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Investing.com -- NextDecade Corporation (NASDAQ:NEXT) stock fell 17% after announcing a positive final investment decision (FID) and financial close on Train 4 at its Rio Grande LNG project, with analysts questioning the company’s long-term margin assumptions.
The Houston-based company issued full notice to proceed to Bechtel Energy for Train 4 construction on September 9, which will add approximately 6 million tonnes per annum (MTPA) of LNG production capacity. This brings the total expected capacity under construction at Rio Grande LNG to approximately 24 MTPA.
NextDecade secured approximately $6.7 billion in committed financing for Train 4, including a $3.85 billion term loan facility, $1.13 billion in equity commitments from NextDecade, and $1.7 billion from investment partners. The company emphasized that its equity commitment was financed without impact to common shares outstanding.
Despite the positive development announcement, investors appeared concerned about the company’s long-term profitability assumptions. TD Cowen analyst Jason Gabelman noted potential valuation issues in his assessment.
"NEXT financials imply a $13/sh for 5 trains. However, we believe the embedded $5/mcf spot margin is higher than what will be realized. We estimate NEXT is worth $7/sh at $3/mcf margin and $10 at $4 margin, and would not be surprised if the stock settles into that range near term," Gabelman stated.
NextDecade also announced it expects to make a positive FID on Train 5 in the fourth quarter of 2025, with anticipated project costs of approximately $6.7 billion. The company has already secured commercial support through 20-year LNG Sale and Purchase Agreements with JERA, EQT Corporation, and ConocoPhillips.
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