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    NextDecade Pushes Rio Grande FID to 2021


Sufficient liquidity to take company through 2021

by: Dale Lunan

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NextDecade Pushes Rio Grande FID to 2021

US LNG developer NextDecade said May 18 it will delay a final investment decision (FID) on its 27mn mt/yr Rio Grande LNG project in Texas until 2021, citing the state of global LNG markets impacted by the Covid-19 pandemic.

“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 company said in releasing its Q1 2020 financial results.

At the end of the quarter, NextDecade had about $58mn in cash and expects to pay or accrue $72mn for pre-FID development activities in 2020. About $46mn of these costs were accounted for in Q1, and to preserve liquidity for the balance of the year – pre-FID costs are expected to average $2mn/month beginning in Q2 – the company has reduced executive salaries by about 10%, cut its full-time headcount by 18% and furloughed about 14% of its headcount “until it has better clarity on the Covid-19 pandemic’s impact.”

Despite the short-term impacts brought on by Covid-19, NextDecade said the long-term fundamentals of the global LNG market and the Permian and Eagle Ford shale basins that are the main supply sources for Rio Grande LNG have not changed, and it continues to progress opportunities with a number of LNG customers and US producers interested in supplying gas to the project.

NextDecade has secured a 2mn mt/yr sale and purchase agreement with Anglo-Dutch major Shell for a 20-year term and believes it can achieve FID with an additional 9mn mt/yr of LNG sales 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,” CEO Matt Schatzman said. “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.”

During Q1, NextDecade achieved several regulatory milestones, including export authorisations from the US Department of Energy, permits under the US Clean Water Act from the US Army Corps of Engineers and a final notice to proceed from the US Federal Energy Regulatory Commission to commence site preparation activities.

It also closed the sale of the Rio Bravo pipeline to Canada’s Enbridge and received a $15mn cash payment from Enbridge, which has assumed full responsibility for the development of the pipeline. And it has negotiated an extension for the start date of its lease of 984 acres in the Port of Brownsville to May 6, 2021, with an option to extend the effective date to May 6, 2022.