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On Tuesday, NextDecade Corp. (NASDAQ:NEXT) received a reaffirmed Buy rating and a $15.00 price target from Stifel analysts following a significant liquefied natural gas (LNG) supply agreement. This endorsement comes on the heels of NextDecade's announcement of a binding sale and purchase agreement (SPA) with Saudi Aramco (TADAWUL:2222), involving 1.2 million tons per annum (mtpa) of LNG off-take from the planned fourth train of its Rio Grande LNG export terminal. According to InvestingPro data, analyst targets for NextDecade range from $9 to $15, with the stock currently trading at $6.62, despite a sharp 22% decline over the past week.
The SPA, which is set for a 20-year duration, will operate on a free on board (FOB) basis with pricing indexed to Henry Hub. This agreement marks a notable milestone for NextDecade, occurring just a few months after the company successfully navigated through a court appeals process and recently received a favorable draft supplemental environmental impact statement (SEIS). The company, currently valued at $1.72 billion, faces significant financial challenges, with InvestingPro analysis indicating a debt-to-equity ratio of 10.77 and a weak overall financial health score.
Stifel's analysis suggests that the regulatory hurdles for NextDecade have been significantly reduced, enhancing the prospects for a final investment decision (FID) on the expansion of Train 4 at Rio Grande LNG in the near future. The analysts at Stifel have evaluated the valuation of NextDecade's Train 4, considering both discounted and undiscounted scenarios, which could potentially lead to a higher trading price for the company's shares.
The firm's valuation models estimate NextDecade's shares at $11 when discounted and $18 when undiscounted. With the recent developments, Stifel anticipates that NextDecade's stock will likely trade closer to these valuations, reflecting the increased likelihood of the project's success, despite the current volatility in the markets.
Investors and industry observers are now watching closely as NextDecade moves towards its anticipated final investment decision, which could solidify its position in the LNG export industry and influence its stock performance in the foreseeable future.
In other recent news, NextDecade Corporation has entered into a significant 20-year agreement with an Aramco subsidiary for the sale of 1.2 million tonnes per annum of liquefied natural gas from its Rio Grande LNG Facility. This deal is contingent on a positive Final Investment Decision for Train 4. Additionally, Stifel analysts have maintained their Buy rating on NextDecade, raising the stock price target to $15.00, highlighting the company's expansion plans for the Rio Grande LNG terminal, which includes the addition of Trains 6, 7, and 8. This expansion is projected to add approximately 18 million tonnes per annum of capacity.
Furthermore, the U.S. Court of Appeals for the D.C. Circuit has revised its judgment, allowing construction at the Rio Grande LNG terminal to continue while awaiting a supplemental Environmental Impact Statement from the Federal Energy Regulatory Commission. In a leadership update, NextDecade announced that Luke Boylston has been appointed as the interim principal accounting officer following the departure of Eric Garcia. The company confirmed that Garcia's departure was not due to any disagreements related to financial disclosures. These developments indicate ongoing progress and strategic adjustments within NextDecade as it navigates the energy sector.
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