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Aethon Energy to acquire Tellurian Integrated upstream assets

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Tellurian Inc. and Aethon Energy Management LLC  have announced a definitive agreement for Aethon to acquire Tellurian’s integrated upstream assets for $260 million. Alongside this acquisition, the two companies have signed a Heads of Agreement for Aethon to purchase two million tons per annum of liquified natural gas from Tellurian’s Driftwood LNG plant.

This acquisition will significantly expand Aethon’s presence in the Louisiana Haynesville and Bossier shale basins, adding approximately 31,000 net acres to its portfolio. These assets include gathering and treating systems with a capacity of up to 100 million cubic feet per day, increasing Aethon’s pro forma gathering and treating capacity to over 3 Bcf/d across its holdings.

The Heads of Agreement outlines the framework for a 20-year offtake agreement, indexed to Henry Hub plus a liquefaction fee. This agreement will include appropriate credit support, forming the basis for project financing of Driftwood LNG. Aethon plans to explore further opportunities to enhance the value of Driftwood LNG following this transaction.

The deal is expected to close in the second quarter of 2024, with Tellurian planning to use the proceeds to reduce borrowings and for general corporate purposes.

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

Albert Huddleston, Aethon Energy CEO, remarked, “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. This Fund II and Fund III acquisition provides complementary growth opportunities alongside our extensive upstream and midstream footprint in the Haynesville with more than 20 years of existing inventory life. Our partnership with Tellurian will provide our downstream LNG customers with the lowest methane emission intensity in North America.”

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

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