NextDecade Corp Q3 FY2026 earnings call

Construction Progress

• Phase I construction remains safe, on budget, and ahead of schedule.
• Trains 1 and 2 are nearly 80% complete; Train 3 is over 55% complete; Train 4 is 22.5% complete; Train 5 is 14% complete.
• More than 7,000 workers are on site daily, with over 70% being local residents.
• Site-wide dredging is complete, gas inlet facilities are ready for startup, and the Bay Runner Pipeline entered service.

Regulatory and Commercial Milestones

• FERC approved the uprate request for Trains 1-5, increasing authorized exports to 30.15 million tons per annum.
• The U.S. Army Corps of Engineers authorized a key construction permit for Train 6 in record time.
• Final environmental impact statement for Train 6 is expected in June 2027.
• Demand for long-term LNG supply remains strong due to global supply disruptions, particularly from the Middle East.

Strategic Direction for Expansions

• Management aims to secure a Final Investment Decision (FID) for Train 6 in the second half of 2027.
• Trains 7 and 8 will be developed as a single project on the western end of the site, roughly one year behind Train 6 in permitting.
• NextDecade intends to retain a substantial economic interest in Train 6, potentially through a joint venture with a strategic partner, while maximizing shareholder value.

Operational Execution

• Over 100 operations personnel are seconded to Bechtel to support commissioning and startup.
• Commissioning systems are underway to introduce hydrocarbons before year-end.
• Engineering and procurement are nearly finished for most trains, with construction progressing rapidly.

NextDecade is currently a pre-revenue development company focused on the Rio Grande LNG project. Consequently, there are no reported operating revenues or segment-specific financial performance metrics for Q3 2026. The company’s financial activity consists primarily of financing transactions, including the issuance of approximately $4.1 billion in senior secured notes to refinance bank facility debt, and accounting adjustments regarding vessel sub-chartering proceeds. No revenue contribution percentages are applicable as commercial operations have not yet commenced.

• First LNG Production from Train 1 narrowed to Q2 2027, consistent with earlier guidance.
• Substantial Completion of Train 1 expected in Q3 2027, one quarter ahead of the guaranteed EPC schedule.
• Trains 2 and 3 also expected to achieve substantial completion approximately one quarter ahead of their guaranteed schedules.
• Base case guidance assumes $5/MMBtu margins on uncontracted volumes during the ramp-up period.
• Current market conditions imply volume-weighted average margins of over $6/MMBtu, projecting distributable cash flow of over $2.4 billion, which is >20% above the base case of $2 billion.
• Downside steady-state guidance assumes $3/MMBtu margins, contingent on contracting additional volumes from Trains 4 and 5 to adjust leverage.

• Forward-looking statements may prove incorrect due to various factors outlined in SEC filings.
• Construction delays or cost overruns, although currently ahead of schedule.
• Regulatory approval timelines for Train 6 and subsequent expansions.
• Volatility in LNG and natural gas prices, although current forward curves are favorable.
• Potential disruption in supply chains or labor availability despite high local hiring.
• Execution risk associated with debottlenecking and optimizing facility operations post-startup.

Q: Olivia Foster asked about the specific commissioning milestones supporting the narrowed first LNG guidance for Q2 2027 and the timeline from first gas to substantial completion.

A: Matt Schatzman clarified that first gas is targeted for Q4 2026, with first LNG in Q2 2027 and substantial completion of Train 1 in Q3 2027, beating the guaranteed contract date by one quarter. He noted that more granular monthly timing would be provided closer to production start, but the current guidance provides clear market expectations.

Q: Olivia Foster inquired about the ability to announce long-term SPAs for Train 6 by H2 2027, citing counterparty interest amid global supply disruptions and recent Qatar headlines.

A: Schatzman highlighted that geopolitical instability has intensified demand for U.S. LNG security, positioning Rio Grande well. He confirmed that commercialization will proceed in parallel with FERC permitting, with FID targeted for H2 2027. Expectations are for SPA announcements in the coming months as regulatory approvals advance.

Q: Doug Irwin asked if NextDecade plans to sell additional uncontracted volumes to capture current high spreads, given improved visibility on Train 1 startup.

A: Matt Schatzman stated the company is comfortable holding its remaining 1,100 TBtu of uncontracted volume, particularly the 700 TBtu scheduled for 2029-2031. He viewed the upside risk as asymmetric due to ongoing Middle East tensions, preferring to remain long rather than hedge against potential price retracements.

Q: Jason Gabelman sought clarity on how cash flows will be distributed from Rio Grande LNG to NextDecade and whether it is a straight payout.

A: John Zuklic explained that cash distribution follows a structured waterfall subject to FinCo restrictions until milestones are met. Distributions are prioritized to pay down FinCo and SuperFinCo debt. Once these are refinanced around late 2030/Q4 2030, excess cash generated from higher-than-base-case margins could be used for future trains or distributions, depending on capital allocation decisions at that time.

Q: Wade Suki asked about the types of customers interested in Train 6 and the tenor of contracts, noting trends in the Middle East.

A: Schatzman reported diverse interest from consumers and portfolio players, emphasizing a shift toward reliability over pure price. He noted that even traditional European buyers are now willing to accept 20-year tenors. He highlighted that major producers like ADNOC and Qatar are diversifying their sourcing, validating the demand for secure U.S. supply.