$TGLO : Delfin Weighs Reverse-Merger Article by Rachel Adams-Heard
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Developer of US gas export project weighs reverse merger with idled tech company EXCLUSIVE
Friday, 05 January 2018 3:48 PM ET
By Rachel Adams-Heard
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The developer of the Delfin LNG export project proposed for offshore Louisiana is considering going public via a reverse merger, according to a source familiar with the matter, a method two other U.S. LNG export hopefuls have used successfully in the past year to access capital markets.
Delfin Midstream LLC on Dec. 31, 2017, closed on a $25,000 deal to buy a majority stake in idled tech company theglobe.com Inc. for less than a penny per share. Based on the number of shares outstanding on Jan. 5, Delfin now owns roughly 71% of the company.
According to the source, who spoke on condition of anonymity because the matter is commercially sensitive, Delfin is "hedging its bets" by purchasing a majority stake in the Fort Lauderdale, Fla.-based company and will not necessarily decide to go public.
A reverse merger allows a private company to more quickly go public than a traditional IPO process. With several LNG companies competing to be the next project to start construction, privately backed export terminal developers have looked to reverse mergers as a way to more quickly access public debt and equity markets.
Delfin LNG declined to comment on the potential reverse merger. The company is working to reach a final investment decision, or FID, on its $7 billion LNG export venture, which is one of four fully permitted projects awaiting FID that have been proposed.
International LNG buyers have hesitated to sign long-term, binding contracts in a well-supplied market. Without long-term contracts, project developers have been unable to lock down financing needed to fund the multibillion-dollar export terminals.
To help finance their proposed projects, two LNG export hopefuls have used a reverse merger to tap capital markets and try to raise funds. Tellurian Inc., which was co-founded by the former CEO of U.S. LNG export pioneer Cheniere Energy Inc., in February 2017 closed on a reverse merger with the former Magellan Petroleum Corp. NextDecade Corp. in July 2017 completed a deal with blank-check company Harmony Merger Corp. Both Tellurian's Driftwood LNG and NextDecade's Rio Grande LNG projects are awaiting approval from the Federal Energy Regulatory Commission.
Delfin was one of a handful of U.S. LNG companies invited to travel alongside President Donald Trump during an official trip to China, one of the top importers of LNG in the world. The developer came away from the visit with a nonbinding agreement with China Gas Holdings Ltd. for 3 million tonnes per annum of LNG for 15 years starting in 2022.
Earlier in 2017, Delfin announced it was teaming up with Bermuda-based Golar LNG Ltd. to develop its 13 million-tonnes-per-annum project, which would be the first offshore liquefaction terminal in the U.S. The companies said the joint development agreement will allow the project to offer more flexible terms to buyers, who have been calling for shorter contracts for smaller volumes.
Despite the current oversupply in the global LNG market, industry observers have begun to speculate on which companies could move forward next. Asset management firm Sanford C. Bernstein & Co. LLC on Jan. 4 said the market will need final investment decisions on new export capacity in 2018 to be able to meet growing demand expected to balance the market in the early to mid-2020s. Delfin was not named in a list of five U.S. projects Bernstein sees as having the best chance of moving forward.
The Delfin LNG project in June 2017 received U.S. Department of Energy authorization to export to countries with which the U.S. does not have a free trade agreement. The location of the proposed facility, about 40 nautical miles off the coast of Cameron Parish, La., makes the offshore portion of the project subject to the Deepwater Port Act and the jurisdiction of the U.S. Coast Guard and the U.S. Department of Transportation's Maritime Administration, which approved the project in March 2017.
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