NextDecade Corporation (NextDecade or the Company) (NASDAQ:
NEXT) today reported its first quarter 2020 results. The Company is
also confirming its strong financial position and providing an
update on progress made during 2020.
NextDecade continues to advance and de-risk its Rio Grande LNG
project (RGLNG). 2020 highlights through April include:
- Received additional regulatory permits for RGLNG.
- Received approval from the Federal Energy Regulatory Commission
(FERC) for notice to proceed: RGLNG shovel ready.
- Sold Rio Bravo Pipeline Company, LLC to Enbridge, Inc.
(Enbridge).
- Extended RGLNG engineering, procurement, and construction (EPC)
contract price validity with Bechtel Oil, Gas and Chemicals, Inc.
(Bechtel).
- Completed hazard and operability (HAZOP) study on RGLNG and
engineering is now 16 percent complete.
- Extended the commencement date of the RGLNG Port of Brownsville
lease agreement.
The COVID-19 pandemic is affecting current liquefied natural gas
(LNG) market conditions and a final investment decision (FID) for
RGLNG is now expected in 2021. Considering this change in the
expected timing of FID, NextDecade has implemented measures to
manage costs which the Company believes will ensure that it has
sufficient pre-FID liquidity to operate through year-end 2021.
The long-term fundamentals of the global LNG market and the
Permian and Eagle Ford producing basins that will supply RGLNG have
not changed. NextDecade continues to progress LNG opportunities
with a significant number of prospective LNG customers that reflect
the global nature of the LNG business and with U.S. producers
interested in supplying natural gas to RGLNG.
Currently, RGLNG has a 2 million tonnes per annum (mtpa),
20-year sale and purchase agreement with Shell. NextDecade believes
it can achieve FID with an additional 9 mtpa of RGLNG capacity sold
under long-term contracts.
“Our balance sheet is strong, we have no debt outstanding, and
the long-term fundamentals for our Rio Grande LNG project remain
firmly intact,” said Matt Schatzman, NextDecade’s Chairman and
Chief Executive Officer. “This solid foundation, together with our
sustained regulatory, engineering and commercial progress,
positions the Company and our Rio Grande LNG project extremely well
for when global market conditions improve.”
Regulatory Progress
RGLNG achieved several key regulatory milestones during the
first quarter of 2020 and RGLNG is now shovel ready:
- On January 23, the FERC issued a final order denying requests
for rehearing.
- On February 10, the U.S. Department of Energy (DOE) issued an
order authorizing LNG exports from RGLNG to nations with which the
U.S. does not have free trade agreements (non-FTA). The DOE issued
the FTA order in August 2016.
- On February 21, the U.S. Army Corps of Engineers issued a
permit under Section 404 of the Clean Water Act.
- On March 6, the FERC issued a notice to proceed authorizing
RGLNG to commence full site preparation activities.
Rio Bravo Pipeline Company
On February 13, 2020, NextDecade entered into an agreement to
sell 100 percent of the equity interests in Rio Bravo Pipeline
Company, LLC to a wholly owned subsidiary of Enbridge for a
purchase price not to exceed $25.0 million. The transaction closed
on March 2, 2020. At closing, NextDecade received a $15.0 million
cash payment from Enbridge, and Enbridge assumed all responsibility
for the development, financing, and operations of Rio Bravo
Pipeline.
On March 2, 2020, NextDecade entered into precedent agreements
with Enbridge that provide NextDecade with rate, volume, and
schedule certainty consistent with NextDecade’s plans to develop,
finance, and operate RGLNG. Pursuant to the agreements, Enbridge
will provide natural gas pipeline transportation services on Rio
Bravo Pipeline and Valley Crossing Pipeline to supply natural gas
to the RGLNG facility for a term of at least 20 years.
Engineering, Procurement and Construction Contract Price
Validity Extension
Pursuant to the lump-sum turnkey EPC contracts executed with
Bechtel in May 2019, the EPC contracts’ prices were valid until
April 22, 2020, subject to certain agreed-upon adjustments set
forth in the contracts. On April 22, 2020, Bechtel agreed to extend
the price validity of the EPC contracts to July 31, 2020.
NextDecade and Bechtel continue to progress engineering and
procurement activities for RGLNG. Bechtel completed the initial
engineering and procurement work (LNTP-1) at the end of December
2019 and, at the direction of NextDecade, began additional
engineering and procurement work (LNTP-2) on January 1, 2020.
Bechtel completed the LNTP-2 work in April 2020 and engineering is
now 16 percent complete. During LNTP-1 and LNTP-2, NextDecade and
Bechtel completed all pre-FID engineering and procurement work for
RGLNG which will enable the placement of major equipment orders and
the award of subcontracts immediately following FID. NextDecade and
Bechtel have agreed to a limited scope of ongoing work (LNTP-3)
which will provide for continued engineering progress for
RGLNG.
Among the significant engineering and design work completed in
recent months is the HAZOP study. The completion of the HAZOP
study, prior to FID and prior to mobilization, significantly
reduces cost and schedule risks for NextDecade and Bechtel.
RGLNG Site Lease Extension
On April 30, 2020, RGLNG and the Brownsville Navigation District
of Cameron County, Texas amended their lease agreement. The lease
amendment extends the effective date for commencing the lease to
May 6, 2021, and further provides that RGLNG has the right to
extend the effective date to May 6, 2022. The lease amendment
provides RGLNG with continued control of the 984-acre site for the
full-scale development of its LNG facility in the Port of
Brownsville, Texas.
Liquidity and Capital Resources
As of March 31, 2020, NextDecade had approximately $58 million
in cash. Current assets less accounts payable and accrued
liabilities totaled approximately $47 million. NextDecade has no
debt outstanding.
In 2020, NextDecade expects to pay or accrue $72 million for
pre-FID development activities in support of RGLNG. Approximately
$46 million of these costs were paid or accrued in the first
quarter of 2020, including: (i) approximately $23 million in
engineering, procurement and permitting activities in support of
the FERC process, including the approval to commence full site
preparation activities; (ii) approximately $6 million for the
acquisition of required environmental mitigation land, and (iii)
approximately $6 million for the payment of 2019 bonus compensation
and one-time information technology costs.
To preserve pre-FID liquidity, NextDecade has implemented
certain measures to manage costs:
- Since December 31, 2019, full-time headcount has decreased by
18 percent. Additionally, in May 2020, NextDecade furloughed 14
percent of its full-time headcount until it has better clarity on
the COVID-19 pandemic’s impact on the current global LNG
market.
- The Chief Executive Officer and certain other members of the
executive team have voluntarily reduced their base salaries by 10
percent for the remainder of 2020.
- NextDecade and Bechtel have agreed to a limited scope of
ongoing work which will provide for continued engineering progress
for RGLNG.
- Over the next few months, NextDecade will reduce its office
space under lease and defer additional information technology
spending until FID is achieved.
NextDecade believes the above-listed measures will ensure that
it can sustain pre-FID development activities through year-end
2021. Beginning in the second quarter of 2020, NextDecade expects
pre-FID development spending to average just over $2 million per
month. NextDecade believes that the measures taken to manage costs
will not negatively affect its ability to successfully deliver
RGLNG and will create value for stockholders.
About NextDecade Corporation
NextDecade is a LNG development company focused on LNG export
projects. NextDecade is developing the largest LNG export solution
linking Permian Basin and Eagle Ford Shale natural gas to the
global LNG market, creating value for producers, customers, and
stockholders. Its portfolio of LNG projects includes the 27 mtpa
Rio Grande LNG export facility in the Port of Brownsville, Texas.
NextDecade’s common stock is listed on the Nasdaq Stock Market
under the symbol “NEXT.” NextDecade is headquartered in Houston,
Texas. For more information, visit www.next-decade.com.
NextDecade Forward-Looking Information
This press release contains forward-looking statements within
the meaning of U.S. federal securities laws. The words
“anticipate,” “contemplate,” “estimate,” “expect,” “project,”
“plan,” “intend,” “believe,” “may,” “might,” “will,” “would,”
“could,” “should,” “can have,” “likely,” “continue,” “design” and
other words and terms of similar expressions are intended to
identify forward-looking statements, and these statements may
relate to the business of NextDecade and its subsidiaries. These
statements have been based on NextDecade’s current assumptions,
expectations, and projections about future events and trends and
involve a number of known and unknown risks, which may cause actual
results to differ materially from expectations expressed or implied
in the forward-looking statements. These risks include
uncertainties about progress in the development of NextDecade’s LNG
liquefaction and export projects and the timing of that progress;
our final investment decision (“FID”) in the construction and
operation of a LNG terminal at the Port of Brownsville in southern
Texas (the “Terminal”) and the timing of that decision; the
successful completion of the Terminal by third-party contractors
and an approximately 137-mile pipeline to supply gas to the
Terminal being developed by a third-party; our ability to secure
additional debt and equity financing in the future to complete the
Terminal; the accuracy of estimated costs for the Terminal;
statements that the Terminal, when completed, will have certain
characteristics, including amounts of liquefaction capacities; the
development risks, operational hazards, regulatory approvals
applicable to the Terminal’s and the third-party pipeline's
construction and operations activities; NextDecade’s anticipated
competitive advantage and technological innovation which may render
its anticipated competitive advantage obsolete; the global demand
for and price of natural gas (versus the price of imported LNG);
the availability of LNG vessels worldwide; changes in legislation
and regulations relating to the LNG industry, including
environmental laws and regulations that impose significant
compliance costs and liabilities; the 2019 novel coronavirus
pandemic and its impact on our business and operating results,
including any disruptions in our operations or development of the
Terminal and the health and safety of our employees, and on our
customers, the global economy and the demand for LNG; risks related
to doing business in and having counterparties in foreign
countries; our ability to maintain the listing of our securities on
a securities exchange or quotation medium; changes adversely
affecting the business in which NextDecade is engaged; management
of growth; general economic conditions; NextDecade’s ability to
generate cash; compliance with environmental laws and regulations;
the result of future financing efforts and applications for
customary tax incentives; and other matters discussed in the “Risk
Factors” section of NextDecade’s Annual Report on Form 10-K for the
year ended December 31, 2019 and other subsequent reports filed
with the Securities and Exchange Commission, all of which are
incorporated herein by reference.
Additionally, any development of the Terminal remains contingent
upon completing required commercial agreements, acquiring all
necessary permits and approval, securing all financing commitments
and potential tax incentives, achieving other customary conditions
and making a final investment decision to proceed. The
forward-looking statements in this press release speak as of the
date of this release. Although NextDecade believes that the
expectations reflected in these forward-looking statements are
reasonable, it can give no assurance that the expectations will
prove to be correct. NextDecade may from time to time voluntarily
update its prior forward-looking statements, however, it disclaims
any commitment to do so except as required by securities laws.
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