Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments (Tables)

v3.23.3
Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Fair Value of Derivative Assets and Liabilities
The following table shows the fair value of the derivative instruments that are required to be measured at fair value on a recurring basis, by the fair value hierarchy levels prescribed by GAAP (in millions):
Fair Value Measurements as of
September 30, 2023 December 31, 2022
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)
 $ 13  $ (1) $ (1,892) $ (1,880) $ (12) $ (10) $ (3,719) $ (3,741)
Fair Value Measurement Inputs and Valuation Techniques The following table includes quantitative information for the unobservable inputs for the Level 3 Liquefaction Supply Derivatives as of September 30, 2023:
Net Fair Value Liability
(in millions)
 Valuation Approach Significant Unobservable Input Range of Significant Unobservable Inputs / Weighted Average (1)
Liquefaction Supply Derivatives $(1,892) Market approach incorporating present value techniques
Henry Hub basis spread
$(0.543) - $0.510 / $0.040
Option pricing model
International LNG pricing spread, relative to Henry Hub (2)
103% - 422% / 213%
(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 the Level 3 Liquefaction Supply Derivatives (in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Balance, beginning of period $ (2,255) $ (3,456) $ (3,719) $ 38 
Realized and change in fair value gains (losses) included in net income (loss) (1):
Included in cost of sales, existing deals (2) 294  (1,545) 1,275  (155)
Included in cost of sales, new deals (3) 8  —  23  — 
Purchases and settlements:
Purchases (4) —  3  —  (4,896)
Settlements (5) 59  (24) 522  (11)
Transfers out of level 3 (6) 2  (2) 7  — 
Balance, end of period $ (1,892) $ (5,024) $ (1,892) $ (5,024)
Favorable (unfavorable) changes in fair value relating to instruments still held at the end of the period
 $ 302  $ (1,545) $ 1,298  $ (155)
(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.
(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.
Derivative Instruments, Gain (Loss)
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 September 30, Nine Months Ended September 30,
2023 2022 2023 2022
LNG revenues $ —  $ (3) $ —  $ 1 
Cost of sales 365  (1,625) 1,867  (2,448)
(1)Does not include the realized value associated with Liquefaction Supply Derivatives 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 the Liquefaction Supply Derivatives on our Consolidated Balance Sheets (in millions):
Fair Value Measurements as of (1)
Consolidated Balance Sheets Location September 30, 2023 December 31, 2022
Current derivative assets $ 34  $ 24 
Derivative assets 111  28 
Total derivative assets 145  52 
Current derivative liabilities (294) (769)
Derivative liabilities (1,731) (3,024)
Total derivative liabilities (2,025) (3,793)
Derivative liability, net $ (1,880) $ (3,741)
(1)Does not include collateral posted by counterparties to us of $1 million as of September 30, 2023, which is included in other current liabilities on our Consolidated Balance Sheets, and collateral posted with counterparties by us of $35 million as of December 31, 2022, which is included in margin deposits on our Consolidated Balance Sheets.
Derivative Net Presentation on Consolidated Balance Sheets
The following table shows the fair value of the derivatives outstanding on a gross and net basis (in millions) for the derivative instruments that are presented on a net basis on our Consolidated Balance Sheets:
Liquefaction Supply Derivatives
September 30, 2023 December 31, 2022
Gross assets $ 172  $ 57 
Offsetting amounts (27) (5)
Net assets $ 145  $ 52 
Gross liabilities $ (2,029) $ (3,814)
Offsetting amounts 4  21 
Net liabilities $ (2,025) $ (3,793)