Tellurian to sell upstream assets to Aethon Energy for $260m, secures LNG offtake agreement

Tellurian Inc. (NYSE American: TELL) and Aethon Energy Management LLC have entered into a significant agreement where Aethon will acquire Tellurian’s upstream assets for $260 million. This transaction not only expands Aethon’s operational footprint in the Louisiana Haynesville and Bossier shale basins but also includes a pivotal Heads of Agreement for the purchase of two million tons per annum (mtpa) of liquified natural gas (LNG) from Tellurian’s Driftwood LNG plant.

Expansion Details and Operational Capacity:

The assets involved in this deal encompass approximately 31,000 net acres, along with existing gathering and treating systems capable of handling up to 100 million cubic feet per day (MMcf/d). This acquisition will boost Aethon’s total gathering and treating capacity to over 3 billion cubic feet per day (Bcf/d) across its various assets, significantly enhancing its scale and operational efficiency in the region.

Tellurian to Divest Upstream Assets to Aethon Energy for $260 Million, Secures Strategic LNG Offtake Agreement

Future Offtake and Financing Implications:

The Heads of Agreement outlines the potential for a 20-year offtake contract tied to the Henry Hub index plus a liquefaction fee. This arrangement is intended to lay the groundwork for project financing of the Driftwood LNG, highlighting the long-term strategic nature of this partnership. Aethon is also exploring further opportunities to add value to the Driftwood LNG project as part of this transaction.

Transaction Timeline and Use of Proceeds:

The deal is slated for completion in the second quarter of 2024. Tellurian plans to use the proceeds from this sale to reduce its borrowings and for general corporate purposes. This strategic divestiture allows Tellurian to retire senior secured notes and strengthen its balance sheet, positioning the company for sustainable long-term growth.

Leadership Insights:

Tellurian Executive Chairman Martin Houston emphasized the strategic importance of this agreement, stating, “Today’s agreements with Aethon take us several steps closer to developing the Driftwood LNG project, for which Aethon is a vital partner.” He further noted that the transaction demonstrates Tellurian’s ability to align its offerings with market needs, thereby accelerating the Driftwood project.

Aethon Energy CEO Albert Huddleston highlighted the transaction’s alignment with broader industry trends, remarking, “The expanding scale of our vertically integrated business continues to deliver capital efficiency and industry-leading margins as we work to accelerate the role of natural gas in the broader energy transition.”

Advisory Roles:

Lazard acted as financial advisor to Tellurian, while Akin Gump and Gibson Dunn served as legal counsel to Tellurian and Aethon, respectively, ensuring a smooth transaction process.

This strategic transaction not only enhances Aethon’s capabilities in shale gas extraction but also supports the larger infrastructure necessary for LNG production, reflecting the growing synergy between traditional energy extraction and modern energy needs.