Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments (Tables)

v3.21.2
Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2021
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 as of September 30, 2021 and December 31, 2020 (in millions):
Fair Value Measurements as of
September 30, 2021 December 31, 2020
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) $ (18) $ (8) $ 59  $ 33  $ 1  $ (1) $ (21) $ (21)
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, 2021:
Net Fair Value Asset
(in millions)		 Valuation Approach Significant Unobservable Input Range of Significant Unobservable Inputs / Weighted Average (1)
Physical Liquefaction Supply Derivatives $59 Market approach incorporating present value techniques Henry Hub basis spread
$(1.333) - $0.415 / $0.015
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
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, 2021 and 2020 (in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Balance, beginning of period $ 33  $ 51  $ (21) $ 24 
Realized and mark-to-market gains (losses):
Included in cost of sales 25  (47) 79  (22)
Purchases and settlements:
Purchases 4  5  6  4 
Settlements (3) (8) (5) (6)
Transfers out of Level 3, net (1) —  (1) —  — 
Balance, end of period $ 59  $ —  $ 59  $ — 
Change in unrealized gains (losses) relating to instruments still held at end of period $ 25  $ (47) $ 79  $ (22)
(1)Transferred into Level 3 as a result of unobservable market, or out of Level 3 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 Sheets Location September 30, 2021 December 31, 2020
Current derivative assets $ 44  $ 14 
Derivative assets 25  11 
Total derivative assets 69  25 
Current derivative liabilities (23) (11)
Derivative liabilities (13) (35)
Total derivative liabilities (36) (46)
Derivative asset (liability), net $ 33  $ (21)
(1)Does not include collateral posted with counterparties by us of $29 million and $4 million, which are included in other current assets in our Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, respectively. Includes a natural gas supply contract that SPL has with a related party, which had a fair value of zero as of both September 30, 2021 and December 31, 2020.
Derivative Instruments, Gain (Loss)
The following table shows the effect and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Operations during the three and nine months ended September 30, 2021 and 2020 (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,
2021 2020 2021 2020
LNG revenues $ —  $ 7  $ —  $ 3 
Cost of sales 10  (74) 64  (41)
(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.
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):
Liquefaction Supply Derivatives
As of September 30, 2021
Gross assets $ 76 
Offsetting amounts (7)
Net assets $ 69 
Gross liabilities $ (43)
Offsetting amounts 7 
Net liabilities $ (36)
As of December 31, 2020
Gross assets $ 69 
Offsetting amounts (44)
Net assets $ 25 
Gross liabilities $ (48)
Offsetting amounts 2 
Net liabilities $ (46)