Tellurian Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE 9 — BORROWINGS
The following tables summarize the Company’s borrowings as of March 31, 2021, and December 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
Principal repayment obligation
|
|
Unamortized DFC and discounts
|
|
Carrying value
|
2018 Term Loan, due September 2021
|
|
$
|
17,000
|
|
|
$
|
(152)
|
|
|
$
|
16,848
|
|
2019 Term Loan
|
|
—
|
|
|
—
|
|
|
—
|
|
2020 Unsecured Note
|
|
—
|
|
|
—
|
|
|
—
|
|
Total borrowings
|
|
$
|
17,000
|
|
|
$
|
(152)
|
|
|
$
|
16,848
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
Principal repayment obligation
|
|
Unamortized DFC and discounts
|
|
Carrying value
|
2018 Term Loan, due September 2021
|
|
$
|
60,000
|
|
|
$
|
(805)
|
|
|
$
|
59,195
|
|
2019 Term Loan, due March 2022 (a)
|
|
43,217
|
|
|
(4,942)
|
|
|
38,275
|
|
2020 Unsecured Note
|
|
16,000
|
|
|
(2,376)
|
|
|
13,624
|
|
Total borrowings
|
|
$
|
119,217
|
|
|
$
|
(8,123)
|
|
|
$
|
111,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Includes paid-in-kind interest on the 2019 Term Loan of $3.3 million.
|
Extinguishment of the 2019 Term Loan
On March 12, 2021 (the “Extinguishment Date”), we finalized a voluntary repayment of the remaining outstanding principal balance of the 2019 Term Loan. A total of approximately $43.7 million was repaid to the lender throughout the first quarter of 2021 to satisfy the outstanding borrowing obligation. The extinguishment of the 2019 Term Loan resulted in an approximately $2.1 million gain, which was recognized within Gain on extinguishment of debt, net, on our Condensed Consolidated Statement of Operations.
As a result of repaying the outstanding balance prior to its contractual maturity, an approximately $4.4 million in unamortized DFC and discount were included in the computation of the gain from the extinguishment of the 2019 Term Loan as of March 31, 2021.
The holder of the 2019 Term Loan held approximately 3.5 million unvested warrants that had a fair value of approximately $6.3 million as of the Extinguishment Date. Due to the extinguishment of the 2019 Term Loan, all the unvested warrants were contractually terminated (the “Terminated Warrants”), and their respective fair value was included in the computation of the gain on extinguishment of the 2019 Term Loan.
The fair value of the Terminated Warrants was determined using a Black-Scholes option pricing model.
Full Repayment of the 2020 Unsecured Note
On March 31, 2020, we made the final contractually required amortization payment of $4.0 million under the terms of the 2020 Unsecured Note, thereby satisfying all financial obligations under the 2020 Unsecured Note.
2018 Term Loan
On September 28, 2018 (the “Closing Date”), Tellurian Production Holdings LLC (“Production Holdings”), a wholly owned subsidiary of the Company, entered into a three-year senior secured term loan credit agreement (the “2018 Term Loan”) in an aggregate principal amount of $60.0 million.
Our use of proceeds from the 2018 Term Loan is predominantly restricted to capital expenditures associated with certain development and drilling activities and fees related to the transaction itself. As of March 31, 2021, unused proceeds from the 2018 Term Loan totaled $3.4 million and were classified as Non-current restricted cash on our Condensed Consolidated Balance Sheets.
We have the right, but not the obligation, to make voluntary principal repayments starting six months following the Closing Date in a minimum amount of $5.0 million or any integral multiples of $1.0 million in excess thereof. If no voluntary principal repayments are made, the principal amount, together with any accrued interest, is payable at the maturity date of
Tellurian Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
September 28, 2021. The 2018 Term Loan can be terminated without penalty, with an early termination payment equal to the outstanding principal plus accrued interest.
Amounts borrowed under the 2018 Term Loan are guaranteed by Tellurian Inc. and each of Production Holdings’ subsidiaries. The 2018 Term Loan is collateralized by a first priority lien on all assets of Production Holdings and its subsidiaries, including our proved natural gas properties.
On February 18, 2021, we voluntarily repaid approximately $43.0 million of the 2018 Term Loan outstanding principal balance. As a result of this voluntary repayment, we recognized an approximately $0.5 million loss, which was netted against the gain on extinguishment of the 2019 Term Loan, and presented within Gain on extinguishment of debt, net, on our Condensed Consolidated Statement of Operations on this partial extinguishment due to the pro-rata recognition of the unamortized DFC and discount associated with the 2018 Term Loan. See Note 16, Subsequent Events, for further information.
The carrying value of the 2018 Term Loan approximates its fair value.
Covenant Compliance
As of March 31, 2021, the Company was in compliance with all covenants under its credit agreement. Refer to Note 6, Financial Instruments, for details of hedging transactions, as of and for the period ended March 31, 2021, entered into as required by the 2018 Term Loan described above.
NOTE 10 — COMMITMENTS AND CONTINGENCIES
On April 23, 2019, we entered into a master LNG sale and purchase agreement and related confirmation notices (collectively, the “SPA”) with an unrelated third-party LNG merchant. Pursuant to the SPA, we committed to purchase one cargo of LNG per quarter through October 2022. The volume of each cargo is expected to range from 3.3 to 3.6 million MMBtu, and each cargo will be purchased under DES terms. The price of each cargo will be based on the JKM price in effect at the time of each purchase.
NOTE 11 — STOCKHOLDERS’ EQUITY
At-the-Market Program
We maintain an at-the-market equity offering program pursuant to which we may sell shares of our common stock from time to time on Nasdaq. For the three months ended March 31, 2021, we issued 38.7 million shares of our common stock under our at-the-market program for net proceeds of approximately $89.2 million. As of March 31, 2021, we had remaining availability under the at-the-market program to raise aggregate gross sales proceeds of up to approximately $241.9 million. See Note 16, Subsequent Events, for further information.
Common Stock Purchase Warrants
2019 Term Loan
During the first quarter of 2021, the lender of the 2019 Term Loan purchased approximately 6.0 million shares of our common stock for total proceeds of approximately $8.2 million. As discussed in Note 9, Borrowings, the 2019 Term Loan has been repaid in full and the lender no longer holds any warrants.
2020 Unsecured Note
In conjunction with the issuance of the 2020 Unsecured Note, we issued a warrant providing the lender with the right to purchase up to 20.0 million shares of our common stock at $1.542 per share (the “2020 Warrant”). The 2020 Warrant vested immediately and will expire in October 2025. The 2020 Warrant has been excluded from the computation of diluted loss per share because including it in the computation would have been antidilutive for the periods presented.
Preferred Stock
In March 2018, we entered into a preferred stock purchase agreement with BDC Oil and Gas Holdings, LLC (“Bechtel Holdings”), a Delaware limited liability company and an affiliate of Bechtel Oil, Gas and Chemicals, Inc., a Delaware corporation, pursuant to which we sold to Bechtel Holdings approximately 6.1 million shares of our Series C convertible preferred stock (the “Preferred Stock”).
The holders of the Preferred Stock do not have dividend rights but do have a liquidation preference over holders of our common stock. The holders of the Preferred Stock may convert all or any portion of their shares into shares of our common stock on a one-for-one basis. At any time after “Substantial Completion” of “Project 1,” each as defined in and pursuant to the LSTK EPC Agreement for the Driftwood LNG Phase 1 Liquefaction Facility, dated as of November 10, 2017, or at any time after March 21, 2028, we have the right to cause all of the Preferred Stock to be converted into shares of our common stock on a one-for-one basis. The Preferred Stock has been excluded from the computation of diluted loss per share because including it in the computation would have been antidilutive for the periods presented.
Tellurian Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE 12 — SHARE-BASED COMPENSATION
We have granted restricted stock and restricted stock units (collectively, “Restricted Stock”), as well as unrestricted stock and stock options, to employees, directors and outside consultants (collectively, the “grantees”) under the Tellurian Inc. 2016 Omnibus Incentive Compensation Plan, as amended (the “2016 Plan”), and the Amended and Restated Tellurian Investments Inc. 2016 Omnibus Incentive Plan (the “Legacy Plan”). The maximum number of shares of Tellurian common stock authorized for issuance under the 2016 Plan is 40 million shares of common stock, and no further awards can be granted under the Legacy Plan.
Upon the vesting of restricted stock, shares of common stock will be released to the grantee. Upon the vesting of restricted stock units, the units will be converted into either cash, stock, or a combination thereof. As of March 31, 2021, there was no Restricted Stock that would be required to be settled in cash.
As of March 31, 2021, we had approximately 29.7 million shares of performance-based Restricted Stock outstanding, of which approximately 19.3 million shares will vest entirely at FID, as defined in the award agreements, and approximately 9.8 million shares will vest in one-third increments at FID and the first and second anniversaries of FID. The remaining shares of performance-based Restricted Stock, totaling approximately 0.6 million shares, will vest based on other criteria. As of March 31, 2021, no expense had been recognized in connection with performance-based Restricted Stock.
As of March 31, 2021, we had approximately 2.3 million shares of time-based Restricted Stock outstanding. They primarily represent the settlement of the 2019 employee bonuses, which were recognized as compensation expenses and included in our accrued liabilities balance as of December 31, 2019, and will vest in their entirety during 2021.
For the three months ended March 31, 2021, the recognized share-based compensation expenses related to all share-based awards totaled approximately $1.6 million. As of March 31, 2021, unrecognized compensation expenses, based on the grant date fair value, for all share-based awards totaled approximately $202.2 million. Further, the approximately 32.0 million shares of performance-based and time-based Restricted Stock, as well as approximately 11.2 million stock options outstanding, have been excluded from the computation of diluted loss per share because including them in the computation would have been antidilutive for the periods presented.
NOTE 13 — INCOME TAXES
Due to our cumulative loss position, historical net operating losses (“NOLs”), and other available evidence related to our ability to generate taxable income, we have recorded a full valuation allowance against our net deferred tax assets as of March 31, 2021 and December 31, 2020. Accordingly, we have not recorded a provision for federal, state or foreign income taxes during the three months ended March 31, 2021.
We experienced ownership changes as defined by Internal Revenue Code (“IRC”) Section 382 in 2017, and an analysis of the annual limitation on the utilization of our NOLs was performed at that time. It was determined that IRC Section 382 will not limit the use of our NOLs over the carryover period. We will continue to monitor trading activity in our shares that may cause an additional ownership change, which may ultimately affect our ability to fully utilize our existing NOL carryforwards.
NOTE 14 — LEASES
Finance Leases
Our land leases are classified as financing leases and include one or more options to extend the lease term for up to 40 years, as well as to terminate the lease within five years, at our sole discretion. We are reasonably certain that those options will be exercised, and that our termination rights will not be exercised, and we have, therefore, included those assumptions within our right of use assets and corresponding lease liabilities. As of March 31, 2021, the weighted-average remaining lease term for our financing leases was approximately fifty years. As none of our finance leases provide an implicit rate, we have determined our own discount rate, which, on a weighted-average basis at March 31, 2021, was approximately 13%.
As of March 31, 2021, our financing leases had a corresponding right of use asset of approximately $19.9 million, which is recognized within Property, plant and equipment, net, and a total lease liability of approximately $13.5 million, which is recognized in Other non-current liabilities. For the three months ended March 31, 2021 and 2020, our finance lease costs, which are associated with the interest on our lease liabilities, were approximately $0.5 million and $0.3 million, respectively.
Operating Leases
Our office space leases are classified as operating leases and include one or more options to extend the lease term for up to 10 years, at our sole discretion. As we are not reasonably certain that those options will be exercised, none are recognized as part of our right of use assets and lease liabilities. As of March 31, 2021, our weighted-average remaining lease term for our operating leases was approximately five years. As none of our operating leases provide an implicit rate, we have determined our own discount rate, which, on a weighted-average basis at March 31, 2021, was approximately 8%.
Tellurian Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
As of March 31, 2021, our operating leases had a corresponding right of use asset of approximately $11.5 million, which is recognized within Other non-current assets, and a total lease liability of approximately $13.2 million which is recognized within Accrued and other liabilities (approximately $2.0 million) and Other non-current liabilities (approximately $11.2 million). For the three months ended March 31, 2021 and 2020, our operating lease costs were $0.7 million and $0.9 million, respectively. For the three months ended March 31, 2021 and 2020, we paid approximately $0.7 million, and $0.9 million, respectively, in cash for amounts included in the measurement of operating lease liabilities, all of which are presented within operating cash flows.
The table below presents a maturity analysis of our lease liability on an undiscounted basis and reconciles those amounts to the present value of the lease liability as of March 31, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Maturity of lease liability
|
Operating
|
|
Finance
|
2021
|
$
|
2,231
|
|
|
$
|
1,369
|
|
2022
|
3,006
|
|
|
1,826
|
|
2023
|
3,044
|
|
|
1,826
|
|
2024
|
3,081
|
|
|
1,826
|
|
2025
|
3,119
|
|
|
1,826
|
|
After 2025
|
1,861
|
|
|
82,368
|
|
Total lease payments
|
$
|
16,342
|
|
|
$
|
91,041
|
|
Less: discount
|
3,154
|
|
|
77,532
|
|
Present value of lease liability
|
$
|
13,188
|
|
|
$
|
13,509
|
|
NOTE 15 — ADDITIONAL CASH FLOW INFORMATION
The following table provides information regarding the net changes in working capital (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
Accounts receivable
|
$
|
916
|
|
|
$
|
1,811
|
|
Prepaid expenses and other current assets
|
5
|
|
|
2,262
|
|
Accounts payable
|
1,674
|
|
|
3,280
|
|
Accounts payable due to related parties
|
(460)
|
|
|
—
|
|
Accrued liabilities
|
7,669
|
|
|
2,500
|
|
Other, net
|
(512)
|
|
|
(662)
|
|
Net changes in working capital
|
$
|
9,292
|
|
|
$
|
9,191
|
|
The following table provides supplemental disclosure of cash flow information (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
Non-cash accruals of property, plant and equipment and other non-current assets
|
$
|
(356)
|
|
|
$
|
2,174
|
|
Non-cash settlement of withholding taxes associated with the 2019 bonus and vesting of certain awards
|
2,305
|
|
|
—
|
|
Non-cash settlement of the 2019 bonus
|
3,258
|
|
|
—
|
|
Non-cash settlement of Final Payment Fee
|
—
|
|
|
8,539
|
|
Tradable equity securities
|
—
|
|
|
2,362
|
|
Tellurian Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
Cash and cash equivalents
|
$
|
58,729
|
|
|
$
|
55,452
|
|
Non-current restricted cash
|
3,443
|
|
|
3,570
|
|
Total cash, cash equivalents and restricted cash shown in the statements of cash flows
|
$
|
62,172
|
|
|
$
|
59,022
|
|
NOTE 16 — SUBSEQUENT EVENTS
At-the-Market Program
Subsequent to March 31, 2021, and through the date of this filing, we issued approximately 7.9 million shares of common stock under our at-the-market equity offering program for total proceeds of approximately $15.2 million, net of approximately $0.5 million in fees and commissions. As of April 30, 2020, we have remaining capacity under our at-the-market program to raise aggregate gross sales proceeds of approximately $226.3 million.
2018 Term Loan Extinguishment
On April 23, 2021, we voluntarily repaid the outstanding principal balance of $17.0 million and all associated interest under the 2018 Term Loan, thereby satisfying all of our borrowing obligations under the 2018 Term Loan.
Tellurian Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past development activities, current financial condition and outlook for the future organized as follows:
•Our Business
•Overview of Significant Events
•Liquidity and Capital Resources
•Capital Development Activities
•Results of Operations
•Recent Accounting Standards
Our Business
Tellurian Inc. (“Tellurian,” “we,” “us,” “our,” or the “Company”) intends to create value for shareholders by building a low-cost, global natural gas business, profitably delivering natural gas to customers worldwide (the “Business”). We are developing a portfolio of natural gas production, LNG marketing, and infrastructure assets that includes an LNG terminal facility (the “Driftwood terminal”) and related pipelines (the “Pipeline Network”). We refer to the Driftwood terminal, the Pipeline Network and required natural gas production assets collectively as the “Driftwood Project.” Our existing natural gas production assets consist of 9,704 net acres and interests in 72 producing wells located in the Haynesville Shale trend of northern Louisiana. Our Business may be developed in phases.
As part of our execution strategy, we will consider partnering with third parties across the natural gas value chain. We are also pursuing activities such as direct sales of LNG to global counterparties, the acquisition of additional upstream acreage, the drilling of new wells on our existing or newly acquired upstream acreage and trading LNG.
We continue to evaluate, and discuss with potential partners, the scope and other aspects of our Business in light of the evolving economic environment, needs of potential partners and other factors. How we execute our Business will be based on a variety of factors, including the results of our continuing analysis, changing business conditions and market feedback.
Overview of Significant Events
Debt Reductions
During the first quarter of 2021, we repaid a total of approximately $102.7 million in outstanding principal balance of our borrowing obligations. As of March 31, 2021, we had one term loan outstanding with an outstanding balance of $17.0 million. On April 23, 2021, the remaining outstanding principal balance was voluntarily repaid.
Liquidity and Capital Resources
Capital Resources
We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We are currently funding our operations, development activities and general working capital needs through our cash on hand. Our current capital resources consist of approximately $58.7 million of cash and cash equivalents as of March 31, 2021, on a consolidated basis, of which approximately $9.4 million is maintained at a wholly owned subsidiary of Tellurian Production Holdings LLC. We currently maintain an at-the-market equity offering program under which, as of the date of this filing, we have remaining availability to raise aggregate gross sales proceeds of approximately $226.3 million. Since January 1, 2021, and through April 30, 2021, we have sold approximately 46.5 million shares of common stock under our at-the-market program for total proceeds of approximately $104.3 million, net of approximately $3.2 million in fees and commissions. We plan to enter into a new at-the-market equity offering program shortly after the filing of this report.
As of March 31, 2021, we had total indebtedness of $17.0 million that is scheduled to be repaid within the next twelve months. We also had contractual obligations associated with our finance and operating leases totaling $107.4 million, of which $4.8 million is scheduled to be paid within the next twelve months.
On April 23, 2021, the remaining indebtedness balance of $17.0 million was voluntarily repaid.
Tellurian Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
We are planning to generate proceeds from our at-the-market program and have determined that it is probable that such proceeds will satisfy our obligations and fund our working capital needs for at least twelve months following the issuance of the financial statements. We also continue to evaluate generating additional proceeds from various other potential financing transactions, such as issuances of equity, equity-linked and debt securities, or similar transactions to fund our obligations and working capital needs.
Sources and Uses of Cash
The following table summarizes the sources and uses of our cash and cash equivalents and costs and expenses for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2021
|
|
2020
|
Cash used in operating activities
|
|
$
|
(10,475)
|
|
|
$
|
(20,494)
|
|
Cash used in investing activities
|
|
(1,400)
|
|
|
(269)
|
|
Cash (used in) provided by financing activities
|
|
(7,691)
|
|
|
11,303
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents and restricted cash
|
|
(19,566)
|
|
|
(9,460)
|
|
Cash, cash equivalents and restricted cash, beginning of the period
|
|
81,738
|
|
|
68,482
|
|
Cash, cash equivalents and restricted cash, end of the period
|
|
$
|
62,172
|
|
|
$
|
59,022
|
|
|
|
|
|
|
Net working capital
|
|
$
|
1,282
|
|
|
$
|
3,699
|
|
Cash used in operating activities for the three months ended March 31, 2021 decreased by approximately $10.0 million compared to the same period in 2020 due to an overall decrease in disbursements in the normal course of business.
Cash used in investing activities for the three months ended March 31, 2021 increased by approximately $1.1 million compared to the same period in 2020. This increase is predominantly driven by increased natural gas development activities.
Cash (used in) provided by financing activities for the three months ended March 31, 2021 decreased by approximately $19.0 million compared to the same period in 2020. This decrease primarily relates to approximately $102.7 million in principal repayments of our borrowings compared to $2.0 million in the prior period. This increase in principal repayments was offset by an increase in net proceeds of approximately $89.2 million from equity issuances compared to approximately $13.3 million in the prior period. See Note 9, Borrowings, of our Notes to the Condensed Consolidated Financial Statements for further information.
Borrowings
As of March 31, 2021, we had total indebtedness of approximately $17.0 million, all of which was secured indebtedness, and we were in compliance with the covenants under our credit agreement. On April 23, 2021, the remaining outstanding principal balance was voluntarily repaid. For additional details regarding our borrowing activity, refer to Note 9, Borrowings, of our Notes to the Condensed Consolidated Financial Statements.
Capital Development Activities
The activities we have proposed will require significant amounts of capital and are subject to risks and delays in completion. We have received all regulatory approvals and, as a result, our business success will depend to a significant extent upon our ability to obtain the funding necessary to construct assets on a commercially viable basis and to finance the costs of staffing, operating and expanding our company during that process.
We currently estimate the total cost of the Driftwood Project to be approximately $24.7 billion, including owners’ costs, transaction costs and contingencies but excluding interest costs incurred during construction of the Driftwood terminal and other financing costs. We have entered into four LSTK EPC agreements currently totaling $15.5 billion, or $561 per tonne, with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for construction of the Driftwood terminal. The proposed Driftwood terminal will have a liquefaction capacity of up to approximately 27.6 Mtpa and will be situated on approximately 1,000 acres in Calcasieu Parish, Louisiana. The proposed Driftwood terminal will include up to 20 liquefaction Trains, three full containment LNG storage tanks and three marine berths.
In addition, part of our strategy involves acquiring additional natural gas properties, including properties in the Haynesville shale trend. We intend to pursue potential acquisitions of such assets, or public or private companies that own such
Tellurian Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
assets, in 2021. We would expect to use stock, cash on hand, or cash raised in financing transactions to complete an acquisition of this type.
We anticipate funding our more immediate liquidity requirements relative to the detailed engineering work and other developmental costs, natural gas development costs, and general and administrative costs through the use of cash on hand, proceeds from operations, and proceeds from completed and future issuances of securities by us. Consistent with our overall financing strategy, the Company has considered, and in some cases discussed with investors, various potential financing transactions, including issuances of debt, equity and equity-linked securities or similar transactions, to support its short- and medium-term capital requirements. The Company will continue to evaluate its cash needs and business outlook, and it may execute one or more transactions of this type in the future.
We currently expect that our long-term capital requirements will be financed by proceeds from future debt, equity and/or equity-linked transactions.
Results of Operations
The following table summarizes revenue, costs and expenses for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2021
|
|
2020
|
Total revenue
|
|
$
|
8,706
|
|
|
$
|
8,217
|
|
Cost of sales
|
|
2,406
|
|
|
2,879
|
|
Development expenses
|
|
8,141
|
|
|
11,183
|
|
Depreciation, depletion and amortization
|
|
2,652
|
|
|
5,832
|
|
General and administrative expenses
|
|
15,111
|
|
|
17,239
|
|
|
|
|
|
|
Severance and reorganization charges
|
|
—
|
|
|
5,505
|
|
|
|
|
|
|
Loss from operations
|
|
(19,604)
|
|
|
(34,421)
|
|
Interest expense, net
|
|
(5,892)
|
|
|
(6,396)
|
|
Gain on extinguishment of debt, net
|
1,574
|
|
|
—
|
|
Other (expense) income, net
|
|
(3,063)
|
|
|
83
|
|
Income tax benefit
|
|
—
|
|
|
—
|
|
Net loss
|
|
$
|
(26,985)
|
|
|
$
|
(40,734)
|
|
Our consolidated net loss was approximately $27.0 million for the three months ended March 31, 2021, compared to a net loss of approximately $40.7 million during the same period in 2020. The decrease in net loss of approximately $13.7 million is primarily a result of the following:
•Decrease of approximately $5.5 million in severance and reorganization charges due to the lack of these activities during the current period.
•Decreases of approximately $2.1 million and approximately $3.0 million in general and administrative expenses and development expenses, respectively, due to an overall decrease in business activities during the quarter.
•Decrease of approximately $3.2 million in DD&A due to the lower net book value utilized in the calculation when compared to the prior period.
Recent Accounting Standards
We do not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our Condensed Consolidated Financial Statements or related disclosures.
Critical Accounting Estimates
There were no changes made by management to the critical accounting policies in the three months ended March 31, 2021. Please refer to the Summary of Critical Accounting Estimates section within MD&A and Note 1 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of our critical accounting estimates and accounting policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not believe that we hold, or are party to, instruments that are subject to market risks that are material to our Business.
Tellurian Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
ITEM 4. CONTROLS AND PROCEDURES
As indicated in the certifications in Exhibits 31.1 and 31.2 to this report, our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of March 31, 2021. Based on that evaluation, these officers have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to them in a manner that allows for timely decisions regarding required disclosures and are effective in ensuring that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There were no changes during our last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.