Quarterly report [Sections 13 or 15(d)]

Derivative Instruments

v3.26.1
Derivative Instruments
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments DERIVATIVE INSTRUMENTS
We have commodity contracts accounted for as derivatives which consist of natural gas supply contracts for the operation of the Liquefaction Project and expansion project, excluding those contracts for which we have designated NPNS, as described in Note 1—Nature of Operations and Basis of Presentation, as well as the associated economic hedges (collectively, the “Liquefaction Supply Derivatives”).

The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis, distinguished by the fair value hierarchy levels prescribed by GAAP (in millions):
Fair Value Measurements as of
June 30, 2026 December 31, 2025
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 liability (1)
 $ —  $ (6) $ (106) $ (112) $ —  $ (23) $ (500) $ (523)
(1)As described in Note 1—Nature of Operations and Basis of Presentation, in June 2026, we designated the NPNS scope exception for our IPM agreements, which resulted in these agreements being no longer accounted for as derivative instruments as of the designation date. The fair value of such agreements was a liability of $394 million as of December 31, 2025.

We value the Liquefaction Supply Derivatives using a market approach incorporating present value techniques, as needed, which incorporates observable commodity price curves, when available, and other relevant data.

We include a significant portion of the Liquefaction Supply Derivatives as Level 3 within the valuation hierarchy as the fair value is developed through the use of internal models, which incorporate significant unobservable inputs. In instances where observable data is unavailable, consideration is given to the assumptions that market participants may use in valuing the asset or liability. We consider the future prices of energy units for unobservable periods to be a significant unobservable input to estimated net fair value, for which we make judgments about market risk related to liquidity of commodity indices utilizing available market data. Changes in facts and circumstances or additional information may result in revised estimates and judgments, and actual results may differ from these estimates and judgments. Our fair value estimates incorporate market participant-based assumptions pertaining to certain contractual uncertainties, including those related to the availability of market information for delivery points. We may recognize changes in fair value through earnings that could impact our results of operations if and when such uncertainties are resolved.

The Level 3 fair value measurements of our natural gas positions within the Liquefaction Supply Derivatives could be impacted by a change in certain natural gas prices. The following table includes quantitative information for the unobservable inputs for the Level 3 Liquefaction Supply Derivatives as of June 30, 2026:
Net Fair Value Liability
(in millions)
 Valuation Approach Significant Unobservable Input Range of Significant Unobservable Inputs / Weighted Average (1)
Liquefaction Supply Derivatives $(106) Market approach incorporating present value techniques
Henry Hub basis spread
$(0.670) - $0.195 / $(0.042)
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
Increases or decreases in basis or pricing spreads, in isolation, would decrease or increase, respectively, the fair value of the Liquefaction Supply Derivatives.
The following table shows the changes in the fair value of the Level 3 Liquefaction Supply Derivatives (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Balance, beginning of period $ (1,161) $ (1,275) $ (500) $ (1,307)
Realized and change in fair value gains (losses) included in net income (1):
Included in cost of sales, existing deals (2) 421  73  (195) 59 
Included in cost of sales, new deals (3) (1) 7  (6) 5 
Purchases and settlements:
Purchases (4) —  —  —  — 
Settlements (5) 115  48  75  96 
Transfers out of level 3 (6) —  —  —  — 
Agreements designated as NPNS and no longer measured at fair value on a recurring basis (7) 520  —  520  — 
Balance, end of period $ (106) $ (1,147) $ (106) $ (1,147)
Favorable (unfavorable) changes in fair value relating to instruments still held at the end of the period
 $ (40) $ 80  $ (55) $ 64 
(1)Does not include the realized value associated with derivative instruments that settle through physical delivery, as settlement is equal to the 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, and on the NPNS-designated agreements prior to the designation date, as further described in Note 1—Nature of Operations and Basis of Presentation.
(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.
(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.
(6)Transferred out of Level 3 as a result of observable market for the underlying natural gas purchase agreements.
(7)Represents the removal of agreements from Level 3 recurring fair value measurements upon the NPNS-designation in June 2026, as further described in Note 1—Nature of Operations and Basis of Presentation.

Liquefaction Supply Derivatives

We hold Liquefaction Supply Derivatives, which are indexed to Henry Hub or other natural gas price indices. As of June 30, 2026, the remaining fixed terms of the Liquefaction Supply Derivatives ranged up to approximately 6 years.

The forward notional amount for the Liquefaction Supply Derivatives was approximately 3,483 TBtu and 5,028 TBtu as of June 30, 2026 and December 31, 2025, respectively. As of December 31, 2025, our Liquefaction Supply Derivatives included 1,381 TBtu that were designated as NPNS in June 2026, which resulted in these agreements being no longer accounted for as derivative instruments as of the designation date. See Note 1—Nature of Operations and Basis of Presentation for further discussion.
The following table shows the effect and location of the 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 June 30, Six Months Ended June 30,
2026 2025 2026 2025
LNG revenues $ —  $ —  $ 1  $ — 
Cost of sales (2) 523  139  (143) 121 
(1)Does not include the realized value associated with the Liquefaction Supply Derivatives that settle through physical delivery. Fair value fluctuations associated with our derivative activities are classified and presented consistently with the item economically hedged and the nature and intent of the derivative instrument.
(2)Includes gains and losses from the NPNS-designated agreements prior to the designation date, as further described in Note 1—Nature of Operations and Basis of Presentation.

The following table shows the fair value and location of the Liquefaction Supply Derivatives on our Consolidated Balance Sheets (in millions):
Fair Value Measurements as of
Consolidated Balance Sheets Location June 30, 2026 December 31, 2025
Other current assets, net $ 3  $ — 
Derivative assets 5  541 
Total derivative assets 8  541 
Current derivative liabilities (93) (164)
Derivative liabilities (27) (900)
Total derivative liabilities (120) (1,064)
Derivative liability, net $ (112) $ (523)

Consolidated Balance Sheets Presentation

The following table reconciles the fair value of our derivative assets and liabilities on a gross basis, by contract, to net amounts as presented on our Consolidated Balance Sheets after offsetting for any balances with the same counterparty under master netting arrangements or other relevant netting criteria under GAAP (in millions):
Liquefaction Supply Derivatives
June 30, 2026 December 31, 2025
Gross assets $ 9  $ 663 
Offsetting amounts (1) (122)
Net assets $ 8  $ 541 
Gross liabilities $ (145) $ (1,084)
Offsetting amounts 25  20 
Net liabilities $ (120) $ (1,064)

The table below shows the collateral balances that are recorded within other current assets, net and other current liabilities that are not otherwise offset against derivative assets and liabilities on our Consolidated Balance Sheets (in millions):
Consolidated Balance Sheets Location June 30, December 31,
2026 2025
Liquefaction Supply Derivatives Other current assets, net $ 10  $ 11 
Liquefaction Supply Derivatives Other current liabilities —  (3)