The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Notes to Consolidated Financial Statements
(unaudited)
Note 1 — Background and Basis of Presentation
NextDecade Corporation engages in development activities related to the liquefaction and sale of liquefied natural gas (“LNG”) and the reduction of CO2 emissions. We have focused and continue to focus our development activities on the Rio Grande LNG terminal facility at the Port of Brownsville in southern Texas (the “Terminal”) and a carbon capture and storage project at the Terminal (the “CCS project”).
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. In our opinion, all adjustments, consisting only of normal recurring items, which are considered necessary for a fair presentation of the unaudited consolidated financial statements, have been included. The results of operations for the three months ended September 30, 2021 are not necessarily indicative of the operating results for the full year.
Note 2 — Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Prepaid subscriptions
|
|
$
|
203
|
|
|
$
|
29
|
|
Prepaid insurance
|
|
|
389
|
|
|
|
314
|
|
Prepaid marketing and sponsorships
|
|
|
60
|
|
|
|
60
|
|
Other
|
|
|
231
|
|
|
|
267
|
|
Total prepaid expenses and other current assets
|
|
$
|
883
|
|
|
$
|
670
|
|
Note 3 — Sale of Equity Interests in Rio Bravo
On March 2, 2020, NextDecade LLC closed the transactions (the “Closing”) contemplated by that certain Omnibus Agreement, dated February 13, 2020, with Spectra Energy Transmission II, LLC, a wholly owned subsidiary of Enbridge Inc. (“Buyer”), pursuant to which NextDecade LLC sold one hundred percent of the equity interests (the “Equity Interests”) in Rio Bravo Pipeline Company, LLC (“Rio Bravo”) to Buyer for consideration of approximately $19.4 million. Buyer paid $15.0 million of the Purchase Price to NextDecade LLC at the Closing and the remainder will be paid within five business days after the date that Rio Grande has received, after a final positive investment decision, the initial funding of financing for the development, construction and operation of the Terminal. Rio Bravo is developing a proposed interstate natural gas pipeline (the “Pipeline”) to supply natural gas to the Terminal. In connection with the Closing, Rio Grande LNG Gas Supply LLC, an indirect wholly-owned subsidiary of the Company (“Rio Grande Gas Supply”), entered into (i) a Precedent Agreement for Firm Natural Gas Transportation Service for the Rio Bravo Pipeline (the “RBPL Precedent Agreement”) with Rio Bravo and (ii) a Precedent Agreement for Natural Gas Transportation Service (the “VCP Precedent Agreement”) with Valley Crossing Pipeline, LLC (“VCP”). VCP and, as of the Closing, Rio Bravo are wholly owned subsidiaries of Enbridge Inc. The Valley Crossing Pipeline is owned and operated by VCP.
Pursuant to the RBPL Precedent Agreement, Rio Bravo agreed to provide Rio Grande Gas Supply with firm natural gas transportation services on the Pipeline in a quantity sufficient to match the full operational capacity of each proposed liquefaction train of the Terminal. Rio Bravo’s obligation to construct, install, own, operate and maintain the Pipeline is conditioned on its receipt, no later than December 31, 2023, of notice that Rio Grande Gas Supply or its affiliate has issued a full notice to proceed to the engineering, procurement and construction contractor (the “EPC Contractor”) for the construction of the Terminal. Under the RBPL Precedent Agreement, in consideration for the provision of such firm transportation services, Rio Bravo will be remunerated on a dollar-per-dekatherm, take-or-pay basis, subject to certain adjustments, over a term of at least twenty years, all in compliance with the federal and state authorizations associated with the Pipeline.
Pursuant to the VCP Precedent Agreement, VCP agreed to provide Rio Grande Gas Supply with natural gas transportation services on the Valley Crossing Pipeline in a quantity sufficient to match the commissioning requirements of each proposed liquefaction train of the Terminal. VCP’s obligation to construct, install, own, operate and maintain the necessary interconnection to the Terminal and the Pipeline is conditioned on its receipt, no later than December 31, 2023, of notice that Rio Grande Gas Supply or its affiliate has issued a full notice to proceed to the EPC Contractor for the construction of the Terminal. VCP will be responsible, at its sole cost and expense, to construct, install, own, operate and maintain the tap, riser and valve facilities (the “VCP Transporter Facilities”), which shall connect to Rio Grande Gas Supply’s custody transfer meter and such other facilities as necessary in order for the Terminal to receive gas from the VCP Transporter Facilities (the “Rio Grande Gas Supply Facilities”). Rio Grande Gas Supply will be responsible, at its sole cost and expense, to construct, install, own, operate and maintain the Rio Grande Gas Supply Facilities. Under the VCP Precedent Agreement, in consideration for the provision of the commissioning transportation services, VCP will be remunerated on the same dollar-per-dekatherm, take-or-pay basis as set forth in the RBPL Precedent Agreement for the duration of such commissioning services, all in compliance with the federal and state authorizations associated with the Valley Crossing Pipeline.
If Rio Grande or its affiliate fails to issue a full notice to proceed to the EPC Contractor on or prior to December 31, 2023, Buyer has the right to sell the Equity Interests back to NextDecade LLC and NextDecade LLC has the right to repurchase the Equity Interests from Buyer, in each case at a price not to exceed $23 million. Accordingly, the proceeds from the sale of the Equity Interests and additional costs incurred by Buyer are presented as a non-current liability and the assets of Rio Bravo have not been de-recognized in the consolidated balance sheet at September 30, 2021.
Note 4 — Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Fixed Assets
|
|
|
|
|
|
|
|
|
Computers
|
|
$
|
487
|
|
|
$
|
487
|
|
Furniture, fixtures, and equipment
|
|
|
464
|
|
|
|
464
|
|
Leasehold improvements
|
|
|
101
|
|
|
|
101
|
|
Total fixed assets
|
|
|
1,052
|
|
|
|
1,052
|
|
Less: accumulated depreciation
|
|
|
(797
|
)
|
|
|
(660
|
)
|
Total fixed assets, net
|
|
|
255
|
|
|
|
392
|
|
Project Assets (not placed in service)
|
|
|
|
|
|
|
|
|
Terminal
|
|
|
149,160
|
|
|
|
140,253
|
|
Pipeline
|
|
|
21,016
|
|
|
|
21,017
|
|
Total Terminal and Pipeline assets
|
|
|
170,176
|
|
|
|
161,270
|
|
Total property, plant and equipment, net
|
|
$
|
170,431
|
|
|
$
|
161,662
|
|
Depreciation expense was $43 thousand and $65 thousand for the three months ended September 30, 2021 and 2020, respectively, and $136 thousand and $146 thousand for the nine months ended September 30, 2021 and 2020, respectively.
Note 5 — Leases
Our leased assets primarily consist of office space and land sites.
Operating lease right-of-use assets are as follows (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Office leases
|
|
$
|
727
|
|
|
$
|
429
|
|
Total operating lease right-of-use assets, net
|
|
$
|
727
|
|
|
$
|
429
|
|
Operating lease liabilities are as follows (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Office leases
|
|
$
|
579
|
|
|
$
|
432
|
|
Total current lease liabilities
|
|
$
|
579
|
|
|
$
|
432
|
|
Non-current office leases
|
|
|
169
|
|
|
|
—
|
|
Total lease liabilities
|
|
$
|
748
|
|
|
$
|
432
|
|
Operating lease expense is as follows (in thousands):
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Office leases
|
|
$
|
156
|
|
|
$
|
238
|
|
|
$
|
470
|
|
|
$
|
691
|
|
Land leases
|
|
|
—
|
|
|
|
113
|
|
|
|
—
|
|
|
|
332
|
|
Total operating lease expense
|
|
|
156
|
|
|
|
351
|
|
|
|
470
|
|
|
|
1,023
|
|
Short-term lease expense
|
|
|
84
|
|
|
|
72
|
|
|
|
208
|
|
|
|
249
|
|
Land option expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
Total land option and lease expense
|
|
$
|
240
|
|
|
$
|
423
|
|
|
$
|
678
|
|
|
$
|
1,281
|
|
Maturity of operating lease liabilities as of September 30, 2021 are as follows (in thousands, except lease term and discount rate):
2021 (remaining)
|
|
$
|
115
|
|
2022
|
|
|
690
|
|
2023
|
|
|
—
|
|
2024
|
|
|
—
|
|
2025
|
|
|
—
|
|
Thereafter
|
|
|
—
|
|
Total undiscounted lease payments
|
|
|
805
|
|
Discount to present value
|
|
|
(57
|
)
|
Present value of lease liabilities
|
|
$
|
748
|
|
|
|
|
|
|
Weighted average remaining lease term - years
|
|
|
1.2
|
|
Weighted average discount rate - percent
|
|
|
12.0
|
|
Other information related to our operating leases is as follows (in thousands):
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for amounts included in the measurement of operating lease liabilities:
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
$
|
509
|
|
|
$
|
600
|
|
Noncash right-of-use assets recorded for operating lease liabilities:
|
|
|
|
|
|
|
|
|
In exchange for new operating lease liabilities during the period
|
|
|
712
|
|
|
|
605
|
|
Note 6 — Other Non-Current Assets
Other non-current assets consisted of the following (in thousands)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Permitting costs(1)
|
|
$
|
7,409
|
|
|
$
|
7,385
|
|
Enterprise resource planning system, net
|
|
|
743
|
|
|
|
1,805
|
|
Rio Grande Site Lease initial direct costs
|
|
|
11,751
|
|
|
|
7,109
|
|
Total other non-current assets, net
|
|
$
|
19,903
|
|
|
$
|
16,299
|
|
(1)
|
Permitting costs primarily represent costs incurred in connection with permit applications to the United States Army Corps of Engineers and the U.S. Fish and Wildlife Service for mitigation measures for potential impacts to wetlands and habitat that may be caused by the construction of the Terminal and the Pipeline.
|
Note 7 — Accrued Liabilities and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Employee compensation expense
|
|
$
|
3,725
|
|
|
$
|
14
|
|
Terminal costs
|
|
|
996
|
|
|
|
650
|
|
Accrued legal services
|
|
|
42
|
|
|
|
5
|
|
Other accrued liabilities
|
|
|
543
|
|
|
|
363
|
|
Total accrued liabilities and other current liabilities
|
|
$
|
5,306
|
|
|
$
|
1,032
|
|
Note 8 – Preferred Stock and Common Stock Warrants
Preferred Stock
In August 2018, we sold an aggregate of 50,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock), at $1,000 per share for an aggregate purchase price of $50 million and we issued an additional 1,000 shares of Series A Preferred Stock in aggregate as origination fees to the purchasers of the Series A Preferred Stock.
In September 2018, we sold an aggregate of 29,055 shares of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), at $1,000 per share for an aggregate purchase price of $29.055 million and we issued an additional 581 shares of Series B Preferred Stock in aggregate as origination fees to the purchasers of the Series B Preferred Stock.
In May 2019, we sold an aggregate of 20,945 shares of Series B Preferred Stock at $1,000 per share for an aggregate purchase price of $20.945 million and we issued an additional 418 shares of Series B Preferred Stock in aggregate as origination fees to the purchasers of such shares of Series B Preferred Stock.
In March 2021, we sold an aggregate of 24,500 shares of Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock” and, together with the Series A Preferred Stock and the Series B Preferred Stock, the “Convertible Preferred Stock”), at $1,000 per share for an aggregate purchase price of $24.5 million and we issued an additional 490 shares of Series C Preferred Stock in aggregate as origination fees to the purchasers of the Series C Preferred Stock.
In April 2021, we sold 10,000 shares of Series C Preferred Stock, at $1,000 per share for a purchase price of $10 million and we issued an additional 200 shares of Series C Preferred Stock as an origination fee to the purchaser of the Series C Preferred Stock.
In July 2021, we sold 5,000 shares of Series C Preferred Stock, at $1,000 per share for a purchase price of $5 million and we issued an additional 100 shares of Series C Preferred Stock as an origination fee to the purchaser of the Series C Preferred Stock.
Warrants, exercisable for Company common stock, were issued together with the shares of Convertible Preferred Stock (collectively, “Common Stock Warrants”).
The shares of Convertible Preferred Stock bear dividends at a rate of 12% per annum, which are cumulative and accrue daily from the respective dates of issuance on the $1,000 stated value. Such dividends are payable quarterly and may be paid in cash or in-kind. During the nine months ended September 30, 2021 and 2020, the Company paid-in-kind $13.0 million and $10.5 million of dividends, respectively, to the holders of the Convertible Preferred Stock. On October 12, 2021, the Company declared dividends to the holders of the Convertible Preferred Stock as of the close of business on September 15, 2021. On October 15, 2021, the Company paid-in-kind $5.3 million of dividends to the holders of the Convertible Preferred Stock.
As of September 30, 2021, shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock were convertible into shares of Company common stock at a weighted average conversion price of $6.54 per share, $6.57 per share and $3.29 per share, respectively.
Initial Fair Value Allocation
Net proceeds from the sales of Series C Preferred Stock were allocated on a fair value basis to the warrants issued together with the shares of the Series C Preferred Stock and on a relative fair value basis to the Series C Preferred Stock. The allocation of net cash proceeds from the sale of Series C Preferred Stock is as follows (in thousands):
|
|
|
|
|
|
Allocation of Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
Series C
|
|
|
|
|
|
|
|
Series C
|
|
|
Preferred
|
|
|
|
|
|
|
|
Warrants
|
|
|
Stock
|
|
Gross proceeds
|
|
$
|
39,500
|
|
|
|
|
|
|
|
|
|
Equity issuance costs
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
Net proceeds - Initial Fair Value Allocation
|
|
$
|
39,439
|
|
|
$
|
1,631
|
|
|
$
|
37,808
|
|
Per balance sheet upon issuance
|
|
|
|
|
|
$
|
1,631
|
|
|
$
|
37,808
|
|
Common Stock Warrants
The Company revalues the Common Stock Warrants at each balance sheet date and recognized a gain of $4.4 million and a loss of $1.6 million during the three months ended September 30, 2021 and 2020, respectively, and a loss of $2.4 million and a gain of $6.1 million during the nine months ended September 30, 2021 and 2020, respectively. The Common Stock Warrant liabilities are included in Level 3 of the fair value hierarchy.
The Company used a Monte Carlo simulation model to estimate the fair value of the Common Stock Warrants using the following assumptions:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Stock price
|
|
$
|
2.78
|
|
|
$
|
2.09
|
|
Exercise price
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Risk-free rate
|
|
|
0.5
|
%
|
|
|
0.1
|
%
|
Volatility
|
|
|
58.2
|
%
|
|
|
58.6
|
%
|
Term (years)
|
|
|
1.9
|
|
|
|
0.8
|
|
Beneficial Conversion Feature
ASC 470-20-20 – Debt – Debt with conversion and Other Options (“ASC 470-20”) defines a beneficial conversion feature (“BCF”) as a nondetachable conversion feature that is in the money at the issuance date. The Company was required by ASC 470-20 to allocate a portion of the proceeds from the Series A Preferred Stock equal to the intrinsic value of the BCF to additional paid-in capital. The Company is recording the accretion of the $2.5 million Series A Preferred Stock discount attributable to the BCF as a deemed dividend using the effective yield method over the period prior to the expected conversion date.
Note 9 — Stockholders' Equity
Common Stock Purchase Agreement
On October 24, 2019, the Company entered into a Common Stock Purchase Agreement with Ninteenth Investment Company LLC, an affiliate of Mubadala Investment Company PJSC (the “Purchaser”). During the three and nine months ended September 30, 2021, the Company issued an additional 399 thousand and 798 thousand shares of Company common stock, respectively, to the Purchaser pursuant to the terms of the Common Stock Purchase Agreement.
At-the-Market Program
In August 2021, the Company entered into an at-the-market sales agreement with Virtu Americas LLC (“Virtu”) pursuant to which the Company may sell shares of Company common stock from time to time through Virtu acting as sales agent, for aggregate proceeds of up to $50 million. During the three and nine months ended September 30, 2021, the Company sold approximately 0.1 million shares for proceeds of approximately $0.4 million.
Common Stock Warrants
During the three months ended September 30, 2021, Common Stock Warrants were exercised by certain holders of Series A Preferred Stock and Series B Preferred Stock. In connection with the exercises of Common Stock Warrants, the Company issued an aggregate of approximately 1.5 million shares of Company common stock.
Note 10 — Net Loss Per Share
The following table (in thousands, except for loss per share) reconciles basic and diluted weighted average common shares outstanding for each of the three and nine months ended September 30, 2021 and 2020:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
119,374
|
|
|
|
117,564
|
|
|
|
118,677
|
|
|
|
117,450
|
|
Dilutive unvested stock, convertible preferred stock, Common Stock Warrants and IPO Warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Diluted
|
|
|
119,374
|
|
|
|
117,564
|
|
|
|
118,677
|
|
|
|
117,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share attributable to common stockholders
|
|
$
|
(0.03
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.19
|
)
|
Potentially dilutive securities not included in the diluted net loss per share computations because their effect would have been anti-dilutive were as follows (in thousands):
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Unvested stock (1)
|
|
|
1,831
|
|
|
|
848
|
|
|
|
1,581
|
|
|
|
993
|
|
Convertible preferred stock
|
|
|
34,095
|
|
|
|
16,869
|
|
|
|
29,174
|
|
|
|
16,386
|
|
Common Stock Warrants
|
|
|
2,510
|
|
|
|
1,979
|
|
|
|
2,486
|
|
|
|
1,972
|
|
IPO Warrants(2)
|
|
|
12,082
|
|
|
|
12,082
|
|
|
|
12,082
|
|
|
|
12,082
|
|
Total potentially dilutive common shares
|
|
|
50,518
|
|
|
|
31,778
|
|
|
|
45,323
|
|
|
|
31,433
|
|
(1)
|
Does not include 8.3 million shares for each of the three and nine months ended September 30, 2021 and 3.0 million shares for each of the three and nine months ended September 30, 2020, of unvested stock because the performance conditions had not yet been satisfied as of September 30, 2021 and 2020, respectively.
|
(2)
|
The IPO Warrants were issued in connection with our initial public offering in 2015. The IPO Warrants are exercisable at a price of $11.50 per share and expire on July 24, 2022. The Company may redeem the IPO Warrants at a price of $0.01 per IPO Warrant upon 30 days’ notice only if the last sale price of our common stock is at least $17.50 per share for any 20 trading days within a 30 trading day period. If the Company redeems the IPO Warrants in this manner, the Company will have the option to do so on a cashless basis with the issuance of an economically equivalent number of shares of Company common stock.
|
Note 11 — Share-based Compensation
We have granted shares of Company common stock, restricted Company common stock and restricted stock units to employees, consultants and non-employee directors under our 2017 Omnibus Incentive Plan, as amended (the “2017 Plan”).
Total share-based compensation consisted of the following (in thousands):
|
|
Three months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Share-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity awards
|
|
$
|
(3,653
|
)
|
|
$
|
629
|
|
|
$
|
(5,799
|
)
|
|
$
|
(606
|
)
|
Liability awards
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total share-based compensation
|
|
|
(3,653
|
)
|
|
|
629
|
|
|
|
(5,799
|
)
|
|
|
(606
|
)
|
Capitalized share-based compensation
|
|
|
944
|
|
|
|
211
|
|
|
|
228
|
|
|
|
(153
|
)
|
Total share-based compensation expense
|
|
$
|
(2,709
|
)
|
|
$
|
840
|
|
|
$
|
(5,571
|
)
|
|
$
|
(759
|
)
|
Note 12 — Income Taxes
Due to our cumulative loss position, we have established a full valuation allowance against our deferred tax assets at September 30, 2021 and December 31, 2020. Due to our full valuation allowance, we have not recorded a provision for federal or state income taxes during either of the three and nine months ended September 30, 2021 or 2020.
In response to the global pandemic related to COVID-19, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020 and the Consolidated Appropriations Act, 2021 (the “CAA”) on December 27, 2020. The CARES Act and the CAA provide numerous relief provisions for corporate taxpayers, including modification of the utilization limitations on NOLs, favorable expansions of the deduction for business interest expense under Internal Revenue Code Section 163(j), and the ability to accelerate timing of refundable alternative minimum tax credits. For the three and nine months ended September 30, 2021, there were no material tax impacts to our consolidated financial statements from the CARES Act, the CAA or other COVID-19 measures. The Company continues to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.
Note 13 — Commitments and Contingencies
Rio Grande Site Lease
On March 6, 2019, Rio Grande entered into a lease agreement (the “Rio Grande Site Lease”) with the Brownsville Navigation District of Cameron County, Texas (“BND”) for the lease by Rio Grande of approximately 984 acres of land situated in Brownsville, Cameron County, Texas for the purposes of constructing, operating, and maintaining (i) a liquefied natural gas facility and export terminal and (ii) gas treatment and gas pipeline facilities.
On April 30, 2020, Rio Grande and the BND amended the Rio Grande Site Lease (the “Rio Grande Site Lease Amendment”) to extend the effective date for commencing the Rio Grande Site Lease to May 6, 2021 (the “Effective Date”). The Rio Grande Site Lease Amendment further provides that Rio Grande has the right, exercisable in its sole discretion, to extend the Effective Date to May 6, 2022 by providing the BND with written notice of its election no later than the close of business on the Effective Date. On April 28, 2021, Rio Grande delivered a notice to the Port of Brownsville electing to extend the Effective Date of the Rio Grande Site Lease Amendment to May 6, 2022.
In connection with the Rio Grande Site Lease Amendment, Rio Grande is committed to pay approximately $1.5 million per quarter to the BND through the earlier of the Effective Date and lease commencement.
Obligation under LNG Sale and Purchase Agreement
In March 2019, we entered into a 20-year sale and purchase agreement (the “SPA”) with Shell NA LNG LLC (“Shell”) for the supply of approximately two million tonnes per annum of liquefied natural gas from the Terminal. Pursuant to the SPA, Shell will purchase LNG on a free-on-board (“FOB”) basis starting from the date the first liquefaction train of the Terminal that is commercially operable, with approximately three-quarters of the purchased LNG volume indexed to Brent and the remaining volume indexed to domestic United States gas indices, including Henry Hub.
In the first quarter of 2020, pursuant to the terms of the SPA, the SPA became effective upon the conditions precedent in the SPA being satisfied or waived. The SPA obligates Rio Grande to deliver the contracted volumes of LNG to Shell at the FOB delivery point, subject to the first liquefaction train at the Terminal being commercially operable.
Legal Proceedings
From time to time the Company may be subject to various claims and legal actions that arise in the ordinary course of business. As of September 30, 2021, management is not aware of any claims or legal actions that, separately or in the aggregate, are likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows, although the Company cannot guarantee that a material adverse effect will not occur.
Note 14 — Recent Accounting Pronouncements
The following table provides a brief description of recent accounting standards that have not been adopted by the Company as of September 30, 2021:
Standard
|
|
Description
|
|
Expected Date of Adoption
|
|
Effect on our Consolidated Financial Statements or Other Significant Matters
|
ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in Entity's Own Equity
|
|
This standard simplifies the accounting for convertible instruments primarily by eliminating the existing cash conversion and beneficial conversion models within Subtopic 470-20, which will result in fewer embedded conversion options being accounted for separately from the host. This standard also amends and simplifies the calculation of earnings per share relating to convertible instruments.
|
|
January 1, 2022
|
|
We plan to adopt this standard using the modified retrospective approach. Preliminarily, we anticipate the adoption of ASU 2020-06 will not have an effect on our consolidated financial statements.
|
Note 15 — Subsequent Events
The Company has evaluated subsequent events through November 10, 2021, the date the financial statements were issued. Any material subsequent events that occurred during this time have been properly recognized and/or disclosed in these financial statements.