Aethon Energy Acquires Tellurian's Upstream Assets

Aethon Energy Management LLC (Aethon) has entered into an agreement to acquire Tellurian Inc.'s integrated upstream assets for $260 million. This deal is accompanied by a heads of agreement for Aethon to purchase two million tons per annum (mtpa) of liquefied natural gas (LNG) from Tellurian's Driftwood LNG plant.

The acquired assets will expand Aethon's presence in the Louisiana Haynesville and Bossier shale basins, adding approximately 31,000 net acres to their portfolio. This includes gathering and treating systems with a capacity for up to 100 million cubic feet per day (mmcf/d), which will increase Aethon's pro forma gathering and treating capacity to over 3 billion cubic feet per day (bcf/d) across its assets.

The heads of agreement also outlines the negotiation of a 20-year offtake agreement indexed to Henry Hub plus a liquefaction fee, with appropriate credit support, to facilitate project financing for the Driftwood LNG plant. The transaction is expected to close during the second quarter of 2024.

Tellurian plans to utilize the proceeds from this sale to reduce borrowings and for general corporate purposes. The company's executive chairman, Martin Houston, emphasized the significance of these agreements in advancing the development of the Driftwood LNG project and aligning commercial offerings with customer needs.

Aethon Energy's CEO, Albert Huddleston, highlighted the capital efficiency and industry-leading margins resulting from the expanding scale of their vertically integrated business. He also underscored the complementary growth opportunities this acquisition provides alongside their existing upstream and midstream footprint in the Haynesville.

Lazard served as the financial advisor to Tellurian in this transaction, and Akin Gump provided legal counsel. Gibson Dunn served as legal counsel for Aethon.

This acquisition marks a significant step for Aethon in expanding its footprint and enhancing its downstream LNG capabilities, while providing Tellurian with the means to strengthen its balance sheet and progress against its strategic plan.

Following these announcements, the company's shares moved 2.8%, and are now trading at a price of $0.58. For more information, read the company's full 8-K submission here.

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