Aethon to buy Tellurian’s upstream assets for $260 million

Dallas-based private investment firm Aethon Energy Management has agreed to buy Tellurian’s integrated upstream assets for $260 million. The two firms also signed a heads of agreement for volumes from Tellurian’s Driftwood LNG plant in Louisiana.

According to a statement issued on Wednesday, the assets will expand Aethon’s footprint in the Louisiana Haynesville and Bossier shale basins with about 31,000 net acres.

This includes gathering and treating systems that have capacity for up to 100 million cubic feet per day (MMcf/d) that will bring Aethon’s pro forma gathering and treating capacity to over 3 Bcf/d across its assets.

The heads of agreement contemplates the parties negotiating a 20-year offtake agreement for 2 mtpa of LNG which would be indexed to Henry Hub plus a liquefaction fee, with appropriate credit support, to provide the basis for project financing of Driftwood LNG.

Aethon will continue to explore additional opportunities to bring value to Driftwood LNG following the transaction, the statement said.

The transaction is expected to close during the second quarter of 2024, and Tellurian will use the proceeds to reduce borrowings and for general corporate purposes.

“Several steps closer” to developing Driftwood LNG

Tellurian executive chairman Martin Houston said “today’s agreements with Aethon take us several steps closer to developing the Driftwood LNG project, for which Aethon is a vital partner.”

He said the offtake agreement for two mtpa provides the foundation to accelerate Driftwood and “demonstrates that we have successfully aligned our commercial offerings to meet the needs of potential customers.”

“For Tellurian, the proceeds from the sale of our upstream assets allow us to retire senior secured notes and strengthen our balance sheet for the long term. This is an important moment for our company, as Tellurian continues to make progress against our strategic plan,” Houston said.

Driftwood LNG

Tellurian issued a limited notice to proceed to compatriot engineering and construction giant Bechtel in March 2022.

Under the first phase, Tellurian aims to build two LNG plants near Lake Charles with an export capacity of up to 11 mtpa.

The firm recently released the latest construction update and also reported a net loss of about $44 million for the quarter ended March 31, 2024, compared to a net loss of $27.5 million for the same period of 2023.

Tellurian claims it has invested more than $1 billion in the Driftwood project up to date.

The full project would include five plants with a total capacity of about 27.6 mtpa.

In February, Tellurian said it is exploring the sale of its Haynesville upstream assets as it works on securing financing for the first phase of its Driftwood LNG project worth about $14.5 billion.

In March, Tellurian also confirmed that it is exploring a potential sale of the company.

Tellurian said in its March presentation it expects to take a final investment decision in 2024 to build the first two plants at its Driftwood LNG export plant.

Also, the company said it expects to issue a full notice to proceed to Bechtel to begin construction for for the first phase of the plant in the second half of this year.

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