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Item 5. Market for Registrant’s Common Equity

2023-03-10 compared with 2022-03-28 · 69 added, 46 removed, 132 unchanged (47% of the section changed)

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Market Information, Holders and Dividends

Our common stock trades on Nasdaq under the symbol “NEXT.”

The IPO Warrants trade on the OTC Pink Market under the symbol “NEXTW.”

Our common stock trades on Nasdaq under the symbol “NEXT.” 

As of March 2, 2023, 150.6 million shares of Company common stock were outstanding held by approximately 66 record owners.

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Overview of Significant Events

COVID-19 Pandemic and its Effect on our Business

The business environment in which we operate has been impacted by the downturn in the energy market as well as the COVID-19 pandemic. 

The COVID-19 pandemic has caused us to modify our business 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 2022 or beyond.

LNG Sale and Purchase Agreements

In April 2022, we entered into a 20-year sale and purchase agreement with ENN for the supply of 1.5 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal (“ENN LNG SPA”). 

The LNG supplied to ENN LNG will be from the first two trains at the Terminal. 

In December 2022, we executed an Amended and Restated ENN LNG SPA to increase the volume to 2.0 mtpa.

In April 2022, we entered into a 15-year SPA with ENGIE for the supply of 1.75 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal.  The LNG supplied to ENGIE will be from the first two trains at the Terminal.

In July 2022, we entered into a 20-year SPA with China Gas for the supply of 1.0 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal. 

The LNG supplied to China Gas will be from the second train at the Terminal.

In July 2022, we entered into a 20-year SPA with Guangdong Energy for the supply of 1.0 mtpa of LNG indexed to Henry Hub delivered on an ex-ship basis from the Terminal. 

The LNG supplied to Guangdong Energy will be from the first train at the Terminal.

In July 2022, we entered into a 20-year SPA with EMLAP, an affiliate of ExxonMobil, for the supply of 1.0 mtpa of LNG indexed to Henry Hub delivered on a free-on-board basis from the Terminal. 

The LNG supplied to EMLAP will be from the first two trains at the Terminal.

In December 2022, we entered into a 20-year SPA with Galp for the supply of 1.0 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal.

In January 2022, we entered into a 15-year SPA with Itochu Corporation for the supply of 1.0 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal.

Each of the above SPAs becomes effective upon the satisfaction of certain conditions precedent, which include a positive final investment decision on the initial phase of the Terminal.

Rio Grande Site Lease

On March 6, 2019, Rio Grande entered into a lease agreement (the “Rio Grande Site Lease”) with the Brownsville Navigation District of Cameron County, Texas (the “BND”) for the lease by Rio Grande of approximately 984 acres of land situated in Brownsville, 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.

On April 20, 2022, Rio Grande and the BND amended the Rio Grande Site Lease to extend the effective date for commencing the Rio Grande Site Lease to May 6, 2023.

Engineering, Procurement and Construction ( “

EPC ”) 

In April 2022, Rio Grande and Bechtel Energy Inc.

(formerly known as Bechtel Oil, Gas and Chemicals, Inc., “Bechtel”) amended each of the Trains 1 and 2 EPC Agreement and the Train 3 EPC Agreement to extend the respective contract validity to July 31, 2023.

In September 2022, Rio Grande and Bechtel amended each of the Trains 1 and 2 EPC Agreement and the Train 3 EPC Agreement.

The amendments to the EPC Agreements primarily give effect to certain updated lump-sum, separated contract pricing components.

As of the date of filing this Annual Report on Form 10-K, we estimate the lump-sum EPC cost to construct Trains 1-3 of the Terminal at approximately $11.5 billion.

The final EPC lump-sum contract pricing for Trains 1-3 of the Terminal will be determined prior to an FID on Trains 1-3 and is subject to change, including if we do not issue a full notice to proceed to Bechtel on or before March 15, 2023, unless extended by mutual agreement of the parties thereto.

NEXT Carbon Solutions

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Through commercial agreements and by investment, NEXT Carbon Solutions looks to share in the value created from this integration.

Series C Convertible Preferred Stock Offering

In March, April and July 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 representing the right to acquire an aggregate number of shares of our common stock equal to approximately 56 basis points (0.56%) of all outstanding shares of Company common stock, measured on a fully diluted basis, on the applicable exercise date with a strike price of $0.01 per share were issued together with the issuances of the Series C Preferred Stock.

In May 2022, we entered into an agreement with California Resources Corporation, whereby NEXT Carbon Solutions was engaged to perform a Front-end Engineering and Design (“FEED”) study for the post combustion capture and compression of up to 95% of the CO 2  produced at the Elk Hills Power Plant. 

The FEED was successfully completed in the first quarter of 2023. 

California Resources Corporation and NEXT Carbon Solutions are continuing review of the FEED results and commercial discussions.

In June 2022, we entered into agreements with an energy infrastructure fund to perform preliminary FEED studies at two power generation facilities. 

Through performance of the preliminary FEED studies, we have generated cash proceeds of $1.0 million.

Private Placements of Company Common Stock

In April 2022, we sold 4,618,226 shares of Company common stock for gross proceeds of approximately $30 million to HGC NEXT INV LLC, as described in 

Note 9 -  

Stockholders' Equity  in the Notes to Consolidated Financial Statements.

In September 2022, we sold 15,454,160 shares of Company common stock for gross proceeds of approximately $85 million. The Private Placement closed on September 19, 2022, as described in 

Note 9 -  

Stockholders' Equity  in the Notes to Consolidated Financial Statements.

Private Placement of Series C Convertible Preferred Stock

In March 2022, we sold an aggregate of 10,500 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 $10.5 million and issued an additional 210 shares of Series C Preferred Stock in aggregate as origination fees.

Warrants representing the right to acquire an aggregate number of shares of our common stock equal to approximately 14.91 basis points (0.1491%) of all outstanding shares of Company common stock, measured on a fully diluted basis, on the applicable exercise date with a strike price of $0.01 per share were issued together with the issuances of the Series C Preferred Stock.

For further descriptions of the Series C Preferred Stock and associated warrants, see 

Note 9 - Preferred Stock and Common Stock Warrants in the Notes to Consolidated Financial Statements.

Heads of Agreement

In March 2022, we entered into a binding Heads of Agreement (“HOA”) with Guangdong Energy Group Natural Gas Co., Ltd.

(“Guangdong Energy”) for the supply of up to 1.5 mtpa of LNG from the Terminal. 

The HOA contemplates that Guangdong Energy will purchase LNG indexed to Henry Hub starting from the commercial operation date of the first train of the Terminal. 

The HOA provides that we will complete the sale and purchase agreement with Guangdong Energy in the second quarter of 2022.

Liquidity and Capital Resources

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Our consolidated financial statements as of and for the year ended December 31, 2022 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Based on our balance of cash and cash equivalents of $25.6 million at December 31, 2021, there is substantial doubt about our ability to continue as a going concern within one year after the date that our consolidated financial statements were issued.

Based on our balance of cash and cash equivalents of $62.8 million at December 31, 2022, there is substantial doubt about our ability to continue as a going concern within one year after the date that our consolidated financial statements were issued.

Our ability to continue as a going concern will depend on managing certain operating and overhead costs and our ability to generate positive cash flows through equity, equity-based or debt financings.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, which could have a material adverse effect on our financial condition.

We expect to spend approximately $3 million per month on similar development activities during 2022 and until a positive FID is made on the Terminal or a FEED for a CCS project commences. 

Because our businesses and assets are in development, we have not historically generated cash flow from operations, nor do we expect to do so during 2022.

We intend to fund the remaining portion of 2022 development activities through the sale of additional equity or equity-based securities in us or our subsidiaries.

We expect to spend approximately $15 million per month on development activities during 2023 and until a positive FID is made on the initial phase of the Terminal. 

Because our businesses and assets are in development, we have not historically generated significant cash flow from operations, nor do we expect to do so until the Terminal is operational or until we install CCS systems on third-party industrial facilities.

We intend to fund development activities for the foreseeable future with cash and cash equivalents on hand and through the sale of additional equity, equity-based or debt securities in us or in our subsidiaries.

There can be no assurance that we will succeed in selling equity or equity-based securities or, if successful, that the capital we raise will not be expensive or dilutive to stockholders.

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We spent approximately $81.0 million on such development activities during 2022, which we funded through our cash on hand and proceeds from the issuances of equity and equity-based securities.

Our capital raising activities since January 1, 2020 have included the following:

In March 2020, we sold our equity interests in Rio Bravo for initial proceeds of $15 million, with an additional $4.4 million due from the buyer promptly after the initial funding of post-FID financing for the Terminal.

In March, April and July 2021, we sold an aggregate of 39,500 shares of 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.

In September and November 2021, we sold an aggregate of 163,332 shares of Company common stock for proceeds, net of placement fees, of approximately $0.6 million pursuant to our at-the-market program.

Our capital raising activities since January 1, 2022 have included the following:

In March 2022, we sold 10,500 shares of Series C Preferred Stock, at $1,000 per share for a purchase price of $10.5 million and issued an additional 210 shares of Series C Preferred Stock as origination fees.

In April 2022, we sold 4,618,226 shares of Company common stock for approximately $30 million.

In September 2022, we sold 15,454,160 shares of Company common stock for approximately $85 million.

In February 2023, we sold 5,835,277 shares of Company common stock for approximately $35 million.

Long Term Liquidity and Capital Resources

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CCS projects will similarly take an extended period of time to develop, construct and become operational and will require significant capital deployment.

We currently expect that the long-term capital requirements for the Terminal and any CCS projects will be financed predominately through project financing and proceeds from future debt, equity-based, and equity offerings by us.

Based on our EPC Agreements with Bechtel, we currently estimate the aggregate lump-sum EPC cost to construct Trains 1-3 of the Terminal at approximately $11.5 billion.

We currently expect that the EPC costs and other long-term capital requirements for the Terminal and any CCS projects will be financed predominately through project financing and proceeds from future debt, equity-based, and equity offerings by us.

Construction of the Terminal and CCS projects would not begin until such financing has been obtained.

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Operating cash outflows during the years ended December 31, 2022 and 2021 were $40.1 million and $18.0 million, respectively.

The decrease in operating cash outflows in 2021 compared to 2020 was primarily related to a decrease in general and administrative and lease expenses.

The increase in operating cash outflows in 2022 compared to 2021 was primarily due to an increase in employee costs and professional fees paid to consultants as we prepare for a positive FID on the initial phase of the Terminal.

Investing Cash Flows

Investing cash outflows during the year ended December 31, 2021 was $18.5 million and investing cash inflows during the year ended December 31, 2020 was $18.5 million.

The investing cash outflows in 2021 were primarily the result cash used in the development of the Terminal of $12.1 million and cash used in the acquisition of other assets of $6.4 million.

The investing cash inflows in 2020 were primarily the result of the sale of investment securities of $62.0 million partially offset by cash used in the development of the Terminal of $32.4 million and cash used in the acquisition of other assets of $10.9 million.

Investing cash outflows during the years ended December 31, 2022 and 2021 were $40.9 million and $18.5 million, respectively.

The investing cash outflows in 2022 were primarily the result cash used in the development of the Terminal of $33.8 million and cash used in the acquisition of other assets of $7.1 million. During the third quarter of 2022, we issued a limited notice to proceed to Bechtel to begin ramping up its personnel and initiate site preparation work;

as a result, investing cash outflows increased in 2022 relative to 2021.

The investing cash inflows in 2021 were primarily the result cash used in the development of the Terminal of $12.1 million and cash used in the acquisition of other assets of $6.4 million.

Financing Cash Flows

Financing cash inflows during the years ended December 31, 2022 and 2021 were $118.2 million and $39.4 million, respectively.

Financing cash inflows in 2022 were primarily the result of proceeds from the sale of common stock of $115 million and sale of Series C Preferred Stock of $10.5 million, partially offset by equity issuance costs of $3.9 million and shares repurchased related to share-based compensation of $3.3 million.

Financing cash inflows in 2021 were primarily the result of proceeds from the sale of Series C Preferred Stock of $39.5 million.

Financing cash inflows in 2020 were primarily the result of proceeds from the sale of Rio Bravo of $15.0 million.

Contractual Obligations

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Operating lease obligations

Permitting costs

Operating lease obligations primarily relate to our Rio Grande Site Lease, and amounts due thereunder until the lease term commences, and office space in Houston, Texas.

Rio Grande site lease

Operating lease obligations relate to our office space in Houston, Texas and Singapore.

Rio Grande site lease represents amounts due until the lease term commences.

A discussion of these obligations can be found at 

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General and administrative expenses

Development expense

Land option and lease expenses

Development expense, net

Lease expense

Depreciation expense

Operating loss

Gain (loss) on Common Stock Warrant Liabilities

Loss on redemption of investment securities

Interest income, net

Loss on Common Stock Warrant Liabilities

Net loss attributable to NextDecade Corporation

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Our consolidated net loss was $60.1 million, or $0.65 per common share (basic and diluted), for the year ended December 31, 2022 compared to a net loss of $22.0 million, or $0.34 per common share (basic and diluted), for the year ended December 31, 2021.

The $7.7 million increase in net loss was primarily a result of a loss on common stock warrant liabilities, partially offset by a decrease in general and administrative expenses and land option and lease expenses, discussed separately below.

General and administrative expenses during the year ended December 31, 2021 decreased $3.4 million compared to the year ended December 31, 2020, due primarily to decreases in professional fees, office expenses, IT and communications costs and share-based compensation expense of $5.3 million, partially offset by an increase in salaries and wages of $4.0 million.

The decrease in share-based compensation expense is primarily a result of forfeitures of restricted stock during the year ended December 31, 2021.

The increase in salaries and wages is primarily due to accrued bonuses.

Development expense during the year ended December 31, 2021 increased $1.6 million compared to the year ended December 31, 2020, due to NEXT Carbon Solutions' preliminary FEED assessments performed on third-party industrial facilities. 

Similar preliminary FEED assessments were not performed during the year ended December 31, 2020.

The loss on Common Stock Warrant Liabilities of approximately $2.5 million in 2021 was primarily due to an increase in the share price of Company common stock from December 31, 2020 to December 31, 2021 and an increase in the Common Stock Warrants outstanding associated with the issuance of Series C Preferred Stock. 

The $38.0 million increase in net loss was primarily a result of increases in general and administrative expense, development expense, net, and loss on common stock warrant liabilities, discussed separately below.

General and administrative expenses during the year ended December 31, 2022 increased $32.3 million compared to the year ended December 31, 2021, primarily due to an increase in share-based compensation expense of $11.8 million and increases in salaries and wages, professional fees, travel expenses, and marketing costs. The increase in share-based compensation expense for the year ended December 31, 2022 was primarily due to forfeitures of awards upon the departure of certain employees during 2021 and the grant of additional restricted stock unit awards in 2022. The increase in salaries and wages, professional fees, travel expense, and marketing is primarily due to fewer pandemic restrictions in 2022 and an increase in the average number of employees during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase in development expense, net of $2.5 million during the year ended December 31, 2022 compared to the year ended December 31, 2021, is primarily due to NEXT Carbon Solutions' FEED study for California Resources Corporation that commenced in May 2022. 

The loss on common stock warrant liabilities of approximately $5.7 million in 2022 was primarily due to an increase in the share price of Company common stock from December 31, 2021 to December 31, 2022.

Preferred stock dividends of $24.3 million in 2022 consisted of dividends paid-in-kind with the issuance of an additional 9,235 shares of Series A Preferred Stock, 8,806 additional shares of Series B Preferred Stock and 6,166 additional shares of Series C Preferred Stock.

Deemed dividends on the Series A Preferred Stock for the year ended December 31, 2021 and December 31, 2020 represents the accretion of the beneficial conversion feature associated with the Series A Preferred Stock issued in 2018.

Summary of Critical Accounting Estimates

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Any change in the estimates used may cause the value to be higher or lower than that reported.

The estimated volatility of our common stock at the date of issuance, and at each subsequent reporting period, is based on our historical volatility.

The estimated volatility of our Common Stock Warrants at the date of issuance, and at each subsequent reporting period, is based on our historical volatility.

The risk-free interest rate is based on rates published by the government for bonds with maturity similar to the expected remaining life of the Common Stock Warrants at the valuation date.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity