Nextdecade Corporation · NASDAQ:NEXT
Nextdecade — Tuohy Brothers Conference 2017
57 slides from Nextdecade's conference presentation, Aug 9, 2017
Slide 1: Investor Presentation August 2017
AUGUST 2017 Developing Low-Cost LNG Export Solutions from the Permian Basin and Eagle Ford Shale in South Texas Investor Presentation NEXTDECADE CORPORATION (NASDAQ: NEXT) INVESTOR P RESENTATION STRICTLY CONFIDENTIAL
Slide 2: Disclaimer and Forward Looking Statements
Disclaimer and Forward Looking Statements The information provided in this Presentation with respect to NextDecade Corporation (the “Company”) has been provided for informational purposes only. This Presentation shall neither constitute an offer to sell or the solicitation of an offer to buy any sec
Slide 3: Contents
Contents 01 Summary 3 02 Overview 7 03 Management Team and Partners 11 04 LNG Market Overview 16 05 Project Overview 25 06 Permian Basin and Eagle Ford Shale 33 07 Appendix A: Additional Project Information 40 08 Appendix B: Shoal Point Overview 44 09 Appendix C: Port of Cork Overview 48 10 Appendix
Slide 4: Summary
oy NEXTDECADE ELV /Portiotio NG Company Summary
Slide 5: Introduction
Introduction NextDecade is a liquefied natural gas (“LNG”) development company focused on LNG export projects and associated pipelines in the State of Texas. The management team is comprised of industry leaders with experience across the global LNG value chain. NextDecade’s first proposed LNG export
Slide 6: Highlights (1 of 2)
Highlights (1 of 2) NextDecade Merger • On July 24, 2017, NextDecade completed a business combination with Harmony Merger Corp., becoming a publicly traded company (NASDAQ: NEXT) Capital Cost, Liquefaction Technology, Engineering • Selected proven and widely utilized technology from Air Products (C3
Slide 7: Highlights (2 of 2)
Highlights (2 of 2) Commercial • Executed non-binding Heads of Agreement (“HOAs”) with prospective customers; substantive sale and purchase agreement (“SPA”) negotiations ongoing with array of customers in Asian, European, and other global markets • Choice of flexible offtake contracting models such
Slide 8: Overview
oy NEXTDECADE ELV /Portiotio NG Company Overview
Slide 9: NextDecade: Overview
NextDecade: Overview NextDecade is a LNG development company focused on LNG export projects and associated pipelines in the State of Texas. NextDecade’s first proposed LNG export facility, RGLNG in Brownsville, Texas, along with the associated RBPL originating in the Agua Dulce market area, is well-
Slide 10: NextDecade: Company Highlights
NextDecade: Company Highlights • The RGLNG project is a planned LNG export facility to be located in the Port of Brownsville, Texas. The associated 137-mile RBPL is to originate in the Agua Dulce market area. Together, the projects are positioned to monetize gas reserves of West and South Texas, ben
Slide 11: NextDecade: Summary Projections
NextDecade: Summary Projections Shown below are summary projections for NextDecade including anticipated operations at its RGLNG and RBPL facilities. NextDecade Summary Projections ($ Millions) 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E (1) Revenue $ - $ - $ - $ - $ - $ 593 $
Slide 12: Management Team and Partners
3 Management Team and Partners
Slide 13: NextDecade: Management
NextDecade: Management NextDecade is supported by a management team that has experience developing some of the most prestigious projects across the global LNG value chain. Kathleen Eisbrenner oversees development and execution of NextDecade’s liquefaction and pipeline strategies. She was formerly ex
Slide 14: NextDecade: Management LNG Experience
NextDecade: Management LNG Experience The management team at NextDecade possesses extensive LNG experience and, at prior projects, has successfully executed numerous long-term LNG contracts. Projects and companies associated with the management team’s industry experience are detailed below Regasific
Slide 15: World-Class Partners
World-Class Partners EPC Contractor • One of the world’s premier LNG EPC firms, CB&I has been involved in the development of LNG projects for over 50 years • NextDecade is in the process of finalizing detailed negotiations for a LSTK EPC contract with CB&I, including performance, time, and cost guar
Slide 16: NextDecade: Current Financial Partners
NextDecade: Current Financial Partners NextDecade has strong financial partners in York Capital Management, Valinor Management, Halcyon Capital Management, and GE Oil & Gas. Financial Entities Strategic Entities York Capital Management ∙ ND Board: Matthew Bonanno, GE Oil & Gas David Magid, Willi
Slide 17: LNG Market Overview
oy NEXTDECADE ELV /Portiotio NG Company LNG Market Overview
Slide 18: Global LNG Market: Highlights
Global LNG Market: Highlights LNG demand is projected to rise for the foreseeable future, driven by a number of factors. While currently oversupplied, the LNG market is expected to enter a prolonged period of shortage in the early 2020s, according to an array of industry consultants. • Strengthening
Slide 19: LNG Demand: Powerful Forces Support Growth
LNG Demand: Powerful Forces Support Growth Global environmental considerations in addition to burgeoning technologies and market applications are further anticipated to increase LNG demand. Environmental and Political Drivers. Many countries have implemented clean energy policies, aimed at lowerin
Slide 20: U.S. Gulf Coast LNG: Highlights
U.S. Gulf Coast LNG: Highlights NextDecade’s commercial progress to date indicates strong market interest and, more specifically, interest in feed gas sourced from West and South Texas, which benefits from low-cost associated gas as production in key basins (Permian Basin and Eagle Ford Shale) is ex
Slide 21: LNG Market Overview: Demand
LNG Market Overview: Demand NextDecade believes the LNG market is headed towards a shortage, likely to occur between 2022-2024, driven by growing demand and certain supply challenges. In 2015, the global LNG trade topped 244 million tons, and is poised to grow at a 5.5-7.5% CAGR through 2024. 1 Next
Slide 22: LNG Contract Roll-Off
LNG Contract Roll-Off Through 2023, 80 mtpa of demand (and 190 mtpa through 2030) is expected to free up as legacy contracts expire and customers look to switch to U.S. LNG providers; we believe ND is well positioned to capitalize on these anticipated roll-off volumes. Contract Roll-Off Volume by Ye
Slide 23: FSRU Growth: Ideally Placed to Capitalize
FSRU Growth: Ideally Placed to Capitalize Floating Storage Regasification Units (“FSRUs”) present a valuable opportunity for NextDecade to access currently underserved or nonexistent LNG markets. Members of NextDecade’s management team’s experience with FSRUs is a source of competitive advantage vis
Slide 24: LNG Market Overview: Supply
LNG Market Overview: Supply While the quantum of proposed projects around the world indicates a much larger surplus than projected, many proposed projects are unlikely to take FID and contribute to global supply for a number of reasons, including feed gas issues, regulatory challenges, environmental
Slide 25: U.S. Production: Significant Cost Advantages
U.S. Production: Significant Cost Advantages U.S. LNG has emerged as a new source of low-cost supply by bringing new technologies to market, lowering capital requirements, breaking industry orthodoxy of oil-linked contracts, and utilizing its well-established regulatory process. Shown below, U.S. Gu
Slide 26: Project Overview
oy NEXTDECADE ELV /Portiotio NG Company Project Overview
Slide 27: Rio Grande LNG: Commercial
Rio Grande LNG: Commercial NextDecade has made substantial progress with prospective customers to date. NextDecade is in the midst of advanced negotiations with an array of prospective customers in key Asian, European, and other global markets that comprise portfolio buyers, traders, and utilities i
Slide 28: Rio Grande LNG: Gas Supply
Rio Grande LNG: Gas Supply RGLNG is optimally located close to key reserve basins (especially the Permian Basin and Eagle Ford Shale) and has access to entirely different pipeline networks than other competitive projects in Eastern Texas and Western Louisiana. Texas Gas Market Permian, Eagle Ford, a
Slide 29: Next Wave of LNG: Texas Stranded Gas
Next Wave of LNG: Texas Stranded Gas Historically, most international LNG projects were constructed on the premise of necessity to move “stranded gas” (supply push) to large demand markets such as Asia and Europe. Recently, US LNG capacity expansions have been driven by a “demand pull” and a price a
Slide 30: Rio Grande LNG: Engineering
Rio Grande LNG: Engineering RGLNG’s EPC liquefaction costs are expected to be among the most competitive in the world due to NextDecade’s close collaboration with its EPC contractor (Chicago Bridge & Iron) and equipment providers (GE Oil & Gas), as well as its use of proven technology (AP-C3MR™). Ca
Slide 31: Rio Grande LNG: Regulatory
Rio Grande LNG: Regulatory NextDecade filed its formal FERC application in May 2016 and has allocated significant time and resources to advance the regulatory processes with FERC and other agencies. Regulatory Highlights • NextDecade commenced pre-filing with FERC in March 2015 and filed its formal
Slide 32: Rio Bravo Pipeline: Overview
Rio Bravo Pipeline: Overview 8 Interconnects Compressor Station #1 • At full build-out, the RBPL will comprise two, parallel 137-mile long, 42- Interconnect Booster inch natural gas pipelines Stations (2) • Each of the two pipelines is expected to have a capacity of up to 2.25 Bcf/d (up to 4.5 Bcf/d
Slide 33: Permian Basin & Eagle Ford Shale
6 Permian Basin & Eagle Ford Shale
Slide 34: U.S. Reserves: Vast Quantities of Inexpensive Gas
U.S. Reserves: Vast Quantities of Inexpensive Gas NextDecade’s RGLNG project is optimally located in Brownsville, Texas, in close proximity to the Permian Basin and Eagle Ford shale. NextDecade expects to realize material benefits from the ability to provide its customers with access to low-cost ass
Slide 35: Trends: Gulf Coast Exports Benefit from Production
Trends: Gulf Coast Exports Benefit from Production The South Texas gas market is poised to benefit from several distinct trends. Many reserve basins proximate to NextDecade have drilled economically even under current oil prices, and the emergence of the Marcellus and Utica plays increasingly pushes
Slide 36: Production: Eagle Ford and Permian
Production: Eagle Ford and Permian Both capital spending and production are expected to rise precipitously in the coming years. Permian Gas Production (Bcf/d) Eagle Ford Gas Production (Bcf/d) 10 9 $80 WTI 8 7 $50 WTI 6 5 4 $30 WTI 3 2 Natural 1 Decline 0 2010 2012 2014 2016 2018 2020 • Apache recen
Slide 37: Associated Gas: South Texas Benefits
Associated Gas: South Texas Benefits Associated gas is a key byproduct of oil production, particularly in some of the largest onshore fields in the United States. According to the Energy Information Administration (“EIA”), current natural gas production in the Permian Basin has risen to more than 8.
Slide 38: Comparison: U.S. Reserve Basins
Comparison: U.S. Reserve Basins Permian production costs are among the lowest across U.S. basins, providing ample scope to absorb transport costs from Waha to Agua Dulce. Gas Breakeven* Rank Play $/mmbtu 1 Permian - Midland $(6.31) 2 Permian - Delaware (2.69) 3 Eagle Ford (0.31) 13 4 Permian - Alpin
Slide 39: Permian Basin: A World-Class Reserve Base
Permian Basin: A World-Class Reserve Base The Permian Basin saw nearly $30 billion of M&A activity in 2016, approximately half of all U.S. upstream M&A activity showcasing elevated interest among producers. Drilling and Completion (D&C) spending in the Basin is expected to more than double (YoY) by
Slide 40: Permian Basin: Takeaways from Q2'17 Earnings
Permian Basin: Takeaways from Q2’17 Earnings Recent earnings results and conference calls with some of the largest Permian producers have shown potentially greater gas-to-oil ratios than anticipated, further showcasing the attractiveness of Rio Grande LNG as a demand outlet for the Permian’s associa
Slide 41: Appendix A: Additional Project Information
7 Appendix A: Additional Project Information
Slide 42: CB&I: LNG EPC Expert
CB&I: LNG EPC Expert CB&I is a preeminent LNG EPC contractor with over fifty years of experience on some of the largest projects in the world, an exceptional training and safety record, and a deep relationship with the Rio Grande Valley workforce. • CB&I has deep experience with the LNG industry, ha
Slide 43: Apache Corporation: Alpine High
Apache Corporation: Alpine High On September 7, 2016, Apache Corporation announced that it estimates its holdings contain 75 Tcf of rich gas and 3 billion barrels of oil in the Barnett and Woodford shales alone. Alpine High Location: Reeves County, TX • Apache has secured more than 300,000 contiguou
Slide 44: Drill Out Program: Alpine High
Drill Out Program: Alpine High The Alpine High Discovery is capable of producing large amounts of natural gas. Limiting factors are demand and the capital/logistic limitations of upstream operators. Delaware Basin Natural Gas Production (Bcf/d) 10 $50/Bbl WTI & $3/MMBtu HH 9 8 $50/Bbl WTI & $3/MMBtu
Slide 45: Appendix B: Shoal Point Overview
8 Appendix B: Shoal Point Overview
Slide 46: Shoal Point: Overview
Shoal Point: Overview Key Points • NextDecade leased a total of 994 Houston acres in Texas City for the development of its Shoal Point project ‒ Lease period 3+1 years; ending Dec. 31, 2020 ‒ Option to enter into long-term lease for 30+20 years • Located within the Port of Houston, second largest U.
Slide 47: Shoal Point: Aerial View
Shoal Point: Aerial View Site Area 994 Acres PAGE 46
Slide 48: Shoal Point: Potential and Development
Shoal Point: Potential and Development Management believes that the Shoal Point site is one of the most attractive locations along the U.S. Gulf Coast • Project is sited in a highly industrial area with very close access to the Gulf of Mexico • Project to have access to two major gas pipeline market
Slide 49: Appendix C: Port of Cork Overview
9 Appendix C: Port of Cork Overview
Slide 50: Commercial: MOU with the Port of Cork
Commercial: MOU with the Port of Cork NextDecade signed a Memorandum of Understanding (MOU) with the Port of Cork to develop FSRU and LNG Import Terminal Infrastructure on July 19, 2017. This project and collaboration highlight NextDecade’s distinctive capability to develop a full value chain of LNG
Slide 51: Appendix D: Valuation Assessment
10 Appendix D: Valuation Assessment
Slide 52: NextDecade: Valuation
NextDecade: Valuation The valuation of NextDecade and its proposed RGLNG and RBPL projects can be assessed using the below methodologies. NextDecade Valuation • Valuation Dynamics. For purposes of the following valuation assessment, each of RGLNG’s liquefaction trains, the RBPL and NextDecade Consol
Slide 53: NextDecade: FCF Yield Analysis
NextDecade: FCF Yield Analysis Shown below is an analysis of the implied valuation of NextDecade utilizing a FCF terminal value yields range of 8-10 percent to assess an appropriate equity value for the assets and NextDecade as a whole. FCF Yield Valuation Assessment ($MM) • FCF Yield Analysis. The
Slide 54: NextDecade: EBITDA Multiples Analysis
NextDecade: EBITDA Multiples Analysis Shown below is an analysis of the implied valuation of NextDecade utilizing various EV / EBITDA multiples (x- axis) and discount rates (y-axis) to assess an attributable valuation for the Company. Equity Value of NextDecade Corp • EBITDA Multiples Analysis. In t
Slide 55: Contact Information
oy NEXTDECADE ELV /Portiotio NG Company Contact Information
Slide 56: Contact
Contact COMMUNICATIONS Ward CC (for NextDecade) 5959 West Loop South, Suite 510 Bellaire, Texas 77401 Molly LeCronier, Vice President T: + 1 (713) 869 0707 | E: [email protected] NextDecade Corporation 3 Waterway Square Place, Suite 400 The Woodlands, Texas 77380 Ben Atkins, Chief Financial Offi
Slide 57: Experienced team Extensive commercial relationships
Experienced team Extensive commercial relationships Strategic partners Expertise along the value chain Proven technology Substantial de-risking accomplished Favorable site Key development milestones completed Strong regional political support PAGE 56