NextDecade Corp. Aktie

Good morning, and welcome to the NextDecade Corporation First Quarter 2026 Investor Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

And now I would like to turn the call over to Megan Light, NextDecade's Vice President of Investor Relations.

Thank you, and good morning, everyone. Welcome to NextDecade's First Quarter 2026 Investor Update Call and Webcast. The slide presentation and access to the webcast for today's call are available on our website at www.next-decade.com.

Today, I am joined by Matt Schatzman, NextDecade's Chairman and Chief Executive Officer; and Mike Mott, NextDecade's Interim Chief Financial Officer.

Before we begin, I would like to remind listeners that discussion on this call, including answers to your questions, contain forward-looking statements within the meaning of U.S. federal securities laws. These statements have been based on assumptions and analysis made by next decade in light of current expectations, perceptions of historical trends, current conditions and projections about future events and trends.

Although NextDecade believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that the expectations will [indiscernible] be correct. NextDecade's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in NextDecade's periodic reports that are filed with and available from the Securities and Exchange Commission.

In addition, discussion on this call includes references to certain non-GAAP financial measures such as adjusted EBITDA and distributable cash flow. A definition of an additional information regarding these measures can be found in the appendix to our presentation.

And now I will turn the call over to Matt Schatzman, executes Chairman and Chief Executive Officer.

Thank you, Megan, and good morning, everyone. Thank you for joining us today. First quarter was productive across the NextDecade organization. We're making solid progress on the key 2026 priorities that we introduced on our fourth quarter call. First, one of our highest priorities continues to be progressing construction at the Rio Grande LNG facility, safely, on budget and ahead of schedule. Safety is engraved in our culture and our work. And in the first quarter, we achieved a low total recordable incident rate or TRIR of less than 0.1.

I'm proud of both our team and the Bechtel team for continuing to progress construction at a rapid pace while maintaining high safety standards. We also continue to be within budget across all 5 trains under construction. Train 1 early electric commissioning is underway. Phase 1 continues to track ahead of the guaranteed substantial completion dates for the EPC contracts, and we're making excellent early progress on trains 4 and 5 at the site.

Based on our current progress, Phase 1 is tracking ahead of the schedule reflected in our early volume guidance, providing a buffer to achieve the numbers we have provided. Our second key priority for 2026 is continuing to prepare our organization for commissioning, first LNG and the transition to operations. We've been advancing hiring, system implementations and process development ahead of first LNG. We've been rapidly hiring and expanding our team, and we currently have over 400 employees with the majority based in Brownsville.

As part of our enterprise readiness efforts, we've made significant progress building the digital and operational foundation required for first LNG. Core enterprise platforms are starting to go live, and we've created a robust in-house integration capability that allows systems to exchange data and supports end-to-end business processes. This work positions us to scale efficiently, reduce operational risk and enter operations with strong governance, visibility and control across the enterprise.

We're laser-focused on ensuring that the organization is prepared for introducing first gas into the facility in the second half of this year and producing the first LNG from Train one in the first half of next year. Our third key priority is to manage near-term exposure to LNG market margins through the sale of projected early LNG cargoes. As we mentioned on the fourth quarter call, early this year, we began marketing early cargoes that we expect to produce in Phase I prior to the commencement of our long-term SPAs for Train 3.

In February, we sold over 175 TBtu on a free on board or FOB basis with fixed liquefaction fees that are expected to achieve margins calculated as the FOB sales price less our expected cost of natural gas feedstock and fuel of over $3 per MBtu. These sales reduced the Phase I early LNG production exposed to LNG market price fluctuations by 33%. Market margins have increased since the Aderant conflict began. And as we increase our visibility into expected early LNG production gain additional assurance on the timing from Bechtel later this year and early next year, we expect to sell additional early volumes to further reduce our market exposure during our ramp-up period. Our final key priority for this year is advancing the development and permitting of Train 6 through 8.

Bechtel is in the process of performing a front-end engineering and design or FEED study for the Train 6 and third birth, and we expect to follow the formal FERC application for Train 6 before the end of this quarter. Additionally, we've begun early commercialization efforts for Train 6, and we're seeing strong demand for potential customers for long-term volumes. I'd like to remind everyone that additional LNG supplies were needed in the early 2030s before the IRAM conflict began and demand for long-term SPAs is even stronger today.

Construction at the Rio Grain LNG facility continues to progress safely, on budget and ahead of schedule. As of March 2026, a Trains 1 and 2 are 67.8% complete. Train 3 is 44.2% complete and trains 4 and 5 are 10.6% and 6.8% complete, respectively. During the overall -- within these overall completion numbers, Trains 1 and 2 are functionally complete on the engineering and procurement front with the engineering of trains 1 and 2, just over 98% complete and the procurement just over 94% complete.

Train 3 is not far behind Trains 1 and 2 with engineering over 90% complete to procurement over 80% complete. Since our last update, Bechtel has continued to make strong progress in construction of Phase 1 with work on Train 1 focused on piping, equipment installation, cable pooling, testing and system completions. The main cryogen, a key exchanger for Train 1 has also been successfully installed. Trains 2 and 3 made Noble progress on civil works, piping, structural steel and equipment installation and placement of the Train 2 compressor packages is underway.

For tanks 1 and 2 welding of the inter tanks is progressing and concrete roof placement has been completed for both tanks. Early civil works are progressing for Train 4 site preparation activities are underway for Train 5 and production piling has commenced for Tank 3. Across the site, construction of permanent buildings is advancing, construction activities of the gas inland area are ongoing, dredging activities for the birth and the turning basin are substantially complete and channel deepening is nearing completion.

The Bay Runner pipeline has been under construction since last fall and is expected to reach in service in the third quarter of this year. Bay runner is being constructed by Whistler LLC, a joint venture between WhiteWater Midstream, Enbridge and MPLX and will be our primary pipeline capacity into the terminal for trains 1 through 3. Early electrical commissioning of train line continues, and we continue to expect first gas into the facility in the second half of this year and first LNG production from Train 1 in the first half of 2027.

In early April, FERC approved our request to ship to a 24/7 construction schedule at the site, a transition that has been contemplated in the EPC contract and will not increase our EPC or total project cost. 24/7 formats to facilitate Bechtel making continued progress ahead of schedule. We're currently tracking ahead of the schedule reflected in our early volumes and cash flow guidance, giving us some buffer for the unexpected events during commissioning and start-up of the trains while still achieving the production guidance we have provided. We're supporting our goal of increasing our capacity at the Rio Grande LNG facility up to 60 million tonnes per annum by advancing the development and permitting of Train 6 through 8.

As we mentioned on our highlights slide, -- the FEED study for Train 6 is underway with Bechtel. Train 6 will have the same design as Trains 1 through 5, and the FEED study will support our regulatory filings with FERC and give us a general idea of where we expect to land on cost for Train 6. We currently expect Train 6 to look a lot like Train 5 from a project cost perspective, adjusted for inflation.

We are also prepared to file a formal application with FERC for Train 6 and a third birth before the end of the second quarter of this year. The current administration's emphasis on U.S. energy dominance is a national security issue, including last week's determination that expanding LNG capacity is necessary under the Defense Production Act is expected to be helpful for the development of U.S. LNG, and we expect permitting new capacity to be smoother and faster under the current administration in the prior ones.

Additionally, the DC Circuit Court's reversal in our case in March 2025 and the Supreme Court 7 County case later last year have set precedents that will go a long way in limiting the ability of certain groups tie-up permits in court over matters that have been appropriately analyzed by FERC in its environmental reviews. The permitting and regulatory framework for LNG infrastructure during the current administration appears to be taking less time, which is very encouraging. It gives us confidence that our future trains will receive approval faster than our first 5 trains. We believe it is possible that we could receive our FERC permit for Train 6 as early as mid-2027, which could set us up for an FID in the second half of 2017, if we can also sufficiently commercialize and finance Train 6 during that time frame.

We expect that FID in the second half of 2027 would result in Train 6 coming online as early as 2032. As I mentioned earlier, we began commercializing efforts for Train 6 and and we're seeing very strong demand from potential SPA counterparties. We believe that one of the main outcomes of the Iran conflict will be increased attractiveness of long-term U.S. LNG volumes, and we'll discuss that more in a few minutes.

The potential demand we are currently seeing for Train 6 provides us with a sales pipeline that is larger than the capacity of Train 6 and places us in a strong position for the subsequent commercialization of Train 7 and 8. We're advancing development of Train 7 and 8 with a focus on determining the supporting infrastructure they will require and finalizing their location on the site.

Train 7 and 8 will need a flood control mechanisms such as the lever wall as they'll be outside the main levy around the site, and we're also evaluating potential tank [indiscernible] requirements. We continue to have the goals of permitting these trains during the current administration and commercializing them while they are in the permitting process. We currently have full ownership of Train 6 through 8, and we believe these trends could contribute significantly to future expect distributable cash flow across a wide range of financing scenarios.

This year, as we advance permitting and commercialization of Train 6, we're working on potential financing options with the goal of maximizing distributable cash flow on a per share basis. Since our last call, global LNG market dynamics have shifted significantly as a result of the Iran conflict. Closure of the Strait of Hormuz during March and April tolled approximately 40 million tons of LNG supply out of the market with capacity at Rospan and Doss Island shut in. Each month of continued shut-in will result in a loss of an additional approximately 7 million tons, and we expect the production ramp-up that Rosatom will take weeks, if not months.

Based on public announcements, the 2 damaged trains at Ross Lafon totaling almost 13 million tons per annum of capacity are estimated to require between 3 and 5 years to repair. Also, it's estimated that expansion capacity in cutter could be delayed by up to a year due to recent events. In total, a significant amount of LNG supply has been pulled out of the market between now and 2030, which we expect will tighten global balances. There's a lot we don't know today, including the full extent of the damage of [indiscernible], exact timing for production to return to the market and the ultimate impact of short-term demand destruction in price-sensitive markets, particularly in Southeast Asia.

For the conflict again, we expect that the appending supply wave of LNG to spur extra normal gas demand growth and additional gas infrastructure investments in developing markets over the next few years. Clearly, with less supply in the market currently, this will slow down. Longer term, we do not see a slowdown in demand for natural gas and in particular, LNG. One very effective way for buyers around the world to acquire LNG at attractive prices is through long-term supply is through long-term supply and U.S. LNG SPAs indexed to Henry Hub are particularly attractive due to the diversified prolific natural gas resource base in the U.S. which effectively shelters buyers from the spikes in the price of LNG and natural gas in other parts of the world.

In [indiscernible] pricing has decreased since the Iran conflict began and customers with long-term contracts out of the U.S. that are indexed to Henry Hub are currently able to deliver into Europe and Asia levels below $8 per MMBtu. Long-term LNG supplies out of the U.S. had been a buffer against market price shocks, not only during the current conflict but also during the prior market spikes associated with the Russia, Ukraine War and weather-related seasonal demand spikes.

Long-term U.S. LNG supplies have also been attractively priced relative to short-term supplies in time market conditions like like we have seen in the past 2 to 3 years. Since 2021, an example, U.S. long-term SPA calculated at 115% of Henry Hub plus a fixed fee of $2.50 and shipping costs of approximately $2 would have delivered into Asia at an average of $8.83 per [indiscernible]. The JKM spot price over the same period was over $17.50, around double the long-term price. Excluding the market spikes related to RusheUkraine in 2022, and 2023 to present, the example U.S. long-term SPA price averaged approximately $5 per MMBtu lower than the short-term LNG price.

Long-term Henry Hub-linked SPAs have also compared favorably to long-term LNG contracts linked to oil. Since 2021, long-term LNG contracts linked to Brent would have be it slows below 11%, inclusive of any fixed adder to beat the pricing of the most recent wave of long-term in rehab linked LNG contracts out of the U.S. Historically, these print linked LNG contracts have had slips between 11% and 15% plus a fixed [indiscernible]. Before the combo began, we received strong indications of demand for long-term supplies out of Train 6. And demand for long-term contracts is even higher today.

With a prolific and diversified natural gas resource in the U.S., the favorable geopolitical environment, buyers can have confidence in U.S. supplies from reliability, energy security and economic standpoint. We expect buyers to increasingly value long-term contracts out of the U.S., which will spur additional capacity growth in the market. And with Train 6 through 8 under development, we're in a very good position to provide a meaningful amount of additional capacity to meet that demand.

Now I'd like to turn it over to Mike to talk about our financial priorities. Mike?

Thanks, Matt, and thanks to everyone for joining us today. Matasjust walk you through key construction, operational and strategic priorities for 2026. And -- now I will spend a few minutes on our financial priorities for the year. First, we are focused on actively managing debt at the project level. Specifically, we plan to continue opportunistically refinancing portions of our project level credit facilities in the debt capital markets.

Today, we have over $9 billion of credit facility commitments for Phase 1 about $3.8 billion for Train 4 and roughly $3.6 billion for Train 5. Over time, we expect to refinance each of these bank facilities into a mix of bullet and amortizing debt securities. We expect to refinance the full term loan balances before the commercial operation dates for Trains 3, 4 and 5, respectively.

Since Phase 1 FID, we have refinanced more than $1.85 billion Phase 1 bank debt, and we expect to continue taking advantage of market opportunities this year. Importantly, this approach allows us to better manage project-level maturities by spreading them out over time and thoughtfully balancing bullet and amortizing structures. Our second financial priority is evaluating equity financing options for Train 6. As Matt mentioned, we are targeting an FID in the second half of 2017 and subject to achieving permitting, commercialization and financing prerequisites.

This timing comes before we expect to be generating meaningful operating cash flows that could fund our equity requirements for Train 6, requiring us to look to other financing alternatives for this capital. We expect to contract a high percentage of Train 6 capacity, which could support project-level bank facilities covering up to approximately 75% of total project costs. Maximizing project level debt lowers the overall cost of capital and meaningfully reduces our equity requirements.

Based on current SPA pricing, early estimates of Train 6 costs and the current interest rate environment, we expect the project to be highly accretive to next decade's distributable cash flow. As a result, all else equal, we will seek to both preserve our high economic interest to Train 6 and select the equity funding options that are most accretive to our distributable cash flow on a per share basis to maximize value for our shareholders. The FinCo bank facility that we will be used to fund a portion of our equity commitments for trains 4 and 5 remains a very attractive source of capital. It is priced at only about 150 basis points over our project level bank facilities and provides significant flexibility through delayed draws and penalty-free prepayments.

We believe additional FinCo capacity will be available to help fund a portion of Train 6 equity needs. Beyond that, we are actively evaluating a range of alternatives to fund the remaining Train 6 equity requirements. We will continue working through these alternatives over the course of the year with a focus on finding the most accretive outcomes. -- and we expect to share more detail with you later this year as these options take shape.

Today, we are reaffirming our early volume and cash flow guidance along with our steady-state outlook. This slide provides a high-level summary highlighting the key points. You can find more detailed assumptions and supporting slides in the investor presentation we posted earlier today.

Let me start with a discussion of early volumes. We continue to project total LNG production of approximately 3,800 TBtu from early cargoes beginning with startup of Train 1 in 2027 and and extending through first commercial delivery to our long-term SPA customers under Train 5. Importantly, that total includes about 1,275 TBtu of LNG production in excess of what's currently contracted under long-term SPAs.

As we discussed on our fourth quarter call, earlier this year, we sold forward more than 175 TBtu of those early volumes on an FOB basis. These sales carry fixed liquefaction fees and are expected to achieve cargo margins of more than $3 per MMBtu calculated as the FOB LNG sales price less our expected feed gas and fuel costs. As a result, we have reduced our exposure to LNG market pricing on early Phase 1 volume by roughly 1/3.

As Matt mentioned earlier, we expect Bechtel to deliver our trains ahead of the guaranteed substantial completion dates. As a result, the majority of the uncontracted volumes reflected in our early production guidance are expected to be produced after substantial completion and prior to DFCD under the SPAs for each trade. As construction continues to progress, our confidence in these projections remains very strong. In fact, Bechtel is currently tracking modestly ahead of the scheduled assumed in our guidance which provides additional buffer and creates potential upside for early volumes that are not currently reflected in our projections.

We expect the cash flow generated from sales of these early volumes to be used primarily to pay down a portion of the FinCo and Super FinCo loans that support our equity commitments for trains 4 and 5. Our early cash flow outlook guidance remains unchanged. Under an assumed margin of $5 per MMBtu on volumes in excess of our contracted SPAs, we project early production could generate approximately $2 billion and next decade share of distributable cash flow at the Rio Grande LNG project level.

At a $3 per MMBtu margin, we project approximately $1.2 billion of distributable cash flow. There is potential upside to both scenarios driven by continued schedule strength, the pace of ramp-up to full production, the potential for production above nameplate capacity and possible additional market price upside. Turning to leverage and capital structure. On our last call, we introduced a steady state leverage target of 3 to 3.5x next decade level debt to adjusted EBITDA.

We believe this target is appropriate given the long-dated highly visible cash flows created by our highly contracted portfolio with high-quality creditworthy customers. In the $5 per MMBtu early volume margin scenario, we expect next decade level debt to fall within that target range as we move into steady-state operations. In the $3 per MMBtu scenario, we would expect to pursue additional balance sheet optimization. In that case, we would consider contracting approximately an additional 2 million tons per annum under long-term SPAs across trains 4, 5. That would increase our 5 train portfolio to roughly 90% contracted, allow us to maximize project level debt, reduce overall equity requirements for both next decade and our partners. -- and ultimately reduce the amount we expect to draw under the FinCo loan, bringing next decade level debt back into our target range for steady-state operations.

Because we contributed the net proceeds from the Super FinCo term loan into trains 4 and 5 at FID, we do not expect any additional next decade equity funding obligations through Das on the FIMCO loan for those trains for at least the next 2 to 3 years. This gives us a long runway to determine the optimal level of long-term contracting. And as Matt mentioned, we are seeing very strong demand in the long-term contracting market today.

Moving our discussion to steady-state operations. We are also reaffirming our steady-state guidance today. In our base case scenario, assuming $5 per MMBtu market margins, both for early volumes and during steady state, we project annual next decade distributable cash flow of approximately $500 million following DST for the Train 5 SPAs and prior to our economic interest lift for trains 4 and 5 in the mid-2030s. After the flip, beginning in the mid-2030s we project annual distributable cash flow of approximately $800 million.

In our additional pricing scenario, assuming $3 per MMBtu margins on early volumes per MBG margins on steady state volumes and an incremental 2 MTPA of long-term SPAs across trains 4 and 5. We project annual distributable cash flow of approximately $400 million prior to the economic interest split for Trains 4 and 5, which we would expect to occur a couple of years later than in our base case.

In this scenario, we project post-distributable cash flow of approximately $500 million annually. As with our early volume outlook, there are potential upsides to our steady-state guidance including continued schedule improvement, ramp-up timing, production above nameplate capacity and ongoing operational efficiencies. Thank you again for joining us today. With that, we'll open the call up for questions.

[Operator Instructions] The first question is from Sunil Sibal from Seaport Global Securities.

So I wanted to start off on your request for additional workovers at the site. I was curious, is that kind of based or baked into your base construction schedule? Or does that kind of accelerate that from the base schedule?

Yes. Thanks for the question. The 24/7 contemplated in the original EPC, it was an option and something that Vectecould call on if they wanted to use it. And I think that's what they're doing. They want to maintain the current schedule, and they want the flexibility to utilize 24/7, and that's what we've requested at FERC, how they end up utilizing and how many people they actually use is up to them. But I wanted to make sure it was clear to the market that this is not an incremental cost to us. This is something that was already baked into the EPC. And I think it's a positive sign that shows we have -- although we are already ahead of schedule, we haven't even utilized all the potential capabilities of a 24/7 schedule to further accelerate.

I'm very optimistic that dental is going to remain ahead of schedule at this point. And I think by adding the 24/7 optionality, that gives us even more confidence.

Okay. And I think you mentioned DPA in your prepared comments. So I was curious what seems like that's primarily related to accelerated permitting? Or there are other kind of potential levers that keeps you or other LNG developers in your view?

Sorry, I missed the first part of that, referencing what?

The Defense Production Act invocation.

Yes, thanks. Yes, I think we'll have to see exactly how this impacts the timing. But clearly, what we've seen recently are some changes in the way FERC has handled some of the current requirements, such as the prefiling waiver for BV, which I view is very positive. That may only apply in certain circumstances. It's something that we're currently in discussions with FERC on and we're waiting to hear additional guidance. But clearly, the Trump's memorandum regarding the importance of LNG along with other energy infrastructure in the U.S. to energy security during this period of time, especially with LNG for our allies. I think it's a very positive sign and suggests that we're going to see these things move very rapidly relative to even what we've seen in the past couple of years under the first couple of years of the Trump administration.

Got it. And then just a clarification on some of your comments. So I think you mentioned that as far as Train 6 is concerned, construction cost is kind of in line with train 5 plus inflation. And then you also commented that based on where the supply demand for long-term contracts is that, that market has strengthened. So I'm kind of curious, when you think about your project, say, 3 and 6 between these 2 factors kind of interplaying do you see improving returns on investment on the project versus where things were for Train 5 last year. And then how are you seeing -- in terms of the demand for additional cargoes -- is that primarily Europe, Asia, any color on that in terms of your discussion so far.

Yes. On the second part, you're talking about the long-term demand are you talking about for the excess card you said additional cargoes you mean for long-term SPAs are you talking about for the short-term cargo sales?

Actually both.

Okay. All right. So first off, the economics of Train 5 were extremely good, and we expect the economics to track closely to the economic outcome for Train 5, again, adjusted for inflation, and we still have to price up the EPC contracts. And we likely won't do that until we're confident that FID is within months of that. And it's all dependent on how long we can get price validity, but it's tended to be about 90 days or so at most.

But -- but inflation, we have to monitor it, it's inflation, it's interest rates are the 2 main factors that are going to impact the project cost. Inflation on the EPC. Obviously, interest rates on the financing costs and interest rearing construction. Both of those appear to be okay right now, but we'll have to see. We've had some early discussions with equipment providers for the main equipment. I've been very pleased, very optimistic that we're not currently seeing the same sort of constraints that we saw back last year as far as timing. But we're not planning to FID until second half of next year. So a lot of things can happen between now and then. But at least in the interim, what we're seeing right now, saying things are tracking, I think, very positively.

As far as the demand for the LNG, I think it's the same group that we saw for 4 and 5. It's Asia, Middle East, not seeing as much out of Europe as far as long-term contracting, but still a lot of interest from major intermediaries that sell into Europe and have markets into Europe. But Asia and I think Middle East, especially look like they're going to be players in the next phase of RG LNG's expansion. In the shorter term, I'd say it's a combination of Europe and Asia.

Next question is from Wade Suki from Capital One.

Just maybe just detail a little bit on Sibal's question, maybe expand a little bit on kind of cost inflation we're not going to maybe get work until next year. But labor running a little hot. Maybe you could speak a little bit to the various equipment components, electrical kind of just thinking about other Gulf Coast projects progressing. Now we have rebuilding, reconstruction going well, hopefully going abroad with all the damage facility. Just wondering if you can kind of speak to those items as you see them today.

Yes. inflation. It appears you've seen the most recent numbers that came out. Inflation appears to be heating up a little bit, but over time has been relatively modest. Again, we would expect the EPC cost to go up by at least inflation. A large part of our EPC since we're stick-built in the U.S. is going to be labor. Labor does tend to be a little bit higher than inflation, although this past year, it wasn't much above inflation. We all monitor this closely, not only for the EPC, but for every year, we have to look at our own employees' costs, and we want to be fair.

So I think at least right now, it's not a worry, a major worry, but we'll see how things progress over the year. As far as equipment, again, as I said, I've been pleasantly surprised at this point with the feedback we've received from our major suppliers as far as the expected availability for equipment for Train 6, 7 and 8 and the timing of when we'll be able to receive that equipment. As far as the cost, that will be determined once we price everything up for the EPC contract. I do expect electrical equipment to continue to be in high demand, not just for LNG, but obviously for data center build-out and power generation. So -- we'll see how that comes in. But I would expect that any sort of cost inflation that we're going to see will likely be offset by contracting -- price contracting.

And again, we're not seeing any sort of -- we're not seeing the same sort of price increases that we saw after the pandemic prior to Phase 1, which was fairly substantial. And then as you recall, between Phase 1 and Train 4 and 5, we had about a 10% increase, and there was a 2-year spread there. So it was running closer to 5% per annum as opposed to the current inflation. But that tracks pretty closely with what we were seeing in inflation. And obviously, some of the equipment stuff got really, really hot, especially around turbine orders, et cetera, that became the the constraints as far as schedule and delivery of the project.

Great. Appreciate the color there. You kind of walked right into my next question, Matt. just to what extent these might kind of influence, if at all, long-term SBA pricing. And I always appreciate your broader thoughts or insight you could do whatever it could give us on what you're seeing out there with regard to kind of leading edge rates. That would be great. Any color would be awesome.

Yes. Look, I think the market for LNG is between $2.50 and $3 on a fixed fee basis, 10%, and and Reata range. And I think it depends on the returns you're going to receive are going to be dependent on whether or not you're running a brownfield project or a greenfield project. [indiscernible] projects, I think, need higher contracting prices in order to get off the ground. If they go lower than and compete with the brownfields like us, I think they're going to have to get their upside through expansion. If they don't have a lot of expansion capability, I think it's a challenging market from an equity return perspective.

Currently, as you guys have seen for our Train 4 and 5, we are -- we tend to not be on the lower end of the market. We tend to be I think, in the mid-range of the market, kind of the true market price if you look at it from a bid offer perspective. And that's where I expect we will be or close to that for Trains 6, 7 and 8.

The next question is from Craig Shere from Tuohy Brothers.

Is your nat gas sourcing team fully in place now? And you've talked about hedging out some of the initial commissioning cargoes and that you expect $3-plus netbacks net of your feedstock costs -- could you, by the end of the year, make any more formal announcements, not just on the sales side but on the purchase side and what you're doing there?

Yes, something we'll take into consideration. We've been active on the supply side for a long term. And been working on that. And I expect that we should be able to give an update as to what we've done on a long-term basis. In addition, some of our customers have to give us notice before the end of the year as to their willingness to sell us gas under long-term contract prices. So either later this year into the year, maybe in the first quarter, right, we can provide some guidance as to what we term basis. a year or greater. I think that will be a good update. So thanks for this year.

As far as the team you got it nicely. So we already had a gas supply team in place, but we're building out the short term, the -- what I'll call the trading and optimization team. They will be managing our gas supply for us, and we expect to have them definitely in-house completed before we have to start introducing gas into the facility, which will be later this year.

Great. And you mentioned about this 24/7 construction that Bechtel officially kind of was the one who asked for it, and it's their discretion how to use it. Maybe you could just speak to their incentives by individual train or by individual FID. They may, depending on how well things are going overall may not necessarily make more money or incentives to accelerate further versus where they're already tracking.

But when you think about well, now already 5 train project moving on to 6 and more that perhaps even if they slightly increase their costs, that you don't have to pay for that their NPV building out 6 to 8 trains over time could be higher and that they're still incentivized to maximize this under most conditions. Could you opine on that?

I think what I'd say simply, Craig, is that without getting into the details of the commercial arrangement, which I don't believe we have disclosed what I would say is that Bechtel is highly incented to deliver substantial completion of each train prior to the guaranteed substantial completion date. And that there is value there that I think can more than compensate them for an increased labor cost if they choose to use it.

There's also, as you know, guarantees. I mean, we're nowhere -- at this point, and we've already said and guided that we're nowhere near that guaranteed substantial completion date as far as the delivery of the trains, but they want to make sure that they achieve prior to guaranteed substantial completion because if they went past it, which, again, we're nowhere in this realm. -- there are key hole mechanisms and damages associated with that. So there's a bunch of different incentives for them to ensure that they deliver the trains on schedule, and there are more incentives for them to deliver them ahead of schedule.

The last question is from Alexander Bidwell from Webber Research.

Just wanted to, I guess, piggyback off some of the prior questions around Phase 1 construction. With the projects tracking ahead of schedule. Could you walk us through the path to maintaining that momentum as well as any avenues that could further accelerate the project schedule?

Yes. I think it's -- importantly, it's execution. We don't currently have any concerns about equipment and supply chain, that appears to be going very well. So we haven't seen any major impact associated with the conflict in Iran, impacting that, which is good to see. I think the key here is we'll continue to provide you updates each quarter. You'll see the progress from the standpoint of the construction you note that we're engineering is effectively complete. [indiscernible] effectively complete for Phase 1 or close to it. So it really boils down to execution at the site and building it.

4 and 5, again, further out in the future, but you should expect to start seeing steel foundations being finished up this year and hopefully steel erecting at the trains. We've already talked about the filings for Tank 3. I hope to see that progress for Train 4 as well this year. But I think it really boils down to execution. There's really there's not one thing that we're specifically looking for. As far as the construction, it's just ongoing, continuing to do and execute what Bechtel has been able to do so far. The next phase, though, I think, is of equal importance, and that is the commissioning phase.

You'll see gas being introduced in the facility this year. You should expect to see that -- we'll be working on the warm side of the facility there. We're looking at working on the flares, and we'll be working on the gas processing side of it. The cold side, you aren't going to -- you shouldn't expect to see that until next year when we start to -- we're seeing compressors and start testing and then start hopefully producing LNG. As we said in the first half of 2027.

We haven't provided any specificity on which month that's going to be hope to be able to provide some additional guidance on that later this year as we continue to progress with Bechtel and we get a better indication of when that's going to occur. And then, of course, once we get through the commissioning process, which I think I've told the market that we're doing with [indiscernible], our operations team is seconded into Bechtel for the commissioning so that we have a seamless handover and substantial completion. Our team will have already worked on operating the facility during the commissioning with Bechtel, which we think is best practice. That should happen -- that will happen in substantial completion, which, again, is tracking ahead of guaranteed substantial completion, which currently, I think we've guided in the fourth quarter of next year.

So those are the key components -- we've been very -- we believe and continue to try to be conservative in our guidance to the market because this is our first train. We are -- we've been around the block on this and other projects. We -- we know how these things work. So far, everything has gone extremely well. We would anticipate based on how well [indiscernible] has done building the facility that we expect the commissioning and hand over to go extremely well also.

But we're not planning for the best, hoping for the best. We're going to plan for expected disruptions as you typically see when you're starting up a facility, especially a new one, we'll learn lessons from that. And then we would expect trains 2 and 3 to go even smoother because we'll learn from Train 1 commissioning and start-up.

So I think these are the key components. And again, we will continue to update the market as we can with more details on when that facility is going to [indiscernible] going to start up, when we expect to produce first LNG, and when we expect to load our first cargo. And then the spread of timing between Train 1 and Train 2, Train 2 and Train 3.

All right. Appreciate the color. And then just I guess real quick on the shipping side. Was wondering if you could provide any additional color on your plans around shipping capacity. I understand you guys have some vessels set to be chartered in. But is there any plans to expand or add additional vessels to handle the merchant book?

Yes. We have 5 vessels under Charter, 3 long-term charters that are utilized for our Guandong DES deal, we've charted those from Dynagas. There are 3 new vessels. In fact, the first one just sailed yesterday from the Hyundai shipyard, I was there. on Tuesday and took a tour of the vessel. It's a phenomenal piece of kit that Hyundai has built for Donna Gas and Donna Gas as designed. We have 2 more of those coming this year. And then we have 2 more vessels that we've subchartered. All these will be used from our commissioning process for Train 1, and then we'll start utilizing those larger ships that we have -- that we are being built for us to deliver to our long-term market in China.

We will likely run a DES type business for our excess cargoes. We believe that being able to do a delivered a ship business for our excess volumes, provides additional flexibility and optionality and should increase the value. So we do anticipate chartering more shifts on a short-term basis for Phase 1 volumes above the firm volumes that we've already sold. And then for Train 4 and 5, we are looking at additional capacity potentially on a longer-term basis. due to the fact that we currently, as you know, haven't sold all of our firm capacity out of those trains.

However, as Mike mentioned in his comments, should we decide to sell more of that capacity a year or two from now, depending on how the short-term market goes, that may reduce how much capacity we would need under a longer-term basis. So we're going to be very mindful of that and make sure that we don't overcontract capacity before we need it. But we will be chartering more ships simply put.

That concludes our call today. Thank you for joining and for your interest in NextDecade.

Good morning. Welcome to NextDecade Corporation's Fourth Quarter 2025 Investor Call and Webcast. [Operator Instructions] as a reminder, this conference is being recorded. I would now like to turn the call over to Megan Light, NextDecade's Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to NextDecade's Fourth Quarter 2025 Investor Update Call and Webcast. The slide presentation and access to the webcast for today's call are available on our website at www.next-decade.com. Today, I am joined by Matt Schatzman, NextDecade's Chairman and Chief Executive Officer; and Mike Mott, NextDecade's Interim Chief Financial Officer.

Before we begin, I would like to remind listeners that discussion on this call, including answers to your questions, contains forward-looking statements within the meaning of U.S. federal securities laws. These statements have been based on assumptions and analysis made by NextDecade in light of current expectations, perceptions of historical trends, current conditions and projections about future events and trends.

Although NextDecade believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that the expectations will prove to be correct. NextDecade's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in NextDecade's periodic reports that are filed with and available from the Securities and Exchange Commission. In addition, discussion on this call includes references to certain non-GAAP financial measures such as adjusted EBITDA and distributable cash flow. A definition of and additional information regarding these measures can be found in the appendix to our presentation.

And now I will turn the call over to Matt Schatzman, NextDecade's Chairman and Chief Executive Officer.

Thank you, Megan, and good morning, everyone. Thank you for joining us today. 2025 was another transformational year for NextDecade. We achieved milestones across multiple facets of the business from construction and development to commercial and financial. Last year, we executed 5 20-year LNG sale and purchase agreements totaling 7.2 million tonnes per annum with TotalEnergies, Ramco, JERA, EQT and ConocoPhillips. These agreements, along with the 1.9 million ton per annum SPA executed with ADNOC in 2024, completed the commercialization of Trains 4 and 5 at strong LNG prices. Across all 9.1 million tonnes per annum of SPAs executed for Trains 4 and 5, our fixed liquefaction fees totaled approximately $1.2 billion annually before escalation for inflation.

We achieved positive final investment decisions or FIDs on Trains 4 and 5 in September and October, respectively, bringing us to 30 million tonnes per annum of LNG production capacity under construction at the Rio Grande LNG Facility. We fully funded each train at FID with approximately 60% debt and 40% equity, and we fully funded NextDecade's equity commitments using a back leveraging approach that enabled us to secure funding with no material impact to common shares outstanding, a creative and unique approach that we're proud of, as it creates a bridge to an efficient steady-state capital structure without materially impacting our common shares outstanding.

NextDecade has an initial economic interest of 40% in Train 4 and 50% in Train 5. Our economic interest increased to 60% and 70%, respectively, once our financial partners achieve a certain return on their investments in each train. Throughout 2025, we also continue to progress the construction of Phase 1 safely, on budget and ahead of the guaranteed substantial completion dates in partnership with Bechtel. Bechtel has an unmatched track record of LNG execution on the U.S. Gulf Coast, and we expect our trains at the Rio Grande LNG facility to continue the streak of strong execution.

As of January 2026, Trains 1 and 2 are almost 65% complete and Train 3 is almost 40% complete. We have a high level of confidence in our early volume projections. And based on Bechtel's recent progress, we may have additional early volumes to sell. Mike will discuss our volume projections in more detail with our guidance slides.

As construction progresses, so do our operational readiness initiatives. We began a company-wide operational readiness program in early 2024. For the past 2 years, we've been diligently working to put people, processes and technologies in place to ensure a safe, efficient and effective transition to commissioning and operations and to position NextDecade for operational excellence. We've also been advancing our natural gas supply and transportation strategy and onboarding operational staff and back-office personnel to support operations.

Finally, early last year, we outlined our development plans for Train 6 through 8 at the Rio Grande LNG Facility. We initiated the prefiling process with FERC for Train 6 and the third berth in November, and we plan to file a full application with FERC for this expansion in mid-2026. Our ultimate development goal at the Rio Grande LNG facility is to double our capacity from 30 million tonnes per annum to 60 million tonnes per annum or 10 trains.

Our key priorities for 2026 are focused on maximizing the value of NextDecade, and we made meaningful progress toward our goals in the first 2 months of the year. First, one of our highest priorities is progressing construction at the Rio Grande LNG facility safely, on budget and ahead of schedule. Ensuring our employees and Bechtel get home safely every day is of prime importance. We achieved excellent safety metrics in 2025 with a total recordable incident rate or TRIR of 0.22, and we and Bechtel are focused on maintaining a low TRIR throughout the construction of the Rio Grande LNG Facility.

Bechtel has shown impressive performance at the site, progressing construction of Phase 1 ahead of the guaranteed substantial completion dates while achieving high safety standards and working within our project budget. Now that Trains 4 and 5 are under construction, we look to build upon the high-quality work that has been done thus far with Phase 1.

Second, we will continue to prepare our organization to begin commissioning activities at the facility this year, first LNG production in the first half of 2027 and transitioning Train 1 to operations later in 2027. We are onboarding experienced, highly skilled team members, implementing systems and processes across the organization and ensuring we are in place to support a smooth transition into operations. The work we're doing now and later this year will position us for operational excellence.

Next, we are managing our near-term exposure to LNG market margins through the sale of projected early LNG cargoes.

Earlier this year, we began marketing early cargoes projected to be produced prior to the commencement of our long-term SPAs. Year-to-date, we have sold over 175 trillion BTUs on a free onboard or FOB basis with fixed liquefaction fees that are expected to achieve margins calculated as the FOB LNG sales price less our expected costs of natural gas feedstock and fuel of over $3 per MMBtu. Throughout this year and early next year, we expect to sell additional early volumes as we increase our visibility of expected early LNG production and gain assurance on timing from Bechtel.

Our final key priority for this year is advancing the development and permitting of Train 6 through 8. We're bullish about the long-term LNG market and the need for incremental LNG supply starting in the 2030s. In addition, we expect the permitting climate under the current administration to foster faster permit approval, which could allow us to FID Train 6 as early as the second half of next year, subject to commercialization, EPC contracting and financing. One of our key priorities is progressing construction at the Rio Grande LNG Facility safely, on budget and on or ahead of schedule.

Phase 1 progressed significantly during 2025. And as of January 2026, Trains 1 and 2 are close to 65% complete and Train 3 is nearly 40% complete. Train 4, which achieved FID in September of 2025 is 7.8% complete and Train 5, which achieved FID in October 2025 is 3.3% complete. Since our last update, Train 1 structural steel and equipment installation has become substantially complete. Early electrical commissioning of Train 1 is underway, along with ongoing piping installation and testing, cable pulling and the installation of main compressors. Additionally, the marine loading and tug berths are advancing with civil and topside construction, including Berth 1 loading arm installation.

Construction activities are also continuing to progress for Trains 2 and 3 with continued structural steel erection, piping fabrication, rebar installation and equipment setting. Progress on Train 4 since FID has been focused primarily on engineering drawings and issuing purchase requisitions for key equipment and Bechtel is advancing soil stabilization and foundations in the Train 4 area.

Progress on Train 5 since FID has been focused primarily on issuing purchase requisitions for key equipment and the Train 5 area is in early site preparation. Phase 1 continues to track ahead of the guaranteed substantial completion dates, giving us very strong confidence in our projections of early LNG production volumes. We expect first LNG production from Train 1 in the first half of 2027.

I'm incredibly proud of the construction team and the work they have done at the site alongside Bechtel. Our construction team and our operations team will continue to partner closely with Bechtel this year in support of safe construction and a safe, effective, efficient transition to commissioning and operations. Our ultimate development goal at the Rio Grande LNG facility is to double our capacity to 60 million tonnes per annum or 10 liquefaction trains. Toward that end, we're continuing to advance the development and permitting of Train 6 through 8.

Our plan is to design once and build many, and we expect these trains to benefit from utilizing our established Trains 1 through 5 design and technologies, which we expect will enable us to accelerate the design and construction of our additional expansion capacity at the Rio Grande LNG site. Train 6 is being developed adjacent to Train 5 and inside the existing levy at Rio Grande LNG in an area that is currently being used as an equipment laydown area and on-site concrete batch plant. We initiated the prefiling process with FERC in November of 2025 for Train 6 and a third berth, and we expect to file a full application mid this year. We expect the Train 6 permitting process to be relatively easy and straightforward because Train 6 is identical in design to Trains 1 through 5, will be located inside the existing levy and was initially contemplated within our original design footprint at the site.

The current administration has shown strong support for natural gas infrastructure, and we believe it is possible we could receive the FERC permit for Train 6 as early as mid-2027. We began early discussions with counterparties for Train 6, and we're seeing strong interest in the market for incremental LNG in the 2030s and beyond, which is the time line when we estimate Train 6 to be operational, depending on the timing of commercialization, EPC contracting and financing.

We continue to believe the market is underestimating global natural gas demand growth in the 2030s and that global gas demand growth will continue to be bolstered by fueling economic growth in developing countries, supporting mass industrialization and feeding growing power demand. Prioritization of energy security around the world also supports global gas demand growth and natural gas is emerging as the clear winner in power generation for data centers and other AI-driven applications.

We also expect recent pressure on near-term LNG prices to be a net positive for the industry as we predict it will spur additional near-term demand for natural gas in price-sensitive regions, which will create long-term demand as additional natural gas infrastructure is built and utilized. The commercial environment for long-term contracting remains strong, and we're seeing indications from many potential counterparties that the world is going to be short gas in LNG in the early 2030s, which puts us in a great position as we seek to commercialize Train 6 and later Train 7 and 8.

We're continuing to evaluate the location of Train 7 and 8 on either the east or west side of the Rio Grande LNG facility site. The location that is not used for Train 7 and 8 is expected to be used for future Trains 9 and 10. We expect to advance the development of Train 7 and 8 this year and maintain a goal of permitting them under the current administration. We currently have full ownership of Train 6 through 8, and we believe these trains could contribute significantly to the future NextDecade distributable cash flows across a wide range of financing scenarios. This structure and financing options with the goal of maximizing distributable cash flow on a per share basis.

Now I'd like to turn it over to Mike to discuss our recent financial highlights, an update on early volumes and cash flows and additional guidance pricing scenarios. Mike?

Thanks, Matt. Let's recap our recent financing transactions. At the FIDs of Trains 4 and 5, we fully funded each train, including our equity commitments for those trains. No incremental capital raises are expected to fund Trains 4 and 5 construction based on current funding sources in place and the estimated total project cost of approximately $6.7 billion per train, which are unchanged since FID. We funded Trains 4 and 5 at their respective FIDs with a mix of approximately 60% debt and 40% equity. We primarily use delayed draw senior secured nonrecourse project finance credit facilities for the debt portion with approximately $3.8 billion for Train 4 and $3.6 billion for Train 5.

For Train 5, we also utilized $500 million of senior secured nonrecourse private placement notes that will be issued in tranches through October 2026. As of year-end 2025, $150 million of those notes were issued and outstanding. Train 4 has approximately $2.8 billion in total equity commitments, consisting of about $1.7 billion from our equity partners and $1.1 billion from NextDecade.

We initially hold a 40% economic interest in Train 4, which will increase to 60% once our financial partners receive certain returns on their investments in Train 4. Train 5 has approximately $2.6 billion in total equity commitments with roughly $1.3 billion contributed by our equity partners and $1.3 billion by NextDecade. Our initial Train 5 economic interest of 50% will increase to 70% once our financial partners receive certain returns on their investments in Train 5.

To fully fund NextDecade's approximate $2.4 billion in total equity commitments across Trains 4 and 5, we entered into approximately $2.7 billion in term loans and utilized over $200 million from cash on hand. The term loans have an attractive all-in expected cost of approximately 9% and provide a bridge to a simplified, optimized capital structure during steady-state operations. The term loans include a $1.2 billion Super FinCo term loan and an approximate $1.5 billion FinCo bank facility.

The FinCo bank facility provides us with an immense amount of flexibility through its structure with delayed draws and prepayable commitments without penalty. It also has attractive pricing at SOFR plus 350 basis points, which is only 150 basis points above the margin of our Train 4 and 5 project level credit facilities.

Turning to the corporate holding company level. In November, we amended our loan at Rio Grande LNG Super Holdings to provide an incremental $50 million of capital for corporate level liquidity. This transaction resulted in a $100 million 8% exchangeable loan due in 2030 with interest payable in cash or in kind at our election. This loan is exchangeable into NextDecade common shares at $9.50 per share. The original loan, which was amended to a 13.5% loan due in 2030 with a $175 million initial principal amount before paid in kind interest.

Last fall, we provided our projected LNG production volumes from early cargoes expected to be produced from start-up of Train 1 in 2027 through the date of first commercial deliveries or DFCD, of LNG supply to our long-term SPA customers in Train 5. We continue to have high confidence in these projections based on Bechtel's progress to date. During the projection period, we expect to produce and sell a total of approximately 3,800 TBtus of LNG, including 1,275 TBtus above the volumes that are contracted to be sold under our long-term LNG SPAs.

We expect Bechtel to deliver our trains ahead of the guaranteed substantial completion dates and the large majority of the estimated uncontracted volumes shown here relate to early production after expected substantial completion and ahead of the FCD under the SPAs for each train.

As Matt said, Phase 1 continues to track ahead of the guaranteed substantial completion dates, and we expect accelerated progress on Trains 4 and 5 as they are identical in design to Phase 1 and will benefit from efficiencies identified and lessons learned during the Phase 1 construction. We are very confident in these production numbers. And as construction continues to progress incredibly well, there is possibility we will have additional volumes to sell above the projections shown here. We have begun and will continue to manage uncontracted LNG production with the goal of reducing our exposure to short-term market price volatility.

Early this year, we began marketing early cargoes that we expect to produce, and we are seeing strong appetite for these volumes. Year-to-date, we have sold over 175 TBtu on a free on board or FOB basis with fixed liquefaction fees that are expected to achieve a cargo margin calculated as the FOB LNG sales price less our expected cost of natural gas feedstock and fuels of over $3 per MMBtu. These sales reduced the Phase 1 uncontracted early LNG production exposed to LNG market price fluctuations by 1/3.

Market margins today remain healthy and above long-term contracting rates. We are seeing strong demand for our LNG. Throughout this year and early next year, we expect to sell additional early cargoes to further reduce our market exposure as we increase our visibility into expected early LNG production and gain assurance on timing from Bechtel. We expect to utilize the cash flows associated with these early volumes to pay down a portion of the FinCo and Super FinCo loans related to our equity commitments for Trains 4 and 5. At Train 5 FID in October, we showed you that approximately 3,800 TBtu of LNG production projected from 2027 through the first half of 2031 is expected to generate approximately $2 billion in NextDecade share of Rio Grande LNG project level distributable cash flow using a $5 per MMBtu cargo margin.

We are reiterating that projection today and providing an additional pricing sensitivity at a cargo margin of $3 per MMBtu for these early cargoes. We believe a $3 per MMBtu cargo margin case is conservative and is roughly equivalent to the value we expect to receive under our long-term Train 4 and Train 5 SPAs, including expected fuel usage and the cost of Rio Grande LNG's gas supply relative to Henry Hub.

In the $3 per MMBtu cargo margin pricing scenario, we project early LNG production will result in approximately $1.2 billion in NextDecade share of Rio Grande LNG project level distributable cash flow from Train 1 start-up through DFCD of the Train 5 SPAs in the first half of 2031. We believe there is a significant amount of upside potential to these projections from a number of factors unrelated to market pricing. Some of these factors include potential additional improvements in Rio Grande LNG's construction schedule, the speed at which each train ramps up to full production and production above nameplate capacity.

As we look forward to steady-state operations, we are focused not only on ensuring that our trains come online safely, on budget and on time or early, but also on reducing the variability in and maximizing our cash flows and ensuring that we employ the capital discipline necessary to position ourselves for long-term success. Creating an optimized and strong balance sheet in the NextDecade will be paramount to our long-term success.

Our initial leverage target for steady-state operations after DFCD of Train 5 is a NextDecade level debt to adjusted EBITDA ratio of 3 to 3.5x. For this metric, NextDecade level debt includes the debt of NextDecade and its subsidiaries, excluding project level debt. We believe a 3 to 3.5x debt to adjusted EBITDA is a reasonable leverage target that is supported by our economic interest in the cash flows from Trains 1 through 5 at Rio Grande LNG.

Currently, Trains 1 through 5 are approximately 85% contracted on a long-term basis with SPAs that have a weighted average life of 19.5 years and annual fixed fee cash flow of approximately $3 billion before escalation. This profile provides us with strong cash flow visibility and predictability on a steady-state basis. We expect this leverage target will place NextDecade in a strong credit position, and we have visible paths to achieving that target at steady-state operations.

As we showed on the previous slide, you can expect us to utilize our share of cash flows generated from Rio Grande LNG Train 1 start-up through Train 5 DFCD to pay down our FinCo and Super FinCo term balances to reduce NextDecade level debt. At steady-state operations, we expect to refinance any remaining balances via opportunistic capital markets transactions. We currently estimate that if early volumes are sold at average margins consistent with our $5 per MMBtu pricing sensitivity, NextDecade level debt would be within our target range. If early volumes were sold at average margins consistent with our $3 per MMBtu pricing sensitivity, we would expect to undertake additional balance sheet optimization to reduce NextDecade level debt within the target range.

In this sensitivity, we would consider contracting an additional approximately 2 million tons under long-term SPA across Trains 4 and 5. This would bring our 5-Train portfolio to approximately 90% contracted and enable us to maximize debt at the project levels, which would, in turn, reduce equity requirements for NextDecade and our equity partners for Trains 4 and 5. This would reduce the amount we expect to draw on the FinCo loan to fund our remaining portion of equity for Trains 4 and 5, thereby reducing projected NextDecade level debt to within the target range. As we previously discussed, we entered into the Super FinCo and FinCo loans to fund most of our equity commitment into Trains 4 and 5. The net proceeds from the Super FinCo loan were contributed into the projects at their respective FID dates.

As we consider various options to optimize our balance sheet into steady-state operations, we have flexibility in timing and approach largely due to the advantageous terms of the FinCo loan, which we expect to use to fund our remaining equity commitments for Trains 4 and 5. We currently do not expect to draw on the FinCo loan for multiple years, during which time we will only pay LC fees, which grants us time to continue to evaluate the market and determine the optimal balance sheet optimization approach while continuing to sell uncontracted early volumes to reduce our near-term market exposure.

We are seeing strong opportunities in the market for LNG sales, both short term and long term. Near-term pricing today remains above long-term pricing levels. Today, we are reaffirming our existing steady-state guidance and providing an additional margin sensitivity and some market exposure sensitivities to help you better model the company and the potential impact of LNG market price fluctuations on our projected cash flows. We previously provided a $5 per MMBtu cargo margin case at Train 4 FID, which is unchanged and is reiterated in the left columns of this chart.

In this scenario, we project annual NextDecade distributable cash flow of approximately $800 million after the economic interest flip in Trains 4 and 5 and approximately $500 million before the flip. In the $5 margin scenario, we estimate the economic interest flip will occur in the mid-2030s. Under this scenario, each $0.50 change in cargo margin is projected to impact NextDecade distributable cash flow by approximately $60 million post-flip and approximately $45 million pre-flip. We are adding the additional margin scenario today, which contemplates a $3 per MMBtu cargo margin during the early volume period from Train 1 start-up through the FCD of the Train 5 SPAs in the first half of 2031.

This case assumes a $5 per MMBtu cargo margin during steady-state operations going forward beginning in the second half of 2031. In this scenario, we assume that we would contract an additional approximately 2 million tonnes under long-term SPAs across Trains 4 and 5. We estimate this scenario would enable us to achieve our steady-state target leverage metrics in a lower early volume margin environment. In this new sensitivity, we project approximately $500 million in NextDecade distributable cash flow per year after the flip and approximately $400 million from Train 5 DFCD in the first half of 2031 until the flip.

In this sensitivity, the timing of the flip would be delayed slightly to the mid- to late 2030s due to the lower early cargo margins. There is potential upside to the timing of the flip from factors outside of market margins, including accelerated ramp-up timing of the trains and higher production profiles, capital spend curves, contingency usage and operational efficiency, among other factors.

Additionally, our steady-state projections include production of 309 TBtu per train per year, which is based on nameplate and does not include impacts from over design or debottlenecking efforts. As a result, we believe there could be meaningful upside potential above the scenarios we are showing here. Our projected cash flows are robust across a range of market margin scenarios and are strengthened by our highly contracted approach, which we could lean further into if needed, depending on the LNG pricing environment over the next few years. Thank you for joining the call today.

We will now open the line up for questions.

[Operator Instructions]

Our first question is from Jason Gabelman with TD Cowen.

Thanks for all the detail on the forward guidance. I guess, I want to start with the events that happened over the weekend. And I understand it's still just a couple of days since the operations started over there. But how do you think that's going to influence your competitive position in the marketplace and the ability to attract volumes to support future trains?

Yes. Thanks for the question. First, let me send my condolences to the families of the U.S. soldiers who've been killed or injured. I'd also like to send my condolences to the civilians who have been killed or injured by the Iranian rocket and drone attacks on our allies in the region. The short-term impact of this war is that nearly 20% of the global supply of LNG will be disrupted, likely causing prices to rise, which I think we've already seen this morning. The longer-term impact of the world will depend on how long it lasts and the extent of the damage, any damage to LNG infrastructure in the region. And we've all heard the rumors that Ras Laffan was attacked by drones. We haven't gotten that confirmed yet.

As we said in our comments, the market is already still relatively -- I mean, strong, all things considered, especially for the period of time that we're focused on for Train 6 through 8, which is kind of the 2032, '33 and beyond time frame. Clearly, I think the situation that we've seen develop over the weekend reaffirms what we've said about our guidance and especially about this period of time between '26 and 2030 as new LNG is coming to the market.

We still have the slide in our deck about this wave and the fact that from an amplitude perspective, it is definitely not the same as the waves we've seen in the past and that any relatively small disruption could balance the market rather quickly. And of course, when you lose 20% of the supply of LNG into the market, most of that going into Asia, it's going to have major ramifications, especially in the short term. How long that lasts is to be seen.

Got it. Great. I want to follow up just on the potential for early volumes above what you've guided. It seems like construction is tracking better than what you've contemplated in the plan, but you didn't raise your volume guidance for volumes that will come on prior to the middle of 2031. So as things sit today, just what is kind of the upside you're looking at from early volumes, particularly from Train 1, which seems like it's going to come on a bit earlier than what you expected?

Yes. What we've said is that as this year progresses and we get more assurances from Bechtel, we will update the market as to those early volumes, especially when Train 1 is going to start, how much more volume we may be able to produce out of those trains relative to the guidance we've already given between Train 1 start-up and Train 5 DFCD.

Longer term, the ability to get more volume out of the trains due to the hydraulic capacity, potential debottlenecking, we're not really prepared to get into that until we operate the facility for a while. I think we have a more conservative approach to this. Clearly, when these facilities are designed and built, they're built with more hydraulic capacity than what we permit. But you don't really know exactly how much of that you can utilize until you start operating because you have to contend with several dynamic things, including the specification of the gas, the ambient temperature, et cetera.

So I feel pretty comfortable that next year, as we begin operating Train 1, we'll get a better feeling about how much capacity each of these trains, they're all exactly the same, how much they can potentially produce. So next year, I would expect us to be able to provide the market with additional guidance on how much more volume we could produce in steady state. Thank you for the question.

Our next question is from Sunil Sibal with Seaport Global Securities.

I was kind of curious, it seems like your decision in terms of contracting more capacity on Trains 4 and 5 is largely driven by the early volume margins, right? So obviously, with the events we've seen in the last few hours, it seems like the spreads are moving up. So I was kind of curious if you could talk about your decision point in light of recent developments and see from a time frame perspective, when do you think you will have a better sense of that contracting decision?

Yes. Thank you for the question. Contracting a higher percentage of Trains 4 and 5 is an option that we will consider as we continue to monitor the market. What we've said is in a lower margin early volume scenario, we estimate the contracting of additional capacity in Trains 4 and 5 will enable us to maximize the debt at the project level and reduce equity requirements for Trains 4 and 5, which in turn would reduce the amount we expect to draw on the FinCo loan for Trains 4 and 5 equity and help us achieve a target corporate level leverage of 3 to 3.5x adjusted EBITDA.

At the same time, as you point out, we see continued strength in the market. And obviously, with this past weekend, additional strength in the short-term market. And so that call on LNG is still there in the short term and as we said, into the 2030s. So we want to remain flexible and the determination as to when we decide to contract will be based largely on how things go over the course of the next year or 2.

We have plenty of time to do this. We are planning to draw on the FinCo loan for Train 1 for at least 2.5 years or so. And so it really doesn't do us much good to do anything early. We want to play this option out. It has a trigger date that's many, many, many, many months in the future. And so we'll see what happens between now and then.

Matt, if I could just add. We talked about where our focus is. And clearly, progressing Train 6 through 8 is a major focus of ours. Our focus will be on commercializing Train 6 in the immediate future. We estimate Train 6 can be very accretive and generate a great deal of additional distributable cash flow on a per share basis in a wide range of financing scenarios. So as Matt said, it's a balancing act. We have lots of options. It's always good to have options in this scenario.

I think we've set ourselves up to enable ourselves to work the commercial side of the business while maintaining that focus on our capital structure and a strong balance sheet that we need as we move forward into the 2030s.

Yes. One other thing I'll add, Mike, and thanks for adding that, is that the -- in the scenario where we assume we've sold an additional 2 million tonnes between Train 4 and 5, we're also using current long-term LNG pricing consistent with our Train 4 and 5 pricing. 2.5-plus years into the future, pricing could be much stronger depending on what happens in the market.

So again, we're trying to be transparent, provide the market with additional information on potential scenarios, but at the same time, remaining conservative on our estimates even when it comes to long-term LNG contracting in the future.

Okay. So just one clarification. So are you suggesting that the 2 MTPA additional contracting is also primarily driven with an eye on overall balance sheet and leverage, especially when you think about Train 6 to 8?

What I would say, it really doesn't have much to do with Train 6 through 8. It has to do with a certain amount of leverage that we feel would be appropriate at the NextDecade level in order to maintain flexibility at NextDecade and provide us the underpinnings of a stable foundation to survive any sort of commodity cycle up or down. The important thing here to note is that we don't have to do anything for that Train 4 and 5 excess cargoes -- excuse me, incremental or long-term cargoes until probably 2.5 years into the future.

If prices scream up and there's plenty of demand for Train 6 and an incremental 1 million tonnes from Train 4 and 5, we'll consider that opportunistically. But to your earlier point, this does potentially lower the amount of cash flow that we can generate because we're contracting 2 million more tonnes at a lower price than that $5 steady-state long-term market view. But at the same time, if we do, do it, it provides guaranteed cash flows for another 2 million tonnes, thereby decreasing our market exposure.

So my expectation is that if we did do this in the future, we should get a higher multiple for that contracted cash flow. If we don't do it, it's because the market has remained very strong and the value of those -- that volume uncontracted, at least during this period of time, has increased in value, and we want to hold on to it a little bit longer.

I said before, we aren't planning to just hold this stuff forever. We will opportunistically contract it out most likely if we don't do a 20-year contract in the future under shorter-term contracts where we can achieve greater margins than a 20-year contract. We're just pointing out for our shareholders that we're thinking about this completely and that if this market is in the shorter term, a lower-margin market and we don't get the full $2 billion of cash flow we expect to get from Train 1 Start-Up to Train 5 DFCD, we have options to ensure that our balance sheet stays strong that are unrelated to commodity pricing.

The last thing I'll mention and reiterate is that there are other upsides for us other than commodity pricing. We could produce a lot more volume in this early period, generating additional cash flow subject to where the margins end up. We can also end up building the project at a lower cost, in other words, not utilize all of our contingency. And clearly, as we mentioned earlier, there is the potential for us even in a steady state environment, producing more volume out of these trains due to hydraulic capacity versus nameplate.

My second question was related to the contracting environment. Obviously, you finalized Train 5 contracts in the fourth quarter. How would you characterize the market currently versus when you finalize the Train 5 contracts in terms of pricing?

Yes. Look, we've been in the market talking to potential customers for Train 6, and we're seeing continued strong demand for incremental LNG supply in the 2030s and beyond. And while there's been this debate recently about the short-term market dynamics, which obviously somewhat changed over the weekend, market participants that we've talked to are almost unanimous in their view that the world needs more LNG in the 2030s, driven by continued growth in global natural gas demand and expected declines in production from legacy gas and LNG. The long-term contracting market remains robust, and we expect prices for Train 6 in the same range, if not better, than Train 5. So it's looking really, really good right now.

Our next question is from Wade Suki with Capital One.

Just real quickly, if you don't mind, looking at some of the sensitivities here, the $3 and the $5 steady state. I'm wondering if you can kind of give us a sense if we were in a $3 flat environment, so $3 and $3 essentially, $3 steady state in terms of maybe sensitivities, kind of DCF sensitivities and then pre and post flip timing kind of thing for Trains 4 and 5?

Yes. So we didn't provide a [ $3 and $3 ] case, clearly. And that's because we think it's somewhat illogical to assume that the long-term price over 20 years is going to be effectively equivalent to the long-term price for a 20-year contract. When you think about it, I know that there are other companies that may be using something closer to $3 for their long-term guidance range. And I'm not saying that we don't look at that from a standpoint of sanctioning projects.

But the reality is we have customers that are buying this from us long term at prices that are effectively equivalent to that. And they're selling it at positive margins. So we didn't provide that guidance. I don't expect to provide the guidance.

That said, we knew it was important for you to see sensitivities around this. So if you want to do a hypothetical, I think we've provided the sensitivity on a $0.50 per MMBtu basis impact from the $3, $5 case I think that, Megan, you can check me on this, but I think that if you multiply the sensitivity in the $3 to $5 case on the pre-flip and post-flip basis, you generally get an idea of what a $3 and $3 would look like. So you'd have to multiply it by [ 4 ] like $80 million, I believe, in one of the cases. But it's not an exact science.

No, understood. I appreciate the color. That's great. But just thinking in terms of like corporate level return, let's call it, in the [ $3 and $5 ] scenario, how do you all think about unlevered return on capital, however you're thinking about corporate level returns?

So we look at the returns on the project level, they're very, very robust, especially Train 4 and 5, but combined Trains 1 through 5 have resulted in extremely good returns for us and our partners. We haven't disclosed the actual metrics on that, but I can assure you that Trains 4 and 5 were probably some of the best returns in the industry last year, and that's based on our cost structure as well as the prices that we sold the long-term LNG for. We would expect Train 6, dependent on ultimate EPC costs, financing costs and where we end up selling the LNG to have similar types of returns, which will be extremely accretive to our shareholders under various ranges of how we would finance it.

Great. And I guess one last one, if I could squeeze it in. If I'm hearing you right on the financing on the Super FinCo loans, ultimately, could that financing -- could that look different in 2, 3 years' time when you actually start drawing on that?

I'm not sure I fully understood the question, Wade...

I'm just thinking about how you're financing equity portions for Trains 4 and 5. Just wondering if the ultimate financing might look -- could look materially different than what is out there kind of today with the, I guess, sort of 12%, 13% rate kind of flow.

I think what we said is that -- yes, what we've said is that because of the low-cost structure of the FinCo, include that with the Super FinCo and how we would expect to draw on that debt yes, the expected cost of that capital probably weighs out to about 9%. If we get into a low commodity price environment and we decide to exercise our option and sell more LNG in Train 4 and 5, thereby maximizing the debt at 4 and 5 and reducing the equity commitments, that would have a direct impact on the FinCo draw.

We wouldn't draw all of it or potentially any of it, which theoretically increases the cost of the loans that we took on, but it would also have the amount of equity that we'd have to provide. So you end up probably in a better place theoretically from a cost perspective, but it's how you value the cost of that equity, I guess. So there are some scenarios here, but I think the way the market should look at it right now is that we're not really changing our guidance.

We're not expecting that we're going to go into -- that we're going to sell more LNG out of Train 4 and 5 as an option for us. We'll determine whether or not we're going to do that over the coming years. I would still focus on the 9% cost and expect that we're going to draw down that FinCo debt over the course of the next several years as we build out Train 4 and 5.

Our next question is from Craig Shere with Tuohy Brothers.

So just kind of some macro thoughts and implications on your T6 to T8 development. There's been a lot of expectations that the U.S. FID parade may be largely coming to a halt over the next, I don't know, 2, 3-plus quarters or so with some exceptions. If that happened and EPC costs notably fell over the next 5-plus years, do you see that providing a meaningful tailwind for Train 6 to 8 development? And kind of feeding into that, I guess, as competition ultimately heats up in a larger market, do you see greenfield just at some point being permanently priced out of the market?

So thanks for the question, Craig. First, I think we already have very strong tailwinds for Train 6 and 7 and 8. But I think what you're alluding to is the fact that Train 6 and really, to some extent, 7 and 8. Train 6 is definitely brownfield. It is inside the levy. It was contemplated to originally be there. The only thing we're doing incrementally that we weren't planning to do is adding another berth, which is only going to help add flexibility to all the trains. This should be the lowest cost train that is going to be built, I think, in the United States under an EPC contract that would be guaranteed.

A lot of folks build their LNG facilities differently and don't necessarily have them wrap. We think at the end of the day, wrapping the EPC is the most cost-effective way of building it. And I think our current track record and how construction is going and how we're tracking as far as cost reflects that. If EPC costs come down, obviously, that would be very, very beneficial, not just to us, but to other projects. I don't foresee that right now. I don't see the cost of equipment coming down. I don't see labor costs decreasing at this time.

As we've said in the past, a lot of the equipment that is utilized for LNG, some of it's also very common with the power generation business. The turbines used for compression, e-houses, transformers, et cetera, and the like, are not decreasing right now. There's still a lot of demand for these.

So I think that we're in a really good position competitively, especially for Train 6 and also for 7 and 8 because of the brownfield nature, it's going to be very, very competitive, as I said earlier with one of the questions, result in what we believe are outstanding returns for us and our shareholders. I think that's really the long and short of it, Craig.

I think it's -- a lot of -- the tailwinds are already there. If prices come down, that would be great for us that probably benefit our competitors as well. But I hear you on the greenfield. Greenfield is very, very hard to get off the ground. If you don't have a lot of expansion capacity, I think it's going to be very challenging for you to achieve returns are going to be interesting for equity investors as you probably will see with some of the projects that are hoping to get FID. That's not to say they won't. But I think the smaller you are and the less upside options you have as far as expanding, the more challenging it's going to be for you.

And the dislocations in the market, obviously, from this weekend's events, war can -- no one knows what will happen with war. What -- hopefully, there'll be fewer lives lost. Hopefully, everything will come to a swift conclusion. But we don't know if major equipment will be impacted. We don't know how long things will be down. We don't know what construction schedules and new capacity will be impacted. And so in light of that, if you don't have immediately available production to sell in the market today. But at what point as Train 1 starts commissioning, do you feel comfortable seizing the day if you have some outsized opportunities?

Yes. As we -- and I'll let Mike chime in here. As we've already disclosed, we have seized the day to some extent by selling a portion of the projected early cargo volumes from Train 1 Start-Up to Train 5 DFCD. Clearly, we haven't sold the majority of it yet. And as we've guided to, and you've mentioned many times before in some of your previous questions on other calls, there's a lot of potential upside here if we deliver the project even earlier than we currently projected, which is not out of the question. We'll guide more to that later this year. Those are the catalysts that I think people should be focused on.

We will be starting commissioning this year. We will start introducing hydrocarbons at facility and start the warm side of the facility. We expect to start producing LNG next year. And as we get closer, we'll give the exact date. As we get more and more confident and we get more assurances from Bechtel, should LNG prices remain strong or get stronger in '27, '28, '29, rest assured that we will start to pair more of this volume down.

And again, we could end up with producing a lot more than expected. So that could work to our benefit. And obviously, all these things have an impact on whether or not we utilize the options available to us to maintain the strong balance sheet, including the additional contracting that we could do in Train 4 and 5, which, again, we are not saying today you should expect that to happen.

We're explaining if that's an option to us but we're going to maintain that optionality because the strike date on that is many, many months, if not years in the future. And we want to see how things play out.

I'll reiterate what I said earlier, and I would again focus people on the slide in our deck that shows that this wave is different. Yes, prices softened pretty dramatically over the past quarter into the '26 to '30 time frame. But as we said, it doesn't take much to balance this market. This is not as big a wave as people think because the underlying market has grown dramatically.

And a supply disruption of the magnitude that we're now seeing is not what I was talking about. I was talking about 10 million to 15 million tonnes, not 20% of the existing market. How long this situation lasts will be critical in determining what impact it's going to have on pricing long term. Much of this LNG goes to our customers in Asia. A lot of U.S. LNG, as you know, has made its way to Europe. If the supply chain for LNG changes dramatically and more LNG from the U.S. has to go to Asia, that will tighten the shipping market, and that will obviously have ramifications on pricing in Europe, which I think we've already seen a pretty substantial spike in the short term there today.

There are no more further questions at this time. That will conclude our call today. Thank you for joining, and thank you for your interest in NextDecade.