NextDecade (NASDAQ:NEXT) said construction of its Rio Grande LNG Phase 1 project continued ahead of the schedule reflected in its production guidance, with the company still targeting first gas later in 2026 and first LNG production from Train 1 in the first half of 2027.
Chairman and Chief Executive Officer Matt Schatzman said the company is preparing to shift from an LNG developer into an operating company, calling safe and reliable operations a key priority for 2026. NextDecade energized the site’s main substation in May and seconded more than 100 operations employees to engineering contractor Bechtel in June ahead of startup activities.
Construction Progress and Commissioning
As of June, Trains 1 and 2 were 74% complete, according to the company, with engineering and procurement nearing completion, construction nearly 60% complete and commissioning beginning. Train 3 was more than 50% complete, while Trains 4 and 5 were 15.5% and 9.4% complete, respectively.
More than 6,000 workers are on site each day, Schatzman said. All major equipment has been installed for Train 1. Train 2’s major-equipment installation is underway, including the setting of its second compressor string and turbine in July. Train 3 has begun major-equipment installation, including its first compressor string.
Other project milestones include continued work on LNG storage tanks, foundation work for Train 4’s main cryogenic rack, and piling work for Tank 3. Construction of the Bay Runner pipeline remains on track for third-quarter 2026 in-service, while the hot tap to the Valley Crossing Pipeline has been completed. Dredging for the berth and turning basin is substantially complete, and the channel-deepening project has been completed.
During the question-and-answer session, Schatzman said the completion of LNG tank work and pipeline facilities are among milestones investors should watch before feed gas is introduced. He said the company may provide more specific first-LNG timing guidance in the fourth quarter as commissioning activities progress.
Train 6 Permitting and Commercialization
NextDecade filed its formal application with the Federal Energy Regulatory Commission for Train 6 in May. The company said FERC informed it that the final environmental impact statement is scheduled for June 25, 2027, a timeline that supports a potential final investment decision in the second half of 2027, provided sufficient commercial support and financing are secured.
The company also applied to the Department of Energy in June for Free Trade Agreement and non-FTA export authorizations for Train 6. It executed a reservation agreement with Baker Hughes during the second quarter to secure supply of the train’s main refrigeration compressors.
Schatzman said NextDecade is in discussions with several high-credit-quality counterparties regarding long-term sales and purchase agreements, or SPAs, for Train 6. He said the company expects market activity related to SPAs over the next six months, while seeking to coordinate commercial contracts, engineering work and financing with its targeted 2027 FID.
The CEO said the company also aims to initiate FERC pre-filing work for Trains 7 and 8 by year-end. He said that, if the permitting schedule proceeds as expected, the company could seek FIDs for those trains about a year after Train 6.
Financing Transactions Reduce Bank Debt
New Chief Financial Officer John Zuklic, who joined NextDecade earlier in July after serving as CFO of Citgo, detailed financing transactions intended to extend maturities and create bank capacity for Train 6 and additional expansions.
- In June, the company entered a $1 billion Phase 1 project holding-company term loan carrying 7.05% interest and maturing in June 2033.
- In July, Rio Grande LNG LLC issued $3.5 billion of senior secured notes in a 144A offering across four maturities ranging from 2031 to 2041.
- The notes were rated BBB- by S&P and Fitch, according to the company.
- NextDecade also unwound a portion of interest-rate swaps tied to retired bank debt, generating a $109 million settlement receipt in July.
Zuklic said the company used proceeds from the transactions, net of fees, to repay about $4.6 billion of Phase 1 bank-facility borrowings. The company expects to refinance the remaining bank-facility balances at each project-level entity before guaranteed substantial completion, subject to market conditions.
Shipping and Operating Costs
NextDecade took delivery of two LNG vessels during the second quarter, including the new-build Clean Texas, the first of three new-build vessels chartered for Phase 1 delivery-ex-ship contracts. The company currently has three LNG carriers under charter and expects to receive more vessels later in 2026 before first LNG production.
The company said it may sub-charter shipping capacity to third parties when capacity exceeds its near-term needs, but Schatzman emphasized that the focus is on ensuring vessels are available for early cargoes and long-term customer commitments.
NextDecade also began separately reporting operating and maintenance expenses as it approaches operations. Zuklic said year-to-date 2026 O&M costs primarily included labor, property taxes and the site lease, and are expected to rise through the remainder of the year as commissioning and operations approach.
About NextDecade (NASDAQ:NEXT)
NextDecade Corporation is a Houston‐based liquefied natural gas (LNG) and decarbonization company focused on the development, engineering, construction and operation of large‐scale LNG export facilities. The company’s core mission is to deliver cleaner energy solutions to global customers while integrating carbon capture and sequestration technologies to reduce greenhouse gas emissions. NextDecade’s projects are designed to leverage abundant U.S. natural gas supplies to meet growing worldwide demand for low‐carbon fuel.
NextDecade’s flagship project, Rio Grande LNG, is located at the Port of Brownsville in southern Texas.
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