Shares of NextDecade Corporation dropped 17% on Tuesday after the company announced a final investment decision and financing close on Train 4 of its Rio Grande LNG project. While the move marked a significant step forward in expanding production capacity, investors focused instead on doubts around the company’s long-term profit margins.
The Houston-based energy developer said it has given full notice to proceed to Bechtel Energy for construction of Train 4, which will add roughly 6 million tonnes per annum (MTPA) of liquefied natural gas output. With this milestone, total LNG capacity under construction at the Rio Grande facility now stands at about 24 MTPA, putting it among the largest LNG projects underway globally.
To fund Train 4, NextDecade secured $6.7 billion in committed financing. That package includes a $3.85 billion term loan facility, $1.13 billion in equity commitments from NextDecade itself, and $1.7 billion from outside investment partners. The company stressed that its equity portion was covered without issuing new shares, aiming to reassure investors about dilution risks.
Even so, analysts were quick to highlight valuation concerns. TD Cowen’s Jason Gabelman argued that NextDecade’s financial models rely on an aggressive margin assumption of $5 per million cubic feet. “NEXT financials imply a $13/sh for 5 trains. However, we believe the embedded $5/mcf spot margin is higher than what will be realized,” he said. Gabelman instead values the stock between $7 and $10 a share, based on more conservative margin assumptions of $3 to $4. He added that the stock could settle into that lower range in the near term.
The skepticism reflects broader worries about the LNG sector’s long-term economics. While demand for U.S. LNG exports has surged in recent years, pricing can be volatile, and profit margins depend heavily on global supply-demand balances as well as shipping costs. Investors appear cautious about whether NextDecade can consistently deliver on its projected returns, especially with major capital outlays still ahead.
Looking forward, the company said it expects to reach a positive final investment decision on Train 5 in the fourth quarter of 2025, with project costs also estimated around $6.7 billion. Commercial momentum is strong, with 20-year LNG Sale and Purchase Agreements already in place with JERA, EQT Corporation, and ConocoPhillips, signaling solid long-term demand for the gas once operations begin.
Still, the sharp market reaction underscores that execution and margin stability remain top of mind. Even with financing locked in and construction progressing, investors want greater confidence that NextDecade’s ambitious buildout will translate into sustainable shareholder returns.