NextDecade now reflects no value for brownfield expansions, says Morgan Stanley

Morgan Stanley analyst Devin McDermott notes NextDecade’s stock fell 27% after the company announced its final investment decision, or FID, on the 17.6 mtpa Phase 1 of the Rio Grande LNG facility. While this “represents a positive step forward for the company,” the firm attributes much of the weakness to the company’s low ownership level in the project of 20.8% of Phase 1, net of financing, and lower cash flow guidance. However, the firm estimates fair value for Phase 1 near the current stock price and argues the shares now reflect no value for further brownfield expansions, which should have higher returns and stronger cash flow than Phase 1. Morgan Stanley keeps an Overweight rating on NextDecade with a $10 price target.