On Thursday, NextDecade Corp. (NASDAQ: NASDAQ:NEXT) saw its price target increased by Stifel to $13.00, up from the previous $9.00, while the firm maintained a Buy rating on the stock. The revision followed NextDecade's announcement of a head of agreement (HOA) with Saudi Aramco (TADAWUL:2222) for 1.2 million tonnes per annum (mtpa) pertaining to Train 4 of the Rio Grande LNG project.
NextDecade recently secured a contract with ADNOC, and with expectations that Total will exercise its option, analysts at Stifel anticipate these developments to sufficiently support the financing and subsequent advancement of Train 4 later in the year. The Rio Grande LNG project, upon completion of all five trains, is projected to yield a distributable cash flow of approximately $1 billion to NextDecade, which could significantly enhance shareholder value.
The Stifel analyst further elaborated on the potential long-term value for NextDecade, suggesting that the per-share value could surpass $27. However, this figure is based on an 8-10 year timeline for the company to achieve the anticipated cash flow levels. The move to increase the price target to $13 reflects the assumption that Train 4 will progress as planned, despite the current agreements being non-binding.
NextDecade's partnership with Saudi Aramco marks a significant milestone for the Rio Grande LNG project, as it continues to garner the necessary agreements to move forward. The project's success hinges on the transition from non-binding to binding agreements, which will enable NextDecade to secure the financing needed for further development. With the new price target set by Stifel, investors may see increased confidence in the company's prospects and future cash flow potential.
In other recent news, Abu Dhabi National Oil Company (ADNOC) has secured an 11.7% equity stake in the first phase of NextDecade Corporation's Rio Grande LNG project in Texas, marking its initial strategic investment in the U.S. The deal includes a 20-year agreement for ADNOC to offtake 1.9 million tons per annum of liquefied natural gas from the project's Train 4, pending a Final Investment Decision.
The transaction was facilitated through an investment vehicle of Global Infrastructure Partners, with NextDecade maintaining its expected economic interest in the initial phase and the fully permitted expansion capacity of Train 4 and Train 5. This move aligns with ADNOC's strategy to expand its lower-carbon LNG portfolio in response to growing global energy demand.
The Rio Grande LNG project, near Brownsville, Texas, is notable as the first U.S. LNG project to propose significant emissions reductions, potentially over 90%, through a planned carbon capture and storage initiative. This initiative is expected to capture and store over 5 million metric tons of carbon dioxide annually. The Final Investment Decision for Train 4 is targeted for the second half of 2024, subject to finalizing commercial arrangements and securing adequate financing.
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