NextDecade Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. NextDecade is developing the Rio Grande LNG terminal in Brownsville, Texas, and a planned carbon capture and storage (CCS) project. The company had no operating revenue; the terminal and CCS project were not yet operating.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $1.6 million | $7.2 million |
| Operating loss | $1.6 million | $7.2 million |
| Net income (loss) attributable to NextDecade | $(3.7) million | $0.9 million |
| Net loss attributable to common stockholders | $(7.5) million; $(0.06) per share | $(2.6) million; $(0.02) per share |
| Cash used in operating activities | $3.8 million | $14.2 million |
| Cash used in investing activities | $3.9 million | Cash provided: $41.9 million |
| Cash provided by financing activities | $24.4 million | $14.9 million |
At March 31, 2021, cash and cash equivalents were $39.3 million, compared with $22.6 million at year-end 2020. Current assets were $40.1 million and current liabilities $7.3 million. Total liabilities were $32.8 million; the filing reports no conventional debt balance. The company had $164.2 million of property, plant and equipment, primarily project assets not yet placed in service. No meaningful operating margin can be calculated because revenue was zero.
Quarterly net loss worsened by $4.9 million year over year, primarily because the company recorded a $2.0 million loss on common stock warrant liabilities versus an $8.3 million gain in Q1 2020. This was partly offset by lower general and administrative expense, down $5.4 million to $1.4 million. Management attributed the decrease mainly to lower share-based compensation, professional fees and other costs. Operating cash outflow improved, which management attributed in part to reduced employee and lease costs and other pandemic-related actions. The prior-year investing inflow largely reflected proceeds from selling investment securities.
Material developments, outlook and risks
- In March, NextDecade raised $24.5 million through Series C preferred stock; the securities carry cumulative dividends at 12% annually, payable in cash or in kind, and were issued with common stock warrants. An additional $10 million Series C issuance closed in April. Series A, B and C preferred stock dividends and deemed dividends were $3.9 million in Q1 and contributed to the larger loss attributable to common stockholders.
- Management expected to spend $42 million on pre-final-investment-decision (pre-FID) development activities in 2021; approximately $8 million was incurred in Q1. Construction and eventual operations depend on securing substantial additional financing. Management cautioned that financing may be unavailable, costly or dilutive, and significant cash flows from the terminal are not expected for several years.
- NextDecade announced NEXT Carbon Solutions and a planned CCS project intended to reduce permitted terminal CO2 emissions by more than 90%. It signed a term sheet with Oxy Low Carbon Ventures for CO2 offtake and sequestration; definitive agreements remained to be negotiated. Project performance and expected emissions reductions are not assured.
- The company extended the Rio Grande site lease effective date to May 6, 2022. It committed to pay approximately $1.5 million per quarter to the landowner through the earlier of the effective date and lease commencement. The site lease, terminal construction, permits, third-party pipeline and offtake arrangements remain important project dependencies.
- The Rio Bravo pipeline equity sale includes conditional repurchase/resale rights if a full notice to proceed for terminal construction is not issued by December 31, 2023. Accordingly, sale proceeds and certain buyer costs remain presented as a non-current liability, and Rio Bravo assets were not derecognized.
- COVID-19 and energy-market conditions could affect development and business operations; the filing says the potential financial effects were uncertain. Other key risks include LNG demand and pricing, project cost estimates, regulatory approvals, construction and technology risks, and the ability to finance both the terminal and CCS project.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and no material change in contractual obligations from its 2020 Form 10-K. Management concluded disclosure controls were effective at quarter-end.
Important facts for investors to verify
- Available cash, ongoing quarterly cash burn, and whether the stated 2021 pre-FID spending outlook remains current.
- Terms, cumulative dividend burden, warrant dilution and future funding needs associated with the preferred-stock financing.
- Progress toward FID, required permits, definitive CCS agreements, pipeline readiness, and the status of LNG sales arrangements.
- Whether Rio Bravo sale-related conditions and site lease obligations could require additional payments or affect project timing.
- Warrant-liability remeasurement effects and the distinction between reported net loss attributable to the company and loss attributable to common stockholders.