NextDecade Corporation — Q1 2022 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2022. NextDecade is developing the Rio Grande LNG export terminal in Brownsville, Texas, and carbon capture and storage (CCS) projects. The company had no operating revenue and remained dependent on financing to advance development.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / prior balance-sheet date |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses / operating loss | $5.1 million / $(5.1) million | $1.6 million / $(1.6) million |
| Net loss attributable to NextDecade | $(11.4) million | $(3.7) million |
| Net loss attributable to common stockholders; loss per share | $(17.2) million; $(0.14) | $(7.5) million; $(0.06) |
| Operating cash flow | $(10.2) million | $(3.8) million |
| Investing cash flow | $(3.0) million | $(3.9) million |
| Financing cash flow | $10.0 million | $24.4 million |
| Cash and cash equivalents | $22.4 million | $25.6 million at December 31, 2021 |
| Total assets | $221.7 million | $222.1 million at December 31, 2021 |
- Operating expenses included $3.3 million of general and administrative expense and $1.5 million of development expense. No meaningful operating margin is available because revenue was zero.
- Cash declined $3.2 million during the quarter. Capital spending and other investing outflows primarily related to Terminal and CCS development.
- Total liabilities were $37.9 million, including $10.9 million of common-stock warrant liabilities and $23.0 million of other non-current liabilities. The filing reports no conventional borrowings. Convertible preferred stock had a combined carrying value of about $183.9 million and a $1,000-per-share liquidation preference.
- Preferred stock bears cumulative 12% annual dividends, payable in cash or in kind. The company issued $5.7 million of in-kind dividends in Q1. The balance sheet showed $23.4 million of current assets and $7.2 million of current liabilities.
Material changes and notable items
- Common-stockholder loss increased $9.6 million year over year. The filing attributes the increase mainly to a larger warrant-liability revaluation loss, higher G&A and development expense, and higher preferred dividends.
- The warrant-liability loss was $6.3 million versus $2.0 million in Q1 2021, primarily reflecting an increase in the company’s share price; it is a fair-value item, not an operating cash outflow.
- G&A rose $2.0 million, mainly due to compensation, salaries and wages, professional fees, travel, and IT costs. Development expense increased $1.5 million, including preliminary front-end engineering and design assessments for third-party CCS facilities.
- In March, the company issued $10.5 million of Series C preferred stock, plus 210 shares as origination fees, with associated common-stock warrants. In April, after quarter-end, it sold 4.6 million common shares for approximately $30 million.
- Cash provided by financing was lower than the prior-year quarter, when preferred-stock proceeds were $24.5 million versus $10.5 million in Q1 2022.
Outlook, commitments, and risks
- Management expected to spend approximately $3 million per month on development for the remainder of 2022 and until a positive final investment decision (FID) on the Terminal or a CCS project. It did not expect operating cash flow during 2022 and planned to fund development through further equity or equity-based security sales.
- Management said the Terminal was not expected to operate and generate significant cash flow for at least four years. Construction requires substantial capital; the company expects to rely mainly on project financing and future debt, equity-based, and equity offerings. Financing availability, cost, and dilution are significant uncertainties.
- After quarter-end, NextDecade announced 20-year SPAs with ENN LNG for 1.5 mtpa and ENGIE for 1.75 mtpa, both indexed to Henry Hub and conditional on specified conditions including a positive Terminal FID. It also reported a March binding heads of agreement for up to 1.5 mtpa with Guangdong Energy, with an SPA expected in Q2 2022. These are forward commercial arrangements, not Q1 revenue.
- The existing 20-year Shell SPA covers approximately 2 mtpa, beginning when the first train is commercially operable. The Terminal is planned as a 27 mtpa facility. The filing also notes that EPC contract validity for Trains 1–3 was extended to July 31, 2023.
- The Rio Grande site lease was amended in April to extend its effective date to May 6, 2023. Rio Grande is committed to pay approximately $1.5 million per quarter through the effective date and lease commencement; wetland mitigation spending of approximately $0.5 million was expected in 2022.
- Key risks include achieving FID, securing construction financing, project cost and execution, regulatory approvals, reliance on contractors and counterparties, LNG demand and pricing, and changes affecting CCS economics and carbon-credit or incentive markets. Management reported no material change to previously disclosed risk factors and no legal proceedings identified as material.
Important facts for investors to verify
- Whether and when the Terminal reaches FID, and the financing package and dilution required to fund construction.
- Cash burn versus the approximately $3 million monthly development-spend expectation, including how long available liquidity will last.
- Conditions, timing, and binding status of the ENN LNG, ENGIE, and Guangdong Energy arrangements, and progress toward the targeted 27 mtpa capacity.
- The terms and potential dilution of preferred stock and associated warrants, including cumulative 12% dividends and conversion provisions.
- Progress on permits, the site lease, EPC arrangements, pipeline prerequisites, and CCS development; the filing text does not provide a clear project-level total cost or completed financing plan.