Shares of Tellurian (TELL 2.48%) had soared more than 21% by 10:30 a.m. EDT on Thursday. Fueling the liquified natural gas (LNG) stock was news of a new long-term contract supporting its proposed Driftwood LNG development.
Tellurian has agreed to supply Gunvor Singapore with 3 million tonnes per annum (mtpa) of LNG over a 10-year period. The company would deliver the LNG from its proposed Driftwood LNG natural gas liquefaction facility near Lake Charles, Louisiana. That agreement covers more than 10% of the facility's proposed 27.6 mtpa capacity.
The company is using a blended price of two LNG indexes for this agreement. It's part of the company's plan to market up to 10 mtpa of Driftwood's first phase under a blended price, providing it with more flexibility. At current LNG prices, the 10-year deal with Gunvor represents about $12 million in revenue.
This agreement is the second major one signed by Tellurian to support Driftwood. In 2019, Total (TTE 0.54%) agreed to purchase 1 mtpa of LNG from Driftwood and an additional 1.5 mtpa of LNG of the facility's offtake volumes. Total also agreed to invest $500 million into the project.
With this agreement, Tellurian is another step closer to securing enough commercial contracts to move forward with its Driftwood development. The company stated earlier this month that it was working with four to five LNG buyers on contracts representing 12 to 15 mtpa of LNG volumes to support the first phase of the project's development. Its success in securing those contracts is vital to moving forward with Driftwood, making it a key catalyst for investors to watch.