Nextdecade Corp annual report, FY2022

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NextDecade Corporation — 2022 Form 10-K

Business and period: Annual report for the fiscal year ended December 31, 2022, filed March 10, 2023. NextDecade is developing the Rio Grande LNG export terminal in Brownsville, Texas, and carbon capture and storage (CCS) projects. The filing provides annual results, not separate fourth-quarter financial figures.

Financial results and liquidity

  • Revenue: $0 in 2022 and 2021; the company remains pre-revenue. Margins are not meaningful.
  • Losses: Operating loss was $54.5 million in 2022 versus $19.5 million in 2021. Net loss attributable to NextDecade was $60.1 million versus $22.0 million; net loss attributable to common stockholders was $84.4 million versus $40.4 million. Basic and diluted loss per share was $0.65 versus $0.34.
  • Cash flow: Operating cash outflow was $40.1 million (2021: $18.0 million); investing outflow was $40.9 million (2021: $18.5 million); financing inflow was $118.2 million (2021: $39.4 million). Cash increased by $37.2 million to $62.8 million at year-end.
  • Liquidity and going concern: Current assets were $63.9 million and current liabilities $25.4 million at year-end. Management and the auditor cited substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the financial statements, absent additional funding and cost management.
  • Debt and capital structure: The balance sheet reports no conventional borrowings. Total liabilities were $55.6 million. Convertible preferred stock is presented as mezzanine equity; its 12% cumulative annual dividends were largely paid in kind. Common-stock warrant liabilities were $6.8 million.
  • Other balance-sheet measures: Total assets were $312.4 million, including $218.6 million of property, plant and equipment, primarily project development assets. Stockholders’ equity was $54.4 million.

Material changes versus 2021

  • Operating loss increased by $35.0 million, primarily reflecting higher general and administrative expense, including share-based compensation, salaries, professional fees and marketing, as well as increased CCS development expense.
  • General and administrative expense rose to $49.1 million from $16.8 million; development expense, net, rose to $4.1 million from $1.6 million.
  • Warrant remeasurement generated a $5.7 million loss in 2022, versus $2.5 million in 2021, primarily reflecting the increase in the company’s share price.
  • NextDecade raised approximately $115 million from common-stock sales and $10.5 million from Series C preferred stock in 2022. Common shares issued and outstanding rose to 143.5 million at year-end from 120.8 million.

Project status, outlook and key risks

  • Rio Grande LNG: The project is designed for 27 million tonnes per annum (mtpa), with a five-train design intended to reduce estimated CO₂ emissions by approximately 21% versus the original six-train design, before CCS benefits. The company had issued eight limited notices to proceed to Bechtel for Trains 1 and 2 by year-end.
  • Cost and funding: At filing, the estimated lump-sum EPC cost for Trains 1–3 was approximately $11.5 billion; final pricing remained subject to change. The company expects development spending of approximately $15 million per month during 2023 until a positive final investment decision (FID). Construction is contingent on obtaining financing.
  • Commercial commitments: By March 10, 2023, the company reported SPAs totaling 10.75 mtpa, with a weighted-average tenor of 18.7 years. Most are conditional, including on a positive FID; Shell’s SPA had become effective, subject to the first train becoming commercially operable.
  • Permitting and timing: Major permits and export authorizations had been obtained, but final FERC notice to proceed remained pending. FERC extended the deadline to complete and place the terminal into service to November 22, 2028. Construction and operations depend in part on Enbridge’s pipeline development.
  • CCS: A FEED study for California Resources Corporation’s Elk Hills Power Plant was completed in first-quarter 2023; commercial discussions continued. Preliminary FEED studies at two other facilities generated $1.0 million in cash proceeds.
  • Risks and contingencies: Principal risks include securing financing and sufficient offtake, construction cost escalation and delay, contractor and pipeline execution, gas supply, LNG market and price conditions, permitting and environmental challenges, and the development of carbon-credit markets and continued government incentives. Failure to issue a full EPC notice to proceed by December 31, 2023 could give Enbridge an option to require repurchase of Rio Bravo equity interests for up to $23 million. EPC price validity was also subject to a March 15, 2023 deadline unless extended.
  • Subsequent financing: In February 2023, the company sold common stock for approximately $35 million. This was after year-end and does not remove the filing’s stated going-concern uncertainty.

Most important facts for investors to verify

  • Whether NextDecade secures adequate funding to address the going-concern uncertainty and finance the multibillion-dollar terminal.
  • Whether a positive FID is reached, EPC pricing and schedule are finalized, and required notices and contractual deadlines are met or extended.
  • How much of the reported 10.75 mtpa of SPAs becomes effective, and whether additional binding offtake is secured.
  • Progress, cost and schedule for Enbridge’s pipeline and the terminal’s remaining regulatory steps, including FERC notice to proceed and CCS approvals.
  • The cash and dilution implications of preferred stock, including its 12% cumulative dividends and potential conversion, as well as future equity financing.
  • Whether CCS projects achieve commercial deployment and whether carbon-credit markets and applicable incentives support their economics.