Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments (Tables)

v3.19.3
Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2019
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Fair Value of Derivative Assets and Liabilities
The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018, which are classified as derivative assets, non-current derivative assets, derivative liabilities or non-current derivative liabilities in our Consolidated Balance Sheets (in millions).
 
Fair Value Measurements as of
 
September 30, 2019
 
December 31, 2018
 
Quoted Prices in Active Markets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total
 
Quoted Prices in Active Markets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total
Liquefaction Supply Derivatives asset (liability)
$
(6
)
 
$
(10
)
 
$
(8
)
 
$
(24
)
 
$
5

 
$
(23
)
 
$
(25
)
 
$
(43
)

Fair Value Measurement Inputs and Valuation Techniques The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of September 30, 2019:
 
 
Net Fair Value Liability
(in millions)
 
Valuation Approach
 
Significant Unobservable Input
 
Significant Unobservable Inputs Range
Physical Liquefaction Supply Derivatives
 
$(8)
 
Market approach incorporating present value techniques
 
Henry Hub basis spread
 
$(0.618) - $0.056

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation
The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives during the three and nine months ended September 30, 2019 and 2018 (in millions):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Balance, beginning of period
 
$
34

 
$
11

 
$
(25
)
 
$
43

Realized and mark-to-market gains (losses):
 
 
 
 
 
 
 
 
Included in cost of sales
 
(42
)
 
4

 
(22
)
 
(5
)
Purchases and settlements:
 
 
 
 
 
 
 
 
Purchases
 
(1
)
 
4

 
(4
)
 
8

Settlements
 
1

 
1

 
43

 
(27
)
Transfers out of Level 3 (1)
 
—

 
(1
)
 
—

 
—

Balance, end of period
 
$
(8
)
 
$
19

 
$
(8
)
 
$
19

Change in unrealized gains (losses) relating to instruments still held at end of period
 
$
(42
)
 
$
4

 
$
(22
)
 
$
(5
)

 
(1)    Transferred to Level 2 as a result of observable market for the underlying natural gas purchase agreements.
Fair Value of Derivative Instruments by Balance Sheet Location
The following table shows the fair value and location of our Liquefaction Supply Derivatives on our Consolidated Balance Sheets (in millions):
 
 
Fair Value Measurements as of (1)
Consolidated Balance Sheet Location
 
September 30, 2019
 
December 31, 2018
Derivative assets
 
$
8

 
$
6

Non-current derivative assets
 
29

 
31

Total derivative assets
 
37

 
37

 
 
 
 
 
Derivative liabilities
 
(29
)
 
(66
)
Non-current derivative liabilities
 
(32
)
 
(14
)
Total derivative liabilities
 
(61
)
 
(80
)
 
 
 
 
 
Derivative liability, net
 
$
(24
)
 
$
(43
)
 
(1)
Does not include collateral calls of $10 million and $1 million for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively.

Derivative Net Presentation on Consolidated Balance Sheets The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions):
 
 
Gross Amounts Recognized
 
Gross Amounts Offset in the Consolidated Balance Sheets
 
Net Amounts Presented in the Consolidated Balance Sheets
Offsetting Derivative Assets (Liabilities)
 
 
 
As of September 30, 2019
 
 
 
 
 
 
Liquefaction Supply Derivatives
 
$
40

 
$
(3
)
 
$
37

Liquefaction Supply Derivatives
 
(63
)
 
2

 
(61
)
As of December 31, 2018
 
 
 
 
 
 
Liquefaction Supply Derivatives
 
$
63

 
$
(26
)
 
$
37

Liquefaction Supply Derivatives
 
(92
)
 
12

 
(80
)

Liquefaction Supply Derivatives [Member]  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Derivative Instruments, Gain (Loss)
The following table shows the changes in the fair value, settlements and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Income during the three and nine months ended September 30, 2019 and 2018 (in millions):
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 Consolidated Statement of Income Location (1)
 
2019
 
2018
 
2019
 
2018
Liquefaction Supply Derivatives gain
LNG revenues
 
$
1

 
$
—

 
$
2

 
$
—

Liquefaction Supply Derivatives gain (loss)
Cost of sales
 
(55
)
 
10

 
28

 
(42
)

 
(1)
Does not include the realized value associated with derivative instruments that settle through physical delivery. Fair value fluctuations associated with commodity derivative activities are classified and presented consistently with the item economically hedged and the nature and intent of the derivative instrument.