LNG

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, has signed an agreement to sell its Haynesville gas production business in East Texas and Louisiana to Dallas, Texas-based Aethon Energy Management, a private investment firm.

Tellurian said Aethon had agreed to pay $260 million for the shale gas business and additionally signed an accord to purchase 2 million tonnes per annum of LNG from the Driftwood liquefaction plant.

“The assets will expand Aethon’s footprint in the Louisiana Haynesville and Bossier shale basins with approximately 31,000 net acres, including gathering and treating systems that have capacity for up to 100 million cubic feet per day that will bring Aethon’s pro forma gathering and treating capacity to over 3 Bcf per day across its assets,” said a statement.

Lazards role

Tellurian earlier in 2024 hired the investment bank Lazards to explore a sale of its Haynesville gas production business as part of efforts to raise new capital to continue the Driftwood project with full permits to produce 27.6 million tonnes per annum.

The Driftwood project as it currently stands involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of Trains.

According to the regulatory permits and building schedules the Phase One development would include the first two of these blocks for 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.

Tellurian’s natural gas assets include 31,149 net acres, interests in 159 producing wells and over 400 drilling locations in the Haynesville Shale.

The Tellurian-Aethon Heads of Agreement contemplates the parties negotiating a 20-year offtake agreement which would be indexed to Henry Hub plus a liquefaction fee, with appropriate credit support, to provide the basis for project financing of Driftwood LNG.

The Tellurian-Aethon transaction is expected to close during the second quarter of 2024 and Tellurian will use the proceeds to reduce borrowings and for general corporate purposes.

Project boost

“Agreements with Aethon take us several steps closer to developing the Driftwood LNG project, for which Aethon is a vital partner,” said Tellurian Executive Chairman Martin Houston.

“The offtake agreement for 2 MTPA provides the foundation to accelerate Driftwood and demonstrates that we have successfully aligned our commercial offerings to meet the needs of potential customers,” Houston explained.

“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,” stated Houston.

The Aethon firm’s Chief Executive for energy funds, Albert Huddleston, said that the expanding scale of its integrated business continues to deliver capital efficiency and industry-leading margins as the firm 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,” added Huddleston.

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

Tellurian Inc., the developer of the Driftwood LNG export plant in Louisiana, was present at the India Energy Week conference and exhibition in Bangalore seeking replacement buyers after it cancelled two sales and purchase agreements in 2022 with UK major Shell and global commodities firm Vitol as it formulated a new financing strategy.

Tellurian Inc., the developer of the Driftwood LNG project in Louisiana, has sealed new employment contracts with Executive Chairman Charif Souki and President and Chief Executive Octávio Simões after signing key sales agreements.

The Houston, Texas-based company informed the Securities and Exchange Commission of executive compensation deals after signing 10-year supply accords earlier in 2021 with commodities companies Gunvor and Vitol as well as Royal Dutch Shell.

The Driftwood project has permits for production capacity of around 27 MTPA. The plant will be sited on the west bank of the Calcasieu River, just south of Lake Charles.

Tellurian told the SEC it entered into an employment agreement with the Chairman Souki for an initial three-year term and will automatically renew for an additional 12-month term at the end of the initial three-year term and each subsequent one-year anniversary thereafter, unless terminated by the company or Souki himself.

“The Executive Chairman’s employment agreement provides for an annual base salary of $1,200,000, which is consistent with the level of Mr. Souki’s cash compensation for fiscal year 2021 and is subject to annual review by the board of directors,” Tellurian said in its statement.

In addition, the Chairman Souki’s agreement provides for a discretionary annual cash bonus target of 150 percent of Souki’s annual base salary, subject to a cap of 300 percent.

“Payment of any such annual cash bonus will be based on Mr. Souki’s and the company’s performance, as determined by the board,” it added.

There were no other details of any other compensation that might be due to Souki in the form of company stocks.

Tellurian has also entered into an employment agreement with the President and CEO Octávio Simões for an initial term through June 5, 2024.

His employment would automatically renew for an additional 12-month term at the end of the initial term and each subsequent one-year anniversary thereafter, unless terminated.

“The CEO’s employment agreement provides for an annual base salary of $725,000, which is consistent with Mr. Simões's current annual base salary and is subject to annual review by the Board,” said the Tellurian filing.

“In addition, the CEO’s agreement provides for a discretionary annual cash bonus target of 125 percent of Mr. Simões’s annual base salary, subject to a cap of 218.75 percent of Mr. Simões’s annual base salary,” it added.

Pursuant to the CEO deal, the parties agreed to amend the terms of Simões’s restricted stock agreements covering a total of 2,000,000 shares of Tellurian restricted stock and a cash incentive award agreement providing for a cash award of up to $5 million (in each case vesting in one-third increments upon an affirmative final investment decision) by the board.

In project activities Tellurian has also filed applications with the US Federal Energy Regulatory Commission to build a new 37-mile pipeline in Louisiana that will originate near Ragley in Beauregard Parish and end near Carlyss in Calcasieu Parish, close to where the Driftwood facility will be located.

Tellurian Inc., developer of the Driftwood LNG export plant with volumes taken by leading commodities firms Gunvor and Vitol, will soon sign a long-term lease near Lake Charles in Louisiana so it can begin preparing the site for full construction.

Tellurian executive Chairman Charif Souki explained the latest plans in a message to investors.

The Houston, Texas-based company is moving ahead after signing firm deals in late May and early June 2021 with commodity trading firms Gunvor and Vitol for a combined 6 million tonnes per annum of cargoes from the Driftwood plant.

Each of the firm agreements is for a period of 10 years with the supply indexed to a combination of the Japan-Korea Marker for Asian spot cargoes and the European benchmark Dutch Title Transfer facility (TTF) price.

The engineering, procurement and construction contract has already been agreed with Bechtel Inc., the leading global builder of LNG export facilities.

The Driftwood plant with production capacity of around 27 MTPA will be built on the west bank of the Calcasieu River, just south of Lake Charles.

Tellurian has also filed a formal application with the US Federal Energy Regulatory Commission to build a new 37-mile pipeline in Louisiana that will originate near Ragley in Beauregard Parish and end near Carlyss in Calcasieu Parish, near where the Driftwood facility will be located.

Tellurian had prevously planned to build four pipelines connecting supplies in the US Gulf Coast region, before deferring three of them because of commercial challenges.

“Look for that lease to be signed, effected and announced so that we can start the work that we need to do this summer. The activities will be taking place this summer,” stated Souki.

The company has noted that to get the Driftwood LNG plant site ready for full construction, a state highway needs to be widened to accommodate traffic for 5,000 workers, while a pipeline currently crosses the plant site and needs to be relocated.

“The new pipeline has been designed and routed to connect the supply located 21 miles north of Lake Charles to the demand located within and south of Lake Charles, bypassing what has become a constrained, complex and expensive transportation pathway,” said Tellurian after making its FERC filing.

As part of the design, the Driftwood Pipeline is proposing to deploy Baker Hughes-supplied electric-driven compression, thereby reducing the pipeline’s carbon-dioxide emissions.

“This new and completed pipeline design provides definitive and measurable results for emissions reduction and is another step in Tellurian’s overall strategy to support and balance the world’s energy needs,” said Tellurian President and Chief Executive Octávio Simões.

“Our latest commercial agreements have included provisions for tracking and documentation of LNG cargo emissions. Tellurian will continue to explore ways to collaborate with the US Administration and contribute to its plan for a cleaner climate with a focus on upending energy poverty domestically and abroad,” stated Simões.