NextDecade Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. NextDecade is developing and constructing the Rio Grande LNG export facility in Brownsville, Texas, and pursuing carbon capture and storage projects. The company had no revenue during the quarter.
Financial performance and position
- Profit/loss: Operating loss was $38.1 million, compared with $27.1 million in Q1 2023. Net income attributable to common stockholders was $28.3 million, or $0.11 per diluted share, versus a $34.0 million loss, or $0.23 loss per share, a year earlier. The 2024 result included a $258.9 million derivative gain, largely reflecting changes in forward interest rates and the valuation of interest-rate swaps; it should not be viewed as operating earnings.
- Expenses and interest: General and administrative expense rose to $32.5 million from $26.3 million. Net interest expense was $25.5 million after $28.1 million of interest was capitalized. A $7.4 million loss was recorded on debt extinguishment.
- Cash flow: Operating cash outflow was $28.8 million, compared with $23.2 million in Q1 2023. Investing cash outflow was $796.4 million, principally for Phase 1 construction, versus $23.4 million. Financing provided $782.1 million, including project borrowings and $194.6 million of equity commitments. Cash, cash equivalents and restricted cash ended at $251.4 million.
- Liquidity: Cash and cash equivalents were $45.8 million; restricted cash was $205.6 million and is subject to project-related restrictions. NextDecade reported $26.2 million available under its corporate revolving facility. Management stated there is substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the financial statements, citing funding needs and reliance on additional financing and cost management.
- Debt and assets: Total debt was $2.443 billion gross and $2.394 billion net of issuance costs, up from $1.850 billion gross at year-end 2023. Total assets were $4.176 billion, including $3.158 billion of net property, plant and equipment, primarily the facility under construction. The company reported covenant compliance at quarter-end.
- Margins: Not meaningful because the company had no revenue or operating operations.
Material changes and project progress
- Construction investment accelerated: property, plant and equipment rose to $3.158 billion from $2.438 billion at December 31, 2023. Trains 1 and 2 and common facilities were 18.2% complete in March; Train 3 was 6.9% complete. Progress was reported in line with EPC schedules.
- In February, Rio Grande issued $190 million of 6.85% senior secured notes, and repaid $176 million of its credit facility. In January, NextDecade LLC entered into a corporate facility providing up to $50 million of revolving loans plus up to $12.5 million for interest obligations.
- Phase 1 has three trains with expected nameplate capacity of approximately 17.6 MTPA. Long-term SPAs cover approximately 16.15 MTPA, over 90% of expected Phase 1 capacity, with a weighted average term of 19.2 years.
Outlook, risks and contingencies
- First-train commercial operation is expected in late 2027 under the EPC schedule. Phase 1 estimated total capital cost is approximately $18.0 billion. The filing expects operating losses and negative cash flows to continue until operations begin.
- Train 4 FID remains conditional on EPC and commercial arrangements and adequate financing. The company was pursuing additional long-term offtake; if TotalEnergies exercises its 1.5 MTPA option, the company estimates another approximately 3 MTPA must be contracted before Train 4 FID. Train 5 development is also conditional.
- Key risks include ability to raise capital on acceptable terms, construction schedule and cost, interest rates and debt service, LNG demand and prices, contractor and pipeline execution, regulatory and environmental approvals, and development of CCS projects.
- Review of the FERC remand order remained pending in the D.C. Circuit; a motion to stay construction was denied in March 2024. The company said it did not expect the appeal process to materially affect construction or operations. Management reported no material legal proceedings and no material changes to previously disclosed risk factors.
- The quarter’s reported derivative gain was a material noncash valuation item. Rio Grande’s restricted project cash and capital resources are not generally available to meet NextDecade Corporation’s obligations.
Important facts for investors to verify
- How NextDecade will address the disclosed going-concern uncertainty, including timing, amount, and terms of required financing.
- Whether Phase 1 construction remains on schedule and within the approximately $18.0 billion estimated total cost.
- Progress toward Train 4 offtake, EPC arrangements, FID, and financing, and the status of Train 5 development.
- Actual availability of corporate liquidity, given restrictions on Rio Grande’s project cash and the distinction between cash and restricted cash.
- Developments in the pending FERC appeal and any changes to project approvals or construction risk.