NextDecade Sees First LNG in Q2 2027, Projects Over $2.4 Billion in Ramp-Up Cash Flow

NextDecade Corporation (NASDAQ: NEXT) said construction of the first five trains at its Rio Grande LNG facility remains on budget, with Phase 1 ahead of its guaranteed schedule as the company prepares to introduce first gas in the fourth quarter of 2026. Train 1 is expected to produce its first LNG in the second quarter of 2027 and reach substantial completion in the third quarter, one quarter earlier than the guaranteed date.

The Q3 2026 update also projected more than $2.4 billion as NextDecade’s share of Rio Grande LNG project-level distributable cash flow during the ramp-up period from Train 1 startup in 2027 through the first commercial deliveries under Train 5 contracts in the second quarter of 2031. The projection is a non-GAAP measure based on management’s production estimates, completed sales and market forward curves as of October 22.

Construction and commissioning advance

Commissioning of Train 1’s electrical, mechanical and utility systems is progressing, while installation and pre-alignment of Train 2’s compressor string has been completed and its main cryogenic heat exchanger installed. The first compressor string for Train 3 has also been set.

Work on the later trains continued during the quarter. Train 4 began foundation pours for its main cryogenic rack and excavation of its main refrigeration area, while soil stabilization started at Train 5. NextDecade said construction across Trains 1-5 is proceeding safely and within budget.

Site infrastructure also advanced. The first hydrotest of Tank 1 was completed, piling and civil work continued at Tank 3, and piling began at Tank 4. Dredging for the berths, turning basin and channel deepening has been completed. Gas inlet facilities were ready for startup, and the Bay Runner pipeline entered service during Q3.

The company expects first gas to enter the facility in the fourth quarter of 2026. Trains 2 and 3 are also expected to achieve substantial completion about one quarter ahead of their guaranteed schedules.

Market margins support ramp-up cash-flow projection

NextDecade estimated a volume-weighted average implied market margin of more than $6 per MMBtu for unsold production during the ramp-up period, compared with the $5 per MMBtu assumption in its base-case guidance. That implies projected cash flow more than 20% above the base case, or over $400 million of additional cash flow attributable to NextDecade.

Each $1 per MMBtu change in the average implied market margin would affect the company’s projected share of project-level distributable cash flow by approximately $350 million to $400 million over the ramp-up period.

NextDecade has sold more than 175 trillion British thermal units of portfolio volumes year to date on a free-on-board basis at a fixed liquefaction fee, with an estimated margin above $3 per MMBtu. The company said additional sales could be completed closer to the start of Train 1 operations.

About 85% of the expected production capacity from the first five trains is covered by long-term LNG sale and purchase agreements with fixed liquefaction fees. NextDecade said current forward curves support its goal of reducing a significant portion of the term loans used to fund its Train 4 and Train 5 equity commitments. It does not currently expect that additional long-term agreements for those trains will be required to meet its leverage target.

The company reaffirmed its existing steady-state guidance. Under assumptions including $5 per MMBtu margins on early and steady-state uncontracted volumes, it projects annual NextDecade distributable cash flow of about $500 million after all five trains begin contracted deliveries, increasing to approximately $800 million after changes in the economic interests of Trains 4 and 5. The timing of those changes depends on project costs, equity funding, commissioning revenue, pre-contract delivery revenue and production volumes.

Debt refinancing and expansion plans

NextDecade continued to replace project-level bank facilities with longer-term debt. More than 60% of the initial capacity under the Phase 1 bank facilities has been refinanced, including $4.1 billion of senior secured notes issued during Q3. Since the Phase 1 final investment decision in July 2023, the company has termed out more than $7 billion through senior secured notes and loans.

About $700 million remained drawn under the Phase 1 bank facilities as of September 30. The Train 4 bank facility had approximately $900 million drawn, while the Train 5 facility remained undrawn. NextDecade plans to access debt markets opportunistically to refinance additional project-level bank debt before term conversion.

At the corporate level, NextDecade continues to target debt of approximately $2 billion to $2.25 billion at the beginning of five-train steady-state operations. That measure excludes debt held at project and project-holding-company entities.

Regulatory work also progressed. The Federal Energy Regulatory Commission approved an uprate for Trains 1-5, increasing authorized liquefaction capacity to 30.15 million tonnes per annum. For Train 6, FERC expects to issue its final environmental impact statement in June 2027, while the U.S. Army Corps of Engineers granted permit authorization in September.

NextDecade is targeting completion of the engineering, procurement and construction contract, commercialization and financing needed to support a positive final investment decision on Train 6 in the second half of 2027. It also expects to pre-file with FERC for Trains 7 and 8 in the fourth quarter of 2026. Any expansion decision remains subject to permits, commercial support and financing.

The outlook remains exposed to construction timing and costs, commissioning performance, regulatory approvals, access to financing and the ability of contractors and infrastructure providers to complete their work. Projected cash flow also depends on LNG and natural-gas prices, shipping and fuel costs, production levels and the availability of distributions from the project joint ventures. The company cautioned that its forward-looking non-GAAP projections are based on internal assumptions and are not guarantees of future performance.