Current TELL Stock Info

Will buy 9,200 acres in the Haynesville for $85.1 million

Tellurian Inc. (ticker: TELL) announced an acquisition in the Haynesville, bringing a convenient source of natural gas production to the LNG exporter that is in the permitting and planning phases for its Gulf coast Driftwood LNG export terminal.

Tellurian is spearheaded by Cheniere’s founder and its former CEO Charif Souki and former BG COO Martin Houston.

Tellurian will purchase about 9,200 net acres from a private seller for a total of $85.1 million. These properties include 19 producing operated wells with current production of 4 MMcf/d. According to Tellurian, the total acreage has about 1.3 Tcf of total natural gas resource potential. In addition, Tellurian has purchased the associated natural gas gathering and processing facilities, which have substantial additional capacity available. This additional capacity may be utilized, as Tellurian reports 138 potential drilling locations on its newly-acquired properties.

Future LNG Exporter Tellurian Acquires 1.3 Tcf of NatGas Resource Potential

Source: TELL Investor Presentation

Tellurian’s transaction ranks in the middle of the pack in terms of acreage valuations of Haynesville acquisitions. If a production valuation of $1,250 per Mcfe/d is assumed, Tellurian has paid $8,707 per acre. For reference, acreage valuations in the area range from $10,000/acre when Indigo purchased 22,500 acres from Buesa Energy to $5,167/acre when GeoSouthern purchased 112,000 from EnCana. Out of seven recent Haynesville deals, the average adjusted acreage price is $7,786. As mentioned above, Tellurian’s properties include significant gathering facilities, which could justify paying a higher price.

This acquisition is intended to give Tellurian access to its own gas supply at prices that will rival Henry Hub. The company reports that the full cycle cost of production and transport to market of natural gas from its Haynesville properties is $2.25/MMBTU. This compares favorably to an expected $3.10/MMBTU from Henry Hub.

Tellurian President and CEO Meg Gentle commented on this opportunity, remarking “Acquisition of natural gas producing assets is integral to our growing business. We expect our full cycle cost of production and transport to markets will be approximately $2.25 per MMBtu, which represents a significant savings to natural gas we will purchase at Henry Hub and other regional liquidity points. Platts LNG Daily reported the price of LNG in the Gulf of Mexico was $5.67 per MMBtu yesterday, providing the price signal to construct additional liquefaction capacity.”

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