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Why NextDecade Stock Rocketed More Than 50% in March

By Matthew DiLallo – Apr 4, 2019 at 9:19AM

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The LNG export project developer took a key step forward last month.

What happened

Shares of NextDecade (NEXT -2.58%) zoomed in March, rallying 51.2%, according to data provided by S&P Global Market Intelligence. Fueling the liquefied natural gas (LNG) export project developer's stock was growing enthusiasm on the progress of its proposed Rio Grand LNG facility.

So what

In early March, NextDecade signed a lease for a 984-acre site on the Port of Brownsville, Texas, where it plans to construct a large-scale LNG export facility. This lease puts it one step closer to building its proposed Rio Grande LNG terminal and the associated Rio Bravo Pipeline, which would cost more than $15 billion. The company hopes to make a positive final investment decision on the project by the end of the third quarter.

A person in a suit with an outstreched hand that has a bright light and upward chart coming out of it.

Image source: Getty Images.

Towards the end of the month, NextDecade put out a press release saying that it would make a major announcement relating to Rio Grande LNG in early April. A few days later, the company revealed that it had signed a 20-year agreement with Royal Dutch Shell (RDS.A) (RDS.B), which will buy 2 million tons of LNG per year from Rio Grande LNG. That marked the first commercial agreement for the project, increasing the likelihood that it will move forward. It was also a major stamp of approval since Shell is one of the largest LNG producers and marketers in the world. It continued Shell's recent actions to bolster its LNG business, which have also included authorizing the construction of a major LNG export facility in Canada and partnering to develop another one in the U.S. 

Now what

NextDecade took two notable steps forward on its Rio Grande LNG project in the past month by securing a site for the facility and a foundational customer in Shell. However, the company has more work to do since Shell has only agreed to buy a small percentage of the 13.5 million tons the first phase of the project would produce. As a result, the company's timeline for green-lighting the project later this year so that it can be in service by 2023 isn't a sure thing. Thus, shares of the LNG development company could quickly give back last month's gains if it starts to run behind schedule.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

NextDecade Corporation Stock Quote
NextDecade Corporation
$5.29 (-2.58%) $0.14
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc

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