Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments (Tables)

v3.22.2.2
Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
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 (in millions):
Fair Value Measurements as of
September 30, 2022 December 31, 2021
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) $ (30) $ (24) $ (5,024) $ (5,078) $ 2  $ (13) $ 38  $ 27 
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, 2022:
Net Fair Value Liability
(in millions)		 Valuation Approach Significant Unobservable Input Range of Significant Unobservable Inputs / Weighted Average (1)
Physical Liquefaction Supply Derivatives $(5,024) Market approach incorporating present value techniques Henry Hub basis spread
$(2.495) - $0.677 / $(0.028)
Option pricing model International LNG pricing spread, relative to Henry Hub (2)
91% - 865% / 243%
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
(2)Spread contemplates U.S. dollar-denominated pricing.
Fair Value, Liabilities 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 (in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Balance, beginning of period $ (3,456) $ 33  $ 38  $ (21)
Realized and mark-to-market gains (losses):
Included in cost of sales (1,545) 25  (155) 79 
Purchases and settlements:
Purchases (1) 3  4  (4,896) 6 
Settlements (24) (3) (11) (5)
Transfers out of Level 3, net (2) (2) —  —  — 
Balance, end of period $ (5,024) $ 59  $ (5,024) $ 59 
Change in unrealized gains (losses) relating to instruments still held at end of period $ (1,545) $ 25  $ (155) $ 79 
(1)Includes the assignment of an IPM agreement that occurred during the period, as discussed in Note 14—Supplemental Cash Flow Information.
(2)Transferred out of Level 3 as a result of unobservable market for the underlying natural gas purchase agreements.
Derivative Instruments, Gain (Loss)
The following table shows the effect and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Operations (in millions):
Gain (Loss) Recognized in Consolidated Statements of Operations
 Consolidated Statements of Operations Location (1)
 Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
LNG revenues $ (3) $ —  $ 1  $ — 
Cost of sales (1,625) 10  (2,448) 64 
(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.
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 Sheets Location September 30, 2022 December 31, 2021
Current derivative assets $ 27  $ 21 
Derivative assets 33  33 
Total derivative assets 60  54 
Current derivative liabilities (1,157) (16)
Derivative liabilities (3,981) (11)
Total derivative liabilities (5,138) (27)
Derivative asset (liability), net $ (5,078) $ 27 
(1)Does not include collateral posted with counterparties by us of $59 million and $7 million, as of September 30, 2022 and December 31, 2021, respectively, which are included in other current assets in our Consolidated Balance Sheets.
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) for our derivative instruments that are presented on a net basis on our Consolidated Balance Sheets:
Liquefaction Supply Derivatives
As of September 30, 2022
Gross assets $ 67 
Offsetting amounts (7)
Net assets $ 60 
Gross liabilities $ (5,158)
Offsetting amounts 20 
Net liabilities $ (5,138)
As of December 31, 2021
Gross assets $ 79 
Offsetting amounts (25)
Net assets $ 54 
Gross liabilities $ (33)
Offsetting amounts 6 
Net liabilities $ (27)