NextDecade Corporation (NASDAQ: NEXT) is an energy company at the forefront of the transition to a net-zero future. The company is primarily focused on the construction and development of the Rio Grande LNG Facility, a liquefied natural gas (LNG) liquefaction and export terminal located in Brownsville, Texas, as well as the advancement of carbon capture and storage (CCS) projects.
Business Overview
NextDecade's core business revolves around the development of the Rio Grande LNG Facility, which has received Federal Energy Regulatory Commission (FERC) approval and Department of Energy (DOE) authorizations to construct up to five liquefaction trains with a total export capacity of 27 million tonnes per annum (MTPA) of LNG. The company is currently constructing the first three liquefaction trains and related infrastructure, known as Phase 1, which is expected to have a total nameplate capacity of approximately 17.6 MTPA.In addition to the LNG facility, NextDecade is also developing a CCS project at the Rio Grande LNG site, as well as exploring potential CCS projects at third-party industrial facilities. These initiatives are aimed at reducing greenhouse gas emissions and contributing to a more sustainable energy future.
Financials
For the fiscal year ended December 31, 2023, NextDecade reported an annual net loss of $162.3 million, with no revenue generated during the year. The company's annual operating cash flow was negative $73.6 million, and its annual free cash flow was negative $1.83 billion. These financial results reflect the company's ongoing development and construction activities, which have not yet generated significant revenue.In the first quarter of 2024, NextDecade reported a net income of $186.8 million, driven by a $258.9 million derivative gain. However, the company's operating cash flow during the quarter was negative $28.8 million, and its free cash flow was negative $796.4 million, as the company continued to invest heavily in the construction of the Rio Grande LNG Facility.
Liquidity
As of March 31, 2024, NextDecade had $45.8 million in cash and cash equivalents, as well as $26.2 million in available commitments under a revolving loan facility. The company's consolidated financial statements indicate that there is substantial doubt about its ability to continue as a going concern within one year after the date the financial statements were issued, as the company's current resources may not be sufficient to fund its planned operations and development activities.To address this liquidity concern, NextDecade plans to raise additional capital through equity, equity-based, or debt financings. The company's ability to successfully raise such capital will be crucial in determining its ability to continue as a going concern and execute its business plan.
Rio Grande LNG Facility Development
The construction of Phase 1 of the Rio Grande LNG Facility is progressing according to schedule, with the overall project completion percentage for Trains 1 and 2, as well as the common facilities, at 18.2% as of March 2024. The overall project completion percentage for Train 3 stood at 6.9% during the same period.In February 2024, Rio Grande LNG, a subsidiary of NextDecade, issued $190 million of senior secured notes to finance a portion of Phase 1. This issuance resulted in a reduction in the commitments outstanding under Rio Grande LNG's existing bank credit facilities for Phase 1.
NextDecade is also actively working on the development of subsequent phases of the Rio Grande LNG Facility, including Trains 4 and 5. The company expects to make a positive final investment decision on Train 4 and its related infrastructure, subject to finalizing commercial arrangements, obtaining adequate financing, and other customary conditions.
LNG Sales and Purchase Agreements
For Phase 1 of the Rio Grande LNG Facility, Rio Grande LNG has entered into long-term LNG Sale and Purchase Agreements (SPAs) with nine creditworthy counterparties for aggregate volumes of approximately 16.2 MTPA, which is over 90% of the expected Phase 1 nameplate LNG production capacity. The SPAs have a weighted average term of 19.2 years and provide a stable foundation of predictable, long-term cash flows to Rio Grande LNG.The company's portfolio of LNG SPAs includes agreements with major industry players such as TotalEnergies, Shell, ENGIE, and Exxon Mobil, among others. These SPAs are structured with a fixed fee per MMBtu of LNG, plus a variable fee to cover the expected cost of natural gas and other sourcing costs.
Rio Grande LNG expects to sell any commissioning LNG volumes and operational LNG volumes in excess of SPA volumes into the LNG market through spot, short-term, and medium-term agreements. The company has also entered into time charter agreements with vessel owners to provide shipping capacity for LNG sales related to its existing SPAs, commissioning volumes, and expected portfolio volumes.
Carbon Capture and Storage (CCS) Initiatives
In addition to the development of the Rio Grande LNG Facility, NextDecade is also focused on advancing its CCS initiatives. The company is developing a planned CCS project at the Rio Grande LNG site, which aims to capture and store a significant portion of the facility's carbon dioxide (CO2) emissions.Furthermore, NextDecade is exploring the potential to develop CCS projects at third-party industrial facilities, leveraging its proprietary processes to lower the cost of carbon capture and storage and reduce CO2 emissions. These CCS initiatives are expected to contribute to NextDecade's goal of providing the world with cleaner energy solutions.
Regulatory Approvals and Challenges
The Rio Grande LNG Facility has received the necessary regulatory approvals from the FERC and the DOE to construct and operate the facility. However, the company has faced some legal challenges related to these approvals, with parties filing petitions for review of the FERC's orders.In April 2023, the FERC issued a remand order reaffirming its previous authorization for the Rio Grande LNG Facility, and in March 2024, the U.S. Court of Appeals for the District of Columbia denied a motion to stay the construction of the facility. NextDecade remains confident that the ongoing appeal process will not have a material negative impact on the construction or operations of Phase 1 or the expected expansions of the Rio Grande LNG Facility.
Appointment of Chief Operating Officer
In July 2024, NextDecade announced the appointment of Tarik Skeik as the company's Chief Operating Officer (COO). Skeik, a former global project executive at ExxonMobil, brings over 20 years of experience in delivering complex energy projects around the world. In his new role, Skeik will report to the Chairman and CEO, Matt Schatzman, and will be responsible for enhancing the company's operational capabilities as it transitions from a successful development company into a world-class operating company.Outlook
NextDecade remains focused on the successful execution of Phase 1 of the Rio Grande LNG Facility, with the goal of reaching positive final investment decisions on Trains 4 and 5. The company is also committed to advancing its CCS initiatives, both at the Rio Grande LNG site and at third-party industrial facilities, as part of its broader strategy to provide the world with cleaner energy solutions.The company's ability to secure the necessary financing to fund future phases of development and construction at the Rio Grande LNG Facility, as well as its CCS projects, will be crucial in determining its long-term success. NextDecade's management team, with the addition of the experienced COO, Tarik Skeik, is well-positioned to navigate the company through these challenges and capitalize on the growing global demand for LNG and carbon capture solutions.