HOUSTON & DALLAS - Tellurian (NYSE:TELL) Inc. (NYSE American: TELL) has struck a deal to sell its upstream assets to Aethon Energy Management LLC for $260 million, the companies announced today. Alongside this transaction, a Heads of Agreement has been established for Aethon to purchase two million tons per annum (mtpa) of liquified natural gas (LNG) from Tellurian's Driftwood LNG project.
The sale encompasses roughly 31,000 net acres in the Louisiana Haynesville and Bossier shale basins, including systems capable of gathering and treating up to 100 million cubic feet per day (MMcf/d). The acquisition is poised to enhance Aethon's gathering and treating capacity to over 3 billion cubic feet per day across its portfolio.
Negotiations are underway for a 20-year offtake agreement that will be indexed to the Henry Hub benchmark plus a liquefaction fee, with credit support provisions to facilitate project financing for the Driftwood LNG plant. Aethon is also exploring further opportunities to add value to the Driftwood LNG project following the closure of this transaction.
The deal is anticipated to conclude in the second quarter of 2024. Tellurian plans to allocate the proceeds from the sale to reduce its debt and for general corporate purposes.
Tellurian Executive Chairman Martin Houston expressed that the agreements with Aethon mark significant progress toward advancing the Driftwood LNG project, which will be foundational for accelerating the initiative. The transaction will also enable Tellurian to retire senior secured notes and bolster its balance sheet.
Aethon Energy CEO Albert Huddleston highlighted the transaction's role in expanding the company's vertically integrated business, emphasizing capital efficiency and low methane emission intensity for LNG customers in North America.
Lazard (NYSE:LAZ) acted as the financial advisor to Tellurian, with Akin Gump providing legal counsel. Aethon received legal guidance from Gibson Dunn.
This information is based on a press release statement. The forward-looking statements included in the press release are subject to risks and uncertainties that may cause actual results to differ materially from those projected.
InvestingPro Insights
As Tellurian Inc. (NYSE American: TELL) navigates its strategic asset sale to Aethon Energy Management LLC, investors are closely monitoring the company's financial health and market performance. According to InvestingPro data, Tellurian's market capitalization stands at a modest $468.96 million, reflecting the scale of this independent oil and gas company. The financials reveal a challenging landscape: a negative price-to-earnings (P/E) ratio of -1.88, which worsens to -3.01 when adjusted for the last twelve months as of Q1 2024. This suggests that the company is not generating profit from its shareholders' investments.
Revenue figures further underscore the company's difficulties, with a stark decline of over 52% in the last twelve months leading up to Q1 2024. This contraction aligns with InvestingPro Tips that analysts anticipate a sales decline in the current year. The company's stock price has also experienced significant volatility, with a 14.45% return over the last month but a precipitous drop of 55.84% over the past year. This is indicative of the high-risk nature of the investment and the market's reaction to Tellurian's operational and financial challenges.
Despite recent price gains, Tellurian's financial structure raises concerns, as highlighted by InvestingPro Tips that the company operates with a significant debt burden and may have trouble making interest payments on its debt. With the proceeds from the asset sale earmarked for debt reduction, investors will be watching to see if this move improves the company's ability to manage its financial obligations.
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