Rio Grande LNG has yet to make a penny, millions is debt, and years behind schedule

What has NextDecade been up to?

I'll be focusing here on NextDecade and its many projects (Rio Grande LNG, Rio Bravo Pipeline, Galveston Bay LNG & Pipeline Header System, and its Inisfree FSRU deal with the Irish Port of Cork). It wants to make everyone believe all its projects are done deals. Texas LNG and Annova LNG also want everyone to believe their projects are done deals. NONE OF THEM ARE DONE DEALS. But here let's just look at NextDecade.

Lately, NextDecade proudly announced on 12-12-2018 that the Texas Commission for Environmental Quality had approved a series of air quality permits for its Rio Grande LNG project, on 03-07-2019 that it had executed a site lease for its Rio Grande LNG project, and on 04-01-2019 that Shell had signed a 20 year agreement to buy LNG from the Rio Grande LNG project.

Making Rio Grande LNG look like a Done Deal. BUT it's not.

Why?

Because NextDecade was formed in November 2010, has yet to earn it's first penney of revenue, and has yet to put shovel to ground anywhere. It won't be getting any revenue until it starts producing LNG. It says it will start producing LNG in 2013.

But will it?

NextDecade has a solid history of falling behind schedule.

For example:

Back in March 2015, Rio Grande LNG said it expected FERC approval in February 2017, expected to start construction in June 2017, and expected to be operational by the 4th Quarter of 2020.

Then NextDecade's 2018 Annual Report stated that it had failed to meet three of the four milestone deadline that were included in it's July 2017 merger deal with the Harmony Merger Corporation. In addition, there's no way it can meet the 4th deadline. The deadlines were:

1) Receive a Final Environmental Impact Statement from FERC by 06-30-2018. This is presently scheduled for 04-26-2019.

2) Also sign up a paying LNG customer for at least 1MTPA of LNG by 06-30-2018 (MPTA = Metric Tonnes Per Annum). NextDecade finally achieved this 04-01-2019 in its deal with Shell.

3) Sign a Engineering Procurement Construction company by 12-31-2018 for the construction of Rio Grande LNG. NextDecade now has this scheduled for September 2019 at the latest).

4) To make its Final Investment Decision by 06-30-2019 to build the Rio Grande LNG and Rio Bravo Pipeline projects. But NextDecade now says it will make this Final Investment Decision by September 2019, after sealing the construction deal with a EPC company. [The Annual Report is available at https://www.sec.gov/Archives/edgar/data/1612720/000155837019001591/next-20181231x10k.htm]

In addition, NextDecade is now planning to have its Rio Grande LNG project operational by 2023 instead of by 2020. AND it plans to start with "up to three" of its planned LNG liquefaction production trains. So starting LNG production three years late and at only half capacity (if even).

In addition, it's also falling behind on its proposed Galveston Bay LNG & Pipeline Header System projects. I just checked that project's website today (http://galvestonbaylng.com/). It's still announcing the Jan 16 and Jan 17 Open Houses, same as when it was first launched in December 2018. Also, on 02-13-2019, FERC told NextDecade that Scoping Meetings on the Galveston Bay projects could be scheduled in late March or early April 2019 if NextDecade could give FERC more information on the projects in time (http://elibrary.FERC.gov/idmws/file_list.asp?accession_num=20190313-3064). But apparently NextDecade couldn't provide the information in time, or isn't ready yet to move forward that fast, so the Scoping Meetings have yet to be scheduled. The "anticipated approximate timeline for the project includes: 1) formal application to FERC for the projects by September 2019, 2) FERC approval for the projects by September 2022, 2) construction on the projects to start by December 2022, and 4) for the projects to become operational by June 2027.

Well what about its Inisfree FSRU project? There's considerable mystery about NextDecade's supposed Inisfree FSRU joint project with the Irish Port of Cork. Is it for real, or just for show? It's included on Slide 18 in NextDecade's 04-01-2019 Corporate Presentation (available at https://investors.next-decade.com/static-files/98725488-73ec-4576-bd9f-a8f236fa48fe). The Slide says "Permitting expected to be initiated in 2019." The deal's based on a 12-13-2016 non-binding Heads Of Agreement between NextDecade and FLEX LNG and a non-binding Memorandum Of Understanding between NextDecade and the Port of Cork. But it looks like

1) NextDecade lost Flex LNG as a partner in September 2018,

2) Ireland doesn't need the Inisfree deal if it can get the much more better larger deal with Shannon LNG, and

3) there's strong opposition in Ireland against importing any LNG (Note: Shannon LNG construction was scheduled to begin early this year, but the Irish High Court the project on hold in February for a review by the European Union Court).

Right now, NextDecade seems to be the only source of the minimal amount of information available on its Inisfree FSRU venture. And NextDecade seems to have a habit of over promising and overexaggerating such things.

But TCEQ's 12-12-2018 permits for Rio Grande LNG show NextDecade's moving strongly forward, no?

See NextDecade's 12-12-2018 announcement at https://www.businesswire.com/news/home/20181212005910/en/TCEQ-Commissioners-Vote-Approve-Air-Permits-NextDecade. It says that TCEQ "voted to issue a series of air permits to NextDecade’s Rio Grande LNG project." A "series of air permits" sounds bigger and more significant than "a package of three permits processed together," which would be closer to the truth.

More importantly, NextDecade also says "all requests for hearing and a motion for reconsideration were denied" -- as if that was a good thing in its favor. Port Isabel and Laguna Vista were among the folks requesting Contested Hearings. So NextDecade appreciates TCEQ throwing Port Isabel and Luna Vista under the Rio Grande LNG bus??? Some of the Contested Hearing requests are headed to state court. NextDecade has the permits, but can it avoid the hearings?

Another Question: Will the Port Isabel Independent School District be more willing to reconsider its 2016 rejection of Rio Grande LNG's request for a tax break, since NextDecade has show such disregard for the City of Port Isabel?

But doesn't the 03-07-2019 enactment of the Rio Grande LNG lease with the Port show it moving strongly forward?

See NextDecade's announcement of the 03-07-2019 deal at https://www.businesswire.com/news/home/20190307005204/en/NextDecade-Executes-Site-Lease-Rio-Grande-LNG. There's also additional information on the lease available at

https://www.sec.gov/Archives/edgar/data/1612720/000161272019000007/next-20190306x8k.htm.

Right now, NextDecade's pay for an ongoing "Option To Lease" on the 940 or so acres -- at about 10% of what leasing the acreage will cost it. The present Option To Lease is good until this November. Then NextDecade has make the payments needed to cement the deal, or it has to turn the acreage back over to the Port.

So the lease won't really be a done deal until November, when NextDecade's actual lease will start, if it has the required $1.5 million security deposit and the money it needs to pay the $6.3 million a year lease price year to year over the next 30 years (with two possible 10 year extensins beyond the initial 30 years). Will NextDecade be good for the money when the money comes due? It won't actually start earning any money until possibly 2023. So that's up to the investors and how much money they're will to risk on the project.

But doesn't the 04-01-2019 NextDecade deal with Shell show it's moving ever onward and upward towards success?

Well, NextDecade really hopes you think so. Announcing the successful completion of milestone after milestone. The TCEQ permits. The Lease. And now it's deal with Shell.

But don't forget that it's missed important milestones in the past. And the deal with Shell isn't as big as NextDecade is making it out to be. See its 04-01-2019 announcement at https://www.businesswire.com/news/home/20190401005954/en/NextDecade-Shell-Execute-2-MTPA-20-Year-LNG. And see its 03-29-2019 announcement about it's 04-01-2019 announcement at https://www.businesswire.com/news/home/20190329005095/en/NextDecade-Major-Announcement-LNG2019-Shanghai. A double dip announcement that makes it look like a double sized big deal -- which it's not.

NextDecade of course gives itself center stage in completing this deal at the LNG2019 conference in Shanghai, China, and boasts about how its "the first-ever long-term contract with LNG produced out of the United States to be indexed to Brent and comes with full destination flexibility. But according to a 04-04-2014 The Motley Fool article, the 2 million tons a year is just

a small percentage of the 13.5 million tons the first phase of the project would produce. As a result, the company's timeline for green-lighting the project later this year so that it can be in service by 2023 isn't a sure thing.

["Why NextDecade Stock Rocketed More Than 50% in March," Matthew DiLallo, 04-04-2019, The Motley Fool,https://www.fool.com/investing/2019/04/04/why-nextdecade-stock-rocketed-more-than-50-in-marc.aspx]

And at the same LNG2019 conference, Tellurian Inc and French oil and gas major Total SA signed a deal for 1.5 million tonnes per annum (mtpa) of LNG to be produced at Tellurian's Driftwood LNG project in Louisiana. And Energy Transfer, also at the conference, is partnering with Shell as well to build a LNG export facility in Lake Charles, Louisiana. Which sounds like a bigger deal than Shell's new deal with NextDecade.

Actually, it's rather amazing that NextDecade has stayed in business as long as it has.

Considering that it hasn't earned a single penny of income since it was incorporated in November 2010 and won't be able to produce and sell LNG until 2023 at the earliest. And even then starting with just two or three of its planned LNG liquefaction production trains even then. Its main challenge right now is to get enough investors to give it enough upfront money to complete a solid deal with the EPC construction company and to make its Final Investment Decision by September 2019 -- or at least in time to finance its lease at the Port of Brownsville by November 2019.

According to its 2018 Annual Report,

where the company reported closing 2018 with a $43.5 million loss and no revenue. With no plants or facilities in operation, NextDecade has thus far, been funded by investors – similar to other LNG companies waiting on permit decisions. A filing with the U.S. Securities and Exchange Commission show that the Houston company is still in the black with at least $3.2 million cash on hand and another $72 million in a highly liquid short-term cash management fund.

["Rio Grande LNG takes step forward with 984-acre lease at Port of Brownsville, Sergio Chapa, 03-07-2019, Houston Chronicle, https://www.chron.com/business/energy/article/Rio-Grande-LNG-takes-step-forward-after-parent-13670164.php]

Yes, extended funding by investors is common for such LNG projects -- but not over a 12 plus year period. And NextDecade could rapidly burn through the $72 million cash management fund before it starts procucing LNG by 2013 (or so). Especially if it wants to keep any hope alive for its proposed Galveston Bay LNG and Inisfree FSRU projects in the meantime.