How have global LNG supply disruptions due to the Middle East conflict affected buyer activity and the ability to secure long-term SPAs for Train 6?

Management stated that the volatility and upward price pressure in the LNG market due to the Iran conflict are helping NextDecade. The lack of reliability from Persian Gulf suppliers has increased buyer interest in U.S. sources. Interest for Train 6 volumes has increased, and the market should expect SPA activity in the next six months. The FERC EIS schedule for Train 6 supports H2 2027 FID. “the level of interest has only increased in the past quarter as this conflict has persisted, and that there's more competition for the volumes that we have for sale out of Train 6, 7, and 8.”

How does volatility in U.S. gas prices, especially in certain basins, impact the company's gas sourcing strategy?

NextDecade sources gas primarily from the Agua Dulce hub, which prices off the Houston Ship Channel index, trading at a substantial discount to Henry Hub. This provides an enviable position compared to other LNG projects, and the prolific Permian and Eagle Ford Basins are expected to maintain this long-term discount. “We think we're in a very enviable position with respect to some of the LNG projects, especially those in Louisiana, where we expect to be able to source our gas at a discount to the Henry Hub, at least for the foreseeable future, but in our view, is probably long-term.”

How do the volatility and forward curve of international LNG prices influence NextDecade's contracting strategy, particularly for uncontracted volumes?

Management noted that the forward curve for TTF/JKM relative to Henry Hub indicates potential margins for uncontracted volumes are better than the guided $5 margins, especially in 2027-2028. They view the market as backwardated, which is bullish, and expect prices to remain elevated due to the changed supply wave. They are wary of locking in long-term prices too far out due to potential supply losses and prefer to wait for more certainty on Train 1/2 startup before contracting uncommitted volumes. “Clearly, based on where those prices are trading today, especially in 2027 and 2028, they are above the margins that we have guided to, which is $5 margins...”

NextDecade (NEXT) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Jul 30, 2026

Source: earnings call transcript

Executive summary

NextDecade Q2 FY26 — Rio Grande LNG Phase 1 Ahead of Schedule, Train 6 Development Progresses Amidst Strong LNG Demand

NextDecade is successfully transitioning from an LNG development company to an operating company, with Rio Grande LNG Phase 1 construction ahead of schedule and first LNG production from Train 1 anticipated in H1 2027. The company made significant financial strides by terming out debt and securing investment-grade ratings, while also advancing Train 6 development towards a H2 2027 FID. Geopolitical events in the Middle East have tightened global LNG supply, reinforcing demand for long-term contracts, particularly for U.S. Henry Hub-indexed LNG, which NextDecade is well-positioned to meet with its expansion plans.

Highlights

Rio Grande LNG Phase 1 construction is advancing safely, efficiently, and ahead of schedule, with first LNG production from Train 1 expected in H1 2027.
Trains 1 and 2 are 74% complete, with construction at almost 60% and commissioning starting.
Successfully completed two financing transactions, including a $1 billion term loan and a $3.5 billion 144A senior secured notes issuance, achieving investment-grade ratings (BBB-).
Filed formal FERC application for Train 6 in May, with final EIS expected by June 25, 2027, supporting H2 2027 FID.
Secured supply of main refrigeration compressors for Train 6 via a reservation agreement with Baker Hughes.

Concerns

Ongoing Iran conflict has caused significant global LNG supply disruptions, with the Strait of Hormuz closure taking almost 20% of world's LNG supply off market.
Loss of approximately 7 million tons of LNG per month due to shut-in Ras Laffan and Das Island facilities, with repairs for damaged trains expected to take years and expansion delays of a year or more.
Elevated spot LNG prices are expected to remain through at least 2030 due to supply uncertainty.
Europe is not filling storage to normal levels and the UK's Rough storage situation could lead to insufficient supply for winter if a cold winter occurs.

Guidance & targets

Category	Target	Timeline	Confidence
First gas into facility	later this year high materiality	FY26	High
First LNG production from Train 1	first half of 2027 high materiality	H1 2027 · FY27	High
Final Environmental Impact Statement (EIS) for Train 6	June 25th, 2027 medium materiality	Q2 FY27	High
Final Investment Decision (FID) on Train 6	second half of 2027 high materiality	H2 2027 · FY27	High
Bay Runner pipeline in-service	third quarter 2026 medium materiality	Q3 FY26	High
Pre-filing for Train 7 and 8	before the end of the year medium materiality	FY26	Medium
Formal application for Train 7 and 8	second quarter next year medium materiality	Q2 FY27	Medium
Final Environmental Impact Statement (EIS) for Train 7 and 8	following June medium materiality	Q2 FY28	Medium
Final Investment Decision (FID) on Train 7 and 8	a year after Train 6 high materiality	H2 2028 · FY28	Medium
Narrowed guidance for first LNG production	in the fourth quarter medium materiality	Q4 FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Trains 1 and 2 (Rio Grande LNG Phase 1) Construction is advancing safely, efficiently, and ahead of schedule. All major equipment for Train 1 has been set. Train 2 major equipment installation is underway, with the second compressor string and turbine set in July. Completion: 74% (engineering and procurement nearing completion, construction almost 60%, start of commissioning)	—	—	—	—
Train 3 (Rio Grande LNG Phase 1) Major equipment installation has started, including the first compressor string. Completion: over 50%	—	—	—	—
Train 4 (Rio Grande LNG Phase 1) Soil stabilization process completed, and foundation pours began for the main cryogenic rack. Completion: 15.5%	—	—	—	—
Train 5 (Rio Grande LNG Phase 1) Soil stabilization process began, and Tank 3 piling work is underway. Completion: 9.4%	—	—	—	—

Deals & partnerships

Baker Hughes Reservation agreement to secure supply of main refrigeration compressors for Train 6.

Ensures critical long-lead equipment availability for Train 6.

Third parties Sub-chartering of LNG shipping capacity.

Used to better match available shipping capacity to anticipated needs; not focused on trading for upside.

Capital programs

Rio Grande LNG Phase 1 (Trains 1-5) Construction underway

Construction is ahead of schedule. Trains 1 and 2 are 74% complete, Train 3 over 50%, Train 4 15.5%, Train 5 9.4% as of June 2026. Over 6,000 workers on site daily.

Train 6 Development underway

Start: May 2026 (FERC application filed)

Benefit:expansion of LNG capacity

Formal FERC application filed in May. Final EIS expected by June 25, 2027. Reservation agreement with Baker Hughes for main refrigeration compressors executed in Q2 2026.

Train 7 and 8 Development planned

Start: before end of 2026 (pre-filing)

Benefit:expansion of LNG capacity

Working to pre-file before end of 2026, formal application by Q2 2027, FEIS by June 2028, FID a year after Train 6.

Risks & headwinds

Global LNG supply disruptions due to Iran conflict through 2030 or longer

Strait of Hormuz closure has taken almost 20% of the world's LNG supply off the market. Loss of approximately 7 million tons of LNG per month from Ras Laffan and Das Island. Damaged Ras Laffan trains will take years to repair; expansion capacity delayed by a year or more.

Mitigation:Increased demand for long-term U.S. Henry Hub-indexed LNG contracts, which NextDecade is positioned to supply.

Elevated spot LNG prices through at least 2030

Expected to remain elevated through at least 2030.

Mitigation:Benefits NextDecade with early cargoes and cash flow from Train 1 startup; spurs demand for long-term contracts.

European gas storage levels and winter supply winter next year (2026-2027)

Europe is not filling storage to a level normally seen and running out of time. Rough storage in the U.K. has yet to get regulatory approval for injection.

Mitigation:Not explicitly stated, but implies increased demand for LNG imports.

Volatility in crude and LNG markets short term

Daily price fluctuations based on kinetic activity in the Middle East.

Mitigation:Management believes the market is not looking at the long-term fundamentals, which are bullish for LNG.

What to watch in Q3 FY26

Narrowed guidance for first LNG production

Q4 2026

Current H1 2027

Target more specific timing

Why it matters

Provides greater clarity on the start of revenue generation and operational ramp-up for Rio Grande LNG Phase 1.

Later this year, I expect to be able to provide the market some more narrowed guidance as to the exact timing of when the LNG is going to be --- is when we're going to start producing LNG.

Find out whether NEXT delivers this. Inve re-checks your case every morning.

Q&A highlights

What are the critical path items to watch for before first gas and first LNG, and when will guidance be narrowed?

Management listed completion of LNG tanks and Bay Runner pipeline as key milestones. They expect to provide narrowed guidance for first LNG production in Q4 2026. They also clarified that the exact procedure for commissioning (warm vs. flares first) is being worked out with Bechtel, and early gas introductions might not reflect the overall pace.

“Later this year, I expect to be able to provide the market some more narrowed guidance as to the exact timing of when the LNG is going to be --- is when we're going to start producing LNG.”

asked by Olivia Halferty · answered by Matthew Schatzman

3 min read 7 chapters

Detailed narrative

Rio Grande LNG Phase 1 Construction Progress

Construction of Rio Grande LNG Phase 1 is ahead of schedule, with Trains 1 and 2 being 74% complete and construction at almost 60% as of June 2026. Major milestones achieved include energizing the main substation in May with 138 kV power and seconding over 100 operational employees to Bechtel in June.

Train 1's major equipment is set, Train 2's major equipment installation is underway, and Train 3's installation has begun. The Bay Runner pipeline is on track for Q3 2026 in-service, and dredging activities are substantially complete.

Train 6 Development and Commercialization

NextDecade filed the formal FERC application for Train 6 in May, and the final Environmental Impact Statement (EIS) is expected by June 25, 2027, supporting a Final Investment Decision (FID) in the second half of 2027. The company also secured a reservation agreement with Baker Hughes for the main refrigeration compressors.

Commercialization efforts are progressing with active discussions for long-term SPAs with high credit quality counterparties, driven by strong demand for LNG.

Strategic Financial Transactions

The company completed two significant financing transactions to term out a portion of its Phase 1 bank facility debt. This included a $1 billion term loan at 7.05% maturing in June 2033 and a $3.5 billion 144A senior secured notes issuance across four tranches, which achieved investment-grade ratings (BBB-).

These transactions diversified the debt maturity stack, freed up bank capacity for future expansions, and resulted in a $109 million settlement receipt from unwound interest rate swaps.

Impact of Geopolitical Environment on LNG Market

The ongoing Iran conflict has significantly impacted global LNG markets, leading to the closure of the Strait of Hormuz and removing almost 20% of the world's LNG supply. This has resulted in a loss of approximately 7 million tons of LNG per month and is expected to keep spot LNG prices elevated through at least 2030.

The situation has heightened buyer awareness for supply reliability, increasing interest in long-term U.S. Henry Hub-indexed LNG contracts.

Gas Supply Strategy and Pricing

NextDecade's Rio Grande LNG facility is strategically located in South Texas, allowing it to source gas primarily from the Agua Dulce hub, which prices off a Houston Ship Channel index. This index typically trades at a substantial discount to Henry Hub, providing a competitive advantage for gas sourcing compared to other U.S.

LNG projects. The prolific nature of associated natural gas from the Permian and Eagle Ford Basins is expected to maintain this discount long-term.

Labor Availability and EPC Costs

Despite increasing labor competition in the U.S. Gulf Coast, NextDecade has not experienced issues with craft labor availability for its Rio Grande LNG project. The company benefits from its location in the Rio Grande Valley, where workers can live at home, and Bechtel's direct hire model.

This unique situation allows for a stable and growing workforce, with over 6,000 workers currently on site, mitigating potential impacts on EPC costs and construction progress.

LNG Vessel Management

NextDecade took delivery of two LNG vessels in Q2 2026 and currently has three under charter, with more expected ahead of first LNG production. The company sub-charters excess shipping capacity to third parties to match available capacity with anticipated needs, accounting for these charters as finance leases.

The primary focus is on ensuring vessel availability for early cargoes and long-term contracts rather than trading for short-term market upside.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.