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Permalink Reply by Lisa Weaver Smith on May 31, 2024 at 15:31

Wondering why we have not received our royalty check from them this month hmm 😕🤔

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Permalink Reply by Skip Peel - Mineral Consultant on June 1, 2024 at 2:37

The sale will take some time to close and then for the operatorship of the Tellurian units to be transferred to Aethon.  Tellurian should be responsible for your royalty payments until that process is complete.

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Permalink Reply by Skip Peel - Mineral Consultant on June 1, 2024 at 3:17

Tellurian Upstream Sale: On To Greener Pastures

• Brandon Myers May 31, 2024com Excerpt

Aethon has agreed to purchase Tellurian’s upstream assets for (US) $260MM below street estimates, which ranged from $270MM to $500MM. As part of the agreement, Aethon has signed a preliminary agreement to purchase two million tons per annum (Mtpa) of LNG from Tellurian’s ~28 Mtpa Driftwood project in Lake Charles, Louisiana. The deal is good for the company despite the market reacting poorly to the sale price. It will allow it to focus on more impactful projects and pay down $224 MM in debt, with the remainder going towards general purposes or construction. Below, we reflect on the deal and walk through what might be next for the play now that gas prices are back in the mid $2/Mcf range. 

 The Road So Far – Looking Back on the Deal

Our original analysis noted that Tellurian rock quality typically sat in the tier-2 to tier-3 category basin-wide, equating to our second and third machine-learning-derived rock quality quartiles. As a result, we came in relatively low on the valuation. We ran a scenario analysis that ranged from ~$140MM up to ~$415MM with a median case of $260MM, relatively close to the actual closing price of $264.5MM. We also highlighted that the valuation could have been lower (<$200MM) if the asset was sold at the end of Q1 or while the front month was still sub $2/Mcf. In hindsight, that outlook was likely too punitive, and conversely, the outlook from the street was frequently too optimistic (>$400MM). Looking at the deal now, the following can be said: 

• Tellurian has one of the three unbuilt LNG projects with a non-FTA license. Put another way, Tellurian is one of three unbuilt projects not subject to the LNG permitting pause and can proceed.
• Despite the market’s dislike of the purchase price, Tellurian’s upstream assets were in the middle of the pack. For investors, it was an unwanted side project; with the asset sold, the company can focus on Driftwood. 
• Aethon gets additional gathering and processing capacity to bolt onto its midstream assets in the basin and a production boost to an already compelling growth story as the company is now ~3x or ~2 Bcf/d higher than its 2020 exit rate.

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Permalink Reply by Lisa Weaver Smith on June 1, 2024 at 10:28

Hmmm .. because we should have received a check by now .

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Permalink Reply by ATK on June 2, 2024 at 15:08

A land owner friend in Vernon Parish said they received lease/contract offer for "carbon infusion" from Aethon out of Shreveport. They did some research and the questions they had is if they sign this contract and the process is done to their property if they will ever be eligible for mineral rights lease in the future. They were also told the process could damage their property.

 ???

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Permalink Reply by Skip Peel - Mineral Consultant on June 3, 2024 at 2:00

That's weird.  Never heard of such.  Would need additional information to offer a reasoned opinion. They should ask Aethon for clarification.  As with all leases, mineral owners should get legal advice. 

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Permalink Reply by Hale Yayuh on June 4, 2024 at 1:53

Tellurian selling to Aethon is great news seems to me, as Tellurian is not one of the better operators. Needed something good to happen after Chesapeake announced their purchase of Southwestern. Chesapeake being one of my least favorite operators. Hopefully, Aethon will develop sooner rather than later.

Here's to better nat gas price!

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Permalink Reply by Lisa Weaver Smith on June 5, 2024 at 12:45

So no one calls you back at Tellurion . Hmmm then the whole BPX thing .. what does BPX have to do with any of this ?

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Permalink Reply by Skip Peel - Mineral Consultant on June 5, 2024 at 15:58

Lisa, you have not provided sufficient information to give an informed answer.  I can't find any connection to BPX for your unit and I have no idea what an operator fee might be.

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