Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words "anticipate," "contemplate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "might," "will," "would," "could," "should," "can have," "likely," "continue," "design" and other words and terms of similar expressions, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives and financial needs. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from those expressed in our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements are subject to change and inherent risks and uncertainties, including those described in the section titled "Risk Factors" in our most recent Annual Report on Form 10-K. You should consider our forward-looking statements in light of a number of factors that may cause actual results to vary from our forward-looking statements including, but not limited to: ? our progress in the development of our liquefied natural gas ("LNG") liquefaction and export projects and the timing of that progress;
? our final investment decision ("FID") in the construction and operation of a
LNG terminal at the
the timing of that decision;
? the successful completion of the Terminal by third-party contractors and a
pipeline to supply gas to the Terminal being developed by a third-party;
? our ability to develop the carbon capture and storage project at the
Terminal (the "CCS project") to reduce carbon emissions from the Terminal;
? our ability to secure additional debt and equity financing in the future to
complete the Terminal;
? our ability to secure additional debt and equity financing in the future to
complete the CCS project, if implemented; ? the accuracy of estimated costs for the Terminal; ? the accuracy of estimated costs for the CCS project;
? statements that the Terminal and the CCS project, when completed, will have
certain characteristics, including amounts of liquefaction capacities and
amount of CO2 reduction;
? the development risks, operational hazards, regulatory approvals applicable to
the Terminal's, the CCS project's and the third-party pipeline's construction
and operations activities; ? technological innovation which may lessen our anticipated competitive advantage; ? the global demand for and price of LNG; ? the availability of LNG vessels worldwide;
? changes in legislation and regulations relating to the LNG industry, including
environmental laws and regulations that impose significant compliance costs
and liabilities;
? global pandemics, including the 2019 novel coronavirus ("COVID-19") pandemic,
and their impact on our business and operating results, including any
disruptions in our operations or development of the Terminal and the health
and safety of our employees, and on our customers, the global economy and the
demand for LNG; ? risks related to doing business in and having counterparties in foreign countries;
? our ability to maintain the listing of our securities on a securities exchange
or quotation medium; ? changes adversely affecting the business in which we are engaged; ? management of growth; ? general economic conditions; ? our ability to generate cash; ? compliance with environmental laws and regulations; and
? the result of future financing efforts and applications for customary tax
incentives. 11
--------------------------------------------------------------------------------
Table of Contents
Should one or more of the foregoing risks or uncertainties materialize in a way that negatively impacts us, or should the underlying assumptions prove incorrect, our actual results may vary materially from those anticipated in our forward-looking statements, and our business, financial condition, and results of operations could be materially and adversely affected. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Except as required by applicable law, we do not undertake any obligation to publicly correct or update any forward-looking statements. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in our most recent Annual Report on Form 10-K as well as other filings we have made and will make with theSecurities and Exchange Commission (the "SEC") and our public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties. OverviewNextDecade Corporation engages in development activities related to the liquefaction and sale of LNG and the reduction of CO2 emissions, in part, through the CCS project. We have focused and continue to focus our development activities on the Terminal and recently announced our planned development of the CCS project (described further under "Recent Developments"). We have undertaken and continue to undertake various initiatives to evaluate, design and engineer the Terminal and the CCS project that we expect will result in demand for LNG supply at the Terminal, which would enable us to seek construction financing to develop the Terminal and the CCS project. We believe the Terminal possesses competitive advantages in several important areas, including, engineering, design, commercial, regulatory, emission reductions, and gas supply. We submitted a pre-filing request for the Terminal to theFederal Energy Regulatory Commission (the "FERC") inMarch 2015 and filed a formal application with theFERC inMay 2016 . InNovember 2019 , theFERC issued an order authorizing the siting, construction and operation of the Terminal. We also believe we have robust commercial offtake and gas supply strategies.
Unless the context requires otherwise, references to "
Recent Developments
COVID-19 Pandemic and its Effect on our Business
The business environment in which we operate has been impacted by the recent downturn in the energy market as well as the outbreak of COVID-19 and its progression into a pandemic inMarch 2020 . We have modified and may continue to modify certain business and workforce practices to protect the safety and welfare of our employees. Furthermore, we have implemented and may continue to implement certain mitigation efforts to ensure business continuity. We will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers, employees, and prospects, or on our financial results for fiscal year 2021 or beyond. NEXT Carbon Solutions OnMarch 18, 2021 , we announced the formation of NEXT Carbon Solutions that is expected to (i) develop one of the largest CCS projects inNorth America at the Terminal, (ii) advance proprietary processes to lower the cost of utilizing CCS technology, (iii) help other energy companies to reduce their greenhouse gas ("GHG") emissions associated with the production, transportation, and use of natural gas, and (iv) generate high-quality, verifiable carbon offsets to support companies in their efforts to achieve net-zero emissions. NEXT Carbon Solutions' CCS project is expected to reduce permitted CO2 emissions at the Terminal by more than 90 percent without major design changes to the Terminal.
Series C Convertible Preferred Stock Offering
In March, April andJuly 2021 , we sold an aggregate of 39,500 shares of Series C Convertible Preferred Stock, par value$0.0001 per share (the "Series C Preferred Stock"), at$1,000 per share for an aggregate purchase price of$39.5 million and issued an additional 790 shares of Series C Preferred Stock in aggregate as origination fees. Warrants were issued together with the issuances of the Series C Preferred Stock.
For further descriptions of the Series C Preferred Stock, see Note 8 -
Preferred Stock and Common Stock Warrants , and for additional details on the issuances of the Series C Preferred Stock and the transactions in connection therewith, please refer to our Current Reports on Form 8-K filed with theSEC onMarch 18, 2021 ,March 29, 2021 andAugust 2, 2021 . CCS project OnMarch 25, 2021 , we announced the execution of a term sheet withOxy Low Carbon Ventures ("OLCV"), a subsidiary of Occidental Petroleum Corporation, for the offtake and storage of CO2 captured from the Terminal. Under the terms of the agreement, OLCV will offtake and transport CO2 from the Terminal and permanently sequester it in an underground geologic formation in theRio Grande Valley , where there is believed to be vast CO2 storage capacity, pursuant to a CO2 Offtake Agreement and a Sequestration and Monitoring Agreement to be negotiated by the parties.
We have partnered with Mitsubishi Heavy Industries, an experienced developer of post-combustion carbon capture technology, to assist with the planned CCS project at the Terminal.
Terminal InApril 2021 , we announced a joint pilot project with Project Canary for the monitoring, reporting, and independent third-party measurement and certification of the GHG intensity of LNG to be sold from the Terminal. 12
--------------------------------------------------------------------------------
Table of Contents Rio Grande Site Lease OnMarch 6, 2019 , Rio Grande entered into a lease agreement (the "Rio Grande Site Lease") with theBrownsville Navigation District ofCameron County, Texas (the "BND") for the lease by Rio Grande of approximately 984 acres of land situated inBrownsville ,Cameron County, Texas for the purposes of constructing, operating, and maintaining (i) a liquefied natural gas facility and export terminal and (ii) gas treatment and gas pipeline facilities. OnApril 30, 2020 , Rio Grande and the BND amended the Rio Grande Site Lease (the "Rio Grande Site Lease Amendment") to extend the effective date for commencing the Rio Grande Site Lease toMay 6, 2021 (the "Effective Date"). The Rio Grande Site Lease Amendment further provides that Rio Grande has the right, exercisable in its sole discretion, to extend the Effective Date toMay 6, 2022 by providing the BND with written notice of its election no later than the close of business on the Effective Date.
On
At-the-Market Program InAugust 2021 , the Company entered into an at-the-market sales agreement withVirtu Americas LLC ("Virtu") pursuant to which the Company may sell shares of Company common stock from time to time through Virtu acting as sales agent, for aggregate proceeds of up to$50 million .
Liquidity and Capital Resources
Capital Resources We have funded and continue to fund the development of the Terminal, CCS project, and general working capital needs through our cash on hand and proceeds from the issuance of equity and equity-based securities. Our capital resources consisted of approximately$36.7 million of cash and cash equivalents as ofSeptember 30, 2021 . Sources and Uses of Cash The following table summarizes the sources and uses of our cash for the periods presented (in thousands): Nine Months Ended September 30, 2021 2020 Operating cash flows$ (12,252 ) $ (22,746 ) Investing cash flows (13,056 ) 23,306 Financing cash flows 39,443 14,637 Net increase in cash and cash equivalents 14,135 14,197
Cash and cash equivalents - beginning of period 22,608 15,736
Cash and cash equivalents - end of period
Operating Cash Flows Operating cash outflows during the nine months endedSeptember 30, 2021 and 2020 were$12.3 million and$22.7 million , respectively. The decrease in operating cash outflows during the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 was due to reduced employee costs and lease costs among other actions taken in response to the COVID-19 pandemic. Investing Cash Flows
Investing cash outflows during the nine months ended
Financing Cash Flows Financing cash inflows during the nine months endedSeptember 30, 2021 and 2020 were$39.4 million and$14.6 million , respectively. For the nine months endedSeptember 30, 2021 financing cash inflows were primarily the result of proceeds from the sale of Series C Preferred Stock. For the nine months endedSeptember 30, 2020 financing cash inflows were primarily the result of$15.0 million of proceeds from the sale ofRio Bravo . 13
--------------------------------------------------------------------------------
Table of Contents Pre-FID Liquidity In 2021, we expect to incur$39 million on pre-FID development activities in support of the Terminal and the CCS project. Approximately$10 million and$27 million of these costs were incurred in the three and nine months endedSeptember 30, 2021 , respectively.
Capital Development Activities
We are primarily engaged in developing the Terminal and the CCS project, which may require additional capital to support further project development, engineering, regulatory approvals and compliance, and commercial activities in advance of a FID made to finance and construct the Terminal and CCS project. Even if successfully completed, the Terminal will not begin to operate and generate significant cash flows until at least several years from now. Construction of the Terminal and CCS project would not begin until, among other requirements for project financing, all required federal, state and local permits have been obtained. As a result, our business success will depend, to a significant extent, upon our ability to obtain the funding necessary to construct the Terminal and CCS project, to bring them into operation on a commercially viable basis and to finance our staffing, operating and expansion costs during that process.
We have engaged
We currently expect that the long-term capital requirements for the Terminal and the CCS project will be financed predominately through project financing and proceeds from future debt and equity offerings by us. There can be no assurance that we will succeed in securing additional debt and/or equity financing in the future to complete the Terminal and CCS project or, if successful, that the capital we raise will not be expensive or dilutive to stockholders. Additionally, if these types of financing are not available, we will be required to seek alternative sources of financing, which may not be available on terms acceptable to us, if at all. Contractual Obligations There have been no material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 . 14
--------------------------------------------------------------------------------
Table of Contents Results of Operations The following table summarizes costs, expenses and other income for the periods indicated (in thousands): For the Three Months Ended For the Nine Months Ended September 30, September 30, 2021 2020 Change 2021 2020 Change Revenues $ - $ - $ - $ - $ - $ - General and administrative expense 2,937 5,069 (2,132 ) 10,840 16,582 (5,742 ) Land option and lease expense 240 423 (183 ) 678 1,281 (603 ) Depreciation expense 43 65 (22 ) 136 146 (10 ) Operating loss (3,220 ) (5,557 ) 2,337 (11,654 ) (18,009 ) 6,355 Gain (loss) on common stock warrant liabilities 4,442 (1,627 ) 6,069 (2,363 ) 6,147 (8,510 ) Loss on redemption of investment securities - - - - (412 ) 412 Interest income, net - 7 (7 ) 2 241 (239 ) Other - (1 ) 1 (1 ) (17 ) 16 Net income (loss) attributable to NextDecade Corporation 1,222 (7,178 ) 8,400 (14,016 ) (12,050 ) (1,966 ) Preferred stock dividends (5,264 ) (3,613 ) (1,651 ) (13,015 ) (10,565 ) (2,450 ) Deemed dividends on Series A Convertible Preferred Stock (16 ) (16 ) - (47 ) (113 ) 66 Net loss attributable to common stockholders$ (4,058 ) $ (10,807 ) $ 6,749 $ (27,078
)$ (22,728 ) $ (4,350 ) Our consolidated net loss was$4.1 million , or$0.03 per common share (basic and diluted), for the three months endedSeptember 30, 2021 compared to a net loss of$10.8 million , or$0.09 per common share (basic and diluted), for the three months endedSeptember 30, 2020 . The$6.7 million decrease in net loss was primarily a result of a gain on common stock warrant liabilities and a decrease in general and administrative expenses partially offset by an increase in preferred stock dividends. Our consolidated net loss was$27.1 million , or$0.23 per common share (basic and diluted), for the nine months endedSeptember 30, 2021 compared to a net loss of$22.7 million , or$0.19 per common share (basic and diluted), for the nine months endedSeptember 30, 2020 . The$4.4 million increase in net loss was primarily a result of an increase in the loss on common stock warrant liabilities and preferred stock dividends partially offset by a decrease in general and administrative expenses. General and administrative expense during the three months endedSeptember 30, 2021 decreased$2.1 million compared to the same period in 2020 primarily due to a decrease in share-based compensation expense of$3.5 million partially offset by increases in salaries and wages, professional fees, travel expenses, and IT and communications in the aggregate of$1.4 million . The increase in salaries and wages, professional fees, travel expense, and IT and communications is primarily due to additional head count added during 2021. General and administrative expense during the nine months endedSeptember 30, 2021 decreased$5.7 million compared to the same period in 2020 primarily due to decreases in share-based compensation expense, professional fees, travel expenses and IT and communications expenses in the aggregate of$7.0 million partially offset by an increase in salaries and wages of$1.2 million . Gain (loss) on common stock warrant liabilities for the three and nine months endedSeptember 30, 2021 and 2020 is primarily due to changes in the share price of Company common stock and an increase in the number of common stock warrants outstanding with the issuance of Series C Preferred Stock. Preferred stock dividends for the three months endedSeptember 30, 2021 of$5.3 million consisted of dividends paid-in kind with the issuance of 2,089 additional shares of Series A Convertible Preferred Stock, par value$0.0001 per share (the "Series A Preferred Stock"), 1,993 additional shares of Series B Convertible Preferred Stock, par value$0.0001 per share (the "Series B Preferred Stock"), and 1,159 additional shares of Series C Preferred Stock, compared to preferred stock dividends of$3.6 million for the three months endedSeptember 30, 2020 that consisted of dividends paid-in kind with the issuance of 1,789 and 1,757 additional shares of Series A Preferred Stock and Series B Preferred Stock, respectively. Preferred stock dividends for the nine months endedSeptember 30, 2021 of$13.0 million consisted of dividends paid-in kind with the issuance of 6,045 additional shares of Series A Preferred Stock, 5,761 additional shares of Series B Preferred Stock and 1,159 additional shares of Series C Preferred Stock compared to preferred stock dividends of$10.6 million for the nine months endedSeptember 30, 2020 that consisted of dividends paid-in kind with the issuance of 5,389 additional shares of Series A Preferred Stock and 5,135 additional shares of Series B Preferred Stock. Deemed dividends on the Series A Preferred Stock for the three and nine months endedSeptember 30, 2021 and 2020 represents the accretion of the beneficial conversion feature associated with the Series A Preferred Stock issued in the third quarter of 2018. 15
--------------------------------------------------------------------------------
Table of Contents
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of
Summary of Critical Accounting Estimates
The preparation of our Consolidated Financial Statements in conformity with accounting principles generally accepted inthe United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
© Edgar Online, source