NextDecade Corporation — FY 2019 Form 10-K
Reporting period: Year ended December 31, 2019. This is an annual filing, not a standalone fourth-quarter report. NextDecade was a pre-revenue LNG project developer focused principally on the proposed Rio Grande LNG terminal in Brownsville, Texas.
Business context and project status
- The Rio Grande terminal received FERC authorization in November 2019 for facilities with up to six trains and 27 million tonnes per annum of capacity. FERC rejected rehearing and stay requests in January 2020; DOE granted non-FTA export authorization in February 2020.
- Bechtel EPC agreements cover trains 1 and 2, with expected capacity up to 11.74 mtpa, for $7.042 billion, and train 3, up to 5.87 mtpa, for $2.323 billion. Two limited notices to proceed were issued for trains 1 and 2. The company said it could make a positive final investment decision (FID) on as few as two trains.
- A 20-year Shell agreement covers 2 mtpa, with about three-quarters of volumes indexed to Brent and the remainder to U.S. gas indices. It is conditional, including on a positive FID. Commercial operations were estimated as early as 2023.
- After year-end, the company sold its Rio Bravo pipeline subsidiary to an Enbridge affiliate, retaining contracted pipeline transportation rights for at least 20 years. NextDecade received $15 million at the March 2, 2020 closing; additional consideration is conditional on post-FID funding.
Financial performance and liquidity
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating loss | $35.0 million | $43.0 million |
| Net loss attributable to NextDecade | $35.9 million | $42.0 million |
| Net loss attributable to common stockholders | $48.6 million | $43.5 million |
| Basic and diluted loss per share | $0.45 | $0.41 |
| Operating cash used | $40.7 million | $23.3 million |
| Investing cash used | $16.7 million | $86.2 million |
| Financing cash provided | $70.0 million | $76.9 million |
- Operating expenses fell by $8.0 million, mainly because share-based compensation expense declined; invitation-to-bid costs rose $3.6 million to $10.2 million. Net loss attributable to the company improved, but common-stockholder loss increased, principally reflecting $11.2 million of preferred dividends versus $0.7 million in 2018.
- Year-end cash and cash equivalents were $15.7 million and investment securities were $62.2 million, totaling $77.9 million. Current assets were $78.8 million against current liabilities of $21.5 million.
- The balance sheet reported no borrowings or conventional debt. It included $12.0 million of warrant liabilities and $97.9 million of Series A and Series B preferred stock presented as mezzanine equity. Preferred shares accrue cumulative dividends at 12% annually; 2019 dividends were paid in kind.
- Cash funding came from equity issuances, including $50.0 million of common stock sold to a Mubadala affiliate and $20.9 million of Series B preferred stock in 2019. Common shares outstanding increased to 117.3 million at year-end from 106.9 million.
- Margins are not meaningful because the company had no revenue. Contractual obligations disclosed in the summary table totaled $8.7 million, including $5.5 million of 2020 permitting costs; that table is distinct from the multibillion-dollar EPC agreements.
Outlook, risks and unusual items
- Management expected operations as early as 2023, but the project still required FID, substantial project financing, long-term offtake commitments, further permits and successful construction. The company warned it would need additional debt and equity capital and might not obtain it on acceptable terms.
- Key exposures include construction delays and cost overruns, dependence on Bechtel and the Enbridge-affiliated pipeline operator, securing sufficient customers and gas supply, LNG market prices and competition, vessel availability, tax incentives, environmental compliance, and potential dilution.
- In 2019 the company recorded a $2.7 million warrant-liability valuation loss. Share-based compensation expense was negative $9.6 million, reflecting forfeitures and capitalized amounts, contributing to lower reported G&A.
- Wetland and habitat mitigation commitments were about $5.5 million at year-end and reduced to $4.0 million following the pipeline sale. Management reported no known legal claims likely to have a material adverse effect.
- The company reported effective disclosure controls and internal control over financial reporting. The auditor issued an unqualified opinion on the financial statements but did not provide an internal-control audit attestation.
Important facts for investors to verify
- Whether and when NextDecade achieves FID, secures project financing, and funds the EPC commitments, including the scope and enforceability of contract terms.
- Progress toward binding offtake agreements beyond Shell and satisfaction of the Shell SPA’s conditions precedent.
- Pipeline development, transportation capacity, remaining sale proceeds, and the conditions for payment of the deferred consideration.
- Available liquidity and future funding needs relative to ongoing cash burn, preferred dividends, and potential equity dilution.
- Remaining permits, local tax incentives, mitigation obligations, and any changes to the stated construction schedule or cost estimates.