Tellurian Inc. is acquiring natural gas assets located in the Haynesville Shale from privately held EnSight Energy Partners LP for $125 million plus a contingent payment tied to the price of natural gas.
“We have been diligently growing our natural gas production and reserves in the Haynesville,” commented John Howie, president of Tellurian Production LLC, in a company release.
A subsidiary of the Houston-based LNG developer, Tellurian Production agreed to pay up to $132.5 million to purchase the natural gas assets from EnSight IV Energy Partners LLC and EnSight Haynesville Partners LLC. The assets are located in the core of the Haynesville Shale in DeSoto, Bossier, Caddo, and Webster parishes in Louisiana.
“The EnSight asset is a great fit with Tellurian’s existing position in the Haynesville Shale and allows us to step into an ongoing development program and bring online significant additional natural gas volumes in the fourth quarter of 2022.”—John Howie, President, Tellurian Production LLC
The EnSight assets comprise about 5,000 net acres, roughly 45 MMcf/d (100% natural gas) of current net production and 30 gross drilling locations. Proved reserves are approximately 108 Bcf of natural gas. The assets also include 44 producing wells and five wells in progress at transaction close, anticipated in the third quarter.
The EnSight acquisition is part of Tellurian’s strategy to acquire develop, and manage natural gas assets to supply long-term, low-cost production to its cornerstone project, Driftwood LNG. The proposed liquefaction export facility located near Lake Charles, Louisiana, is expected to have a capacity of 27.6 million tonnes per year.
“Tellurian continues to focus on two critical pathways—progressing Driftwood LNG and continuing to increase our upstream footprint,” Tellurian President and CEO Octávio Simões noted in the release.
Simões said the EnSight transaction grows Tellurian’s 2023 estimated natural gas production by roughly 30%, increases upstream asset-level EBITDA by about 25% and expands upon the company’s existing platform. The EnSight assets also provide Tellurian with both cash flow and a physical hedge for Driftwood LNG, Howie added.
“The EnSight asset is a great fit with Tellurian’s existing position in the Haynesville Shale and allows us to step into an ongoing development program and bring online significant additional natural gas volumes in the fourth quarter of 2022,” Howie said.
At closing, Tellurian Production’s Haynesville Shale acreage will increase to roughly 20,000 net acres, with more than 275 gross drilling locations. The company’s net resource is expected at over 2 Tcf.
The acquisition is also projected to grow pro forma net production for 2022 to roughly 140 MMcf/d, from 39 MMcf/d in 2021.
EnSight is currently operating a one-rig drilling program, which Tellurian plans to maintain on the acquired assets through the fourth quarter. The company then plans to add a rig to run a two-rig drilling program in 2023 with approximately 350 MMcf/d of net production.
The effective date of the EnSight transaction is Aug. 1. The purchase price is $125 million and a contingent payment of $7.5 million which is based on the price of natural gas and may be payable in March 2023 under certain conditions.
Tellurian said it will fund the EnSight purchase with cash on hand.
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