NEXTDECADE CORPORATION

TABLE OF CONTENTS

Organizational Structure

The following diagram depicts our abbreviated organizational structure as of December 31, 20172018 with references to the names of certain entities discussed in this annual report.

Unless the context requires otherwise, references to “NextDecade,” the “Company,” “we,” “us” and “our” refer to NextDecade Corporation and its consolidated subsidiaries.

Cautionary Statement Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Annual Report on Form 10‑K, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “anticipate,” “contemplate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “might,” “will,” “would,” “could,” “should,” “can have,” “likely,” “continue,” “design” and other words and terms of similar expressions, are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives and financial needs.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from those expressed in our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements are subject to change and inherent risks and uncertainties, including those described in the section entitled “Risk Factors” in this Annual Report on Form 10-K.  You should consider our forward-looking statements in light of a number of factors that may cause actual results to vary from our forward-looking statements including, but not limited to:

Should one or more of the foregoing risks or uncertainties materialize in a way that negatively impacts us, or should the underlying assumptions prove incorrect, our actual results may vary materially from those anticipated in our forward-looking statements and, our business, financial condition and results of operations could be materially and adversely affected.

You should not rely upon forward-looking statements as predictions of future events. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Except as required by applicable law, we do not undertake any obligation to publicly correct or update any forward-looking statement.

Please read “Risk Factors” contained in this Annual Report on Form 10-K for a more complete discussion of the risks and uncertainties mentioned above and for a discussion of other risks and uncertainties.  All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements and hereafter in our other filings with the Securities and Exchange Commission (the “SEC”) and public communications.  You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

Part I

Item 1. Business

Our Formation

We were incorporated in Delaware on May 21, 2014 and were formed for the purpose of acquiring, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities. On July 24, 2017, one of our subsidiaries merged with and into NextDecade LLC, a liquefied natural gas (“LNG”)LNG development company founded in 2010 to develop LNG export projects and associated pipelines in the State of Texas.pipelines.  Prior to the merger with NextDecade LLC, we had no operations and our assets consisted of cash proceeds received in connection with our initial public offering.

Our first proposedcommon stock trades on the Nasdaq Capital Market (“Nasdaq”) under the symbol “NEXT.”

Our warrants issued in connection with our initial public offering in 2015 (the “IPO Warrants”) trade on the OTC Pink Market under the symbol “NEXTW.”

Company Overview

Our management is comprised of a team of industry leaders with extensive experience in LNG export facility,marketing and project development.  We have focused and continue to focus our development activities on the Project is well-positioned among the second wave of United States (“U.S”) LNG projects.  Weand have undertaken and continue to undertake various initiatives to evaluate, design and engineer the Project that we expect will result in demand for contracted capacityLNG supply at the Terminal, which willwould allow us to seek construction financing to develop the Project.

Our common stock trades on the Nasdaq Capital Market (“Nasdaq”) under the symbol “NEXT.”

As a result of our failure to satisfy the initial listing requirements of Nasdaq with respect to our warrants, on February 22, 2018, our warrants were delisted from trading on Nasdaq and began trading on the OTC Pink Market under the symbol “NEXTW.”

Company Overview

Our management is comprised of a team of industry leaders with extensive experience in LNG marketing and project development.  We have focused and continue to focus our development activities on the Project.  We believe the Project possesses competitive advantages in several important areas, including engineering, design, commercial, regulatory and gas supply. We submitted a pre-filing request for the Project to the Federal Energy Regulatory Commission (“FERC”(the “FERC”) in March 2015 and filed a formal application with the FERC in May 2016. We also believe we have robust commercial offtake and gas supply strategies in place and we estimate that the Project will commence commercial operations as early as 2023.

We believe that the Terminal, to be located on a 984-acre site in Brownsville, Texas, along with the Pipeline connecting the Terminal to the Agua Dulce market area, is well-positioned among the second wave of United States (“U.S.”) LNG projects. The Terminal is engineered to have liquefaction capacity of 27 million metric tons of LNG per annum (“mtpa”). It is located to take advantage of natural gas reservesresources in West and South Texas, benefiting from recent discoveries inincluding the Permian Basin and Eagle Ford Shale. We plan to construct, develop, own develop, and operate the Project. We have an exclusive option for a long-term lease with the Port of Brownsville for the Terminal site through November 5, 2019.

The Project will includeis expected to be permitted for up to six liquefaction trains (each with a nominal capacity of at least 4.5 mtpa/train)mtpa), four LNG storage tanks (each with a capacity of 180,000 cubic meters), two marine jetties for ocean-going LNG vessels, one turning basin, and six truck loading bays for LNG and natural gas liquids. The Pipeline is expected to be comprised of twin, 137-mile-long, 42-inch-outside diameter, natural gas pipelines, three 180,000-horsepower compressor stations, two 30,000-horsepower interconnect booster stations, six mainline valve sites, four metering sites, and various ancillary facilities. The twin pipelines are expected to be rated to a maximum allowable operating pressure of 1,480 pounds per square inch and total deliverability of at least 4.5 billion cubic feet per day (“Bcf/d.d”). We are exploring design enhancements to increase throughput capacity for the Project.

We have also leased a second 994-acre site on the Houston Ship Channel in Texas City, Texas for anour second U.S. LNG project, which is expected two orto be permitted for up to three trains (each with at least 13.5 mtpaa nominal capacity of 5.5 mtpa), a minimum of two LNG storage tanks (each with a capacity of 200,000 cubic meters), two marine jetties for ocean-going LNG vessels and one turning basin (the “Galveston Bay Terminal”).  We intend to use similar design and engineering as the Terminal asTerminal. 

Engineering, Procurement, and Construction

During the third quarter of 2018, we retain rightsinitiated a competitive engineering, procurement and construction (“EPC”) bid process.  We received expressions of interest (the “EOIs”) from multiple EPC contractors to participate in the design specificationsEPC process.  We reviewed the EOIs against a series of selection criteria and intellectual property associated withissued formal invitations to bid to Bechtel Oil, Gas and Chemicals, Inc., Fluor Enterprises, Inc. and McDermott International, Inc.  In December 2018, each of the Terminal.

EPC

Capital Cost, Liquefaction Technology, and Engineering

Our expected engineering, procurement, and construction (“EPC”) contractor, CB&I LLC (“CB&I), has vast experience in the LNG industry. CB&I is onebidders provided us with an endorsement of the world’s premier EPC firms, specializing in oil and gas infrastructure projects. Founded in 1889, CB&I has been involved with LNG projects for more than 50 years, including construction of the first double-walled storage tank (1958) and the first marine distribution terminal (1970). Additionally, CB&I has an extraordinary record with workplace safety; CB&I won the National Safety Council’s Green Cross for Safety in 2015.

Based on the progress of its detailed engineering and cost optimization exercises to date, in conjunction with CB&I’s own work with Baker Hughes, a GE Company (the Terminal’s primary rotating equipment provider), we estimate construction costs for the first three liquefaction trains of the Terminal of $490/ton before owners’ costs, financing costs, and contingencies, with a target EPC cost reduction to $450/ton. Our FERC applications contemplate the Terminal’s entire six trains of production.  We anticipate taking a positive final investment decision (“FID”) on the first phase of the Project with three trains at the Terminal, though we can take an initial positive FID on as few as two trains.

CB&I has conducted front endfront-end engineering and design (“FEED”) work, which indicates the bidders’ confirmation that the Terminal is technically feasible and can be further designed, engineered, permitted, constructed, commissioned and safely placed into operations.  The EPC bid process is scheduled to culminate on behalf of numerous LNG export projects globally and served asApril 22, 2019 with the submission by each EPC contractor for Peru LNG, which commenced operations in 2010 and has successfully delivered more than 430 cargoes, as well as two LNG export projects currently under construction in the U.S. (the Cameron and Freeport projects). The Terminal is of substantially similar design to the Peru LNG project that CB&I completed several years ago. During the construction of Peru LNG, CB&I experienced a lost time incident rate of only 0.01 and successfully trained and hired thousands of local workers. Additionally, hundreds of workers from the Rio Grande Valley have been hired and trained by CB&I in recent years to work on other U.S. LNG project developments in Texas and Louisiana. We believe a well-trained workforce will be prepared to return to the Rio Grande Valley upon successful completion of those projects.

We have selected Air Products’ C3MR™ liquefaction technology, which is used in a wide array of LNG projects around the world, including in several LNG projects under construction in the U.S. With global expertise in LNG EPC projects, CB&I performed our FEED work for the Terminal. We are currently progressing design, regulatory, engineering, and commercial activities.  We are finalizing detailed negotiations for a lump-sum turnkey (“LSTK”) EPC contract that includes performance, time, and cost guarantees, and weprice.  We expect to execute the LSTKa final EPC contract in the secondthird quarter of 2018. We believe that the combination of proven technology with one of the foremost LNG EPC contractors significantly mitigates design, construction, and execution risk and is expected to be viewed favorably by prospective customers and to facilitate attractively priced project financing.2019.

Commercial

We are continuing commercial discussions with a variety of other parties ranging from large utilities and state-sponsored enterprises to portfolio and multinational commodity interests and expect to sign long-term binding offtake commitments prior to FID, leveraginginterests.  Leveraging the global relationships and extensive experience of our management team.team, we expect to sign long-term binding offtake commitments for substantially all of the Terminal’s capacity prior to a final investment decision (“FID”).

We believe our project locationsthe Project’s location will provide customers with access to low-cost natural gas from the Permian Basin and Eagle Ford Shale. Importantly,We are focused on selling LNG to customers through a “free on board” model whereby a marketing affiliate would acquire feed gas, the Terminal would produce the LNG and the title transfer would occur at the interface between the Terminal and the customer’s ship.

In 2018, we have offered customerscomplemented our Henry Hub-based offering with LNG pricing indexed to the Agua Dulce area, Waha and Brent crude oil prices.  As discussed below, we believe this Brent indexed product is a choicecompetitive advantage related to our access to associated gas from the Permian basin as it allows us to access new customer segments that desire an alternative to Henry Hub priced LNG. This builds on natural advantages of flexible offtake contracting models such as tolling, free on board or delivered ex-ship.

We believe traditional LNG buyers are seeking to diversify away from oil-linked contracts and are looking to increase destination flexibility. As a result, low-cost U.S. LNG is poised to capture market share, supported byexport projects such as the country’s abundant gas supply, existing pipeline infrastructure, political stability, and a competitive project execution environment.

RegulatoryGovernmental Permits, Approvals and Authorizations

We filedwill be required to obtain governmental approvals and authorizations to implement our formal application withproposed business strategy, which includes the FERC on May 5, 2016design, construction and expect to receive a Draft Environmental Impact Statementoperation of the Project and the export of LNG from the FERC as early as the second quarterU.S. to foreign countries. The design, construction and operation of 2018.  Final authorizationLNG export terminals is a regulated activity and is subject to Section 3 of the Terminal under Section 3(a) of thefederal Natural Gas Act (the “NGA”). Federal law has bifurcated regulatory jurisdiction of LNG export and import activities.  The FERC has jurisdiction over the siting, construction and permitting of the Pipeline under Section 7(c) of the Natural Gas Act, is expected as early as the end of 2018. On September 7, 2016, we received authorization from theLNG import and export facilities.  The U.S. Department of Energy (the “DOE”) tohas jurisdiction over the import and export LNG to FTA countries on our own behalf and as agent for others, for a term of 30 years. A non-FTA authorization is expected shortly after completion of the natural gas commodity, including natural gas in the form of LNG.  The FERC National Environmentalalso has jurisdiction over the siting, construction and operation of interstate natural gas pipelines under Section 7 of the NGA and regulates interstate pipelines’ terms and conditions of service under Sections 4 and 5 of the NGA. In 2002, the FERC established a policy of not regulating the terms and conditions of service for LNG import or export facilities or requiring that LNG import or export facilities operate as “open access” facilities for all customers.  The Energy Policy Act review process.of 2005, which amended the NGA, codified this policy until January 1, 2015, and the FERC has not indicated that it intends to depart from its policy of not regulating the terms or conditions of service or requiring that LNG terminals operate on an open access basis.

Although the FERC is the primary agency with jurisdiction over LNG import and export facilities, the FERC works closely with other federal and state agencies to evaluate applications for LNG export facilities.  These agencies include the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (the “PHMSA”), the U.S. Coast Guard (the “Coast Guard”), the U.S. Army Corps of Engineers, the U.S. Environmental Protection Agency, the International Boundary and Water Commission and other federal agencies with jurisdiction over potential environmental impacts of LNG terminal construction and operation.  Certain federal laws, such as the Clean Water Act, the Clean Air Act and the Coastal Zone Management Act, delegate authority over certain actions to state agencies.  In reviewing an application for an LNG import or export terminal or an interstate natural gas pipeline, the FERC also works with these state agencies that have jurisdiction over certain aspects of LNG terminal or interstate natural gas pipeline construction or operation.

In particular, the PHMSA has established safety standards for interstate natural gas pipelines and LNG facilities.  Similarly, the Coast Guard has established safety regulations for marine operations at LNG facilities and the operation of LNG carriers.  The FERC, the PHMSA and the Coast Guard entered into a Memorandum of Understanding in 2004 that

establishes the FERC’s primary role in evaluating LNG terminal applications and defines the process for coordinating the review of an LNG import or export terminal application with the PHMSA and the Coast Guard.  In 2018, the FERC and the PHMSA entered into a separate Memorandum of Understanding that establishes the process and timeline by which the PHMSA should determine whether an LNG terminal project will meet the PHMSA’s LNG safety siting standards.

We filed our formal application for the Project with the FERC on May 5, 2016 and received a Draft Environmental Impact Statement from the FERC on October 12, 2018.  The FERC’s approval of the Terminal under Section 3 of the NGA and of the Pipeline under Section 7 of the NGA is expected in late July 2019.  Separately, we submitted a pre-filing request to the FERC for the Galveston Bay Terminal on August 31, 2018, and the FERC initiated its pre-filing process for that application on October 10, 2018.

Section 3 of the NGA requires prior authorization by the DOE for the import or export of natural gas, including LNG, from the U.S. The DOE’s practice has been to include certain reporting requirements in its LNG export authorizations, including mandating the reporting of the foreign destination of U.S.-sourced LNG.  In December 2018, the DOE clarified its reporting requirements, directing LNG export authorization holders and their downstream counterparties to report the destination to which the U.S.-sourced LNG was “actually delivered,” in contrast to the agency’s prior policy requiring the reporting of where the LNG was “delivered for end use.”  This revised policy recognizes the increasing flexibility and liquidity in the global LNG market.

On September 7, 2016, Rio Grande obtained an authorization for export of LNG to countries with which the U.S. has a Free Trade Agreement (“FTA”) on our own behalf and as an agent for others for a term of 30 years.  On June 13, 2018, Galveston Bay obtained a similar authorization for export of LNG to FTA countries on our own behalf and as an agent for others for a term of 20 years.  The DOE’s December 2018 order adjusting the reporting requirements applies to both of the authorizations for LNG to FTA countries.  However, many of our target markets are not FTA countries. We have applied to the DOE for approval to export LNG to non-FTA countries.  Non-FTA authorizations are expected shortly after completion of the FERC’s environmental review processes.

Gas Supply

The proposed Terminal issite will be located in Brownsville, Texas, benefiting from close access to the Permian Basin and Eagle Ford Shale. We expect to realize material benefits from providing our customers with access to these low-cost associated gas resources in Texas.resources.  Independent shale producers have created extraordinary efficiencies and improvements, including enhanced well recoveries through extended lateral lengths and hydraulic fracturing technology, rig productivity, and operating and lifecycle costs. However, U.S. demand has not risen proportionally with the growth in recoverable reserves.

For example, whereas U.S. demand for natural gas has generally increased modestly year-over-year over the past few decades, the level of new discoveries and production has been remarkable.significant.  According to the U.S. Energy Information Administration (the “EIA”), domestic demand for natural gas has increased from approximately 20 Tcftrillion cubic feet (“Tcf”) per year in 1980 to approximately 2727.1 Tcf in 2015,2017, a 35 percent increase.  However, proved reserves of natural gas have increased by approximately 200 Tcf over the same period, a 100 percent increase. Due to technological advancements, almost all U.S. reserve basins are able to produce gas for a break-even cost of less than $3.00/MMBtu, which is less than the approximate price implied by gas forward curves for at least the next ten years.

The development of the Marcellus Shale and Utica Shale figures in the strategic importance of the Permian Basin has exceeded expectations and Eagle Ford Shale. In 2010, Marcellus production totaled approximately 2 Bcf/d; by the end of 2017, this number exceeded 23.7 Bcf/d. Currently, Marcellus production is greater than any individual country in the world except for Russia. This has caused the northeast to swing from an importer of natural gas (8 Bcf/d in 2010) to an exporter (-3.7 Bcf/d in 2017). There is more than 13 Bcf/d of northeast pipeline capacity scheduled to enter service during 2018 and Marcellus and Utica producers remain focused on moving volumes to more favorable Gulf Coast markets.  This indicates that Texas production is increasingly less likely to flow towards northeast markets and expected to be consumed in or exported from the southwest or Gulf of Mexico regions.

The Permian Basin is expected to produceproduced large quantities of associated gas, the production of which occurs as a byproduct with oil production. The State of Texas severely restricts the flaring of natural gas, so infrastructure will beis required to transport this associated gas to Gulf Coast markets economically. InTwo new high-pressure Permian pipeline gas takeaway projects are being constructed.  The first is the fall of 2017, KinderMorgan announced it had enough binding customer commitments to proceed with the development of its Gulf Coast Express (“GCX”) project.  TheWith an estimated in-service date of October 2019, the GCX project will move an estimated 1.9 Bcf/d of gas from the Waha area in the Permian Basin to Agua Dulce, Texas, where the ProjectTerminal expects to receive gas supply.   The GCXsecond project is expectedthe Permian Highway Pipeline, capable of bringing 2.0 Bcf/day of gas supply to have an estimatedthe Katy Hub, located just outside of Houston, Texas with a portion of that capacity of 1.9 Bcf/d and is expectedable to be in service by October 2019.  Thisdelivered to markets from Freeport, Texas to the Agua Dulce area of Texas.  These new high-pressure pipelinepipelines will provide a much neededmuch-needed exit strategy for incremental Permian gas supplies. Due to the production economics for the primary resource (oil), many Permian producers are expected to face sub-zero breakeven prices with respect to the price

The Permian Basin is approaching its 100th100th year of oil production.  At present, production has reached a record 2.93.8 million barrels per day (MBPD), and is estimated to grow to 6.4 MBPD by 2022, making it the world’s second-most-prolific field, behind the formidable Ghawar in Saudi Arabia. The Texas side of

In December 2018, the Permian Basin (excluding the portion underneath New Mexico) has already produced 30 billion barrels of crude and 75 trillion cubic feet (Tcf) of natural gas.  Since 2012, Permian Basin production has increased by nearly 2 MBPD, which is a larger increase than any other oilfield in the world.  The natural gas production volumes associated with this oil have been just as impressive.  According to the U.S. Energy Information Administration, 2018EIA estimated natural gas production in the Permian Basin is expected to rise to more than 9.2 MMcf/be 12.4 Bcf/d, up from May 2016 levels of approximately 6.9 MMcf/d. Current oil production in the Permian has risen to more than 2.9 MBPD from 1.9 MBPDBcf/d in May 2016.   These comprise 33.0% and 53.0% increases, respectively, and both capital spending and production are expected to continue rising precipitouslyThis significant increase in the coming years. Significant gas production relative to anticipated takeaway capacity constraints (despite expected capacity growth), could leadhas led to a negative basis to Henryat the Waha Hub that could benefit our projects relative to other second-wave U.S. LNG projects.the Henry Hub.

We believe that the Pipeline, projected to have at least eight interconnects with a combined 6.7 Bcf/d of receipt capacity, will have supply flexibility and be price competitive. Eastward takeaway capacity from the Permian is already expanding in the region, with high-profile plans over the next 129 to 18 months among key sponsors such as KinderMorgan, NAmerico and others.pipeline sponsors.  The combination of increased production and expanding takeaway capacity indicates that the Agua Dulce hub, from which the Pipeline is proposed to be routed, is expected to become increasingly liquid and remain competitively priced to Henry Hub. We believe our proximity to two major gas reserves basins, increasing takeaway capacity in the area, a significant influx of production and infrastructure investment over the last 12 to 18 months, as well as our existing contacts and

Item 1A.Risk Factors

We are subject to uncertainties and risks due to the nature of the business activities we conduct. The following information describes certain uncertainties and risks that could affect our business, financial condition or results of operations or could cause actual results to differ materially from estimates or expectations contained in our forward-looking statements on page 3 of this Annual Report on Form 10-K. This section does not describe all risks applicable to us, our industry or our business, and it is intended only as a summary of known material risks that are specific to us. We may experience additional risks and uncertainties not currently known to us or that we currently deem to be immaterial which may materially and adversely affect our business, financial condition and results of operations.

We are in the process of developing LNG liquefaction and export projects, and the success of such projects is unpredictable; as such, positive cash flows and even revenues will be several years away, if they occur at all.

We are not expected to generate cash flow, or even obtain revenues, unless and until the Project is operational, which is expected to be at least fivefour years away, and, accordingly, distributions to investors may be limited, delayed, or non-existent.

Our cash flow and consequently our ability to distribute earnings is solely dependent upon the revenues Rio Grande and Rio Bravo receive from the Project and the transfer of funds by Rio Grande and Rio Bravo to NextDecade in the form of distributions or otherwise. Rio Grande’sGrande’s and Rio Bravo’s abilityBravo’s abilities to complete the Project, as discussed further below, will be dependent upon, among other things, our ability to obtain necessary regulatory approvals and raise the capital necessary to fund development of the Project.

Our ability to pay dividends is almost entirely dependent upon our ability to complete the Project and generate cash and net operating income from operations. We do not expect to generate any revenues until the completion of construction of the first phase of the Project. Upon such completion, financing and numerous other factors affecting the Project may reduce our cash flow. As a result, we may not make distributions of any amount or any distributions may be delayed.

Substantially all of our anticipated revenue will be dependent upon the Project. Due to our lack of asset diversification, adverse developments at or affecting the Project would have a significantly greater impact on our financial condition and results of operations than if we maintained a more diverse portfolio of assets.

We will be required to seek additional debt and equity financing in the future to complete the Project and may not be able to secure such financing on acceptable terms, or at all.

Since we will be unable to generate any revenue from our operations and expect to bewhile we are in the development orand construction stagestages for multiple years, we will need additional financing to provide the capital required to execute our business plan. We will need significant funding to develop and construct the Project as well as for working capital requirements and other operating and general corporate purposes.

There can be no assurance that we will be able to raise sufficient capital on acceptable terms, or at all. If sufficient capital is not available on satisfactory terms, we may be required to delay, scale back or eliminate the development of business opportunities, and our operations and financial condition may be adversely affected to a significant extent.

Debt financing, if obtained, may involve agreements that include liens on Project assets and covenants limiting or restricting our ability to take specific actions, such as paying dividends or making distributions, incurring additional debt, acquiring or disposing of assets and increasing expenses. Debt financing would also be required to be repaid regardless of our operating results.

In addition, the ability to obtain financing for the Project is expected to be contingent upon, among other things, our ability to enter into sufficient long-term commercial agreements prior to the commencement of construction. For additional information regarding our ability to enter into sufficient long-term commercial agreements, see “— “—Our ability to generate cash is substantially dependent upon itus entering into satisfactory contracts with third parties and the performance of those third parties under those contracts.”

We may be subject to risks related to doing business in, and having counterparties based in, foreign countries.

We may engage in operations or make substantial commitments to and investments in, and enter into agreements with, counterparties located outside the U.S., which would expose us to political, governmental and economic instability and foreign currency exchange rate fluctuations.

Any disruption caused by these factors could harm our business, results of operations, financial condition, liquidity and prospects. Risks associated with potential operations, commitments and investments outside of the U.S. include but are not limited to risks of:

As our reporting currency is the U.S. dollar, any operations conducted outside the U.S. or transactions denominated in foreign currencies would face additional risks of fluctuating currency values and exchange rates, hard currency shortages and controls on currency exchange. In addition, we would be subject to the impact of foreign currency fluctuations and exchange rate changes on our financial reports when translating our assets, liabilities, revenues and expenses from operations or transactions outside of the U.S. into U.S. dollars at the then-applicable exchange rates. These translations could result in changes to our results of operations from period to period.

Our estimatedCosts for the Project are subject to various factors.

Construction costs for the Project may notwill be accurate and are subject to change due to various factors.

Our construction cost estimates are only an approximation of the actual costs of construction and are before owners’ costs, financing costs, pipeline construction costs and contingencies. Moreover, cost estimates may change due to various factors such as economic and market conditions, government policy, claims and litigation risk, competition, the final terms of any definitive requestagreement for services with our EPC service provider, as well as change orders, delays in construction, legal and regulatory requirements, unanticipated regulatory delays, site issues, increased component and material costs, escalation of labor costs, labor disputes, increased spending to maintain our construction schedule and other factors. In particular, our estimated costs for the Project are expected to be substantially affected by:

Cost estimates may change, and actual costs of construction may vary from current cost estimates, due to various factors, such as the final terms of any LSTK contract into which we enter with CB&I, as well as any change orders, delays in construction, unanticipated regulatory delays, increased material or staffing costs, or other factors.

In addition to our actual willingness to takemake a FID and our ability to construct the Project and achieve operations, events related to such activities may cause actual costs of the Project to vary from the range, combination and timing of assumptions used for the projected costs of the Project, suchProject.  Such variations may be material and adverse, and an investor may lose all or a portion of its investment.

The construction and operation of the Project remains subject to further governmental approvals, and some approvals may be subject to further conditions, review and/or revocation.

We will beare required to obtain governmental approvals and authorizations to implement our proposed business strategy, which includes the design, construction and operation of the Project and the export of LNG from the U.S. to foreign countries. TheAs described above under “Business− Governmental Permits, Approvals and Authorizations,” the design, construction and operation of LNG export terminals is a highly regulated activity. The approvalactivity in the U.S., subject to a number of the FERC under Section 3 of the Natural Gas Act, as well as several other material governmental andpermitting requirements, regulatory approvals and permits, is required in order to constructongoing safety and operate an LNG terminal. An equivalent approval under Section 7 of the Natural Gas Act is required to construct and operate the Pipeline.operational compliance programs. There is no guarantee that such approvals can be obtained. Although the necessary authorizations to construct and operate the Project may be obtained, such authorizations are subject to ongoing conditions imposed by regulatory agencies, and additional approval and permit requirements may be imposed.

Substantially all of our revenue will be generated from exports of LNG from the U.S. to foreign countries. Under Section 3 of the Natural Gas Act authorization of the DOE is required to export LNG from the U.S. We have obtained such authorization for export to countries with which the U.S. has a Free Trade Agreement (“FTA”), but many of our target markets are not FTA countries. We have applied to the DOE for approval to export LNG to non-FTA countries. There is no assurance that we will obtain or, if obtained, maintain these governmental authorizations, approvals and permits.  Failure to obtain, failure to obtain on a timely basis, or failure to maintain any of these governmental authorizations, approvals and permits could have a material adverse effect on our business, results of operations, financial condition and prospects.

For example,Future legislation and regulations, such as those relating to the transportation and security of LNG exported from the proposed LNG facilities, and ongoing reviews relating to certain permits and approvals could cause additional expenditures, restrictions and delays in connection with the proposed LNG facilities and their construction, the extent of which cannot be predicted, and which may require us to substantially limit, delay or cease operations in some circumstances.

We consider recent policy and regulatory developments that (i) streamline LNG terminal permitting,such as the FERC’s continuation of its policy of not regulating the terms and conditions of service for LNG import or export facilities and the 2018 FERC-PHMSA Memorandum of Understanding, and (ii) clarify LNG export reporting requirements, such as the DOE’s 2018 policy statement on downstream LNG delivery reporting, to be beneficial to us and the broader U.S. LNG industry.  However, revised, reinterpreted or additional laws and regulations that result in increased compliance costs or additional operating costs and restrictions could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.

In addition, some of these governmental authorizations, approvals and permits require extensive environmental review. Some groups have perceived, and other groups could perceive, that the proposed construction and operation of the Project asor the Galveston Bay Terminal could negatively impactingimpact the environment or cultural heritage sites. Objections from such groups could cause delays, damage to reputation and difficulties in obtaining governmental authorizations, approvals or permits or prevent the obtaining of such authorizations, approvals or permits altogether.

  Although the necessary authorizations, approvals and permits to construct and operate the Project and the Galveston Bay Terminal may be

obtained, such authorizations, approvals and permits may be subject to ongoing conditions imposed by regulatory agencies or may be subject to legal proceedings not involving us, which is customary for U.S. LNG projects.

The Project and the Galveston Bay Terminal will be subject to a number of environmental laws and regulations that impose significant compliance costs, and existing and future environmental and similar laws and regulations could result in increased compliance costs, liabilities or additional operating restrictions.

Our business will be subject to extensive federal, state and local regulations and laws, including regulations and restrictions on discharges and releases to the air, land and water and the handling, storage and disposal of hazardous materials and wastes in connection with the development, construction and operation of its liquefaction facilities. These regulations and laws will require us to maintain permits, provide governmental authorities with access to its facilities for inspection and provide reports related to its compliance.  Violation of these laws and regulations could lead to substantial fines and penalties or to capital expenditures related to pollution control or remediation equipment that could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects. Federal and state laws impose liability, without regard to fault or the lawfulness of the original conduct, for the release of certain types or quantities of hazardous substances into the environment. As the owner and operator of the Project and the Galveston Bay Terminal, we could be liable for the costs of cleaning up hazardous substances released into the environment and for damage to natural resources.

We will be dependent on third-party contractors for the successful completion of the Project, and these contractors may be unable to complete the Project or may build a non-conforming Project.

The construction of the Project is expected to take several years, will be confined to a limited geographic area and could be subject to delays, cost overruns, labor disputes and other factors that could adversely affect financial performance or impair our ability to execute our scheduled business plan.

Timely and cost-effective completion of the Project in conformity with agreed-upon specifications will be highly dependent upon the performance of third-party contractors pursuant to their agreements. However, we have not yet entered into definitive agreements with certain of the contractors, advisors and consultants necessary for the development and construction of the Project. We may not be able to successfully enter into such construction contracts on terms or at prices that are acceptable to it.us.

Further, faulty construction that does not conform to our design and quality standards may have an adverse effect on our business, results of operations, financial condition and prospects. For example, improper equipment installation may lead to a shortened life of our equipment, increased operations and maintenance costs or a reduced availability or production capacity of the affected facility. The ability of our third-party contractors to perform successfully under any agreements to be entered into is dependent on a number of factors, including force majeure events and such contractors’contractors’ ability to:

Furthermore, we may have disagreements with our third-party contractors about different elements of the construction process, which could lead to the assertion of rights and remedies under the related contracts, resulting in a contractor’scontractor’s unwillingness to perform further work on the relevant project. We may also face difficulties in commissioning a newly constructed facility. Any of the foregoing issues or significant project delays in the development or construction of the Project could materially and adversely affect our business, results of operations, financial condition and prospects. We plan to enter into a LSTKlump-sum turnkey EPC contract, which could mitigate certain of these design, construction and execution risks through performance, time and cost guarantees. We expect to execute thean EPC contract in the secondthird quarter of 2018.2019. 

Our ability to generate cash is substantially dependent upon itus entering into satisfactory contracts with third parties and the performance of those third parties under those contracts.

We have not yet entered into, and may never be able to enter into, satisfactory commercial arrangements with third-party suppliers of feedstock or other required supplies to the Project, or customers for products and services from the Project.

Our business strategy regarding how and when the Project’sProject’s export capacity or LNG produced by the Terminal is marketed may change based on market factors. Without limitation, our business strategy may change due to inability to enter into agreements with customers or based on our or market participants’participants’ views regarding future supply and demand of LNG, prices, available worldwide natural gas liquefaction capacity or regasification capacity or other factors. If efforts

Delays beyond the estimated development periods, as well as cost overruns, could increase the cost of completion beyond the amounts that are currently estimated, which could require us to obtain additional sources of financing to fund the activities until the Project is constructed and operational, (whichwhich could cause further delays).delays. The need for moreadditional financing may also make the Project uneconomic. Any delay in completion of the Project may also cause a delay in the receipt of revenues projected from the Project or cause a loss of one or more customers. As a result, any significant construction delay, whatever the cause, could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.

Our operations arewill be subject to all of the hazards inherent in the receipt and processing of natural gas to LNG, and associated short-term storage including:

for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, contractual liabilities and pollution and environmental risks generally are not fully insurable. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

We may experience increased labor costs, and the unavailability of skilled workers or our failure to attract and retain qualified personnel could adversely affect us. In addition, changes in our senior management or other key personnel could affect our business operations.

We are dependent upon the available labor pool of skilled employees authorized to work in the United States.U.S. We compete with other energy companies and other employers to attract and retain qualified personnel with the technical skills and experience required to construct and operate our facilities and pipelines and to provide our customers with the highest quality service. A shortage in the labor pool of skilled workers able to legally work in the United StatesU.S. or other general inflationary pressures or changes in applicable laws and regulations could make it more difficult for us to attract and retain qualified personnel and could require an increase in the wage and benefits packages that we offer, thereby increasing our operating costs. Any increase in our operating costs could materially and adversely affect our business, financial condition, operating results, liquidity and prospects.

We depend on our executive officers for various activities. We do not maintain key person life insurance policies on any of our personnel. Although we have arrangements relating to compensation and benefits with certain of our executive officers, we do not have any employment contracts or other agreements with key personnel binding them to provide services for any particular term. The loss of the services of any of these individuals could have a material adverse effect on our business.

Political instability in foreign countries that import natural gas, or strained relations between such countries and the U.S. may also impede the willingness or ability of LNG suppliers, purchasers and merchants in such countries to import LNG from the U.S.  Furthermore, some foreign purchasers of LNG may have economic or other reasons to obtain their LNG from non-U.S. markets or our competitors’ liquefaction facilities in the U.S.

As a result of these and other factors, LNG may not be a competitive source of energy internationally. The failure of LNG to be a competitive supply alternative to local natural gas, oil and other alternative energy sources in markets accessible to our customers could adversely affect the ability of our customers to deliver LNG from the U.S. on a commercial basis. Any significant impediment to the ability to deliver LNG from the U.S. generally or from the Project specifically could have a material adverse effect on our customers and our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

Decreases in the global demand for and price of natural gas (versus the price of imported LNG) could lead to reduced development of LNG projects worldwide.

We are subject to risks associated with the development, operation and financing of domestic LNG facilities. The development of domestic LNG facilities and projects is generally based on assumptions about the future price of natural gas and LNG and the conditions of the global natural gas and LNG markets. Natural gas and LNG prices have been, and are likely to remain in the future, volatile and subject to wide fluctuations that are difficult to predict. As a result, our activities will expose us to risks of commodity price movements, which we believe could be mitigated by entering into long-term LNG sales contracts. There can be no assurance that we will be successful in entering into long-term LNG sales contracts. Additionally, the global LNG market could shift toward the use of shorter-term LNG sales contracts.

Fluctuations in commodity prices may create a mismatch between natural gas and petroleum prices, which could have a significant impact on our future revenues. Commodity prices and volumes are volatile due to many factors over which we have no control, including competing liquefaction capacity in North America; the international supply and receiving capacity of LNG; LNG marine transportation capacity; weather conditions affecting production or transportation of LNG from the Terminal; domestic and global demand for natural gas; the effect of government regulation on the production, transportation and sale of natural gas; oil and natural gas exploration and production activities; and the development of and changes in the cost of alternative energy sources for natural gas and political and economic conditions worldwide.

Our activities are also dependent on the price and availability of materials for the construction of the Project, such as nickel, aluminum, pipe, and steel, which may be subject to import tariffs in the U.S. market and are all also subject to factors affecting commodity prices and volumes. In addition, authorities with jurisdiction over wholesale power rates in the U.S., Europe and elsewhere, as well as independent system operators overseeing some of these markets, may impose

lead to diminished opportunities for gain. We cannot predict the impact energy trading may have on our business, results of operations or financial condition.

Further, the development of liquefaction facilities takes a substantial amount of time, requires significant capital investment, may be delayed by unforeseen and uncontrollable factors and is dependent on our financial viability and ability to market LNG internationally.

Competition in the LNG industry is intense, and some of our competitors have greater financial, technological and other resources.

We plan to operate in the highly competitive area of LNG production and face intense competition from independent, technology-driven companies as well as from both major and other independent oil and natural gas companies and utilities.

Many competing companies have secured access to, or are pursuing development or acquisition of, LNG facilities in North America. We may face competition from major energy companies and others in pursuing our proposed business strategy to provide liquefaction and export products and services at the Project. In addition, competitors have and are developing LNG terminals in other markets, which will compete with U.S. LNG facilities. Some of these competitors have longer operating histories, more development experience, greater name recognition, larger staffssuperior tax incentives, more employees and substantially greater financial, technical and marketing resources than we currently possess. The superior resources that some of these competitors have available for deployment could allow them to compete successfully against us, which could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.

There may be shortages of LNG vessels worldwide, which could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.

The construction and delivery of LNG vessels requires significant capital and long construction lead times, and the availability of the vessels could be delayed to the detriment of our business and customers due to the following:

We will rely on third-party engineers to estimate the future capacity ratings and performance capabilities of the Project, and these estimates may prove to be inaccurate.

We will rely on third parties for the design and engineering services underlying our estimates of the future capacity ratings and performance capabilities of the Project. Any of our LNG facilities, when constructed, may not have the capacity ratings and performance capabilities that we intend or estimate. Failure of any of our facilities to achieve our intended capacity ratings and performance capabilities could prevent us from achieving the commercial start dates under our future LNG sale and purchase agreements and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

Terrorist attacks, including cyberterrorism, or military campaigns involving us or the Project could result in delays in, or cancellation of, construction or closure of the Project.

A terrorist or military incident involving the Project may result in delays in, or cancellation of, construction of the Project, which would increase our costs and prevent us from obtaining expected cash flows. A terrorist incident could also result in temporary or permanent closure of the Project, which could increase costs and decrease cash flows, depending on the duration of the closure. Operations at the Project could also become subject to increased governmental scrutiny that may result in additional security measures at a significant incremental cost. In addition, the threat of terrorism and the impact of military campaigns may lead to continued volatility in prices for natural gas that could adversely affect our business and customers, including the ability of our suppliers or customers to satisfy their respective obligations under our

We do not, nor do we intend to, maintain insurance against all these risks and losses. We may not be able to maintain desired or required insurance in the future at rates that we consider reasonable. The occurrence of a significant event not fully insured or indemnified against could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

We are dependent on a limited number of customers for the purchase of LNG.

The number of potential customers is limited. Some potential purchasers of the LNG to be produced from the Terminal are new to the LNG business and have limited experience in the industry. We will be reliant upon the ability forof these customers to enter into satisfactory downstream arrangements in their home markets for the licenses to import and re-sellsell re-gasified LNG. Some of these jurisdictions are heavily regulated and dominated by state entities. In certain instances, customers may require credit enhancement measures in order to satisfy project-financing requirements.

The Project will be dependent on the availability of gas supply at the Agua Dulce Hub.

The Pipeline will collect and transport natural gas to the Terminal. The Pipeline route passes through Jim Wells, Kleberg, Kenedy, Willacy, and Cameron Counties in Texas. The header system at the upstream end of the Pipeline is intended to have multiple interconnects to the existing natural gas pipeline grid located in the Agua Dulce market area (the “Agua“Agua Dulce Hub”Hub”). The Agua Dulce Hub is located in Nueces County, Texas, and includes deliveries from, (butbut not limited to) ConocoPhillip’sto, ConocoPhillip’s 1,100-mile South Texas intrastate and gas gathering pipeline system and ExxonMobil’sExxonMobil’s 925 MMcf/d King Ranch processing facility. As the Pipeline system interconnects are expected to be relatively close to the Agua Dulce Hub, it is expected that gas will be available for purchase in large volumes at commercially acceptable prices. Nonetheless, disruptions in upstream supply sources or increased market demand could impact the availability of gas supply to the Pipeline header system, which would result in curtailments at the Terminal.

Each liquefaction train for the Terminal is expected to involve the transportation and liquefaction of approximately 0.75 Bcf/day of natural gas, (forfor a total of 4.5 Bcf/day for six liquefaction trains at full build-out).build-out. Gas sales agreements for the supply of these volumes could entail negotiations with multiple parties for firm and interruptible gas supply and transportation services to the Pipeline header system, as well as pipeline interconnects and ancillary operational

The market price of our common stock has fluctuated in the past and is likely to fluctuate in the future. Holders of our common stock could lose all or part of their investment.

The securities markets in general and our common stock hashave experienced significant price and volume volatility. The market price and trading volume of our common stock may continue to experience significant fluctuations due not only to general stock market conditions but also to a change in sentiment in the market regarding our operations, or business prospects or those of companies in our industry. In addition to the other risk factors discussed above, the price and volume volatility of our common stock may be affected by:

As of December 31, 2017, outstanding warrants to purchase an aggregate of 12,081,895 shares of our common stock became exercisable in accordance with the terms of the warrant agreement governing those securities. These warrants will expire at 5:00 p.m., New York time, on July 24, 2022 or earlier upon redemption or liquidation. The exercise price of these warrants is $11.50 per one full share, subject to certain adjustments. To the extent such warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to the holders of our common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our common stock.

Our Second Amended and Restated Certificate of Incorporation grants our board of directors the power to designate and issue additional shares of common and/or preferred stock.

Our authorized capital consists of 480,000,000 shares of common stock and 1,000,000 shares of preferred stock. Our preferred stock may be designated into series pursuant to authority granted by our Second Amended and Restated Certificate of Incorporation (the “Certificate“Certificate of Incorporation”Incorporation”), and on approval from our board of directors. In the third quarter of 2018, our board of directors designated 50,000 shares of preferred stock as Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), and 50,000 shares of preferred stock as Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Convertible Preferred Stock”), in each case such designated number of shares subject to adjustment pursuant to the provisions of the certificate of designations governing such shares.  The board of directors, without any action by our stockholders, may designate and issue additional shares of preferred stock in such classes or series as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. The rights of holders of other classes or series of stock that may be issued could be superior to the rights of holders of our common stock. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to shares of our common stock.

The dividend, liquidation, and redemption rights of the holders of the Convertible Preferred Stock may adversely affect our financial position and the rights of the holders of our common stock.

At December 31, 2018, we had 51,720 shares of Series A Preferred Stock and 29,636 shares of Series B Preferred Stock outstanding. The shares of Convertible Preferred Stock bear dividends at a rate of 12% per annum, which are cumulative and accrue daily from the date of issuance on the $1,000 stated value.  Such dividends are payable quarterly and may be paid in cash or in-kind.  No dividends may be paid to holders of our common stock while accumulated dividends remain unpaid on the Convertible Preferred Stock.

Further, we are required, on the earlier of (i) ten (10) business days following a FID Event (as defined in the certificates of designations of the Convertible Preferred Stock) and (ii) the date that is the tenth (10th) anniversary of the closings of the issuances of the Convertible Preferred Stock, as applicable, to convert all of the Convertible Preferred Stock into shares of Company common stock at a strike price of $7.50 per share of Company common stock. The conversion of the Convertible Preferred Stock would directly dilute the holders of our common stock. In the event we are liquidated while shares of Convertible Preferred Stock are outstanding, holders of Convertible Preferred Stock will be entitled to receive a preferred liquidation distribution, plus any accumulated and unpaid dividends, before holders of our common stock receive any distributions.

Holders of the Convertible Preferred Stock have certain voting and other rights that may adversely affect holders of our common stock, and the holders of Convertible Preferred Stock may have different interests from and vote their shares in a manner deemed adverse to, holders of our common stock.

The holders of Convertible Preferred Stock vote on an “as-converted” basis with the holders of our common stock on all matters brought before the holders of our common stock. In addition, prior to the conversion of the Convertible Preferred Stock, the consent of the holders of at least a majority of each of the Series A Preferred Stock and the Series B Preferred Stock then outstanding, in each case voting together as a single class, will be required for the Company to take certain actions, including, among others, (i) authorizing, creating or approving the issuance of any shares, or of any security convertible into, or convertible or exchangeable for shares of, senior to the Convertible Preferred Stock; (ii) authorizing, creating or approving the issuance of any shares of, or of any security convertible into, or convertible or exchangeable for shares of, Parity Stock (as defined in the certificates of designations of the Convertible Preferred Stock), subject to certain exceptions; (iii) adversely affecting the rights, preferences or privileges of the Convertible Preferred Stock, as applicable, subject to certain exceptions; (iv) amending, altering or repealing any of the provisions of the Certificate of Incorporation in a manner that would adversely affect the powers, designations, preferences or rights of the Convertible Preferred Stock, as applicable; or (v) amending, altering or repealing any of the provisions of the certificates of designations of the Convertible Preferred Stock, as applicable.

The holders of Convertible Preferred Stock may have different interests from the holders of our common stock and could vote their shares in a manner deemed adverse to the holders of our common stock. 

Exercise of warrants may have a dilutive effect on our common stock.

As of December 31, 2018, outstanding IPO Warrants to purchase an aggregate of 12,081,895 shares of our common stock were exercisable in accordance with the terms of the warrant agreement governing such warrants. These warrants will expire at 5:00 p.m., New York time, on July 24, 2022 or earlier upon redemption or liquidation. The exercise price of these warrants is $11.50 per one full share of our common stock, subject to certain adjustments.

In addition, we issued warrants together with the Series A Preferred Stock and the Series B Preferred Stock.  The warrants issued together with the Series A Preferred Stock represent the right to acquire in the aggregate approximately 71 basis points (0.71%) of the fully diluted shares of all outstanding shares of Company common stock on the exercise date with a strike price of $0.01 per share.  The warrants issued together with the Series B Preferred Stock represent the right to acquire in the aggregate 42 basis points (0.42%) of the fully diluted shares of all outstanding shares of Company common stock on the exercise date with a strike price of $0.01 per share. The warrants issued together with the Convertible Preferred Stock have a fixed three-year term commencing on the closings of the issuances of the associated Convertible Preferred Stock and may only be exercised by the holders thereof at the expiration of such three-year term; however, we can force exercise of such warrants prior to expiration of such term if the volume weighted average trading price of shares of Company common stock for each trading day during any 60 of the prior 90 trading days is equal to or greater than 175% of the $7.50 per share of Company common stock and, in the case of the warrants issued together with the Series B Preferred Stock, also if we simultaneously elect to force a mandatory exercise of all other warrants then-outstanding and unexercised and held by any holder of Parity Stock.

To the extent the IPO Warrants are exercised or the warrants issued together with the Convertible Preferred Stock are exercised, additional shares of our common stock will be issued, which will result in dilution to the holders of our common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our common stock.

Provisions of our charter documents or Delaware law could discourage, delay or prevent an acquisition of NextDecadeus from being acquired even if the acquisitionbeing acquired would be beneficial to our stockholders and could make it more difficult to change management.

Provisions of the Certificate of Incorporation and our Amended and Restated Bylaws (the “Bylaws”) may discourage, delay or prevent a merger, acquisition or other change in control that stockholders might otherwise consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. In addition, these provisions may

duty owed by, or any wrongdoing by,  a director, officer or employee or (iii) any action asserting a claim pursuant to any provision of the Delaware General Corporation Law, the Certificate of Incorporation or the Bylaws, (iv) any action to  interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws or (v) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision that is contained in the Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, operating results and financial condition.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We currently lease approximately 8,30025,600 square feet of office space for general and administrative purposes in The Woodlands,Houston, Texas under an amendeda lease agreement that expires on September 30, 2018.2020.

In January 2017, NextDecade LLC executed surface lease agreements with the City of Texas City and the State of Texas for a 994‑acre site for the Galveston Bay Terminal (collectively, the “Galveston Bay Leases”). The term of the Galveston Bay Leases is 36 months with an option to extend for an additional 12 months.   

In March 2017, NextDecade LLC executed a lease agreement with the Brownsville Navigation District for a ten‑acre tract subsumed within the site for the Terminal (the “Brownsville Lease”). The Brownsville Lease has an eight‑month primary term with the option to renew such lease for six additional six-month terms. OnIn October 10, 2017,2018, NextDecade LLC exercised its option to renew the Brownsville Lease for an additional six-month term, which expires May 5, 2018.6, 2019.

We do not own or lease any other real property that is materially important to our business. We believe that our current properties are adequate for our current needs and that additional space will be available when and as needed.

Item 3.   Legal Proceedings

None.

Item 4.   Mine Safety Disclosures

Not applicable.

PART II 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information, Holders and Dividends

Our common stock trades on Nasdaq under the symbol “NEXT.”  Our warrantsThe IPO Warrants traded on Nasdaq under the symbol “NEXTW” until February 22, 2018, the date on which our warrants were delisted from Nasdaq as a result of our failure to satisfy the initial listing requirements of Nasdaq.2018.  Since February 22, 2018, our warrantsthe IPO Warrants have been tradingtraded on the OTC Pink Market under the symbol “NEXTW.” The table below presents the high and low sales prices of our common stock and warrants, as reported by the Nasdaq, for each quarter during 2017 and 2016.

As of March 1, 2018,2019, we had 106.4109.9 million shares of Company common stock outstanding held by approximately 8190 record owners.  All shares of Company common stock held in street name are recorded in our stock register as being held by one stockholder.

We currently intend to retain earnings to finance the growth and development of our business and do not anticipate paying any cash dividends on theCompany common stock in the foreseeable future.  Any future change in our dividend policy will be made at the discretion of our board of directors in light of our financial condition, capital requirements, earnings, prospects and any restrictions under any financing agreements, as well as other factors it deems relevant.

Purchase of Equity Securities by the Issuer

The following table summarizes stock repurchases for the three months ended December 31, 2018:

Recent Issuances of Unregistered Securities

On December 31, 2018, the Company issued 25,000 shares of Company common stock to a consultant under the terms of a consulting services agreement.  Such shares were fully vested on the date of issuance and were issued in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof as a transaction by an issuer not involving any public offering.  The Company relied on the representations made by such consultant.  No commissions were paid, and no underwriter or placement agent was involved in such transaction.

Item 6. Selected Financial Data

Selected financial data set forth below (in thousands, except per share data)We are derived from our audited Consolidated Financial Statements fora smaller reporting company as defined by Rule 12b-2 of the periods indicated.  The financial data should be read in conjunction with Management’s DiscussionSecurities Exchange Act of 1934 and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements andare not required to provide the accompanying notes thereto included elsewhere ininformation under this report.item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes in “Financial Statements and Supplementary Data.”  This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future.  Our discussion and analysis include the following subjects:

Overview of Business

We are a LNG development company focused on LNG export projects and associated pipelines in the State of Texas. We have focused and continue to focus our development activities on the Project and have undertaken and continue to undertake various initiatives to evaluate, design and engineer the Project that we expect will result in demand for contracted capacity at the Terminal, which would allow us to seek construction financing to develop the Project. We believe we maintain keythe Project possesses competitive advantages involvingin several important areas, including, engineering, commercial, regulatory, and gas supply considerations.supply. We submitted a pre-filing request for the Project to the FERC in March 2015 and filed a formal application with the FERC in May 2016. We also believe we have robust commercial offtake and gas supply strategies in place and we estimate that the Project willcould commence commercial operations as early as 2023.

Overview of Significant Events

Our Merger with NextDecade LLCReceipt of FERC Scheduling Notice and Draft Environmental Impact Statement

On August 31, 2018, the FERC issued a notice of schedule for environmental review of the Project.  According to the notice, the FERC will issue its final Environmental Impact Statement (“EIS”) on April 26, 2019, based on issuance of the draft EIS in October 2018.  The FERC subsequently issued the draft EIS on October 12, 2018.  The FERC has established a Federal Authorization Decision Deadline of July 25, 2019, the date by which all other agencies responsible for issuing required Project-related permits pursuant to federal law must act.  This deadline does not apply to the FERC.

Engineering, Procurement, and Construction Contract

On July 24, 2017, oneDuring the third quarter of 2018 we initiated a competitive engineering, procurement and construction (“EPC”) bid process.  We received expressions of interest (the “EOIs”) from multiple EPC contractors to participate in the EPC process.  We reviewed the EOIs against a series of selection criteria and issued formal invitations to bid to Bechtel Oil, Gas and Chemicals, Inc., Fluor Enterprises, Inc. and McDermott International, Inc. See additional information relating to the invitations to bid in Note 12 – Commitments and Contingencies of our subsidiaries merged with and into NextDecade LLC, a liquefied natural gas (“LNG”) development company founded in 2010Notes to develop LNG export projects and associated pipelines in the State of Texas.  Prior to the merger with NextDecade LLC, we had no operations and our assets consisted of cash proceeds received in connection with our initial public offering.

Completion of Front End Engineering and Design Update Package

In early 2018, we completed the FEED update package with CB&I for the Terminal.  The update incorporates identified cost reduction and value improvement initiatives and reconfirms market-leading EPC cost estimates for three trains of $490 per ton with a target of $450 per ton.  For two trains the EPC cost estimate improves to $535 per ton with a target of $500 per ton.  NextDecade and CB&I are finalizing an Open Book Estimate to incorporate the FEED update improvements and planConsolidated Financial Statements.  We expect to execute a binding Lump-Sum Turnkeyfinal EPC agreementcontract in the secondthird quarter of 2018.2019.

Preferred Equity Offerings

Series A Convertible Preferred Stock Offering

In August 2018, we sold an aggregate of 50,000 shares of Series A Preferred Stock at $1,000.00 per share for an aggregate purchase price of $50 million and we issued an additional 1,000 shares of Series A Preferred Stock in aggregate as origination fees to (i) York Capital Management Global Advisors, LLC, severally on behalf of certain funds or accounts managed by it or its affiliates (“York”), (ii) Valinor Management, L.P., severally on behalf of certain funds or accounts for which it is investment manager (“Valinor”), (iii) Bardin Hill Investment Partners LP (formerly known as Halcyon Capital Management LP), severally on behalf of certain funds or accounts managed by it or its affiliates (“Bardin Hill,” and together with York and Valinor, the “Fund Purchasers”) and (iv) HGC NEXT INV LLC (“HGC” and, together with the Fund Purchasers, the “Series A Preferred Stock Purchasers”).  Warrants were issued together with the shares of Series A Preferred Stock (the “Series A Warrants”). 

In connection with the issuance of Series A Preferred Stock and pursuant to backstop commitment agreements with the Fund Purchasers dated April 11, 2018, as subsequently amended on August 3, 2018 (as amended, the “Backstop Agreements”), we also issued a total of 413,658 shares of Company common stock as fees to the Fund Purchasers.  Each Fund Purchaser is a Company stockholder and, pursuant to that certain Agreement and Plan of Merger, dated as of April 17, 2017, by and among the Company, each Fund Purchaser and/or one or more of its affiliates, and the other parties named therein, three individuals, two individuals, and one individual from York, Valinor, and Bardin Hill, respectively, were appointed to the Company’s board of directors. For further descriptions of the Series A Preferred Stock and the Series A Warrants, see Note 8 – Preferred Stock and Common Stock Warrants, and for additional details on the Series A Preferred Stock offering and the transactions in connection therewith, please refer to our Current Report on Form 8-K filed with the SEC on August 7, 2018.

Series B Convertible Preferred Stock Offering

In September 2018, we sold an aggregate of 29,055 shares of Series B Preferred Stock at $1,000.00 per share for an aggregate purchase price of $29.055 million and issued an additional 581 shares of Series B Preferred Stock in aggregate as origination fees to certain funds managed by BlackRock (collectively, the “Series B Preferred Stock Purchasers”).  Warrants were issued together with the shares of Series B Preferred Stock (the “Series B Warrants” and, together with the Series A Warrants, the “Common Stock Warrants”).  For further descriptions of the Series B Preferred Stock and the Series B Warrants, see Note 8 – Preferred Stock and Common Stock Warrants, and for additional details on the Series B Preferred Equity Offering and the transactions in connection therewith, please refer to our Current Report on Form 8-K filed with the SEC on August 24, 2018.

Air Permits

On December 12, 2018, the Texas Commission on Environmental Quality (“TCEQ”) Commissioners voted to issue a series of air permits for the Project, which include Air Quality Permit No. 104792, PSD Air Quality Permit No. PSDTX1498, and GHPSD Air Quality Permit No. GHGPSDTX158.  In addition, all requests for hearing and a motion for reconsideration were denied.

Liquidity and Capital Resources

Capital Resources

In March 2015, we completed our initial public offering raising approximately $115 million in cash proceeds.  We have funded and continue to fund the development of the Project and general working capital needs through our cash on hand and proceeds from the issuanceissuances of equity.  As discussed above in “Overview of Significant Events – Preferred Equity Offerings,” in August 2018, we sold an aggregate of 50,000 shares of Series A Preferred Stock at $1,000.00 per share for an aggregate purchase price of $50 million and we issued an additional 1,000 shares of Series A Preferred Stock in aggregate to Series A Preferred Stock Purchasers, together with the Series A Warrants.  In September 2018, we sold an aggregate of 29,055 shares of Series B Preferred Stock at $1,000.00 per share for an aggregate purchase price of $29.055 million and we issued an additional 581 shares of Series B Preferred Stock in aggregate to the Series B Preferred Stock Purchasers, together with the Series B Warrants. Our capital resources consistconsisted of approximately $35.7$3.2 million of cash and $5.1cash equivalents and $72.5 million of available-for-sale investment securities as of December 31, 2017.2018.

Sources and Uses of Cash

The following table summarizes the sources and uses of our cash for the periods presented (in thousands):

We currently expect that the long-term capital requirements for the Project will be financed predominately through project financing and proceeds from future debt and equity offerings.offerings by us. There can be no assurance that we will succeed in securing additional debt and/or equity financing in the future to complete the Project or, if successful, that the capital we raise will not be expensive or dilutive to stockholders.  Additionally, if these types of financing are not available, we will be required to seek alternative sources of financing, which may not be available on terms acceptable to us, if at all.

Contractual Obligations

We are committed to make cash payments in the future pursuant to certain of our contracts.  The following table summarizes certain contractual obligations (in thousands) in place as of December 31, 2017:2018:

Operating lease obligations primarily relate to our land site for our Galveston Bay Terminal and office space in The Woodlands,Houston, Texas.

During the third quarter of 2018, we initiated a competitive EPC bid process.  In connection with the EPC bid process, we entered into agreements with potential EPC contractors that provide for payments to be made by us to the EPC contractors as bid milestones are achieved (“Invitation to Bid Contract Costs”).  Future potential payments for Invitation to Bid Contract Costs are up to $14.9 million in 2019.

A discussion of these obligations can be found at Note 12 – Commitments and Contingencies of our Notes to Consolidated Financial Statements.

Results of Operations

The following table summarizes costs, expenses and other income for the year ended December 31, 20172018 and 20162017 (in thousands):

Our consolidated net loss was $35.3$42.0 million, or $0.35$0.41 per common share (basic and diluted), for the year ended December 31, 2017,2018, compared to a net loss of $8.4$35.3 million, or $0.09$0.35 per common share (basic and diluted), for the year ended December 31, 2016.2017.  This $26.9 million increase in net loss was primarily a result of increased general and administrative expenses discussed separately below.

General and administrative expenses during the year ended December 31, 2017 increased $27.3 million compared to the year ended December 31, 2016 due primarily to (i) share-based compensation expense of $22.7 million, which was not incurred in 2016, and (ii) an increase in the number of employees and amount of professional fees increasing from $5.6 million in the year ended December 31, 2016 to $9.5 million in the year ended December 31, 2017.

Land option and lease expenses during the year ended December 31, 2017, increased $0.4 million compared to the year ended December 31, 2016 primarily due to lease expense associated with a 994-acre site with the City of Texas City and the State of Texas of $0.3 million, which was not incurred in 2016.

Impairment loss on capital projects decreased in the year ended December 31, 2017 compared to the year ended December 31, 2016 due to an approximate $0.5 million impairment charge recognized in May 2016, when we decided to abandon several early-stage, non-core projects to focus on development of the Project.

Interest income, net during the year ended December 31, 2017 increased $0.3 million compared to the year ended December 31, 2016 due to increased yield and higher average balances maintained in our cash accounts and investments.

The following table summarizes costs, expenses and other income for the year ended December 31, 2016 and 2015 (in thousands):

Our consolidated net loss was $8.4 million, or $0.09 per share (basic and diluted), for the year ended December 31, 2016, compared to a net loss of $7.8 million, or $0.14 per share (basic and diluted), for the year ended December 31, 2016.  This $0.7$6.7 million increase in net loss was primarily a result of increased general and administrative expenses and impairment loss on capital projectsInvitation to Bid Contract Costs partially offset by interest income discussed separately below.

General and administrative expenses during the year ended December 31, 20162018 increased $0.2$0.6 million compared to the year ended December 31, 20152017, due primarily to, (i) an increase in the number of employees which resulted in increased salaries and employee benefits, office expenses, travel, and professional fees for legal, financial advisors,of $5.6 million and market consultants(ii) increased marketing and promotion costs, insurance, taxes and license fees of  $1.2$0.9 million, comparedpartially offset by a decrease in share-based compensation expense of $5.9 million as a result of forfeitures of restricted stock awards during the period and changes in the probability and expected timing of achievement of performance conditions.

As of December 31, 2018, we incurred approximately $6.6 million of Invitation to $1.0 millionBid Contract Costs. There were no Invitation to Bid Contract Costs incurred during 2017.

Interest income, net during the year ended December 31, 2015.   

Impairment loss on capital projects during the year ended December 31, 20162018 increased $0.7 million compared to the year ended December 31, 20152017 due to increased yield and higher average balances maintained in our cash accounts and investment securities.

Preferred stock dividends of $0.7 million in 2018 were paid-in-kind with the issuance of an approximate $0.5 million impairment charge recognized in May 2016, when we decided to abandon several early-stage, non-core projects to focusadditional 720 shares of Series A Preferred Stock.  The Series A Preferred Stock was not issued or outstanding during 2017.

Deemed dividends on developmentthe Series A Preferred Stock for the year ended December 31, 2018 represents the accretion of the Project.beneficial conversion feature associated with the Series A Preferred Stock issued in 2018. Due to the price of our common stock as of the closing date of the Series B Preferred Stock, the Series B Preferred Stock does not have a beneficial conversion feature.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2017.2018.

change and we use different assumptions, our share-based compensation expense could be materially different in the future.

For additional information regarding our share-based compensation, see Note 10 – Share-based Compensation of our Notes to Consolidated Financial Statements.

Valuation of Common Stock Warrant Liabilities

The fair value of Common Stock Warrant liabilities is determined using a Monte Carlo valuation model.  Determining the appropriate fair value model and calculating the fair value of Common Stock Warrant requires considerable judgment.  Any change in the estimates used may cause the value to be higher or lower than that reported.  The estimated volatility of our common stock at the date of issuance, and at each subsequent reporting period, is based on our historical volatility.  The risk-free interest rate is based on rates published by the government for bonds with maturity similar to the expected remaining life of the Common Stock Warrants at the valuation date.  The expected life of the Common Stock Warrants is assumed to be equivalent to their remaining contractual term.

The Common Stock Warrants are not traded in an active market and the fair value is determined using valuation techniques.  The estimates may be significantly different from those recorded in the consolidated financial statements because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market.  All changes in the fair value are recorded in the consolidated statement of operations and comprehensive loss each reporting period.

For additional information regarding the valuation of Common Stock Warrant liabilities, see Note 8 – Preferred Stock and Common Stock Warrants of our Notes to Consolidated Financial Statements.

Income Taxes

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements.  Deferred tax assets and liabilities are included in the Consolidated Financial Statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the current period’s provision for income taxes.  We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized.  This assessment requires significant judgment and is based upon our assessment of our ability to generate future taxable income among other factors.

Recent Accounting Standards

For descriptions of recently issued accounting standards, see Note 13 – Recent Accounting Pronouncements of our Notes to Consolidated Financial Statements.

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

NextDecade Corporation and Subsidiaries

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

NextDecade Corporation

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of NextDecade Corporation and subsidiaries (the “Company”) as of December 31, 2018, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, series A and series B convertible preferred stock, and cash flows for the year ended December 31, 2018 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Companyas of December 31, 2018 and the results of itsoperations and itscash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.  

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2018.

Houston, TX

March 6, 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

NextDecade Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheetssheet of NextDecade Corporation and Subsidiaries (the “Company”) as of December 31, 2017, and 2016, the related consolidatedstatements of operations and comprehensive loss,, stockholders’ equity and cash flows for yearsthe year ended December 31, 2017, 2016 and 2015 and the related notes(collectively (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and December 2016, and the results of its operations and its cash flows for each of the three years in the periodyear ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our auditsaudit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our auditsaudit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our auditsaudit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditsaudit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provideaudit provides a reasonable basis for our opinion.

/s/ Marcum llp

Marcum llpLLP

We have served as the Company’s auditor since 2017.

New York, NY

March 8, 2018

NextDecade Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)

NextDecade Corporation and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)