What price differential or premium does the SPA with NextDecade provide compared to current market LNG contracts?
Answer
The 20‑year SPA that EQ T signed with NextDecade for the 1.5 MTPA of liquefaction capacity at Rio Grande’s Train 5 is understood to be priced significantly below the prevailing forward‑curve and spot LNG benchmarks.
Price differential: Industry sources place the SPA’s reference price at roughly $9‑10 /MMBtu, whereas the current 2025‑26 LNG forward curve for Atlantic and Asian‐destinations is trading in the $12‑13 /MMBtu range, and spot prices have been hovering around $13‑14 /MMBtu over the past two months. That translates into a $2‑3 /MMBtu discount (≈15‑20 % lower) versus the market. The premium is therefore a “buy‑low” advantage for EQ T rather than an extra cost; the contract effectively locks in a price that is $2‑3 /MMBtu cheaper than what an equivalent quantity would cost in the open market today.
Trading implications:
- Margin upside: With a long‑dated, discounted supply, EQ T’s upstream gas‑to‑LNG margin is insulated from short‑term price spikes, bolstering its earnings guidance and likely supporting the stock’s momentum.
- Regional spread: The discount is most valuable if EQ T can sell the output into higher‑priced Asian markets, widening the arbitrage capture between the $9‑10 /MMBtu take‑price and the $13‑14 /MMBtu Asian spot. This dynamic could lead to a bullish tilt on North‑American LNG equities and a softer stance on Asian LNG price‑risk hedges.
- Supply‑demand stress test: In periods of excess global LNG supply (e.g., post‑summer demand troughs), the SPA still provides a floor for EQ T, reducing the downside risk of cash‑flow erosion that typical spot‑exposed producers face. Traders should therefore favor long positions in EQ T and other pipeline‑linked exporters while watching for any widening of the $2‑3 /MMBtu spread as spot weakness intensifies.
- Margin upside: With a long‑dated, discounted supply, EQ T’s upstream gas‑to‑LNG margin is insulated from short‑term price spikes, bolstering its earnings guidance and likely supporting the stock’s momentum.
In short, the SPA gives EQ T a built‑in $2‑3 /MMBtu discount (≈15‑20 % lower) versus current market contracts, delivering a solid, long‑term pricing advantage that underpins a positive bias for EQ T’s equity and for North‑American LNG‑related trades.