Annual report pursuant to Section 13 and 15(d)

Derivative Instruments (Tables)

v3.22.4
Derivative Instruments (Tables)
 12 Months Ended
Dec. 31, 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
December 31, 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) $ (12) $ (10) $ (3,719) $ (3,741) $ 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 Liquefaction Supply Derivatives as of December 31, 2022:
Net Fair Value Liability
(in millions)		 Valuation Approach Significant Unobservable Input Range of Significant Unobservable Inputs / Weighted Average (1)
Liquefaction Supply Derivatives $(3,719) Market approach incorporating present value techniques Henry Hub basis spread
$(1.775) - $0.660 / $(0.063)
Option pricing model International LNG pricing spread, relative to Henry Hub (2)
77% - 515% / 193%
(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 Liquefaction Supply Derivatives (in millions):
Year Ended December 31,
2022 2021 2020
Balance, beginning of period $ 38  $ (21) $ 24 
Realized and change in fair value gains (losses) included in net income (1):
Included in cost of sales, existing deals (2) (228) 74  (43)
Included in cost of sales, new deals (3) (804) —  — 
Purchases and settlements:
Purchases (4) (2,712) (10) 5 
Settlements (5) (13) (5) (7)
Balance, end of period $ (3,719) $ 38  $ (21)
Favorable (unfavorable) changes in fair value relating to instruments still held at the end of the period
 $ (1,032) $ 74  $ (43)
(1)Does not include the realized value associated with derivative instruments that settle through physical delivery, as settlement is equal to contractually fixed price from trade date multiplied by contractual volume.  See settlements line item in this table.
(2)Impact to earnings on deals that existed at the beginning of the period and continue to exist at the end of the period.
(3)Impact to earnings on deals that were entered into during the reporting period and continue to exist at the end of the period.
(4)Includes any day one gain (loss) recognized during the reporting period on deals that were entered into during the reporting period which continue to exist at the end of the period, in addition to any derivative contracts acquired from entities at a value other than zero on acquisition date, such as derivatives assigned or novated during the reporting period and continuing to exist at the end of the period. For further discussion of IPM agreements that were novated to us during the period, see Note 18—Supplemental Cash Flow Information.
(5)Roll-off in the current period of amounts recognized in our Consolidated Balance Sheets at the end of the previous period due to settlement of the underlying instruments in the current period.
Derivative Instruments, Gain (Loss)
The following table shows the effect and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Income (in millions):
Gain (Loss) Recognized in Consolidated Statements of Income
 Consolidated Statements of Income Location (1)
 Year Ended December 31,
2022 2021 2020
LNG revenues $ 1  $ (1) $ — 
Cost of sales (1,159) 30  (49)
Cost of sales—related party —  2  — 
(1)Does not include the 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 December 31, 2022 December 31, 2021
Current derivative assets $ 24  $ 21 
Derivative assets 28  33 
Total derivative assets 52  54 
Current derivative liabilities (769) (16)
Derivative liabilities (3,024) (11)
Total derivative liabilities (3,793) (27)
Derivative asset (liability), net $ (3,741) $ 27 
(1)Does not include collateral posted with counterparties by us of $35 million and $7 million, as of December 31, 2022 and 2021, respectively, which are included in margin deposits 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 December 31, 2022
Gross assets $ 57 
Offsetting amounts (5)
Net assets $ 52 
Gross liabilities $ (3,814)
Offsetting amounts 21 
Net liabilities $ (3,793)
As of December 31, 2021
Gross assets $ 79 
Offsetting amounts (25)
Net assets $ 54 
Gross liabilities $ (33)
Offsetting amounts 6 
Net liabilities $ (27)