UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarterly period ended
For the transition period from to
Commission File No.
NEXTDECADE CORPORATION
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices) (Zip Code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: |
| Trading Symbol |
| Name of each exchange on which registered: |
| | | The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| | ☒ | Smaller reporting company | |
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| Emerging growth company | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 7, 2023, the issuer had
FORM 10-Q FOR THE QUARTER ENDED September 30, 2023
TABLE OF CONTENTS
The following diagram depicts our abbreviated organizational structure with references to the names of certain entities discussed in this Quarterly Report on Form 10-Q.
Unless the context requires otherwise, references to “NextDecade,” the “Company,” “we,” “us” and “our” refer to NextDecade Corporation (NASDAQ: NEXT) and its consolidated subsidiaries, and references to “Rio Grande” refer to Rio Grande LNG, LLC and its consolidated subsidiaries.
PART I – FINANCIAL INFORMATION
Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Current derivative asset | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Debt issuance costs, net of amortization | ||||||||
| Non-current derivative assets | ||||||||
| Other non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, Convertible Preferred Stock and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities and other current liabilities | ||||||||
| Current common stock warrant liabilities | ||||||||
| Current operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current common stock warrant liabilities | ||||||||
| Non-current operating lease liabilities | ||||||||
| Non-current debt, net of unamortized debt issuance costs | ||||||||
| Other non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 16) | ||||||||
| Series A Convertible Preferred Stock, $ per share liquidation preference; Issued and outstanding: and shares at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Series B Convertible Preferred Stock, $ per share liquidation preference ; Issued and outstanding: and shares at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Series C Convertible Preferred Stock, $ per share liquidation preference; Issued and outstanding: and shares at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Stockholders’ equity | ||||||||
| Common stock, $ par value Authorized: million shares at September 30, 2023 and December 31, 2022; Issued and outstanding: million shares and million shares at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Treasury stock: million shares and million shares at September 30, 2023 and December 31, 2022, respectively, at cost | ( | ) | ( | ) | ||||
| Preferred stock, $ par value Authorized: million, after designation of the Convertible Preferred Stock Issued and outstanding: at September 30, 2023 and December 31, 2022 | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Non-controlling interest | ||||||||
| Total equity | ||||||||
| Total liabilities, convertible preferred stock and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative expense | ||||||||||||||||
| Development expense, net | ||||||||||||||||
| Lease expense | ||||||||||||||||
| Depreciation expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Total operating loss | ( | ) | ) | ) | ) | |||||||||||
| Other income (expense) | ||||||||||||||||
| Gain (loss) on common stock warrant liabilities | ( | ) | ( | ) | ( | ) | ||||||||||
| Derivative gain | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense, net of capitalized interest | ( | ) | ( | ) | ||||||||||||
| Other, net | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Net income (loss) attributable to NextDecade Corporation | ( | ) | ( | ) | ||||||||||||
| Less: net income attributable to non-controlling interest | ||||||||||||||||
| Less: preferred stock dividends | ||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net income (loss) per common share - basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net income (loss) per common share - diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average shares outstanding - basic | ||||||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Consolidated Statement of Stockholders’ Equity and Convertible Preferred Stock
(in thousands)
(unaudited)
| For the Three Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Series A | Series B | Series C | ||||||||||||||||||||||||||||||||||||||||
| Par | Additional | Non- | Total | Convertible | Convertible | Convertible | ||||||||||||||||||||||||||||||||||||||
| Value | Paid-in | Accumulated | Controlling | Equity | Preferred | Preferred | Preferred | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Interest | (Deficit) | Stock | Stock | Stock | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock vesting | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased related to share-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | ||||||||||||||||||||||||||||||||||||||||||||
| Rio Bravo Pipeline, LLC de-consolidation | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Sale of equity in Intermediate Holdings | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Preferred stock conversion | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| For the Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Series A | Series B | Series C | ||||||||||||||||||||||||||||||||||||||||
| Par | Additional | Non- | Total | Convertible | Convertible | Convertible | ||||||||||||||||||||||||||||||||||||||
| Value | Paid-in | Accumulated | Controlling | Equity | Preferred | Preferred | Preferred | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Interest | (Deficit) | Stock | Stock | Stock | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock vesting | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased related to share-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | ||||||||||||||||||||||||||||||||||||||||||||
| Rio Bravo Pipeline, LLC de-consolidation | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Sale of equity in Intermediate Holdings | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Preferred stock conversion | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| For the Three Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Series A | Series B | Series C | ||||||||||||||||||||||||||||||||||||
| Par | Additional | Total | Convertible | Convertible | Convertible | |||||||||||||||||||||||||||||||||||
| Value | Paid-in | Accumulated | Stockholders’ | Preferred | Preferred | Preferred | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | Stock | Stock | Stock | |||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 127,254 | $ | 13 | 742 | $ | (3,067 | ) | $ | 213,749 | $ | (192,418 | ) | 18,277 | $ | 68,259 | $ | 68,863 | $ | 52,604 | |||||||||||||||||||||
| Share-based compensation | — | — | — | — | 3,041 | — | 3,041 | — | — | — | ||||||||||||||||||||||||||||||
| Restricted stock vesting | 620 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Shares repurchased related to share-based compensation | (147 | ) | — | 147 | (1,060 | ) | — | — | (1,060 | ) | — | — | — | |||||||||||||||||||||||||||
| Issuance of common stock, net | 15,454 | 1 | — | — | 81,142 | — | 81,143 | — | — | — | ||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | — | (6,248 | ) | — | (6,248 | ) | 2,335 | 2,228 | 1,669 | ||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (18,797 | ) | (18,797 | ) | — | — | — | ||||||||||||||||||||||||||||
| Balance at September 30, 2022 | 143,181 | $ | 14 | 889 | $ | (4,127 | ) | $ | 291,684 | $ | (211,215 | ) | $ | 76,356 | $ | 70,594 | $ | 71,091 | $ | 54,273 | ||||||||||||||||||||
| For the Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Series A | Series B | Series C | ||||||||||||||||||||||||||||||||||||
| Par | Additional | Total | Convertible | Convertible | Convertible | |||||||||||||||||||||||||||||||||||
| Value | Paid-in | Accumulated | Stockholders’ | Preferred | Preferred | Preferred | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | Stock | Stock | Stock | |||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 120,838 | $ | 12 | 346 | $ | (1,315 | ) | $ | 191,264 | $ | (170,069 | ) | 19,892 | $ | 63,791 | $ | 64,602 | $ | 40,007 | |||||||||||||||||||||
| Share-based compensation | — | — | — | — | 3,555 | — | 3,555 | — | — | — | ||||||||||||||||||||||||||||||
| Restricted stock vesting | 2,293 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Shares repurchased related to share-based compensation | (543 | ) | — | 543 | (2,812 | ) | — | — | (2,812 | ) | — | — | — | |||||||||||||||||||||||||||
| Issuance of common stock, net | 20,072 | 2 | — | — | 111,078 | — | 111,080 | — | — | — | ||||||||||||||||||||||||||||||
| Exercise of common stock warrants | 521 | — | — | — | 3,564 | — | 3,564 | — | — | — | ||||||||||||||||||||||||||||||
| Issuance of Series C Convertible Preferred Stock | — | — | — | — | — | — | — | — | — | 9,836 | ||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | — | (17,777 | ) | — | (17,777 | ) | 6,803 | 6,489 | 4,430 | ||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (41,146 | ) | (41,146 | ) | — | — | — | ||||||||||||||||||||||||||||
| Balance at September 30, 2022 | 143,181 | $ | 14 | 889 | $ | (4,127 | ) | $ | 291,684 | $ | (211,215 | ) | $ | 76,356 | $ | 70,594 | $ | 71,091 | $ | 54,273 | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Operating activities: | ||||||||
| Net income (loss) attributable to NextDecade Corporation | $ | $ | ( | ) | ||||
| Adjustment to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation | ||||||||
| Share-based compensation expense | ||||||||
| Loss on common stock warrant liabilities | ||||||||
| Derivative gain | ( | ) | ||||||
| Net cash provided by settlement of derivative instruments | ||||||||
| Amortization of right-of-use assets | ||||||||
| Gain on sale of assets | ( | ) | ||||||
| Amortization of debt issuance costs | ||||||||
| Interest Expense | ||||||||
| Amortization of other non-current assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Operating lease liabilities | ( | ) | ||||||
| Accrued expenses and other liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities: | ||||||||
| Acquisition of property, plant and equipment | ( | ) | ( | ) | ||||
| Acquisition of other non-current assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Proceeds from debt issuance | ||||||||
| Proceeds from sale of equity in Intermediate Holdings | ||||||||
| Proceeds from sale of Rio Bravo Pipeline, LLC | ||||||||
| Proceeds from sale of Series C Convertible Preferred Stock | ||||||||
| Proceeds from sale of common stock | ||||||||
| Debt and equity issuance costs | ( | ) | ( | ) | ||||
| Preferred stock dividends | ( | ) | ( | ) | ||||
| Shares repurchased related to share-based compensation | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents – beginning of period | ||||||||
| Cash and cash equivalents – end of period | $ | $ | ||||||
| Balance per Consolidated Balance Sheets: | ||||||||
| September 30, 2023 | ||||||||
| Cash and cash equivalents | $ | |||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | |||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Notes to Consolidated Financial Statements
(unaudited)
Note 1 — Background and Basis of Presentation
NextDecade Corporation (“we” or the “Company”) is engaged in construction and development activities related to the liquefaction of natural gas and sale of liquefied natural gas (“LNG”) and the capture and storage of CO2 emissions. We are constructing a natural gas liquefaction and export facility located in the Rio Grande Valley in Brownsville, Texas (the “Rio Grande LNG Facility”). In July 2023, we commenced construction on the first three liquefaction trains and related common facilities (“Phase 1”) of the Rio Grande LNG Facility following a positive final investment decision (“FID”) and the closing of project financing by our subsidiary, Rio Grande LNG, LLC (“Rio Grande”). We are also developing two more Federal Energy Regulatory Commission approved liquefaction trains at the Rio Grande LNG Facility, a planned carbon capture and storage (“CCS”) project at the Rio Grande LNG Facility, and other potential CCS projects that would be located at third-party industrial source facilities.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. In our opinion, all adjustments, consisting only of normal recurring items, which are considered necessary for a fair presentation of the unaudited consolidated financial statements, have been included. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full year.
Certain reclassifications have been made to conform prior period information to the current presentation. The reclassifications did not have a material effect on the Company's financial position, results of operations or cash flows.
The Company has incurred operating losses since its inception and management expects operating losses and negative cash flows to continue until the commencement of operations at the Rio Grande LNG Facility and, as a result, the Company will require additional capital to fund its operations and execute its business plan. As of September 30, 2023, the Company had $
The Company plans to alleviate the going concern issue by obtaining sufficient funding through additional equity, equity-based or debt instruments or any other means and by managing certain operating and overhead costs. The Company's ability to raise additional capital in the equity and debt markets, should the Company choose to do so, is dependent on a number of factors, including, but not limited to, the market demand for the Company's equity or debt securities, which itself is subject to a number of business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additional capital at a price or on terms that are satisfactory to the Company. In the event the Company is unable to obtain sufficient additional funding, there can be no assurance that it will be able to continue as a going concern.
These consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event the Company can no longer continue as a going concern.
Note 2 — Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Prepaid subscriptions | $ | $ | ||||||
| Prepaid insurance | ||||||||
| Other | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
Note 3 — Sale of Equity Interests in Rio Bravo
On March 2, 2020, NextDecade LLC closed the sale of the equity interests (the “Equity Interests”) in Rio Bravo Pipeline Company, LLC (“Rio Bravo”) to Spectra Energy Transmission II, LLC, a wholly owned subsidiary of Enbridge Inc. (“Buyer”), for consideration of approximately $
If Rio Grande or its affiliate failed to issue a full notice to proceed to the Bechtel Energy, Inc. (“Bechtel”) under the EPC agreements for Phase 1 on or prior to December 31, 2024, Buyer had the right to sell the Equity Interests back to NextDecade LLC and NextDecade LLC had the right to repurchase the Equity Interests from Buyer. Rio Grande issued a full notice to proceed to Bechtel on July 12, 2023. Accordingly, the assets of Rio Bravo have been de-recognized in the consolidated balance sheet at September 30, 2023.
Buyer paid $
Note 4 — Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Fixed Assets | ||||||||
| Computers | $ | $ | ||||||
| Furniture, fixtures, and equipment | ||||||||
| Vehicles | ||||||||
| Leasehold improvements | ||||||||
| Total fixed assets | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total fixed assets, net | ||||||||
| Project Assets (not placed in service) | ||||||||
| Rio Grande LNG Facility | ||||||||
| Pipeline | ||||||||
| Total Project Assets | ||||||||
| Total property, plant and equipment, net | $ | $ | ||||||
Depreciation expense was $
Note 5 — Derivatives
In July 2023, Rio Grande entered into interest rate swaps agreements (the “Swaps”) to protect against interest rate volatility by hedging a portion of the floating-rate interest payments associated with the credit facilities described in Note 9 — Debt. As of September 30, 2023, Rio Grande has the following Swaps outstanding (in thousands):
| Initial Notional Amount | Maximum Notional Amount | Maturity | Weighted Average Fixed Interest Rate Paid | Variable Interest Rate Received | ||||||||||||||
| $ | $ | | % | USD - SOFR | ||||||||||||||
The Swaps are not designated as cash flow hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Operations.
The Company values the Swaps using an income-based approach based on observable inputs to the valuation model including interest rate curves, risk adjusted discount rates, credit spreads and other relevant data. The fair value of the Swaps is approximately $
Note 6 — Leases
Our leased assets consist of office space and the Rio Grande site lease. On July 12, 2023, Rio Grande delivered the effective date notice to the Brownsville Navigation District and commenced the Rio Grande site lease.
Operating lease right-of-use assets are as follows (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Office leases | $ | $ | ||||||
| Land lease | ||||||||
| Total operating lease right-of-use assets, net | $ | $ | ||||||
Operating lease liabilities are as follows (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Office leases | $ | $ | ||||||
| Land lease | ||||||||
| Total current lease liabilities | $ | $ | ||||||
| Non-current office leases | ||||||||
| Non-current land leases | ||||||||
| Total lease liabilities | $ | $ | ||||||
Operating lease expense is as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Office leases | $ | $ | $ | $ | ||||||||||||
| Land lease | ||||||||||||||||
| Total operating lease expense | ||||||||||||||||
| Short-term lease expense | ||||||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||||
Maturity of operating lease liabilities as of September 30, 2023 are as follows (in thousands, except lease term and discount rate):
| 2023 (remaining) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total undiscounted lease payments | ||||
| Discount to present value | ( | ) | ||
| Present value of lease liabilities | $ | |||
| Weighted average remaining lease term - years | ||||
| Weighted average discount rate - percent |
Other information related to our operating leases is as follows (in thousands):
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash paid for amounts included in the measurement of operating lease liabilities: | ||||||||
| Cash flows from operating activities | $ | $ | ||||||
| Noncash right-of-use assets recorded for operating lease liabilities: | ||||||||
| In exchange for new operating lease liabilities during the period | $ | $ | ||||||
Note 7 — Other Non-Current Assets
Other non-current assets consisted of the following (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Permitting costs(1) | $ | $ | ||||||
| Rio Grande Site Lease initial direct costs (2) | ||||||||
| Contributions in aid of construction | ||||||||
| Deposits and other | ||||||||
| Total other non-current assets | $ | $ | ||||||
| (1) |
Permitting costs primarily represent costs incurred in connection with permit applications to the United States Army Corps of Engineers and the U.S. Fish and Wildlife Service for mitigation measures for potential impacts to wetlands and habitat that may be caused by the construction of the Rio Grande LNG Facility. Permitting costs were reclassified to property, plant and equipment in July 2023 with the positive final investment decision on phase 1 of the Rio Grande LNG Facility.
|
| (2) | Rio Grande Site Lease initial direct costs were reclassified to operating lease right-of-use asset in July 2023 upon commencement of the Rio Grande site lease. |
Note 8 — Accrued Liabilities and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Employee compensation expense | $ | $ | ||||||
| Rio Grande LNG Facility costs | ||||||||
| Debt issuance costs | ||||||||
| Accrued interest | ||||||||
| Permitting costs | ||||||||
| Accrued legal services | ||||||||
| Share-based compensation liability | ||||||||
| Other accrued liabilities | ||||||||
| Total accrued liabilities and other current liabilities | $ | $ | ||||||
Note 9 — Debt
Our debt consists of long-term secured debt securities and credit agreements with banks and other lenders. Debt issuances are placed directly by us or through securities dealers, underwriters, or lead arrangers and are held by institutional investors, banks and other lenders.
Debt is recorded on our Consolidated Balance Sheets at outstanding principal value, net of unamortized debt issuance costs related to term notes and loans. Debt issuance costs consist primarily of arrangement fees, professional fees, legal fees and in certain cases, commitment fees. If debt issuance costs are incurred in connection with a line of credit arrangement or on undrawn funds, the debt issuance costs are presented as an asset on our Consolidated Balance Sheets. Discounts, premiums and debt issuance costs directly related to the issuance of debt are amortized over the life of the debt and are recorded in interest expense, net of capitalized interest using the effective interest method.
We classify debt as current or non-current on our Consolidated Balance Sheets based on contractual maturity; however, long-term debt extinguished after the balance sheet date but before the financial statements are issued would be classified based on facts and circumstances existing as of the balance sheet date.
Debt consisted of the following (in thousands):
| September 30, 2023 | December 31, 2022 | |||||||
| Senior Secured Notes and Loans | ||||||||
| % Senior Secured Notes due 2033 | $ | $ | ||||||
| % Senior Secured Loans due 2033 | ||||||||
| Total Senior Secured Notes and Loans | ||||||||
| Credit Facilities | ||||||||
| CD Senior Working Capital Facility | ||||||||
| CD Credit Facility | ||||||||
| TCF Credit Facility | ||||||||
| Total Debt | ||||||||
| Current Portion of debt | ||||||||
| Non-current portion of unamortized debt issuance costs, net | ||||||||
| Total non-current debt, net of unamortized debt issuance costs | $ | $ | ||||||
Senior Secured Notes and Loans
Rio Grande 6.67% Senior Secured Notes due 2033
The
Rio Grande 6.72% Senior Secured Loans due 2033
The
Debt Maturities
| Years Ending December 31, | Principal Payments | |||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total | $ | |||
Credit Facilities
Below is a summary of our committed credit facilities outstanding as of September 30, 2023 (in thousands):
| CD Senior Working Capital Facility (1) | CD Credit Facility (1) | TCF Credit Facility (2) | ||||||||||
| Total Facility Size | $ | $ | $ | |||||||||
| Less: | ||||||||||||
| Outstanding balance | ||||||||||||
| Letters of credit issued | ||||||||||||
| Available commitment | $ | $ | $ | |||||||||
| Priority ranking | Senior secured | Senior secured | Senior secured | |||||||||
| Interest rate on outstanding balance |
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| Commitment fees on undrawn balance | % | % | % | |||||||||
| Maturity Date |
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| (1)
| The obligations of Rio Grande under the CD Senior Working Capital Facility and CD Credit Facility are secured by substantially all of the assets of Rio Grande as well as a pledge of all of the membership interests in Rio Grande on a first-priority basis, pari passu with the Senior Secured Notes, the Senior Secured Loans and the loans made under the TCF Credit Facility.
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| (2) | The obligations of Rio Grande under the TCF Credit Agreement are secured by substantially all of the assets of Rio Grande as well as a pledge of all of the membership interests in Rio Grande on a first-priority basis, pari passu with the Senior Secured Notes, the Senior Secured Loans and the loans made under the CD Credit Agreement. Total Energies Holdings SAS (“Total Holdings”) provides contingent credit support to the lenders under the TCF Credit Agreement to pay past due amounts owing from Rio Grande under the agreement upon demand. |
Restrictive Debt Covenants
The CD Credit Facility and the TCF Credit Facility (collectively, the “Facilities”) include certain covenants and events of default that are supplemental to the covenants and events of default set forth in the P1 Common Terms Agreement and that are customary for project financing facilities of this type, including a requirement that interest rates for a minimum of
The Senior Secured Notes also contain customary terms and events of default and certain covenants that, among other things, limit Rio Grande’s ability to incur additional indebtedness, make certain investments or pay dividends or distributions on equity interests or subordinated indebtedness or purchase, redeem, or retire equity interests, sell or transfer assets, incur liens, dissolve, liquidate, consolidate, merge, or sell or lease all or substantially all of Rio Grande’s assets. The Senior Secured Notes further require Rio Grande to submit certain reports and information to the trustee and holders of the Senior Secured Notes, maintain certain LNG offtake agreements, and maintain a debt service coverage ratio of at least at the end of each fiscal quarter starting from the Initial Principal Payment Date. With respect to certain events, including a change of control event and receipt of certain proceeds from asset sales, events of loss or liquidated damages, the indenture governing the Senior Secured Notes requires Rio Grande to make an offer to repurchase the Senior Secured Notes at
The Senior Secured Loan Agreement contains customary terms and events of default and certain covenants that, among other things, limit Rio Grande’s ability to incur additional indebtedness, make certain investments or pay dividends or distributions on equity interests or subordinated indebtedness or purchase, redeem, or retire equity interests, sell or transfer assets, incur liens, dissolve, liquidate, consolidate, merge, or sell or lease all or substantially all of Rio Grande’s assets. The Senior Secured Loan Agreement further requires Rio Grande to submit certain reports and information to the Administrative Agent and the lenders, maintain certain LNG offtake agreements, and maintain a debt service coverage ratio of at least at the end of each fiscal quarter starting from the first quarterly payment date to occur on or after the date that is ninety days following the project completion date. With respect to certain events, including a change of control event and receipt of certain proceeds from asset sales, events of loss or liquidated damages, the Senior Secured Loan Agreement requires Rio Grande to make an offer to the lenders to have their Senior Secured Loans prepaid at
As of September 30, 2023, Rio Grande was in compliance with all covenants related to its respective debt agreements.
Interest Expense
Total interest expense, net of capitalized interest, consisted of the following (in thousands):
| September 30, 2023 | December 31, 2022 | |||||||
| Interest cost of Non-current Debt | ||||||||
| Interest per contractual rate | $ | $ | ||||||
| Amortization of debt issuance costs | ||||||||
| Total Interest cost | ||||||||
| Capitalized interest | ( | ) | ||||||
| Total interest expense, net of capitalized interest | $ | $ | ||||||
Fair Value Disclosures
The following table shows the carrying amount and estimated fair value of our debt (in thousands):
| September 30, 2023 | December 31, 2023 | |||||||||||||||
| Carrying Amount | Estimated Fair Value (1) | Carrying Amount | Estimated Fair Value | |||||||||||||
| Senior Notes - Level 2 | $ | 700,000 | $ | 700,000 | $ | — | $ | — | ||||||||
| Senior Loans - Level 2 | 356,000 | 356,000 | — | — | ||||||||||||
| (1) | The Level 2 estimated fair value approximates the carrying amount due to the close proximity of the issuance of the debt and September 30, 2023. |
Note 10 – Preferred Stock and Common Stock Warrants
Preferred Stock
As of December 31, 2022, the Company had outstanding
The shares of Convertible Preferred Stock bear dividends at a rate of
On July 26, 2023, the Convertible Preferred Stock was converted into
Common Stock Warrants
The Company issued warrants exercisable to purchase Company common stock in connection with its issuances of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (collectively, the “Common Stock Warrants”). The Company revalues the Common Stock Warrants at each balance sheet date and recognized a gain of $
The assumptions used in the Monte Carlo simulation model to estimate the fair value of the Common Stock Warrants are as follows:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Volatility | % | % | ||||||
| Term (years) | ||||||||
Note 11 — Variable Interest Entity
The Company consolidates Variable Interest Entities ("VIEs") where it has been determined that the Company is the primary beneficiary of the applicable entities’ operations. For each VIE, the primary beneficiary is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to such VIE. In evaluating whether the Company is the primary beneficiary of each entity, the Company evaluates its power to direct the most significant activities of the VIE by considering the purpose and design of each entity and the risks each entity was designed to create and pass through to its respective variable interest holders. The Company also evaluates its economic interests in each of the VIEs.
Intermediate Holdings and its wholly owned subsidiaries, including Rio Grande, have been formed to undertake Phase 1 of the construction and operation of the Rio Grande LNG Facility. The Company is not obligated to fund losses of Rio Grande, however, the Company's capital account, which would be considered in allocating the net assets of Rio Grande were it to be liquidated, continues to share in losses of Rio Grande. Further, Rio Grande has granted the Company decision-making rights regarding the construction of Phase 1 of the Rio Grande LNG Facility and key aspects of its operation, which may only be terminated by equity holders for cause, via agreements with NextDecade LLC. Due to the foregoing, the Company determined that it holds a variable interest in Rio Grande and is its primary beneficiary and therefore consolidates Rio Grande in these Consolidated Financial Statements.
The following table presents the summarized assets and liabilities (in thousands) of Rio Grande, which are included in the Company's Consolidated Balance Sheets. The assets in the table below may only be used to settle the obligations of Rio Grande. In addition, there is no recourse to us for the consolidated VIE’s liabilities. The assets and liabilities in the table below include assets and liabilities of Rio Grande only and exclude intercompany balances between Rio Grande and NextDecade, which are eliminated in the Consolidated Financial Statements of NextDecade.
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | — | |||||
| Current derivative asset | — | |||||||
| Prepaid expenses and other current assets | ||||||||