What NextDecade (NEXT) Said on Its Q3 Earnings Call

Key Points

• Rio Grande LNG remains ahead of schedule and on budget: Train 1 is expected to produce its first LNG in Q2 2027, with hydrocarbons introduced before the end of 2026 and substantial completion targeted for Q3 2027. Trains 2 and 3 are also projected to finish about one quarter ahead of their guaranteed schedules.
• Improved LNG market conditions could boost cash flow: NextDecade estimates implied margins on uncontracted ramp-up volumes will average more than $6 per MMBtu, potentially increasing its share of project-level distributable cash flow to over $2.4 billion versus a $2 billion base case.
• Expansion and refinancing plans are progressing: FERC approved higher export capacity for Trains 1–5, while NextDecade targets a positive Train 6 investment decision in H2 2027. The company also refinanced more than $7 billion of project debt and aims for corporate debt of approximately $2 billion to $2.25 billion after Train 5 begins commercial deliveries.

NextDecade NASDAQ: NEXT said construction of its Rio Grande LNG project remained on budget and ahead of schedule in the third quarter, as the company narrowed its timing outlook for first liquefied natural gas production from Train 1 to the second quarter of 2027.

Chairman and Chief Executive Officer Matt Schatzman said the company expects to introduce hydrocarbons into the facility before the end of 2026. He said Train 1 is expected to reach substantial completion in the third quarter of 2027, one quarter ahead of its guaranteed substantial-completion date under the engineering, procurement and construction contract with Bechtel.

Trains 2 and 3 also remain ahead of schedule, according to Schatzman. The company expects both trains to reach substantial completion about one quarter before their guaranteed schedules. During the quarter, Rio Grande LNG installed Train 2's main cryogenic heat exchanger and completed installation and pre-alignment of its compressor strings, while Train 3's first compressor string was set.

Construction and commissioning progress

As of September, Trains 1 and 2 were nearly 80% complete, with engineering and procurement nearly finished, construction almost 70% complete and commissioning approaching 5%, Schatzman said. Train 3 was more than 55% complete, while Train 4 was 22.5% complete and Train 5 was 14% complete.

More than 7,000 workers are on site daily, and more than 70% are local residents, the company said. More than 100 operations personnel seconded to Bechtel are supporting commissioning and startup activities and are expected to remain through the transition to operations.

Other project milestones included completion of site-wide dredging for the berth, turning basin and channel deepening. The gas inlet facilities are ready for startup, and the Bay Runner Pipeline entered service in the third quarter. Tank 1 completed intertank nickel plate welding and its first hydrotest, while piling progressed on Tanks 3 and 4.

LNG market outlook and early volumes

Schatzman said current LNG market conditions have strengthened following supply losses from the Middle East. Based on current forward LNG and U.S. natural-gas prices, the company estimates volume-weighted implied margins on projected uncontracted volumes from Train 1 startup through the first commercial deliveries under Train 5's long-term sales agreements will average more than $6 per MMBtu.

That estimate includes the effect of 175 TBtu of volumes sold forward in the first quarter. It is more than $1 per MMBtu above NextDecade's base-case guidance of $5 per MMBtu, according to management.

At those implied margins, NextDecade said its share of Rio Grande LNG project-level distributable cash flow during the ramp-up period could exceed $2.4 billion, compared with its base-case estimate of about $2 billion. The company said each $1-per-MMBtu change in weighted average margins during the period would alter its projected share of distributable cash flow by roughly $350 million to $400 million.

Management said it remains comfortable retaining exposure to uncontracted ramp-up volumes rather than selling additional volumes forward. Schatzman said the company expects to have approximately 1,100 TBtu of available uncontracted volumes over the ramp-up period, including roughly 700 TBtu from the first quarter of 2029 through the second quarter of 2031.

While the company has already sold 175 TBtu at margins above $3 per MMBtu, Schatzman said those sales are included in the company's more than $6-per-MMBtu weighted-average margin estimate and do not carry the same margin as the current forward-curve estimate.

Train 6, future expansion and permitting

NextDecade reported regulatory progress for its expansion plans. The Federal Energy Regulatory Commission approved an uprate request for Trains 1 through 5, authorizing LNG exports of up to 30.15 million tonnes per annum. For Train 6, FERC's final environmental impact statement is expected in June 2027, and the U.S. Army Corps of Engineers authorized a key construction permit during the third quarter.

The company is in discussions with multiple high-credit-quality counterparties on long-term Train 6 offtake agreements and is targeting a positive final investment decision in the second half of 2027. Schatzman said customer interest has increased amid energy-security concerns and supply diversification efforts.

Management said long-term contract pricing remains in a range that could support Train 6 returns at least as strong as those for Trains 4 and 5. The company expects to retain a substantial economic interest in Train 6, though it may consider a joint venture with a strategic LNG offtaker.

NextDecade also selected the western portion of its site for Trains 7 and 8 and expects to pre-file with FERC before year-end. Schatzman said Trains 7 and 8 would be developed together as a standalone two-train project, roughly one year behind Train 6 in permitting and development. Potential Trains 9 and 10 would be located on the eastern side of the site.

Debt refinancing and leverage plans

Chief Financial Officer John Zuklic said Rio Grande LNG issued about $4.1 billion of senior secured notes during the third quarter as NextDecade continued to refinance project-level bank debt. The company has now refinanced more than $7 billion, or 60%, of the $11.1 billion of initial Phase I bank-facility capacity, leaving approximately $700 million drawn as of Sept. 30.

In July, Rio Grande LNG issued $3.5 billion of senior secured notes in an inaugural 144A offering, with maturities from 2031 through 2041 and fixed rates ranging from 5.15% to 6.15%. The offering was four times oversubscribed, Zuklic said. In September, the project issued an additional $575 million of senior secured notes bearing 6.72% interest and maturing in December 2047.

NextDecade reiterated its target for steady-state debt at the corporate level of approximately $2 billion to $2.25 billion after Train 5's commercial-delivery milestone, expected in the second quarter of 2031. Zuklic said cash flows generated during the ramp-up period are intended first to reduce FinCo debt and then to address SuperFinCo interest and principal.

The company said it expects to use a combination of project-level non-recourse debt, FinCo capacity and potentially equity or convertible instruments to fund Train 6, while seeking to maximize shareholder value.

About NextDecade (NASDAQ:NEXT)

NextDecade Corporation is an energy company focused on developing liquefied natural gas (LNG) infrastructure and related carbon-management solutions. The company's principal project is Rio Grande LNG, an LNG export facility located near Brownsville, Texas, on the U.S. Gulf Coast.

Rio Grande LNG is designed to receive natural gas, process it into LNG, and export the product by ship to customers in international markets. The project is being developed in multiple phases and is intended to serve energy markets in Europe, Asia and other regions seeking access to U.S.

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