NextDecade Corporation — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; unaudited. Comparisons are with Q1 2017 unless stated otherwise. NextDecade is a pre-revenue LNG development company focused on the Rio Grande LNG terminal and associated Rio Bravo pipeline in Texas.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 / prior balance |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $16.28 million | $2.42 million |
| Net loss | $16.20 million; $0.15 per share | $2.39 million; $0.02 per share |
| Operating cash used | $5.80 million | $3.32 million |
| Investing cash used | $5.20 million | $3.51 million |
| Cash and cash equivalents | $24.71 million | $35.70 million at Dec. 31, 2017 |
| Investments | $5.07 million | $5.06 million at Dec. 31, 2017 |
| Total assets | $111.42 million | $116.09 million at Dec. 31, 2017 |
| Total liabilities | $12.08 million | $13.00 million at Dec. 31, 2017 |
Cash plus investments totaled approximately $29.77 million at quarter-end. Property, plant and equipment was $79.36 million, primarily project assets not yet placed in service. The filing reports no revenue, so operating margins are not meaningful. No debt balance is reported in the presented balance sheet. The company had no off-balance-sheet arrangements.
Changes and notable items
- Net loss increased by $13.81 million year over year, largely reflecting $12.23 million of share-based compensation expense in Q1 2018, versus none in Q1 2017. The company said higher staffing and professional fees also contributed: these costs rose from $1.7 million to $2.9 million.
- Cash declined by $11.00 million during the quarter. Operating outflows increased amid additional employees and professional fees; investing outflows increased primarily with project development spending.
- Project assets grew from $73.02 million at year-end to $79.16 million at March 31. The company reported 106.4 million common shares outstanding at quarter-end.
- Adoption of ASU 2016-01 resulted in a $40,000 cumulative adjustment to accumulated deficit. The company expects lease-accounting standard adoption in 2019 to have a preliminary material balance-sheet impact; its effect on results was not yet determined.
Outlook, financing and risks
- Management estimated that the Rio Grande Project could begin commercial operations as early as 2023, subject to financing, regulatory approvals, permits, construction and commercial progress. Construction is contingent on required FERC authorization and other permits.
- The company said substantial additional capital is needed before a final investment decision and for construction. A non-binding term sheet with GE Oil & Gas contemplated up to $150 million of pre-FID bridge financing, subject to development milestones.
- After quarter-end, the company entered into backstop agreements related to its preferred-stock offering. Backstop parties agreed, at the company’s election, to purchase up to approximately $35 million in aggregate preferred stock and associated warrants. As of the filing, no preferred shares had been sold. The company cautioned that financing may not be obtained or may be on unacceptable or dilutive terms.
- Other key risks include project cost estimates and execution, regulatory and environmental approvals, securing site and pipeline rights, LNG market conditions, and access to future debt and equity capital. Management reported no known legal claims likely to have a material adverse effect and no changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether the preferred-stock offering closed, how much capital was raised, and the resulting dilution and warrant terms.
- Whether the potential GE bridge financing advanced beyond a non-binding term sheet and whether its milestones were met.
- Progress on FERC and other permits, LNG offtake agreements, EPC contracting, project costs, and the stated potential 2023 start-up timing.
- Quarterly cash burn and remaining liquidity relative to the company’s pre-FID development needs.
- The amount and vesting conditions of milestone-based equity awards, including awards tied to project milestones and final investment decision.