NextDecade Corporation — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. NextDecade is developing LNG export facilities and related pipelines, principally the Rio Grande LNG Terminal and Rio Bravo Pipeline in Texas. The company had no operating revenue during the quarter.
Financial results and liquidity
- Revenue was $0, unchanged from Q1 2018; operating margin is not meaningful because the company had no revenue.
- Operating expenses were $12.5 million, down from $16.3 million. General and administrative expense fell $4.0 million, primarily due to lower share-based compensation, partly offset by higher staffing, professional fees, travel, marketing and sponsorship costs.
- Net loss attributable to NextDecade was $12.0 million, versus $16.2 million in Q1 2018. Net loss attributable to common stockholders was $17.6 million, or $0.16 per share, compared with $16.2 million, or $0.15 per share. The difference reflects $5.0 million of preferred dividends and $0.6 million of deemed dividends.
- Operating cash outflow was $8.0 million, compared with $5.8 million. Project property and equipment purchases were $5.9 million, compared with $5.2 million.
- At quarter-end, cash and cash equivalents were $5.6 million and investment securities were $56.1 million, totaling $61.7 million in these liquid assets. Cash increased $2.4 million during the quarter, mainly because the company sold $17.0 million of investment securities.
- Total assets were $160.8 million and total liabilities were $15.4 million. The filing reports no borrowings; liabilities include $7.6 million of warrant liabilities and $1.7 million of operating lease liabilities. Series A and B preferred stock had $71.8 million in carrying value and bears cumulative dividends at 12% annually.
Developments, outlook and risks
- In March, the company signed a 20-year LNG sale and purchase agreement with Shell for 2 million tons per annum, expected to begin at terminal operations, currently targeted as early as 2023. The agreement is subject to conditions including a positive final investment decision (FID).
- Rio Grande signed a lease for approximately 984 acres at the Brownsville site. Its 30-year primary term begins only after the specified FID notice and is subject to an outside effective date and exceptions.
- After quarter-end, the company received EPC bids from Bechtel and Fluor on April 22 and expected to select a contractor and execute a lump-sum turnkey contract in Q3 2019. It also received the FERC final environmental impact statement on April 26; this does not itself establish that all required approvals have been obtained.
- Management says the project requires substantial additional capital and expects it to be funded primarily through project financing and future debt and equity offerings. There is no assurance financing will be available on acceptable terms. Construction depends on required regulatory approvals, permits, financing and project execution.
- Other commitments include approximately $0.9 million for the first phase of an ERP system, expected to be spent in 2019, and approximately $4.0 million of EPC bid costs incurred after quarter-end. Management reported no known legal matters likely to have a material adverse effect and no changes to previously disclosed risk factors.
Most important facts for investors to verify
- Whether the Shell SPA’s conditions are satisfied and whether additional LNG offtake is secured.
- Progress toward FID, required permits and approvals, and the timing and cost terms of an EPC contract.
- Availability, cost and potential dilution of financing needed to fund development through construction and operations.
- Cash burn, liquid investment balances, and the cumulative 12% preferred dividends and associated impact on common stockholders.