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Tellurian (TELL) Seals Long-Term LNG Supply Deal With Vitol

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Tellurian Inc. (TELL - Free Report) entered a sale and purchase (“SPA”) agreement with Vitol Inc. to deliver 3 million tons per year (mtpa) of liquefied natural gas (“LNG”) from its Driftwood LNG production and export terminal in Louisiana.

Per the terms of the deal, the company will supply LNG to commodity trader Vitol from its proposed LNG facility in the United States Gulf Coast on a free on board (“FOB”) basis for 10 years. Notably, the majority of LNG in the United States is sold on a FOB basis, wherein LNG ownership is transferred to the buyers when it is loaded on a ship at the export terminal.

Earlier, Vitol expressed interest in the development of the Driftwood project since the world is slowly shifting the energy demand from mainly fossil fuels toward electricity and low-carbon fuels. Hence, the demand for reliable, low-cost energy continues to increase as LNG provides a stable source of fuel at an attractive price. Notably, the deal will position Vitol as one of the largest natural gas exporters of North America, providing affordable and cleaner fuel solutions for customers.

In the first week of June, Tellurian entered an identical agreement with commodity trader Gunvor Group to supply the same volume of LNG from its Driftwood facility for 10 years. The two deals were indexed to a combination of the Japan Korea Marker and the Dutch Title Transfer Facility. Importantly, the deals represent significant progress for Tellurian in its commercial efforts, following a two-year break in firm activity.

The two deals are expected to generate $24 billion in revenues over 10 years, based on current prices. Tellurian continues to implement the work plan to market Driftwood LNG volumes on indices that customers want. Above all, the Vitol agreement brings Tellurian a step closer to reach a final investment decision on Driftwood, which is targeted for the first quarter of 2022.

Company Profile

Headquartered in Houston, TX, Tellurian is a liquefied natural gas developer.

Zacks Rank & Stocks to Consider

The company currently carries a Zack Rank #4 (Sell).

Some better-ranked players in the energy space are Canadian Natural Resources Limited (CNQ - Free Report) , SilverBow Resources Inc. (SBOW - Free Report) and Petrobras (PBR - Free Report) , each currently carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past 60 days, the Zacks Consensus Estimate for Canadian Natural’s 2021 earnings has been raised by 17.2%, while that for SilverBow has been raised by 39.3%.

Petrobras’s earnings for 2021 are expected to rise 14.7% year over year.

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