NextDecade: Buy The FERC News

Core Viewpoint - NextDecade is a pure LNG company aiming to export its first gas by the end of 2027, currently advancing with the construction of Trains 1-3 and seeking to secure contracts for Train 4 despite recent regulatory challenges [1][21]. Company Overview - NextDecade is based in Houston, Texas, and is the owner and operating partner of the Rio Grande LNG project, which is expected to reach a capacity of 27 million tons per annum (mtpa) once fully developed [4]. - The project will utilize natural gas from the Eagle Ford and Permian fields for global LNG exports, with Trains 1-3 expected to provide 17.6 mtpa of export capacity [4][6]. Recent Developments - The Federal Energy Regulatory Commission (FERC) permit for the Rio Grande LNG project was overturned, leading to a significant drop in NextDecade's stock price, which fell 40% from its 52-week highs [2][21]. - Despite the permit issues, construction of Trains 1-3 is ongoing, and NextDecade is actively working with Bechtel for the engineering, procurement, and construction contracts [1][21]. Financial Insights - The company has secured financing for Trains 1-3, with an expected distributable cash flow of $200-$300 million per annum once operational [9]. - Current market capitalization is below $2 billion, suggesting a price-to-distributable cash flow (P/DCF) ratio of 6.5 to 10 times, with full cash flow expected to start in 2029 [10]. Future Prospects - If NextDecade can secure a 60% ownership stake in Trains 4 and 5, it could generate an additional $700 million to $1 billion in distributable cash flow, enhancing its valuation significantly [12][22]. - Analysts have mixed views on the stock, with some rating it a buy and others expressing caution due to the speculative nature of the investment and the long timeline for cash flow generation [17][18]. Market Position - NextDecade is positioned as a unique investment opportunity in the U.S. LNG sector, particularly with its focus on carbon capture and sequestration, aiming for over a 90% reduction in CO2 emissions [7][22]. - The company is seen as a single-asset corporation, which poses risks if it fails to appeal the recent regulatory ruling [22].