resolution making. Lastly, Govt Order 13990 directs the White Home Council on Environmental High quality to rescind draft steerage proscribing the overview of local weather change points in opinions below NEPA and to replace laws to strengthen local weather change opinions. On March 8, 2021, 12 states filed a lawsuit within the U.S. District Court docket for the Jap District of Missouri difficult President Biden’s authority to ascertain interim values for the social price of greenhouse gases below Govt Order 13990; the case is at present pending attraction earlier than the U.S. Circuit Court docket of Appeals for the eighth Circuit.

NEPA. NEPA and comparable state legal guidelines and laws require that authorities companies overview the environmental impacts of proposed tasks. On July 16, 2020, the White Home Council on Environmental High quality (the “CEQ”) revealed a last rule to “modernize and make clear” the prior NEPA implementation laws and to streamline environmental opinions required by NEPA (the “Revised NEPA Laws”). The Revised NEPA Laws set a presumptive time restrict for completion of NEPA opinions and restrict the scope of NEPA opinions to these results which are fairly foreseeable and have a fairly shut causal relationship to the proposed motion or alternate options. Whereas these modifications will not be prone to require amendments to the USACE permits and NEPA-related findings that had been accomplished previous to the efficient date of the ultimate NEPA rule, the modifications within the NEPA laws might impression new permits, allow modifications and different components of the Driftwood Mission and associated pipelines which are below improvement. The Revised NEPA Laws are at present topic to authorized challenges. On October 7, 2021, the CEQ revealed a discover of proposed rulemaking to announce a set of proposed modifications to typically restore prior regulatory provisions. Subsequently, the impression on the Driftwood Mission and associated pipelines of the beforehand Revised NEPA Laws and new NEPA laws and steerage will not be determinable right now.

Clear Air Act. The CAA and comparable state legal guidelines and laws limit the emission of air pollution from many sources and impose varied monitoring and reporting necessities, amongst different necessities. The Driftwood Mission and associated pipelines embrace services and operations which are topic to the federal CAA and comparable state and native legal guidelines, together with necessities to acquire pre-construction permits and working permits. We could also be required to incur capital expenditures for air air pollution management gear in reference to sustaining or acquiring permits and approvals pursuant to the CAA and comparable state legal guidelines and laws.

In August 2020, the EPA issued two last guidelines that revised the brand new supply efficiency requirements below the CAA (the “2020 CAA Revisions”) to require reductions in emissions, together with methane emissions, from new and modified sources within the oil and pure fuel sector. On June 30, 2021, President Biden signed into legislation a joint Congressional decision disapproving most of the 2020 CAA Revisions pursuant to the Congressional Assessment Act making the disapproved parts of the 2020 CAA Revisions not efficient. In November 2021, the EPA revealed a proposed rule that will replace and increase current necessities for the oil and fuel trade, in addition to creating important new necessities and requirements for brand new, modified and current oil and fuel services. The proposed new necessities would come with, for instance, new requirements and emission limitations relevant to storage vessels, effectively liquids unloading, pneumatic controllers, and flaring of pure fuel at each new and current services. The proposed guidelines for brand new and modified services are anticipated to be finalized by the top of 2022, whereas any requirements finalized for current services would require additional state rulemaking actions over the subsequent a number of years earlier than they develop into relevant and efficient. The remark interval for that proposed rule was prolonged till January 31, 2022. Subsequently, the impression of the revised oil and fuel new supply efficiency requirements on the Driftwood Mission and different associated pipelines and Tellurian’s compliance obligations will not be determinable right now.

Greenhouse Gases. In December 2009, the EPA revealed its findings that emissions of carbon dioxide, methane, and different greenhouse gases (“GHGs”) current an endangerment to public well being and the surroundings as a result of emissions of GHGs are, based on the EPA, contributing to warming of the earth’s ambiance and different climatic modifications. These findings present the idea for the EPA to undertake and implement laws that will limit emissions of GHGs below current provisions of the CAA. In June 2010, the EPA started regulating GHG emissions from stationary sources, together with LNG terminals. In June 2019, the EPA issued the ultimate Inexpensive Clear Vitality rule, which, amongst different issues, establishes emission pointers for states to develop plans to deal with greenhouse fuel emissions from current coal-fired energy crops. The Inexpensive Clear Vitality rule was topic to authorized challenges and, in January 2021, the U.S. Court docket of Appeals for the District of Columbia Circuit vacated the rule and remanded the rule to the EPA for revision or substitute.

The Biden Administration has communicated its intention to deal with local weather change and has issued Govt Orders with respect to sure governmental actions associated to local weather change. Sooner or later, the EPA might promulgate further laws for sources of GHG emissions that would have an effect on the oil and fuel sector, and Congress or states might enact new GHG laws, both of which might impose emission limits on the Driftwood Mission or associated pipelines or require the Driftwood Mission or associated pipelines to implement further air pollution management applied sciences, pay charges associated to GHG emissions or implement mitigation measures. The scope and results of any new legal guidelines or laws are troublesome to foretell, and the impression of such legal guidelines or laws on the Driftwood Mission or associated pipelines can’t be predicted right now.

Coastal Zone Administration Act. Sure features of the Driftwood terminal are topic to the necessities of the CZMA. The CZMA is run by the states (in Louisiana, by the Division of Pure Sources). This program is carried out to make sure that impacts to coastal areas are in keeping with the intent of the CZMA to handle the coastal areas. Sure services which are a part of the Driftwood Mission obtained permits for development and operation in coastal areas pursuant to the necessities of the CZMA.

Clear Water Act. The Driftwood Mission and associated pipelines are topic to the CWA and analogous state and native legal guidelines. The CWA and analogous state and native legal guidelines regulate discharges of pollution to waters of the US or waters of the state, together with discharges of wastewater and storm water runoff and discharges of dredged or fill materials into waters of the US, in addition to spill prevention, management and countermeasure necessities. Permits should be obtained previous to discharging pollution into state and federal waters or dredging or filling wetland and coastal areas. The CWA is run by the EPA, the USACE and by the states. Moreover, the siting and development of the Driftwood terminal and Driftwood pipeline will impression jurisdictional wetlands, which might require applicable federal, state and/or native permits and approval previous to impacting such wetlands. The authorizing company might impose important direct or oblique mitigation prices to compensate for regulated impacts to wetlands. Though the CWA permits required for development and operation of the Driftwood terminal and Driftwood pipeline have been obtained, different CWA permits could also be required in reference to our tasks which are below improvement and our future tasks. The approval timeframe may additionally be longer than anticipated and will doubtlessly have an effect on challenge schedules.

In April 2020, the EPA and the USACE finalized a rule revising and narrowing the definition of “waters of the US” and changing prior guidelines defining the identical issued in 1986 and 2015 (the “2020 Rule”). On August 30, 2021, the U.S. District Court docket for the District of Arizona vacated and remanded the 2020 Rule and in June 2021, the EPA and the Division of the Military introduced their intention to provoke a brand new rulemaking course of to revive the pre-2015 definition of “waters of the US” knowledgeable by selections of the Supreme Court docket of the US. The proposed rule was revealed on December 7, 2021 and the remark interval closed on February 7, 2022. As well as, in January 2022, the Supreme Court docket of the US granted certiorari in a case, Sackett v. EPA, that would additional impression this rulemaking course of and the final word rule. Adjustments within the definition of “waters of the US” will not be prone to have an effect on the permits already obtained for the Driftwood terminal and Driftwood pipeline, however additional regulatory modifications or any judicial selections might have an effect on different components of the Driftwood terminal and Driftwood pipeline or different associated pipelines in methods that can not be predicted right now.

Federal legal guidelines together with the CWA require sure house owners or operators of services that retailer or in any other case deal with oil and produced water to organize and implement spill prevention, management, countermeasure and response plans addressing the doable discharge of oil into floor waters. The Oil Air pollution Act of 1990 (“OPA”) topics house owners and operators of services to strict and joint and several other legal responsibility for all containment and cleanup prices and sure different damages arising from oil spills, together with the federal government’s response prices. Spills topic to the OPA might lead to various civil and felony penalties and liabilities. The Driftwood Mission incorporates applicable gear and operational measures to scale back the potential for spills of oil and set up protocols for responding to spills, however oil spills stay an operational danger that would adversely have an effect on our operations and lead to further prices or fines or penalties.

Useful resource Conservation and Restoration Act. The federal RCRA and comparable state necessities govern the era, dealing with and disposal of strong and dangerous wastes and require corrective motion for releases into the surroundings. Within the occasion such wastes are generated or utilized in reference to our services, we might be topic to regulatory necessities affecting the dealing with, transportation, remedy, storage and disposal of such wastes and might be required to carry out corrective motion measures to wash up releases of such wastes. The EPA and sure environmental teams entered into an settlement pursuant to which the EPA was required to suggest, no later than March 2019, a rulemaking for revision of sure laws pertaining to grease and pure fuel wastes or signal a willpower that revision of the laws will not be needed. In April 2019, the EPA decided that revision of the laws will not be needed. Info comprising the EPA’s overview and the choice is contained in a doc entitled “Administration of Exploration, Growth and Manufacturing Wastes: Components Informing a Determination on the Want for Regulatory Motion.” The EPA indicated that it will proceed to work with states and different organizations to determine areas for continued enchancment and to deal with rising points

to make sure that exploration, improvement and manufacturing wastes proceed to be managed in a way that’s protecting of human well being and the surroundings. Environmental teams, nonetheless, expressed dissatisfaction with the EPA’s resolution and can possible proceed to press the difficulty on the federal and state ranges. A lack of the exclusion from RCRA protection for drilling fluids, produced waters and associated wastes sooner or later might lead to a big improve in our prices to handle and get rid of waste related to our manufacturing operations.

The Complete Environmental Response, Compensation, and Legal responsibility Act (“CERCLA”). CERCLA, sometimes called Superfund, and comparable state statutes, impose legal responsibility that’s typically joint and several other and that’s retroactive for prices of investigation and remediation and for pure useful resource damages, with out regard to fault or the legality of the unique conduct, for the discharge of a “hazardous substance” (or below state legislation, different specified substances) into the surroundings. So-called doubtlessly accountable events (“PRPs”) embrace the present and sure previous house owners and operators of a facility the place there was a launch or menace of launch of a hazardous substance and individuals who disposed of or organized for the disposal of, or transported hazardous substances discovered at a website. CERCLA additionally authorizes the EPA and, in some instances, third events to take actions in response to threats to the general public well being or the surroundings and to hunt to recuperate from the PRPs the price of such motion. Legal responsibility can come up from circumstances on properties the place operations are carried out, even below circumstances the place such operations had been carried out by third events and/or from circumstances at disposal services the place supplies had been despatched. Our operations contain the use or dealing with of supplies that embrace or could also be labeled as hazardous substances below CERCLA or regulated below related state statutes. We may additionally be the proprietor or operator of web sites on which hazardous substances have been launched and could also be accountable for the investigation, administration and disposal of soils or dredge spoils containing hazardous substances in reference to our operations.

Oil and pure fuel exploration and manufacturing, and probably different actions, have been carried out at a few of our properties by earlier house owners and operators. Supplies from these operations stay on a few of the properties and in sure cases might require remediation. In some cases, we’ve got agreed to indemnify the sellers of manufacturing properties from whom we’ve got acquired reserves towards sure liabilities for environmental claims related to the properties. Accordingly, we might incur materials prices for remediation required below CERCLA or related state statutes sooner or later.

Hydraulic Fracturing. Hydraulic fracturing is often used to stimulate the manufacturing of crude oil and/or pure fuel from dense subsurface rock formations. We plan to make use of hydraulic fracturing extensively in our pure fuel improvement operations. The method entails the injection of water, sand, and components below strain right into a focused subsurface formation. The water and strain create fractures within the rock formations that are held open by the grains of sand, enabling the pure fuel to extra simply circulate to the wellbore. The method is usually topic to regulation by state oil and pure fuel commissions however can also be topic to new and altering regulatory applications on the federal, state and native ranges.

In February 2014, the EPA issued allowing steerage below the Secure Ingesting Water Act (the “SDWA”) for the underground injection of liquids from hydraulically fractured wells and different wells the place diesel is used. Relying upon how it’s carried out, this steerage might create duplicative necessities in sure areas, additional gradual the allowing course of in sure areas, improve the prices of operations, and lead to expanded regulation of hydraulic fracturing actions associated to the Driftwood Mission.

In Could 2014, the EPA issued an advance discover of proposed rulemaking below the Poisonous Substances Management Act (“TSCA”) pursuant to which it should gather intensive info on the chemical substances utilized in hydraulic fracturing fluid, in addition to different health-related knowledge, from chemical producers and processors. If the EPA regulates hydraulic fracturing fluid below TSCA sooner or later, such regulation might improve the price of our pure fuel improvement operations and the feedstock for the Driftwood terminal.

In June 2016, the EPA finalized pretreatment requirements for oblique discharges of wastewater from the oil and pure fuel extraction trade. The regulation prohibits sending wastewater pollution from onshore unconventional oil and pure fuel extraction services to publicly-owned remedy works. Sure actions of our Enterprise are topic to the pretreatment requirements, which implies that we’re required to make use of disposal strategies that will require further permits or price extra to implement than disposal at publicly-owned remedy works.

In December 2016, the EPA launched a report titled “Hydraulic Fracturing for Oil and Gasoline: Impacts from the Hydraulic Fracturing Water Cycle on Ingesting Water Sources in the US.” The report concluded that actions concerned in hydraulic fracturing can have impacts on consuming water below sure circumstances. As well as, the U.S. Division of Vitality has investigated practices that the company might suggest to raised defend the surroundings from drilling utilizing hydraulic fracturing completion strategies. These and related research, relying on their diploma of improvement and nature of outcomes obtained, might spur initiatives to

additional regulate hydraulic fracturing below the SDWA or different regulatory mechanisms. If the EPA proposes further laws of hydraulic fracturing sooner or later, they might impose further emission limits and air pollution management expertise necessities, which might restrict our operations and revenues and doubtlessly improve our prices of fuel manufacturing or acquisition.

Endangered Species Act (“ESA”). Our operations could also be restricted by necessities below the ESA. The ESA prohibits the harassment, harming or killing of sure protected species and destruction of protected habitats. Beneath the NEPA overview course of carried out by FERC, we’ve got been and might be required to seek the advice of with federal companies to find out limitations on and mitigation measures relevant to actions which have the potential to lead to hurt to threatened or endangered species of crops, animals, fish and their designated habitats. Though we’ve got carried out research and engaged in consultations with companies with the intention to keep away from harming protected species, inadvertent or incidental hurt might happen in reference to the development or operation of our properties, together with of the Driftwood Mission or associated pipelines, which might lead to fines or penalties. As well as, if threatened or endangered species are discovered on any a part of our properties, together with the websites of the Driftwood Mission, associated pipelines, or pipeline rights of manner, then we could also be required to implement avoidance or mitigation measures that would restrict our operations or impose further prices.

Regulation of Pure Gasoline Operations

Our pure fuel operations are topic to quite a lot of further legal guidelines, guidelines and laws that require, amongst different issues, permits for the drilling of wells, drilling bonds and experiences regarding operations. States, parishes and municipalities wherein we function might regulate, amongst different issues:

State legal guidelines regulate the scale and form of drilling and spacing models or proration models governing the pooling of oil and pure fuel properties. Some states, together with Louisiana, enable compelled pooling or integration of tracts to facilitate exploration, whereas different states depend on voluntary pooling of lands and leases. In some cases, compelled pooling or unitization could also be carried out by third events and will cut back our curiosity within the unitized properties. As well as, state conservation legal guidelines set up most charges of manufacturing from oil and pure fuel wells and usually prohibit the venting or flaring of pure fuel and require that oil and pure fuel be produced in a prorated, equitable system. These legal guidelines and laws might restrict the quantity of oil and pure fuel that we will produce from our wells or restrict the variety of wells or the areas at which we will drill. Furthermore, most states typically impose a manufacturing, advert valorem or severance tax with respect to the manufacturing and sale of oil and pure fuel inside their jurisdictions. Many native authorities additionally impose an advert valorem tax on the minerals in place. States don’t typically regulate wellhead costs or have interaction in different, related direct financial regulation, however there might be no assurance they won’t achieve this sooner or later.

Anti-Corruption, Commerce Management, and Tax Evasion Legal guidelines

We’re topic to anti-corruption legal guidelines in varied jurisdictions, such because the U.S. Overseas Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.Okay. Bribery Act of 2010 and different anti-corruption legal guidelines. The FCPA and these different legal guidelines typically prohibit our workers, administrators, officers and brokers from authorizing, providing, or offering improper funds or the rest of worth to authorities officers or different lined individuals to acquire or retain enterprise or achieve an improper enterprise benefit. We face the danger that certainly one of our workers or brokers will provide, authorize, or present one thing of worth that would topic us to legal responsibility below the FCPA and different anti-corruption legal guidelines. As well as, we can not predict the character, scope or impact of future regulatory necessities to which our worldwide operations may be topic or the style wherein current legal guidelines may be administered or interpreted.

We’re additionally topic to different legal guidelines and laws governing our worldwide operations, together with laws administered by the U.S. Division of Commerce’s Bureau of Business and Safety, the U.S. Division of Treasury’s Workplace of Overseas Property Management, and varied non-U.S. authorities entities, together with relevant export management laws, financial sanctions on international locations and individuals, customs necessities, foreign money alternate laws, and switch pricing laws (collectively, “Commerce Management legal guidelines”).

We’re additionally topic to new U.Okay. company felony offenses for failure to forestall the facilitation of tax evasion pursuant to the Prison Funds Act 2017, which imposes felony legal responsibility on an organization the place it has failed to forestall the felony facilitation of tax evasion by an individual related to the corporate.

We’ve instituted insurance policies, procedures and ongoing coaching of workers designed to make sure that we and our workers and brokers adjust to the FCPA, different anti-corruption legal guidelines, Commerce Management legal guidelines and the Prison Funds Act 2017. Nevertheless, there is no such thing as a assurance that our efforts have been and might be fully efficient in making certain our compliance with all relevant anti-corruption legal guidelines, together with the FCPA or different authorized necessities. If we’re not in compliance with the FCPA, different anti-corruption legal guidelines, the Commerce Management legal guidelines or the Prison Funds Act 2017, we could also be topic to felony and civil penalties, disgorgement and different sanctions and remedial measures, and authorized bills, which might have a fabric adversarial impression on our enterprise, monetary situation, outcomes of operations and liquidity. Likewise, any investigation of any potential violations of the FCPA, different anti-corruption legal guidelines the Commerce Management legal guidelines or the Prison Funds Act 2017 by the U.S. or international authorities might have a fabric adversarial impression on our fame, enterprise, monetary situation and outcomes of operations. U.S. or international authorities may additionally search to carry us responsible for successor legal responsibility for anti-corruption violations dedicated by corporations we purchase or wherein we make investments (for instance, by means of buying fairness pursuits, collaborating as a three way partnership associate, or buying property).

Competitors

We’re topic to a excessive diploma of competitors in all features of our enterprise. See “Merchandise 1A – Danger Components – Dangers Referring to Our Enterprise in Basic – Competitors is intense within the vitality trade and a few of Tellurian’s rivals have better monetary, technological and different assets.”

Manufacturing & Transportation. The pure fuel and oil enterprise is extremely aggressive within the exploration for and acquisition of reserves, the acquisition of pure fuel and oil leases, gear and personnel required to develop and produce reserves, and the gathering, transportation and advertising and marketing of pure fuel and oil. Our rivals embrace nationwide oil corporations, main built-in pure fuel and oil corporations, different impartial pure fuel and oil corporations, and individuals in different industries supplying vitality and gasoline to industrial, business, and particular person shoppers, equivalent to operators of pipelines and different midstream services. Lots of our rivals have longer working histories, better identify recognition, bigger staffs and considerably better monetary, technical and advertising and marketing assets than we at present possess.

Liquefaction. The Driftwood terminal will compete with liquefaction services worldwide to provide low-cost liquefaction to the market. There are a variety of liquefaction services worldwide that we compete with for purchasers. Most of the corporations with which we compete have better identify recognition, bigger staffs and considerably better monetary, technical and advertising and marketing assets than we do.

LNG Advertising and marketing. Tellurian competes with a wide range of corporations within the world LNG market, together with (i) built-in vitality corporations that market LNG from their very own liquefaction services, (ii) buying and selling homes and aggregators with LNG provide portfolios, and (iii) liquefaction plant operators that market fairness volumes. Most of the corporations with which we compete have better identify recognition, bigger staffs, better entry to the LNG market and considerably better monetary, technical, and advertising and marketing assets than we do.

Title to Properties

With respect to our pure fuel producing properties, we imagine that we maintain good and defensible leasehold title to considerably all of our properties in accordance with requirements typically accepted within the trade. A preliminary title examination is carried out on the time the properties are acquired. Our pure fuel properties are topic to royalty, overriding royalty, and different excellent pursuits. We imagine that we maintain good title to our different properties, topic to customary burdens, liens, or encumbrances that we don’t anticipate to materially intervene with our use of the properties.

Main Clients

We would not have any main clients.

Services

Sure subsidiaries of Tellurian have entered into working leases for workplace house in Houston, Texas, and Washington, D.C. The tenors of the leases are 5 and eight years for Houston and Washington, D.C., respectively.

Staff and Human Capital

As of December 31, 2021, Tellurian had 107 full-time workers worldwide. None of them are topic to collective bargaining preparations. The Firm’s workforce is primarily situated in Houston, Texas, and we’ve got places of work in Louisiana, Washington DC, London and Singapore. Lots of our workers are initially from, or have intensive expertise working in, international locations aside from the US. This displays our total technique of constructing a pure fuel enterprise that’s world in scope.

We plan to construct, amongst different issues, an LNG liquefaction facility that we imagine is without doubt one of the largest vitality infrastructure tasks at present below improvement in the US. Given the inherent challenges concerned within the development of a challenge of this sort, particularly by an organization that has restricted present operations, our human assets technique focuses on the recruitment and retention of workers who’ve already established related experience within the trade. The execution of this technique has resulted in us assembling what we imagine to be a premier administration group within the world pure fuel and LNG trade. A associated facet of our human assets technique is that the compensation construction for a lot of of our workers is weighted in direction of incentive compensation that’s designed to reward progress towards the event of our enterprise, together with particularly the financing and development of the Driftwood Mission.

Jurisdiction and Yr of Formation

The Firm is a Delaware company initially fashioned in 1967 and previously often known as Magellan Petroleum Company.

Obtainable Info

We file annual, quarterly and present experiences, proxy statements and different info with the SEC. Our SEC filings can be found freed from cost from the SEC’s web site at www.sec.gov or from our web site at www.tellurianinc.com. We additionally make accessible freed from cost any of our SEC filings by mail. For a mailed copy of a report, please contact Tellurian Inc., Investor Relations, 1201 Louisiana Road, Suite 3100, Houston, Texas 77002.

PART II

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The next dialogue and evaluation presents administration’s view of our enterprise, monetary situation and total efficiency and needs to be learn along with our Consolidated Monetary Statements and the accompanying notes. This info is meant to offer buyers with an understanding of our previous improvement actions, present monetary situation and outlook for the long run organized as follows:

Our Enterprise

Tellurian Inc. (“Tellurian,” “we,” “us,” “our,” or the “Firm”), a Delaware company, is a Houston-based firm that intends to create worth for shareholders by constructing a low-cost, world pure fuel enterprise, profitably delivering pure fuel to clients worldwide (the “Enterprise”). We’re growing a portfolio of pure fuel, LNG advertising and marketing, and infrastructure property that features an LNG terminal facility (the “Driftwood terminal”), an related pipeline (the “Driftwood pipeline”), different associated pipelines, and upstream pure fuel property. The Driftwood terminal and the Driftwood pipeline are collectively known as the “Driftwood Mission”. Our current pure fuel property encompass 11,060 web acres and pursuits in 78 producing wells situated within the Haynesville Shale pattern of northern Louisiana. Our Enterprise could also be developed in phases.

As a part of our execution technique, which incorporates growing our asset base, we are going to contemplate varied business preparations with third events throughout the pure fuel worth chain. We’re additionally pursuing actions equivalent to direct gross sales of LNG to world counterparties, buying and selling of LNG, the acquisition of further upstream acreage and drilling of latest wells on our current or newly acquired upstream acreage. As mentioned in “Overview of Important Occasions – LNG Sale and Buy Agreements” beneath, we entered into 4 LNG SPAs with three unrelated purchasers, finishing the deliberate gross sales for crops one and two of the Driftwood terminal (“Section 1”). We’re at present centered on securing financing for the development of Section 1.

We handle and report our operations in three reportable segments. The Upstream phase is organized and operates to provide and collect pure fuel. The Midstream phase is organized to develop, assemble and function LNG terminals and pipelines. The Advertising and marketing & Buying and selling phase is organized and operates to buy and promote pure fuel, market the Driftwood terminal’s LNG manufacturing capability and commerce LNG.

We proceed to judge the scope and different features of our Enterprise in mild of the evolving financial surroundings, wants of potential counterparties and different elements. How we execute our Enterprise might be based mostly on a wide range of elements, together with the outcomes of our persevering with evaluation, altering enterprise circumstances and market suggestions.

Overview of Important Occasions

LNG Sale and Buy Agreements

Driftwood LNG LLC (“Driftwood LNG”), an entirely owned subsidiary of the Firm, entered into the next SPAs with three purchasers for the acquisition of a complete of 9.0 Mtpa of LNG:

The value for LNG offered below the SPAs with Gunvor and Vitol might be a blended common based mostly on the JKM index value and the TTF futures contract value, in every case minus a transportation netback. The value for LNG offered below every SPA with Shell might be based mostly on the JKM index value or the TTF futures contract value, in every case minus a transportation netback. Every SPA has a ten-year time period from the date of first business supply from the Driftwood terminal.

Initiated Proprietor Development Actions

Through the 12 months ended, December 31, 2021 we initiated proprietor development actions essential to proceed below our LSTK EPC agreements with Bechtel Oil, Gasoline and Chemical substances, Inc. (“Bechtel”).

Driftwood Land Lease Settlement

On July 1, 2021, we entered right into a long-term floor lease settlement with the Lake Charles Harbor and Terminal District to safe property important for the development of the Driftwood terminal.

Environmental, Social, Governance Practices

Through the 12 months ended December 2021, the Firm started a partnership with the Nationwide Forest Basis on a five-year plan for reforestation and different forest administration tasks totaling $25 million throughout the US. One of many first recognized tasks is to re-plant 300,000 timber within the Kisatchie Nationwide Forest, situated close to Alexandria, Louisiana, the place practically 40,000 acres of native timber had been misplaced as a result of excessive climate occasions throughout the previous few years.

Upstream Drilling Actions

Through the 12 months ended December 31, 2021, we accomplished the drilling of and put in manufacturing 4 new Haynesville operated pure fuel wells. We additionally participated within the drilling of six Haynesville non-operated pure fuel wells. Our 2021 drilling actions elevated our proved developed reserves by roughly 51 Bcfe as of December 31, 2021.

Compensation of Borrowing Obligations

Through the 12 months ended December 31, 2021, we repaid all borrowing obligations that had been excellent on the finish of December 31, 2020. For additional info relating to the reimbursement of our borrowing obligations, see Observe 10 – Borrowings, of our Notes to the Consolidated Monetary Statements.

Fairness Providing

On August 6, 2021, we offered 35.0 million shares of our frequent inventory in an underwritten public providing at a value of $3.00 per share. Web proceeds from this providing, after deducting charges and bills, had been roughly $100.8 million. The underwriters had been granted an choice to buy as much as an extra 5.3 million shares of frequent inventory inside 30 days. On August 31, 2021, the underwriters exercised this selection, which generated web proceeds, after deducting charges, of roughly $15.1 million.

8.25% Senior Notes due 2028

On November 10, 2021, we offered $50.0 million mixture principal quantity of 8.25% Senior Notes due November 30, 2028 (the “Senior Notes”) in a registered public providing. Web proceeds from the sale of the Senior Notes had been roughly $47.5 million after deducting charges. The underwriter was granted an choice to buy as much as an extra $7.5 million of the Senior Notes inside 30 days. On December 7, 2021, the underwriter exercised the choice and bought an extra $6.5 million of the Senior Notes, which generated web proceeds of roughly $6.2 million after deducting charges.

At-the-Market Debt Providing Program

On December 17, 2021, we entered into an at-the-market debt providing program below which the Firm might provide and promote, once in a while on the NYSE American, as much as an mixture principal quantity of $200.0 million of further Senior Notes. Through the 12 months ended December 31, 2021, we didn’t promote any further Senior Notes below the at-the-market debt providing program.

Liquidity and Capital Sources

Capital Sources

We contemplate all extremely liquid investments with an authentic maturity of three months or much less to be money equivalents. We’re at present funding our operations, improvement actions and normal working capital wants by means of our money available. Our present capital assets consist of roughly $305.5 million of money and money equivalents as of December 31, 2021 on a consolidated foundation. We at present preserve at-the-market debt and fairness providing applications pursuant to which we promote our Senior Notes and customary inventory once in a while. As of the date of this submitting, we’ve got remaining availability to boost mixture product sales proceeds of roughly $581.9 million below these applications.

As of December 31, 2021, we had whole indebtedness of roughly $56.5 million, of which no quantities are scheduled to be repaid throughout the subsequent twelve months. We additionally had contractual obligations related to our finance and working leases totaling $216.9 million, of which $7.1 million is scheduled to be paid throughout the subsequent twelve months.

The Firm has adequate money available and accessible liquidity to fulfill its obligations and fund its working capital wants for not less than twelve months following the date of issuance of the consolidated monetary statements. The Firm has the power to generate further proceeds from varied different potential financing transactions. We’re at present centered on securing financing for the development of crops one and two of the Driftwood terminal.

Sources and Makes use of of Money

The next desk summarizes the sources and makes use of of our money and money equivalents and prices and bills for the durations offered (in hundreds):

Money utilized in working actions for the 12 months ended December 31, 2021 decreased by roughly $8.4 million in comparison with the identical interval in 2020 as a result of an total decline in disbursements within the regular course of enterprise.

Money utilized in investing actions for the 12 months ended December 31, 2021 elevated by roughly $56.6 million in comparison with the identical interval in 2020. This improve is predominantly pushed by elevated spending on pure fuel improvement actions, settlement of excellent liabilities related to engineering providers for the Driftwood terminal and property and gear purchases.

Money offered by financing actions for the 12 months ended December 31, 2021 elevated by roughly $260.4 million in comparison with the identical interval in 2020. This improve primarily pertains to the next:

See Observe 10, Borrowings and Observe 12, Stockholders’ Fairness, of our Notes to the Consolidated Monetary Statements for added details about our financing actions.

Capital Growth Actions

The actions we’ve got proposed would require important quantities of capital and are topic to dangers and delays in completion. We acquired all main regulatory approvals for the development of Section 1 and, in consequence, our enterprise success will rely to a big extent upon our skill to acquire the funding essential to assemble property on a commercially viable foundation and to finance the prices of staffing, working and increasing our firm throughout that course of. We’ve initiated sure proprietor development actions essential to proceed below our LSTK EPC agreements and have elevated our upstream improvement actions.

We at present estimate the entire price of the Driftwood Mission in addition to associated pipelines and upstream pure fuel property to be roughly $25.0 billion together with house owners’ prices, transaction prices and contingencies however excluding curiosity prices incurred throughout development and different financing prices. We’ve entered into 4 LSTK EPC agreements at present totaling $15.5 billion, or $561 per tonne, with Bechtel Oil, Gasoline and Chemical substances, Inc. (“Bechtel”) for development of the Driftwood terminal. The proposed Driftwood terminal can have a liquefaction capability of as much as roughly 27.6 Mtpa and might be located on roughly 1,200 acres in Calcasieu Parish, Louisiana. The proposed Driftwood terminal will embrace as much as 20 liquefaction Trains, three full containment LNG storage tanks and three marine berths. Our technique entails buying further pure fuel properties, together with properties within the Haynesville shale pattern. We intend to pursue potential acquisitions of such property, or public or non-public corporations that personal such property. We’d anticipate to make use of inventory, money available, or money raised in financing transactions to finish an acquisition of this sort.

We anticipate funding our extra rapid liquidity necessities relative to the graduation of development of the Driftwood terminal, pure fuel improvement prices, and normal and administrative prices by means of using money available, proceeds from operations, and proceeds from accomplished and future issuances of securities by us. Investments within the development of the Driftwood terminal and pure fuel improvement could also be important in 2022, however the dimension of these investments will depend upon, amongst different issues, commodity costs, Driftwood Mission financing developments and different liquidity issues, and our persevering with evaluation of strategic dangers and alternatives. In step with our total financing technique, the Firm has thought-about, and in some instances mentioned with buyers, varied potential financing transactions, together with issuances of debt, fairness and equity-linked securities or related transactions, to assist its short-term and long-term capital necessities. The Firm will proceed to judge its money wants and enterprise outlook, and it could execute a number of transactions of this sort sooner or later.

Outcomes of Operations

The next desk summarizes prices and bills for the durations offered (in hundreds):

Probably the most important modifications affecting our outcomes of operations for the 12 months ended December 31, 2021 in comparison with 2020, on a consolidated foundation and by phase, are the next:

Upstream

Advertising and marketing & Buying and selling

Midstream

Consolidated

Because of the foregoing, our consolidated Web loss was roughly $114.7 million for the 12 months ended December 31, 2021, in comparison with a Web lack of roughly $210.7 million in 2020.

Probably the most important modifications affecting our outcomes of operations for the 12 months ended December 31, 2020 in comparison with 2019, on a consolidated foundation and by phase, are the next:

Upstream

Advertising and marketing & Buying and selling

Midstream

Consolidated

Because of the foregoing, our consolidated web loss was roughly $210.7 million for the 12 months ended December 31, 2020, in comparison with a web lack of roughly $151.8 million in 2019.

Commitments and Contingencies

The knowledge set forth in Observe 11, Commitments and Contingencies, to the accompanying Consolidated Monetary Statements included in Half II, Merchandise 8 of this Type 10-Okay is integrated herein by reference.

Abstract of Vital Accounting Estimates

Our accounting insurance policies are extra absolutely described in Observe 2, Abstract of Important Accounting Insurance policies, of our Notes to Consolidated Monetary Statements included on this report. As disclosed in Observe 2, the preparation of economic statements requires using judgments and estimates. We base our estimates on historic expertise and on varied different assumptions we imagine to be cheap based on present details and circumstances, the outcomes of which kind the idea for making judgments in regards to the carrying values of property and liabilities that aren’t readily obvious from different sources. Precise outcomes might differ from these estimates. We thought-about the next to be our most important accounting estimates that contain important judgment:

Valuation of Lengthy-Lived Property

When there are indicators that our proved pure fuel properties carrying worth is probably not recoverable, we examine anticipated undiscounted future money flows at a depreciation, depletion and amortization group stage to the unamortized capitalized price of the asset. If the anticipated undiscounted future money flows, based mostly on our estimates of (and assumptions relating to) future pure fuel costs, working prices, improvement expenditures, anticipated manufacturing from proved reserves and different related knowledge, are decrease than the unamortized capitalized price, the capitalized price is decreased to honest worth. Honest worth is usually calculated utilizing the revenue strategy in accordance with GAAP. Estimates of undiscounted future money flows require important judgment, and the assumptions utilized in making ready such estimates are inherently unsure. The impairment overview contains money flows from proved developed and undeveloped reserves, together with any improvement expenditures needed to realize that manufacturing. Moreover, when possible and doable reserves exist, an applicable risk-adjusted quantity of those reserves could also be included within the impairment calculation. As well as, such assumptions and estimates are fairly prone to change sooner or later.

Proved reserves are the estimated portions of pure fuel and condensate that geological and engineering knowledge show with cheap certainty to be recoverable in future years from identified reservoirs below current financial and working circumstances. Regardless of the inherent imprecision in these engineering estimates, our reserves are used all through our monetary statements. For instance, as a result of we use the units-of-production methodology to deplete our pure fuel properties, the amount of reserves might considerably impression our DD&A expense. Consequently, materials revisions (upward or downward) to current reserve estimates might happen once in a while. Lastly, these reserves are the idea for our supplemental pure fuel disclosures. See Merchandise 1 and a couple of – Our Enterprise and Properties for added info on our estimate of proved reserves.

Share-Primarily based Compensation

Share-based compensation transactions are measured based mostly on the grant-date estimated honest worth. For awards containing solely service circumstances or efficiency circumstances deemed possible of occurring, the honest worth is acknowledged as expense over the requisite service interval utilizing the straight-line methodology. We acknowledge compensation price for awards with efficiency circumstances if and after we conclude that it’s possible that the efficiency situation might be achieved. For awards the place the efficiency or market situation will not be thought-about possible, compensation price will not be acknowledged till the efficiency or market situation turns into possible. We reassess the likelihood of vesting at every reporting interval for awards with efficiency circumstances and modify compensation price based mostly on our likelihood evaluation. We acknowledge forfeitures as they happen.

Latest Accounting Requirements

We don’t imagine that any not too long ago issued, however not but efficient, accounting requirements, if at present adopted, would have a fabric impact on our Consolidated Monetary Statements or associated disclosures.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

TELLURIAN INC.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Administration, together with the Firm’s Chief Govt Officer, Chief Monetary Officer, and Chief Accounting Officer, is accountable for establishing and sustaining ample inner management over the Firm’s monetary reporting. Administration carried out an analysis of the effectiveness of inner management over monetary reporting based mostly on standards established in Inner Management – Built-in Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Fee. Primarily based on this analysis, administration concluded that Tellurian Inc.’s inner management over monetary reporting was efficient as of December 31, 2021.

Deloitte & Touche LLP, an impartial registered public accounting agency, audited the effectiveness of Tellurian Inc.’s inner management over monetary reporting as of December 31, 2021, as acknowledged of their report on web page 24.

Houston, Texas

February 23, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Administrators of Tellurian Inc.

Opinion on the Monetary Statements

We’ve audited the accompanying consolidated stability sheets of Tellurian Inc. and subsidiaries (the “Firm”) as of December 31, 2021 and 2020, the associated consolidated statements of operations, stockholders’ fairness and money flows, for every of the three years within the interval ended December 31, 2021, and the associated notes (collectively known as the “monetary statements”). In our opinion, the monetary statements current pretty, in all materials respects, the monetary place of the Firm as of December 31, 2021 and 2020, and the outcomes of its operations and its money flows for every of the three years within the interval ended December 31, 2021, in conformity with accounting ideas typically accepted in the US of America.

We even have audited, in accordance with the requirements of the Public Firm Accounting Oversight Board (United States) (PCAOB), the Firm’s inner management over monetary reporting as of December 31, 2021, based mostly on standards established in Inner Management – Built-in Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Fee and our report dated February 23, 2022, expressed an unqualified opinion on the Firm’s inner management over monetary reporting.

Foundation for Opinion

These monetary statements are the duty of the Firm’s administration. Our duty is to specific an opinion on the Firm’s monetary statements based mostly on our audits. We’re a public accounting agency registered with the PCAOB and are required to be impartial with respect to the Firm in accordance with the U.S. federal securities legal guidelines and the relevant guidelines and laws of the Securities and Alternate Fee and the PCAOB.

We carried out our audits in accordance with the requirements of the PCAOB. These requirements require that we plan and carry out the audit to acquire cheap assurance about whether or not the monetary statements are free of fabric misstatement, whether or not as a result of error or fraud. Our audits included performing procedures to evaluate the dangers of fabric misstatement of the monetary statements, whether or not as a result of error or fraud, and performing procedures that reply to these dangers. Such procedures included analyzing, on a check foundation, proof relating to the quantities and disclosures within the monetary statements. Our audits additionally included evaluating the accounting ideas used and important estimates made by administration, in addition to evaluating the general presentation of the monetary statements. We imagine that our audits present an affordable foundation for our opinion.

Vital Audit Matter

The important audit matter communicated beneath is a matter arising from the current-period audit of the monetary statements that was communicated or required to be communicated to the audit committee and that (1) pertains to accounts or disclosures which are materials to the monetary statements and (2) concerned our particularly difficult, subjective, or advanced judgments. The communication of important audit issues doesn’t alter in any manner our opinion on the monetary statements, taken as an entire, and we’re not, by speaking the important audit matter beneath, offering a separate opinion on the important audit matter or on the accounts or disclosures to which it relates.

Proved Pure Gasoline Properties and Depletion – Pure Gasoline Reserves – Seek advice from Observe 2 and 4 to the monetary statements

Vital Audit Matter Description

The Firm’s proved pure fuel properties are depleted utilizing the units-of-production methodology based mostly upon pure fuel reserves. The event of the Firm’s pure fuel reserve portions requires administration to make important estimates and assumptions. The Firm engages an impartial reservoir engineer, administration’s specialist, to estimate pure fuel portions utilizing typically accepted strategies, calculation procedures and engineering knowledge. Adjustments in assumptions or engineering knowledge might have a big impression on the quantity of depletion. Proved pure fuel properties had been $47.7 million as of December 31, 2021, and depletion expense was $11.0 million for the 12 months then ended.

Given the numerous judgments made by administration and administration’s specialist, performing audit procedures to judge the Firm’s pure fuel reserve portions, together with administration’s estimates and assumptions associated to pure fuel costs requires a excessive diploma of auditor judgment and an elevated extent of effort.

How the Vital Audit Matter Was Addressed within the Audit

Our audit procedures associated to administration’s important judgments and assumptions associated to pure fuel reserves included the next, amongst others:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Administrators of Tellurian Inc.

Opinions on Inner Management over Monetary Reporting

We’ve audited the interior management over monetary reporting of Tellurian Inc. and subsidiaries (the “Firm”) as of December 31, 2021, based mostly on standards established in Inner Management – Built-in Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Fee (COSO). In our opinion, the Firm maintained, in all materials respects, efficient inner management over monetary reporting as of December 31, 2021, based mostly on standards established in Inner Management – Built-in Framework (2013) issued by COSO.

We’ve additionally audited, in accordance with the requirements of the Public Firm Accounting Oversight Board (United States) (PCAOB), the consolidated monetary statements as of and for the 12 months ended December 31, 2021, of the Firm and our report dated February 23, 2022, expressed an unqualified opinion on these monetary statements.

Foundation for Opinion

The Firm’s administration is accountable for sustaining efficient inner management over monetary reporting and for its evaluation of the effectiveness of inner management over monetary reporting, included within the accompanying Administration’s Report on Inner Management over Monetary Reporting. Our duty is to specific an opinion on the Firm’s inner management over monetary reporting based mostly on our audit. We’re a public accounting agency registered with the PCAOB and are required to be impartial with respect to the Firm in accordance with the U.S. federal securities legal guidelines and the relevant guidelines and laws of the Securities and Alternate Fee and the PCAOB.

We carried out our audit in accordance with the requirements of the PCAOB. These requirements require that we plan and carry out the audit to acquire cheap assurance about whether or not efficient inner management over monetary reporting was maintained in all materials respects. Our audit included acquiring an understanding of inner management over monetary reporting, assessing the danger {that a} materials weak spot exists, testing and evaluating the design and working effectiveness of inner management based mostly on the assessed danger, and performing such different procedures as we thought-about needed within the circumstances. We imagine that our audit supplies an affordable foundation for our opinion.

Definition and Limitations of Inner Management over Monetary Reporting

An organization’s inner management over monetary reporting is a course of designed to offer cheap assurance relating to the reliability of economic reporting and the preparation of economic statements for exterior functions in accordance with typically accepted accounting ideas. An organization’s inner management over monetary reporting contains these insurance policies and procedures that (1) pertain to the upkeep of information that, in cheap element, precisely and pretty mirror the transactions and tendencies of the property of the corporate; (2) present cheap assurance that transactions are recorded as needed to allow preparation of economic statements in accordance with typically accepted accounting ideas, and that receipts and expenditures of the corporate are being made solely in accordance with authorizations of administration and administrators of the corporate; and (3) present cheap assurance relating to prevention or well timed detection of unauthorized acquisition, use, or disposition of the corporate’s property that would have a fabric impact on the monetary statements.

Due to its inherent limitations, inner management over monetary reporting might not forestall or detect misstatements. Additionally, projections of any analysis of effectiveness to future durations are topic to the danger that controls might develop into insufficient due to modifications in circumstances, or that the diploma of compliance with the insurance policies or procedures might deteriorate.

TELLURIAN INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in hundreds, besides share and per share quantities)

The accompanying notes are an integral a part of these consolidated monetary statements.

TELLURIAN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in hundreds, besides per share quantities)

The accompanying notes are an integral a part of these consolidated monetary statements.

TELLURIAN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(in hundreds)

⁽¹⁾Consists of settlement of 2019 and 2018 bonuses that had been accrued for in 2019 and 2018, respectively.

The accompanying notes are an integral a part of these consolidated monetary statements.

TELLURIAN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in hundreds)

The accompanying notes are an integral a part of these consolidated monetary statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

Tellurian Inc. (“Tellurian,” “we,” “us,” “our,” or the “Firm”), a Delaware company, is a Houston-based firm which intends to create worth for shareholders by constructing a low-cost, world pure fuel enterprise, profitably delivering pure fuel to clients worldwide (the “Enterprise”).

We plan to develop, personal and function a world pure fuel enterprise and to ship pure fuel to clients worldwide. Tellurian is growing a portfolio of pure fuel, LNG advertising and marketing, and infrastructure property that features an LNG terminal facility (the “Driftwood terminal”), an related pipeline (the “Driftwood pipeline”), different associated pipelines, and upstream pure fuel property. The Driftwood terminal and the Driftwood pipeline are collectively known as the “Driftwood Mission.”

The phrases “we,” “our,” “us,” “Tellurian” and the “Firm” as used on this report refer collectively to Tellurian Inc. and its subsidiaries except the context suggests in any other case. These phrases are used for comfort solely and will not be supposed as a exact description of any separate authorized entity related to Tellurian Inc.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Foundation of Presentation

Our Consolidated Monetary Statements have been ready in accordance with GAAP. The Consolidated Monetary Statements embrace the accounts of Tellurian Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eradicated in consolidation.

Sure reclassifications have been made to evolve prior interval info to the present presentation. The reclassifications didn’t have a fabric impact on our consolidated monetary place, outcomes of operations or money flows.

Liquidity

Our Consolidated Monetary Statements have been ready in accordance with GAAP, which contemplates the conclusion of property and satisfaction of liabilities within the regular course of enterprise in addition to the Firm’s skill to proceed as a going concern. As of the date of the Consolidated Monetary Statements, we’ve got generated losses and destructive money flows from operations, and have an accrued deficit. We’ve not but established an ongoing supply of revenues that’s adequate to cowl our future working prices and obligations as they develop into due throughout the twelve months following the issuance of the Consolidated Monetary Statements.

The Firm has adequate money available and accessible liquidity to fulfill its obligations and fund its working capital wants for not less than twelve months following the date of issuance of the Consolidated Monetary Statements. The Firm has the power to generate further proceeds from varied different potential financing transactions. We’re at present centered on securing financing for the development of crops one and two of the Driftwood terminal.

Segments

Phase info is ready on the identical foundation that our Chief Govt Officer, who’s our Chief Working Determination Maker, makes use of to handle the segments, consider monetary outcomes and make key working selections. We recognized the Upstream, Midstream and Advertising and marketing & Buying and selling elements because the Firm’s working segments. These working segments symbolize the Firm’s reportable segments. The rest of our enterprise is offered as “Company,” and consists of company prices and intersegment eliminations.

Use of Estimates

The preparation of economic statements in conformity with GAAP requires administration to make sure estimates and assumptions that have an effect on the quantities reported within the Consolidated Monetary Statements and the accompanying notes. Administration

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evaluates its estimates and associated assumptions regularly. Adjustments in details and circumstances or further info might lead to revised estimates, and precise outcomes might differ from these estimates.

Honest Worth

Honest worth is the value that will be acquired to promote an asset or paid to switch a legal responsibility in an orderly transaction between market individuals on the measurement date. The Firm makes use of three ranges of the honest worth hierarchy of inputs to measure the honest worth of an asset or a legal responsibility. Stage 1 inputs are quoted costs in lively markets for equivalent property or liabilities. Stage 2 inputs are inputs aside from quoted costs included inside Stage 1 which are instantly or not directly observable for the asset or legal responsibility. Stage 3 inputs are inputs that aren’t observable available in the market.

Income Recognition

For the sale of pure fuel, we contemplate the supply of every unit (MMBtu) to be a separate efficiency obligation that’s happy upon supply to the designated gross sales level and subsequently is acknowledged at a time limit. These contracts are both mounted value contracts or contracts with a hard and fast differential to an index value, each of that are deemed mounted consideration that’s allotted to every efficiency obligation and represents the relative standalone promoting value foundation.

Every LNG cargo, in its entirety, is deemed to be a single efficiency obligation as a result of every molecule of LNG being distinct and considerably the identical and subsequently assembly the factors for the switch of a sequence of distinct items. Accordingly, LNG gross sales are acknowledged at a time limit when the LNG has accomplished discharging to the shopper. These are contracts with a hard and fast differential to an index value, which is deemed mounted consideration that’s allotted to every efficiency obligation and represents the relative standalone promoting value foundation. These LNG gross sales are recorded on a gross foundation and reported in “LNG gross sales” on the Consolidated Statements of Operations.

Purchases and gross sales of LNG stock with the identical counterparty which are entered into in contemplation of each other (together with purchase/promote preparations) are mixed and recorded on a web foundation and reported in “LNG gross sales” on the Consolidated Statements of Operations. For such LNG gross sales, we require cost inside 10 days from supply.

We exclude all taxes from the measurement of the transaction value.

Money, Money Equivalents and Restricted Money

We contemplate all extremely liquid investments with an authentic maturity of three months or much less to be money equivalents. Money and money equivalents which are restricted as to withdrawal or use below the phrases of sure contractual agreements are recorded in Non-current restricted money on our Consolidated Stability Sheets. The carrying worth of money, money equivalents and restricted money approximates their honest worth.

Focus of Money

We preserve money balances and restricted money at monetary establishments, which can, at instances, be in extra of federally insured ranges. We’ve not incurred losses associated to those balances up to now.

By-product Devices

We use by-product devices to hedge our publicity to money circulate variability from commodity value danger. By-product devices are recorded at honest worth and included in our Consolidated Stability Sheets as property or liabilities, relying on the by-product place and the anticipated timing of settlement, except they fulfill the factors for and we elect the traditional purchases and gross sales exception.

We’ve not elected and don’t apply hedge accounting for our by-product devices; subsequently, all modifications in honest worth of the Firm’s by-product devices are acknowledged inside Different revenue, web, within the Consolidated Statements of Operations.

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Settlements of by-product devices are reported as a element of money flows from operations within the Consolidated Statements of Money Flows.

Property, Plant and Tools

Pure fuel improvement and manufacturing actions are accounted for utilizing the profitable efforts methodology of accounting. Prices incurred to amass a property (whether or not proved or unproved) are capitalized when incurred. Prices to develop proved reserves are capitalized and we deplete our pure fuel reserves utilizing the units-of-production methodology.

Fastened property are recorded at price. We depreciate our property, plant and gear, excluding land, utilizing the straight-line depreciation methodology over the estimated helpful lifetime of the asset. Upon retirement or different disposition of property, plant and gear, the fee and associated accrued depreciation are eliminated, and the ensuing beneficial properties or losses are recorded in our Consolidated Statements of Operations.

Administration assessments property, plant and gear for impairment at any time when there are indicators that the carrying quantity of property, plant and gear may not be recoverable. The carrying values of our proved pure fuel properties are reviewed for impairment when occasions or circumstances point out that the remaining carrying worth is probably not recoverable. If there is a sign that the carrying quantity of our proved pure fuel properties is probably not recoverable, we examine the estimated anticipated undiscounted future money flows from our pure fuel properties to the carrying values of these properties. Proved properties which have carrying quantities in extra of estimated future undiscounted money flows are written all the way down to honest worth.

Leases

The Firm adopted Accounting Requirements Replace ASU 2016-02, Leases (Matter 842), and subsequent amendments thereto (“ASC 842”) on January 1, 2019 utilizing the optionally available transition strategy to use the usual originally of the primary quarter of 2019 with no retrospective changes to prior durations. We elected the transition bundle of sensible expedients to carry-forward prior conclusions associated to lease identification and classification for current leases, mix lease and non-lease elements of an association for all lessons of our leased property and omit short-term leases with a time period of 12 months or much less from recognition on the stability sheet.

The Firm determines if an association is a lease at inception. Leases are acknowledged as both finance or working leases on our Consolidated Stability Sheets by recording a lease legal responsibility representing the duty to make future lease funds and a right-of-use asset representing the precise to make use of the underlying asset for the lease time period. Seek advice from Observe 17 – Leases for working and finance right-of-use property and lease liabilities classification inside our Consolidated Stability Sheets. Within the absence of a readily determinable implicitly rate of interest, we low cost our anticipated future lease funds utilizing our incremental borrowing price. Choices to resume a lease are included within the lease time period and acknowledged as a part of the right-of-use asset and lease legal responsibility, solely to the extent they’re fairly sure to be exercised.

Lease expense for working lease funds is acknowledged on a straight-line foundation over the lease time period. Lease expense for finance leases is acknowledged because the sum of the amortization of the right-of-use property on a straight-line foundation and the curiosity on lease liabilities over the lease time period.

Accounting for LNG Growth Actions

As we’ve got been within the preliminary stage of growing the Driftwood terminal, considerably all the prices associated to such actions have been expensed. These prices primarily embrace skilled charges related to FEED research and complying with FERC for authorization to assemble our terminal and different required allowing for the Driftwood Mission.

Prices incurred in reference to a challenge to develop the Driftwood terminal shall typically be handled as improvement bills till the challenge has reached the notice-to-proceed state (“NTP State”) and the next standards (the “NTP Standards”) have been met: (i) the mandatory regulatory permits have been obtained, (ii) financing for the challenge has been secured and (iii) administration has dedicated to begin development.

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As well as, sure prices incurred previous to attaining the NTP State might be capitalized though the NTP Standards haven’t been met. Prices to be capitalized previous to attaining the NTP State embrace land buy prices, land enchancment prices, prices related to making ready the power to be used and any mounted construction development prices (fence, storage areas, drainage, and so forth.). Moreover, actions instantly related to detailed engineering and/or facility designs shall be capitalized. All quantities capitalized are periodically assessed for impairment and could also be impaired if indicators are current. For extra particulars relating to capitalized quantities, please check with Observe 5, Deferred Engineering Prices.

Debt

Reductions, charges and bills incurred with the issuance of debt are amortized over the time period of the debt. These quantities are offered as a discount of our indebtedness on the accompanying Consolidated Stability Sheets. See Observe 10, Borrowings, for added particulars about our loans.

Share-Primarily based Compensation

We’ve awarded share-based compensation within the type of inventory, restricted inventory, restricted inventory models and inventory choices to workers, administrators and out of doors consultants. Share-based compensation transactions are measured based mostly on the grant-date estimated honest worth. For awards containing solely service circumstances or efficiency circumstances deemed possible of occurring, the honest worth is acknowledged as expense over the requisite service interval utilizing the straight-line methodology. We acknowledge compensation price for awards with efficiency circumstances if and after we conclude that it’s possible that the efficiency situation might be achieved. For awards the place the efficiency or market situation will not be thought-about possible, compensation price will not be acknowledged till the efficiency or market situation turns into possible. We reassess the likelihood of vesting at every reporting interval for awards with efficiency circumstances and modify compensation price based mostly on our likelihood evaluation. We acknowledge forfeitures as they happen.

Earnings Taxes

We account for revenue taxes below the asset and legal responsibility methodology, which requires the popularity of deferred tax property and liabilities for the anticipated future tax penalties of occasions which have been included within the monetary statements. Beneath this methodology, we decide deferred tax property and liabilities on the idea of the variations between the monetary assertion and tax foundation of property and liabilities through the use of enacted tax charges in impact for the 12 months wherein the variations are anticipated to be realized or settled. The impact of a change in tax charges on deferred tax property and liabilities is acknowledged in revenue within the interval that features the enactment date.

We acknowledge deferred tax property to the extent that we imagine that these property are extra possible than to not be realized. In making such a willpower, we contemplate present and historic monetary outcomes, expectations for future taxable revenue and the provision of tax planning methods that may be carried out, if needed, to comprehend deferred tax property. If we decide that we’d be capable of notice our deferred tax property sooner or later in extra of their web recorded quantity, we are going to make an adjustment to the deferred tax asset valuation allowance, which would cut back the supply for revenue taxes.

Postemployment advantages

The Firm supplies money and different termination advantages pursuant to ongoing profit preparations to its workers in reference to a qualifying termination of their employment. The price of offering postemployment advantages is acknowledged when the duty is possible of occurring and might be fairly estimated.

Web Loss Per Share (EPS)

Primary web loss per share excludes dilution and is computed by dividing web loss by the weighted common variety of frequent shares excellent throughout the interval. Diluted web loss per share displays potential dilution and is computed by dividing web loss by the weighted common variety of frequent shares excellent throughout the interval elevated by the variety of further frequent shares that will have been excellent if the potential frequent shares had been issued and had been dilutive.

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NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

The elements of pay as you go bills and different present property encompass the next (in hundreds):

NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

The elements of property, plant and gear encompass the next (in hundreds):

Depreciation, depletion and amortization bills for the years ended December 31, 2021, 2020 and 2019 had been roughly $11.5 million, $17.2 million and $20.4 million, respectively.

Land and Land enhancements

We personal land in Louisiana for the aim of establishing the Driftwood terminal. Through the 12 months ended December 31, 2021, we capitalized roughly $9.4 million in land enchancment prices to organize the land for its supposed use.

Proved Properties

Through the 12 months ended December 31, 2021, we accomplished the drilling and put in manufacturing 4 new Haynesville operated pure fuel wells. We additionally participated within the drilling of six Haynesville non-operated pure fuel wells.

Through the 12 months ended December 31, 2020, we acknowledged an Impairment cost of roughly $81.1 million primarily related to our property situated in northern Louisiana.

NOTE 5 – DEFERRED ENGINEERING COSTS

Deferred engineering prices of roughly $110.0 million and $110.5 million at December 31, 2021 and 2020, respectively, symbolize detailed engineering providers associated to the Driftwood terminal. The stability on this account might be transferred to development in progress upon reaching an affirmative FID by the Firm’s Board of Administrators.

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NOTE 6 – OTHER NON-CURRENT ASSETS

Different non-current property encompass the next (in hundreds):

Land Lease and Buy Choices

We maintain lease and buy possibility agreements (the “Choices”) for sure tracts of land and related river frontage. Upon train of the Choices, the leases are topic to most phrases of fifty years (inclusive of assorted renewals, on the possibility of the Firm). Prices of the Choices are amortized over the lifetime of the lease as soon as obtained or capitalized into the land if bought.

Allowing Prices

Allowing prices primarily symbolize the acquisition of wetland credit in reference to our allow utility to the USACE in 2017 and 2018. These wetland credit might be utilized to our allow in accordance with the Clear Water Act and the Rivers and Harbors Act, which require us to mitigate the impression to Louisiana wetlands attributable to the development of the Driftwood Mission. In Could 2019, we acquired the USACE allow. The allowing prices might be transferred to development in progress upon reaching an affirmative FID by the Firm’s Board of Administrators.

Restricted Money

Restricted money as of December 31, 2021 represents money collateralization of a letter of credit score related to a finance lease. Restricted money as of December 31, 2020 represents unused proceeds from the 2018 Time period Mortgage as described below Observe 10 – Borrowings.

NOTE 7 – FINANCIAL INSTRUMENTS

Pure Gasoline Monetary Devices

Through the 12 months ended December 31, 2021, we entered into pure fuel future choices to economically hedge the commodity value publicity for a portion of our pure fuel manufacturing. As of December 31, 2021, there have been no open pure fuel monetary devices positions.

LNG Monetary Futures

Through the fourth quarter of 2021, we entered into LNG monetary future contracts to scale back our publicity to commodity value fluctuations, and to realize extra predictable money flows relative to 2 LNG cargos that we’re dedicated to buy from and promote to unrelated third-party LNG retailers within the regular course of enterprise in January and April 2022. As of December 31, 2021, the Firm hedged roughly 2.4 million MMBtu of LNG, which represents a portion of its anticipated LNG cargo transactions. The open LNG monetary futures positions at December 31, 2021 had maturities extending by means of April 2022.

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The next desk summarizes the impact of the Firm’s monetary devices on the consolidated Statements of Operations (in hundreds):

The next desk presents the classification of the Firm’s monetary by-product property and liabilities which are required to be measured at honest worth on a recurring foundation on the Firm’s Consolidated Stability Sheets (in hundreds):

The Firm’s pure fuel and LNG monetary devices are valued utilizing quoted costs in lively alternate markets as of the stability sheet date and are labeled as Stage 1 throughout the honest worth hierarchy.

NOTE 8 – RELATED PARTY TRANSACTIONS

Accounts Payable as a result of Associated Events

At the side of the dismissal of prior litigation, we agreed to reimburse the Vice Chairman of our Board of Administrators, Martin Houston, for cheap attorneys’ charges and bills he incurred throughout the litigation. We paid roughly $5.1 million to 3rd events to settle excellent quantities incurred by Mr. Houston for cheap attorneys’ charges and bills for the 12 months ended December 31, 2020. As of December 31, 2021 and 2020, we had additionally paid Mr. Houston roughly $0.9 million and $1.4 million, respectively, for different bills he incurred in reference to the litigation. As of December 31, 2021, all quantities owed to Mr. Houston had been absolutely settled.

Different

A member of our Board of Administrators is a associate at a legislation agency that has offered authorized providers to the Firm. Charges incurred for such providers had been $0.1 million and $0.4 million for the years ended December 31, 2020 and 2019, respectively. There have been no charges incurred for such providers for the 12 months ended December 31, 2021.

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NOTE 9 – ACCRUED AND OTHER LIABILITIES

The elements of accrued and different liabilities encompass the next (in hundreds):

NOTE 10 – BORROWINGS

The next tables summarize the Firm’s borrowings as of December 31, 2021, and December 31, 2020 (in hundreds):

Senior Notes due 2028

On November 10, 2021, we offered in a registered public providing, $50.0 million mixture principal quantity of 8.25% Senior Notes due November 30, 2028 (the “Senior Notes”). Web proceeds from the Senior Notes had been roughly $47.5 million after deducting charges. The underwriter was granted an choice to buy as much as an extra $7.5 million of the Senior Notes inside 30 days. On December 7, 2021, the underwriter exercised the choice and bought an extra $6.5 million of the Senior Notes leading to web proceeds of roughly $6.2 million after deducting charges. The Senior Notes have quarterly curiosity funds due on January 31, April 30, July 31, and October 31 of every 12 months and on the maturity date.

At-the-Market Debt Providing Program

On December 17, 2021, we entered into an at-the-market debt providing program below which the Firm might provide and promote, once in a while on the NYSE American, as much as an mixture principal quantity of $200.0 million of further Senior Notes. Throughout

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the 12 months ended December 31, 2021, we didn’t promote any further Senior Notes below the at-the-market debt providing program. See Observe 20, Subsequent Occasions, for additional info.

2020 Senior Unsecured Observe

On April 29, 2020, we issued a zero coupon $56.0 million senior unsecured word (the “2020 Unsecured Observe”) to an unrelated third celebration. The 2020 Unsecured Observe was repaid in installments with the ultimate contractually required cost made on March 31, 2021.

2019 Time period Mortgage

On Could 23, 2019, Driftwood Holdings LP (“Driftwood Holdings”), an entirely owned subsidiary of the Firm, entered right into a senior secured time period mortgage settlement (the “2019 Time period Mortgage”) to borrow an mixture principal quantity of $60.0 million. On July 16, 2019, the principal quantity was elevated by an extra $15.0 million. Upon maturity or early reimbursement of the 2019 Time period Mortgage, Driftwood Holdings was obligated to pay to the lender a payment equal to twenty% of the principal quantity borrowed much less financing prices and money curiosity paid (the “Ultimate Cost Charge”). We issued to the lender a warrant to buy roughly 1.5 million shares of our frequent inventory at $10.00 per share (the “Authentic Warrant”). On March 3, 2020, the Authentic Warrant was changed with a brand new warrant (the “Alternative Warrant”) which offered the lender with the precise to buy 9.0 million shares of our frequent inventory at $1.00 per share.

On March 12, 2021 (the “Extinguishment Date”), we finalized a voluntary reimbursement of the remaining excellent principal stability of the 2019 Time period Mortgage. The extinguishment of the 2019 Time period Mortgage resulted in an roughly $2.1 million achieve, which was acknowledged inside Achieve on extinguishment of debt, web, on our Consolidated Statements of Operations for the 12 months ended December 31, 2021. Because of repaying the excellent stability previous to its contractual maturity, an roughly $4.4 million in unamortized debt issuance prices and low cost had been written off and included within the computation of the achieve from the extinguishment of the 2019 Time period Mortgage for the 12 months ended December 31, 2021.

The holder of the 2019 Time period Mortgage held roughly 3.5 million unvested warrants that had a good worth of roughly $6.3 million as of the Extinguishment Date. As a result of extinguishment of the 2019 Time period Mortgage, all of the unvested warrants had been contractually terminated, and their respective honest worth was included within the computation of the achieve on extinguishment of the 2019 Time period Mortgage.

2018 Time period Mortgage

On September 28, 2018, Tellurian Manufacturing Holdings LLC, an entirely owned subsidiary of Tellurian Inc., entered right into a three-year senior secured time period mortgage credit score settlement (the “2018 Time period Mortgage”) in an mixture principal quantity of $60.0 million.

On April 23, 2021, we voluntarily repaid the remaining excellent principal stability of the 2018 Time period Mortgage. Because of the voluntary reimbursement, we acknowledged an roughly $0.7 million loss, which was acknowledged inside Achieve on extinguishment of debt, web, on our Consolidated Statements of Operations for the 12 months ended December 31, 2021.

Covenant Compliance

As of December 31, 2021, the Firm was in compliance with all covenants below the indentures governing the Senior Notes.

Honest Worth

The Senior Notes are traded on the NYSE American below the image “TELZ,” and are labeled as Stage 1 throughout the honest worth hierarchy. As of December 31, 2021, the closing market value of $25.02 per Senior Observe was considerably the identical as its carrying worth.

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Commerce Finance Credit score Line

On July 19, 2021, we entered into an uncommitted commerce finance credit score line for as much as $30.0 million that’s supposed to finance the acquisition of LNG cargos for final resale within the regular course of enterprise. On December 7, 2021, the uncommitted commerce finance credit score line was amended and elevated to $150.0 million. As of the interval ended December 31, 2021, no quantities had been drawn below this credit score line.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Contractual Obligations

In reference to our LNG buying and selling actions, we’ve got beforehand entered into agreements with unrelated third-party LNG retailers pursuant to which we’re obligated to buy one cargo of LNG per quarter by means of October 2022 at a value based mostly on then-prevailing JKM costs. The quantity of every cargo is anticipated to vary from 3.3 to three.6 million MMBtu, and every cargo might be bought below DES phrases.

NOTE 12 – STOCKHOLDERS’ EQUITY

At-the-Market Fairness Providing Applications

We preserve a number of at-the-market fairness providing applications pursuant to which we might promote shares of our frequent inventory once in a while on the NYSE American. For the 12 months ended December 31, 2021, we issued roughly 95.9 million shares of our frequent inventory below our at-the-market applications for web proceeds of roughly $292.0 million. As of December 31, 2021, we had remaining availability below the at-the-market applications to boost mixture product sales proceeds of as much as roughly $432.8 million. See Observe 20, Subsequent Occasions, for additional info.

Widespread Inventory Issuances

On August 6, 2021, we offered 35.0 million shares of our frequent inventory in an underwritten public providing at a value of $3.00 per share. Web proceeds from this providing, after deducting charges and bills, had been roughly $100.8 million. The underwriters had been granted an choice to buy as much as an extra 5.3 million shares of frequent inventory inside 30 days. On August 31, 2021, the underwriters exercised this selection, which generated web proceeds, after deducting charges, of roughly $15.1 million.

Widespread Inventory Buy Warrants

2020 Unsecured Observe

At the side of the issuance of the 2020 Unsecured Observe, we issued a warrant offering the lender with the precise to buy as much as 20.0 million shares of our frequent inventory at $1.542 per share (the “2020 Warrant”). The 2020 Warrant, which vested instantly, will expire in October 2025. The 2020 Warrant was valued utilizing a Black-Scholes possibility pricing mannequin that resulted in a relative honest worth of roughly $16.1 million on the Issuance Date and isn’t topic to subsequent remeasurement. The 2020 Warrant has been labeled as fairness and is acknowledged inside Further paid-in capital on our Consolidated Stability Sheets. The 2020 Warrant has been excluded from the computation of diluted loss per share as a result of together with it within the computation would have been antidilutive for the durations offered.

2019 Time period Mortgage

Through the first quarter of 2021, the lender of the 2019 Time period Mortgage exercised warrants to buy roughly 6.0 million shares of our frequent inventory for whole proceeds of roughly $8.2 million. As mentioned in Observe 10, Borrowings, the 2019 Time period Mortgage has been repaid in full and the lender not holds any warrants.

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Most well-liked Inventory

In March 2018, we entered right into a most popular inventory buy settlement with BDC Oil and Gasoline Holdings, LLC (“Bechtel Holdings”), a Delaware restricted legal responsibility firm and an affiliate of Bechtel Oil, Gasoline and Chemical substances, Inc., a Delaware company, pursuant to which we offered to Bechtel Holdings roughly 6.1 million shares of our Sequence C convertible most popular inventory (the “Most well-liked Inventory”).

The holders of the Most well-liked Inventory would not have dividend rights however do have a liquidation choice over holders of our frequent inventory. The holders of the Most well-liked Inventory might convert all or any portion of their shares into shares of our frequent inventory on a one-for-one foundation. At any time after “Substantial Completion” of “Mission 1,” every as outlined in and pursuant to the LSTK EPC Settlement for the Driftwood LNG Section 1 Liquefaction Facility, dated as of November 10, 2017, or at any time after March 21, 2028, we’ve got the precise to trigger the entire Most well-liked Inventory to be transformed into shares of our frequent inventory on a one-for-one foundation. The Most well-liked Inventory has been excluded from the computation of diluted loss per share as a result of together with it within the computation would have been antidilutive for the durations offered.

NOTE 13 – 2020 SEVERANCE AND REORGANIZATION

We carried out a value discount and reorganization plan throughout the first quarter of 2020 because of the sharp decline in oil and pure fuel costs in addition to the destructive financial results of the COVID-19 pandemic. We happy all quantities owed to former workers and incurred roughly $6.4 million of severance and reorganization fees throughout the 12 months ended December 31, 2020.

Worker Retention Plan

In July 2020, the Firm’s Board of Administrators authorized an worker retention incentive plan (the “Worker Retention Plan”) aggregating $12.0 million. The Worker Retention Plan vests in 4 equal installments upon the attainment of a ten-day common closing value of the Firm’s frequent inventory above $2.25, $3.25, $4.25 and $5.25 (the “Inventory Efficiency Targets”). Topic to continued employment, the Worker Retention Plan’s awards are payable over a interval of twelve months commencing with the later of (i) the primary month following the month wherein the relevant Inventory Efficiency Goal is attained, and (ii) June 2021. The Worker Retention Plan will expire if the Inventory Efficiency Targets will not be attained by March 31, 2022. Through the 12 months ended December 31, 2021, three of the 4 installments vested and we acknowledged roughly $7.9 million in retention fees inside Basic and administrative bills and Growth bills in our Consolidated Statements of Operations, of which $3.7 million might be paid throughout 2022.

NOTE 14 – SHARE-BASED COMPENSATION

We’ve granted restricted inventory and restricted inventory models (collectively, “Restricted Inventory”), in addition to unrestricted inventory and inventory choices, to workers, administrators and out of doors consultants below 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 utmost variety of shares of Tellurian frequent inventory approved for issuance below the 2016 Plan is 40 million shares of frequent inventory, and no additional awards might be made below the Legacy Plan.

For the years ended December 31, 2021, 2020 and 2019, Tellurian acknowledged roughly $6.0 million, $2.7 million and $4.2 million, respectively, of share-based compensation expense associated to all share-based awards. As of December 31, 2021, unrecognized compensation expense, based mostly on the grant date honest worth, for all share-based awards totaled roughly $200.7 million.

Restricted Inventory

As of December 31, 2021, we had roughly 30.8 million shares of performance-based Restricted Inventory excellent, of which roughly 19.2 million shares will vest solely based mostly upon an affirmative FID by the Firm’s Board of Administrators, as outlined within the award agreements, and roughly 10.8 million shares will vest in one-third increments at FID and the primary and second anniversaries of FID. The remaining shares of primarily performance-based Restricted Inventory, totaling roughly 0.8 million shares,

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will vest based mostly on different standards. As of December 31, 2021, no expense had been acknowledged in reference to performance-based Restricted Inventory.

The roughly 30.8 million shares of performance-based and time-based Restricted Inventory have been excluded from the computation of diluted loss per share as a result of together with them within the computation would have been antidilutive for the durations offered.

The next desk supplies a abstract of our Restricted Inventory transactions for the 12 months ended December 31, 2021 (shares and models in hundreds):

The whole grant date honest worth of restricted inventory vested throughout the years ended December 31, 2021, 2020 and 2019 had been roughly $7.4 million, $11.7 million and $1.2 million, respectively.

Inventory Choices

Contributors within the 2016 Plan have been granted non-qualified choices to buy shares of frequent inventory. Inventory choices are granted at a value not lower than the market value of the frequent inventory on the date of grant. The next desk supplies a abstract of our inventory possibility transactions for the 12 months ended December 31, 2021 (inventory choices in hundreds):

The inventory choices that had been granted to a member of the Firm’s government administration group throughout the 12 months ended December 31, 2020, vest and develop into exercisable upon the achievement of each triggers as follows (inventory choices in hundreds):

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The inventory choices granted throughout the 12 months ended December 31, 2020, expire on the fifth anniversary of the date of its grant. There have been no inventory choices granted throughout the years ended December 31, 2019 or 2018.

The honest worth of every inventory possibility awarded in 2020 was estimated utilizing a Monte Carlo simulation and, because of the service set off, is being acknowledged as compensation expense ratably over the vesting time period. Valuation assumptions used to worth inventory choices granted throughout the 12 months ended December 31, 2020 had been as follows:

As a result of our restricted historical past, the anticipated volatility relies on a mix of our historic annualized volatility and the implied volatility using choices quoted or traded. The anticipated dividend yield relies on historic yields on the date of grant. The danger-free price relies on the U.S. Treasury yield curve in impact on the time of the grant.

There have been roughly zero, zero and seven thousandinventory choices exercised throughout the years ended December 31, 2021, 2020, and 2019, respectively. Additional, the roughly 11.1 million inventory choices excellent have been excluded from the computation of diluted loss per share as a result of together with them within the computation would have been antidilutive for the durations offered.

NOTE 15 – INCENTIVE COMPENSATION PROGRAM

On November 18, 2021, the Firm’s Board of Administrators authorized the adoption of the Tellurian Incentive Compensation Program (the “Incentive Compensation Program” or “ICP”). The ICP permits the Firm to award short-term and long-term efficiency and service-based incentive compensation to full-time workers of the Firm. ICP awards could also be earned with respect to every calendar 12 months and are decided based mostly on pointers established by the Compensation Committee of the Board of Administrators, as administrator of the ICP.

Quick-term incentive awards

Quick-term incentive (“STI”) awards are payable in money yearly on the discretion of the Firm’s Board of Administrators. Compensation expense for STI awards is acknowledged over the efficiency interval when it’s possible that the efficiency situation might be achieved. For the 12 months ended December 31, 2021, we acknowledged roughly $26.2 million in compensation bills for STI awards.

Lengthy-term incentive awards

Lengthy-term incentive (“LTI”) awards are granted within the type of “monitoring models,” on the discretion of the Firm’s Board of Administrators. Every monitoring unit can have a price equal to at least one share of Tellurian frequent inventory and entitles the grantee to obtain, upon vesting, a money cost equal to the closing value of our frequent inventory on the buying and selling day previous to the vesting date. Monitoring models will vest in three equal tranches at grant date, and the primary and second anniversaries of the grant date. As of December 31, 2021, no monitoring models for LTI awards had been granted below the ICP.

We acknowledge compensation expense for awards with graded vesting schedules over the requisite service durations for every individually vesting portion of the award as if every award was in substance a number of awards. Compensation expense for the primary tranche of the LTI award that vests on the grant date is acknowledged over the efficiency interval when it’s possible that the efficiency situation might be achieved. Compensation expense for the second and third tranches might be acknowledged on a straight-line foundation over the requisite service interval. Compensation expense for unvested monitoring models is subsequently adjusted every reporting interval to mirror the estimated payout ranges based mostly on the modifications within the Firm’s inventory value and precise forfeitures. For the 12 months ended December 31, 2021, we acknowledged roughly $19.9 million in compensation bills for LTI awards which have been earned over the 2021 efficiency interval.

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NOTE 16 – INCOME TAXES

Earnings tax profit (provision) included in our reported web loss consisted of the next (in hundreds):

The sources of loss from operations earlier than revenue taxes had been as follows (in hundreds):

The reconciliation of the federal statutory revenue tax price to our efficient revenue tax price is as follows:

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Important elements of our deferred tax property and liabilities are as follows (in hundreds):

As of December 31, 2021, we had federal, state and worldwide web working loss (“NOL”) carryforwards of roughly $360.8 million, $253.7 million and $31.4 million, respectively. Roughly $270.5 million of those NOLs have an indefinite carryforward interval. All different NOLs will expire between 2036 and 2037.

As a result of our historic losses and different accessible proof associated to our skill to generate taxable revenue, we’ve got established a valuation allowance to totally offset our federal, state and worldwide deferred tax property as of December 31, 2021 and 2020. We’ll proceed to judge the realizability of our deferred tax property sooner or later. The rise within the valuation allowance was roughly $29.6 million for the 12 months ended December 31, 2021.

As well as, we skilled a Part 382 possession change in April 2017. An evaluation of the annual limitation on the utilization of our NOLs was carried out in accordance with IRC Part 382. It was decided that IRC Part 382 is not going to materially restrict using our NOLs over the carryover interval. We’ll proceed to observe buying and selling exercise in our shares which might trigger an extra possession change. If the Firm experiences a Part 382 possession change, it might additional have an effect on our skill to make the most of our current NOL carryforwards.

As of December 31, 2021, the Firm decided that it has no unsure tax positions, curiosity or penalties as outlined inside ASC 740-10. The Firm doesn’t have unrecognized tax advantages. The Firm doesn’t imagine that it’s fairly doable that the entire unrecognized advantages will considerably improve throughout the subsequent 12 months.

We’re topic to tax within the U.S. and varied state and international jurisdictions. We aren’t at present below audit by any taxing authority. Federal and state tax returns filed with every jurisdiction stay open to examination below the traditional three-year statute of limitations.

Pursuant to ASC 740-30-25-17, the Firm acknowledges deferred tax liabilities related to outdoors foundation variations on investments in international subsidiaries except the distinction is taken into account basically everlasting in length. As of December 31, 2021, the Firm has not recorded any deferred taxes on unremitted earnings because the Firm has no undistributed earnings and income. If circumstances change within the foreseeable future and it turns into obvious that some or the entire undistributed earnings and income is not going to be reinvested indefinitely, or might be remitted within the foreseeable future, a deferred tax legal responsibility might be recorded for some or the entire outdoors foundation distinction.

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NOTE 17 – LEASES

Our land leases are labeled as finance leases and embrace a number of choices to increase the lease time period for as much as 40 years, in addition to to terminate the lease inside 5 years, at our sole discretion. We’re fairly sure that these choices might be exercised, and that our termination rights is not going to be exercised, and we’ve got, subsequently, included these assumptions inside our proper of use property and corresponding lease liabilities. Our workplace house leases are labeled as working leases and embrace a number of choices to increase the lease time period as much as 10 years, at our sole discretion. As we’re not fairly sure that these choices might be exercised, none are acknowledged as a part of our proper of use property and lease liabilities. As none of our leases present an implicit price, we’ve got decided our personal low cost price.

The next desk reveals the classification and placement of our right-of-use property and lease liabilities on our Consolidated Stability Sheets (in hundreds):

Lease prices acknowledged in our Consolidated Statements of Operations is summarized as follows (in hundreds):

Different details about lease quantities acknowledged in our Consolidated Monetary Statements is as follows:

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The next desk contains different quantitative info for our working and finance leases (in hundreds):

The desk beneath presents a maturity evaluation of our lease legal responsibility on an undiscounted foundation and reconciles these quantities to the current worth of the lease legal responsibility as of December 31, 2021 (in hundreds):

NOTE 18 – SUPPLEMENTAL CASH FLOW INFORMATION

The next desk supplies info relating to the web modifications in working capital (in hundreds):

The next desk supplies supplemental disclosure of money circulate info (in hundreds):

For the 12 months ended December 31, 2020, the assertion of money flows displays roughly $78.5 million and $2.1 million in non-cash actions associated to the 2019 Time period Mortgage and the Alternative Warrant, respectively. For the 12 months ended December 31, 2019,

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the assertion of money flows displays a non-cash motion of roughly $0.4million related to funds deposited in escrow in December 2018 that had been cleared in March 2019 for the acquisition of land.

The next desk supplies a reconciliation of money, money equivalents, and restricted money reported throughout the Consolidated Stability Sheets that sum to the entire of such quantities proven within the Consolidated Statements of Money Flows (in hundreds):

NOTE 19 – DISCLOSURE ABOUT SEGMENTS AND RELATED INFORMATION

Through the quarter ended June 30, 2022, the Firm commenced development of the Driftwood terminal below the Section 1 EPC Settlement with Bechtel. The Firm additionally continued to extend its pure fuel presence within the Haynesville Shale basin in northern Louisiana by means of the acquisition of mineral rights and pure fuel drilling and advertising and marketing actions. The Firm’s Chief Working Determination Maker (“CODM”) decided to put further emphasis on working money flows generated by our upstream and pure fuel advertising and marketing enterprise actions. Consequently, we recognized the Upstream, Midstream and Advertising and marketing & Buying and selling elements because the Firm’s working segments. The Firm’s prior interval info was retrospectively revised to mirror this alteration in reportable segments.

These features have been outlined because the working segments of the Firm as a result of (1) they’re engaged in enterprise actions from which revenues are acknowledged and bills are incurred, (2) their working outcomes are recurrently reviewed by the Firm’s CODM to make selections about assets to be allotted to the phase and to evaluate its efficiency, and (3) they’re segments for which discrete monetary info is out there.

Components used to determine these working segments are based mostly on the character of the enterprise actions which are undertaken by every element. The Upstream phase is organized and operates to provide and collect pure fuel. The Midstream phase is organized to develop, assemble and function LNG terminals and pipelines. The Advertising and marketing & Buying and selling phase is organized and operates to buy and promote pure fuel, market the Driftwood terminal’s LNG manufacturing capability and commerce LNG. These working segments symbolize the Firm’s reportable segments. The rest of our enterprise is offered as “Company,” and consists of company prices and intersegment eliminations. The Firm’s CODM doesn’t at present assess phase efficiency or allocate assets based mostly on a measure of whole property. Accordingly, a complete asset measure has not been offered for phase disclosure.

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NOTE 20 – SUBSEQUENT EVENTS

At-the-Market Applications

Since January 1, 2022, and thru February 7, 2022, we offered roughly $1.2 million mixture principal quantity of Senior Notes for whole proceeds of roughly $1.1 million after charges and commissions and 17.9 million shares of frequent inventory for whole proceeds of roughly $48.2 million, web of roughly $1.5 million in charges and commissions below our at-the-market debt and fairness providing applications, respectively. As of the date of this submitting, we’ve got remaining availability to boost mixture product sales proceeds of roughly $581.9 million below our at-the-market debt and fairness providing applications.

Cancellation of a Dedication to Buy LNG Cargos

On January 26, 2022, our wholly owned subsidiary Tellurian Buying and selling UK Ltd entered into an settlement to cancel three LNG cargos that the Firm was dedicated to buy in April, July and October 2022. The Firm might be required to pay a cancellation payment of roughly $1.0 million for all three LNG cargos. Seek advice from Observe 11, Commitments and Contingencies, for additional info.

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(unaudited)

SUPPLEMENTAL DISCLOSURES ABOUT NATURAL GAS PRODUCING ACTIVITIES

In accordance with FASB and SEC disclosure necessities for pure fuel producing actions, this part supplies supplemental info on Tellurian’s pure fuel producing actions in six separate tables. Tables I by means of III present historic price info pertaining to prices incurred in exploration, property acquisitions and improvement; capitalized prices; and outcomes of operations. Tables IV by means of VI current info on the Firm’s estimated web proved reserve portions, standardized measure of estimated discounted future web money flows associated to proved reserves and modifications in estimated discounted future web money flows.

Desk I – Capitalized Prices Associated to Pure Gasoline Producing Actions

Capitalized prices associated to Tellurian’s pure fuel producing actions are summarized as follows (in hundreds):

Desk II – Prices Incurred in Exploration, Property Acquisitions and Growth

Prices incurred in pure fuel property acquisition (inclusive of manufacturing effectively prices), exploration and improvement actions are summarized as follows (in hundreds):

Desk III – Outcomes of Operations for Pure Gasoline Producing Actions

The next desk contains revenues and bills instantly related to our pure fuel and condensate producing actions. It doesn’t embrace any curiosity prices or oblique normal and administrative prices and, subsequently, will not be essentially indicative of the contribution to consolidated web working outcomes of our pure fuel operations. Tellurian’s outcomes of operations from pure fuel and condensate producing actions for the durations offered are as follows (in hundreds):

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(unaudited)

Desk IV – Pure Gasoline Reserve Amount Info

Our estimated proved reserves are situated in Louisiana. We warning that there are various uncertainties inherent in estimating proved reserve portions and in projecting future manufacturing charges and the timing of improvement expenditures. Accordingly, these estimates are anticipated to alter as additional info turns into accessible. Materials revisions of reserve estimates might happen sooner or later, improvement and manufacturing of the pure fuel and condensate reserves might not happen within the durations assumed, and precise costs realized and precise prices incurred might differ considerably from these utilized in these estimates.

The estimates of our proved reserves as of December 31, 2021, 2020 and 2019 have been ready by Netherland, Sewell & Associates, Inc., impartial petroleum consultants.

2020 to 2021 Total Reserve Adjustments

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(unaudited)

2020 to 2021 PUD Adjustments

2019 to 2020 Total Reserve Adjustments

2019 to 2020 PUD Adjustments

2018 to 2019 Total Reserve Adjustments

2018 to 2019 PUD Adjustments

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(unaudited)

Desk V – Standardized Measure of Discounted Future Web Money Flows Associated to Proved Pure Gasoline Reserves

ASC 932 prescribes pointers for computing a standardized measure of future web money flows and modifications therein regarding estimated proved reserves. Tellurian has adopted these pointers, that are briefly mentioned beneath.

Future money inflows and future manufacturing and improvement prices as of December 31, 2021, 2020 and 2019 had been decided by making use of the typical of the first-day-of-the-month costs for the 12 months of the 12 months and year-end prices to the estimated portions of pure fuel and condensate to be produced. Precise future costs and prices could also be materially increased or decrease than the costs and prices used. For every year, estimates are manufactured from portions of proved reserves and the long run durations throughout which they’re anticipated to be produced based mostly on the continuation of the financial circumstances utilized for that 12 months. Estimated future revenue taxes are computed utilizing present statutory revenue tax charges, together with consideration of the present tax foundation of the properties and associated carryforwards, giving impact to everlasting variations and tax credit. The ensuing future web money flows are decreased to current worth quantities by making use of a ten% annual low cost issue.

The assumptions used to compute the standardized measure are these prescribed by the FASB and don’t essentially mirror our expectations of precise income to be derived from these reserves or their current value. The restrictions inherent within the reserve amount estimation course of, as mentioned beforehand, are equally relevant to the standardized measure computations since these estimates mirror the valuation course of.

The next abstract units forth our future web money flows regarding proved pure fuel and condensate reserves based mostly on the standardized measure (in hundreds):

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(unaudited)

Desk VI – Adjustments in Standardized Measure of Discounted Future Web Money Flows Associated to Proved Pure Gasoline Reserves

The next desk units forth the modifications within the standardized measure of discounted future web money flows (in hundreds):