Yahoo Finance Tellurian (TELL) Advances Driftwood LNG Project With Aethon Deal
Tellurian Inc. TELL has signed an agreement with Aethon Energy Management, the Dallas-based private investment firm, wherein the latter would acquire TELL’s integrated upstream assets for a total consideration of $260 million. The agreement also involves a Heads of Agreement to procure 2 million tons per annum (mmtpa) of liquefied natural gas (LNG) from Tellurian’s Driftwood LNG facility. The transaction is expected to be concluded during the second half of 2024.
Aethon’s presence in the Louisiana Haynesville and Bossier shale has been expanded by nearly 31,000 net acres with the deal. Moreover, the acquisition involves gathering and treating systems with a capacity of up to 100 million cubic feet per day (MMcf/d). This should take Aethon’s pro forma gathering and treating capacity across its asset base to more than 3 billion cubic feet per day (Bcf/d).
The Heads of Agreement outlines a 20-year offtake deal, which will be negotiated between the two parties. The agreement states that the price of LNG will be indexed to the Henry Hub, along with a liquefaction fee and adequate credit support. The Heads of Agreement was outlined in this way to support the financing of the Driftwood LNG project.
Following the transaction, Aethon will continue to look for opportunities to support the Driftwood LNG project further. Tellurian will use the proceeds from this deal for reducing its borrowings and general corporate purposes.
Tellurian has stated that its deal with Aethon should help it in advancing with Driftwood LNG. Aethon will be a crucial partner, and the offtake agreement for 2 mmtpa of LNG should allow Tellurian to go ahead with the project.
TELL has highlighted that the offtake agreement demonstrates the successful alignment of its commercial offerings to meet the demands of its prospective customers. The sale of its upstream assets should allow Tellurian to retire its senior secured notes and achieve a robust balance sheet.
Tellurian’s Driftwood LNG involves five plants and 20 trains, with a total capacity of 27.6 mmtpa. So far, the company has invested more than $1 billion in this project. In February 2024, TELL revealed its plans to divest its upstream assets. However, in March, TELL stated that it is exploring a potential opportunity to sell off the company.
Tellurian has disclosed its plans about taking a final investment decision on the Driftwood LNG export plant in 2024, for building the first two plants. In addition, a full notice to proceed will be issued to the engineering and construction giant Bechtel to begin the construction of the two LNG plants in the second half of 2024.
Zacks Rank and Other Key Picks
Currently, TELL carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the energysector are Archrock Inc. AROC, Hess Midstream Partners LP HESM and Sunoco LP SUN.Archrock presently sports a Zacks Rank #1 (Strong Buy), while Hess Midstream and Sunoco carry a Zacks Rank of #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
Hess Midstream LP owns, operates, develops and acquires a wide range of midstream assets, providing services to Hess Corporation and other third-party customers. The partnership has a stable fee-based revenue model secured via long-term commercial contracts. Since Hess Midstream operates through 100% fee-based contracts, it is exposed to minimal commodity price risks.
Sunoco LP is one of the largest distributors of motor fuel in the United States. The partnership distributes fuel to independent dealers, commercial customers, convenience stores as well as distributors. Its current distribution yield is greater than the composite stocks in the industry, providing unitholders with consistent returns.
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