HOUSTON (BUSINESS WIRE) — May 18, 2020 — 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 and associated pipelines in Texas. NextDecade intends to develop the largest LNG export solution linking Permian Basin associated 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 Brownsville, Texas and the 4.5 Bcf/d Rio Bravo Pipeline that would transport natural gas from the Agua Dulce area to Rio Grande LNG. 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; government approval of construction and operation of NextDecade’s Rio Grande LNG and Rio Bravo Pipeline projects terminal at the Port of Brownsville in southern Texas (the “Terminal”) and an associated 137-mile pipeline to supply gas to the Terminal (the “Pipeline” and together with the Terminal, the “Project”) and the timing of that approval; the successful completion of the Project by third-party contractors; our ability to secure additional debt and equity financing in the future to complete the Project; the accuracy of estimated costs for the Project; statements that the Project, when completed, will have certain characteristics, including amounts of liquefaction capacities; 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; negotiations for the Terminal site lease and right-of-way options for the Pipeline route; changes in legislation and regulations relating to the LNG industry, including environmental laws and regulations that impose significant compliance costs and liabilities; risks related to doing business in and having counterparties in foreign countries; 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, 2018 and other subsequent reports filed with the Securities and Exchange Commission, all of which are incorporated herein by reference.
Additionally, any development of the Project 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.
About Enbridge Inc.
Enbridge Inc. is a leading North American energy infrastructure company. We safely and reliably deliver the energy people need and want to fuel quality of life. Our core businesses include Liquids Pipelines, which transports approximately 25 percent of the crude oil produced in North America; Gas Transmission and Midstream, which transports approximately 20 percent of the natural gas consumed in the U.S.; and Utilities and Power Operations, which serves approximately 3.7 million retail customers in Ontario and Quebec, and generates approximately 1,750 MW of net renewable power in North America and Europe. The Company’s common shares trade on the Toronto and New York stock exchanges under the symbol ENB. For more information, visit www.enbridge.com
Enbridge Forward-Looking Information
Forward-looking information, or forward-looking statements, have been included in this press release to provide information about Enbridge and its subsidiaries and affiliates, including management’s assessment of Enbridge and its subsidiaries’ future plans and operations. This information may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as ”anticipate”, ”expect”, ”project”, ”estimate”, ”forecast”, ”plan”, ”intend”, ”target”, ”believe”, “likely” and similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information or statements included in this press release include, but are not limited to, statements with respect to NextDecade’s Rio Grande LNG and Rio Bravo Pipeline projects terminal at the Port of Brownsville in southern Texas (the “Terminal”) and an associated 137-mile pipeline to supply gas to the Terminal (the “Pipeline” and together with the Terminal, the “Project”), including the acquisition of RBPL by Enbridge; the benefits, risks, costs and timing of the transaction and the Project; and the expected capacity and characteristics of the Pipeline.
Although Enbridge believes these forward-looking statements are reasonable based on the information available on the date such statements are made and processes used to prepare the information, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Assumptions regarding the expected supply of and demand for crude oil, natural gas and LNG, and the prices of these commodities, are material to and underlie all forward-looking statements, as they may impact current and future levels of demand for Enbridge’s services and for the Project. Similarly, exchange rates, inflation and interest rates impact the economies and business environments in which Enbridge operates and may impact levels of demand for Enbridge’s services and the Project and cost of inputs and are therefore inherent in all forward-looking statements. Due to the interdependencies and correlation of these macroeconomic factors, the impact of any one assumption on a forward-looking statement cannot be determined with certainty. The most relevant assumptions associated with forward-looking statements on announced projects and projects under construction, including estimated completion dates and expected capital expenditures, include the following: the impact of customer, government and regulatory approvals on construction and in-service schedules and cost recovery regimes; the availability and price of labour and construction materials; the effects of inflation and foreign exchange rates on labour and material costs; the effects of interest rates on borrowing costs; the impact of weather; and the ability of our joint venture partners to complete and finance proposed projects, including the Terminal.
Enbridge’s forward-looking statements are subject to risks and uncertainties, including, but not limited to those risks and uncertainties discussed in this press release and in Enbridge’s other filings with Canadian and United States securities regulators. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent and Enbridge’s future course of action depends on management’s assessment of all information available at the relevant time. Except to the extent required by applicable law, Enbridge assumes no obligation to publicly update or revise any forward-looking statements made in this news release or otherwise, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to Enbridge or persons acting on Enbridge’s behalf, are expressly qualified in their entirety by these cautionary statements.
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