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(1)

Amounts presented include balances held by our consolidated variable interest entity (“VIE”), Cheniere Partners, as further discussed in Note 8— Non-controlling Interest and Variable Interest Entity. As of March 31, 2020, total assets and liabilities of Cheniere Partners, which are included in our Consolidated Balance Sheets, were $19.0 billion and $18.4 billion, respectively, including $1.7 billion of cash and cash equivalents and $0.1 billion of restricted cash.

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(1)	Earnings per share in the table may not recalculate exactly due to rounding because it is calculated based on whole numbers, not the rounded numbers presented.

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We are operating and constructing two natural gas liquefaction and export facilities at Sabine Pass and Corpus Christi. The Sabine Pass LNG terminal is located in Cameron Parish, Louisiana, on the Sabine-Neches Waterway less than four miles from the Gulf Coast. Cheniere Partners, through its subsidiary SPL, is currently operating five natural gas liquefaction Trains and is constructing one additional Train for a total production capacity of approximately 30 mtpa of LNG (the “SPL Project”) at the Sabine Pass LNG terminal. The Sabine Pass LNG terminal has operational regasification facilities owned by Cheniere Partners’ subsidiary, SPLNG, that include pre-existing infrastructure of five LNG storage tanks, two marine berths and vaporizers. Cheniere Partners also owns a 94-mile pipeline that interconnects the Sabine Pass LNG terminal with a number of large interstate pipelines (the “Creole Trail Pipeline”) through its subsidiary, CTPL. As of March 31, 2020, we owned 100% of the general partner interest and 48.6% of the limited partner interest in Cheniere Partners.

The Corpus Christi LNG terminal is located near Corpus Christi, Texas and is operated and constructed by our subsidiary, CCL. We are currently operating two Trains and are constructing one additional Train for a total production capacity of approximately 15 mtpa of LNG. We also operate a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the Trains, the “CCL Project”) through our subsidiary, CCP. The CCL Project, once fully constructed, will contain three LNG storage tanks and two marine berths.

Additionally, separate from the CCH Group, we are developing an expansion of the Corpus Christi LNG terminal adjacent to the CCL Project (“Corpus Christi Stage 3”) through our subsidiary CCL Stage III, for up to seven midscale Trains with an expected total production capacity of approximately 10 mtpa of LNG. We received approval from FERC in November 2019 to site, construct and operate the expansion project.

We remain focused on operational excellence and customer satisfaction. Increasing demand of LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We hold significant land positions at both the Sabine Pass LNG terminal and the Corpus Christi LNG terminal which provide opportunity for further liquefaction capacity expansion. The development of these sites or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make a final investment decision (“FID”).

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Cheniere have been prepared in accordance with GAAP for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our annual report on Form 10-K for the year ended December 31, 2019. In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation, have been included.

Results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2020.

Recent Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance primarily provides temporary optional expedients which simplify the accounting for contract modifications to existing debt agreements expected to arise from the market transition from LIBOR to alternative reference rates. The optional expedients were available to be used upon issuance of this guidance but we have not yet applied the guidance because we have not yet modified any of our existing contracts for reference rate reform. Once we apply an optional expedient to a modified contract and adopt this standard, the guidance will be applied to all subsequent applicable contract modifications until December 31, 2022, at which time the optional expedients are no longer available.

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Restricted cash consists of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Consolidated Balance Sheets. As of March 31, 2020 and December 31, 2019, restricted cash consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
Current restricted cash
SPL Project		$	109			$	181
CCL Project		94				80
Cash held by our subsidiaries restricted to Cheniere		227				259
Total current restricted cash		$	430			$	520

As of March 31, 2020 and December 31, 2019, accounts and other receivables consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
Trade receivables
SPL and CCL		$	304			$	328
Cheniere Marketing		88				113
Other accounts receivable		76				50
Total accounts and other receivables		$	468			$	491

As of March 31, 2020 and December 31, 2019, inventory consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
Natural gas		$	13			$	16
LNG		35				67
LNG in-transit		48				93
Materials and other		143				136
Total inventory		$	239			$	312

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As of March 31, 2020 and December 31, 2019, property, plant and equipment, net consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
LNG terminal costs
LNG terminal and interconnecting pipeline facilities		$	27,330			$	27,305
LNG site and related costs		322				322
LNG terminal construction-in-process		4,233				3,903
Accumulated depreciation		(2,272		)		(2,049		)
Total LNG terminal costs, net		29,613				29,481
Fixed assets and other
Computer and office equipment		23				23
Furniture and fixtures		22				22
Computer software		112				110
Leasehold improvements		43				42
Land		59				59
Other		24				21
Accumulated depreciation		(149		)		(141		)
Total fixed assets and other, net		134				136
Assets under finance lease
Tug vessels		60				60
Accumulated depreciation		(5		)		(4		)
Total assets under finance lease, net		55				56
Property, plant and equipment, net		$	29,802			$	29,673

Depreciation expense was $232 million and $143 million during the three months ended March 31, 2020 and 2019, respectively.

We realized offsets to LNG terminal costs of $202 million during the three months ended March 31, 2019 that were related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations of the respective Trains of the Liquefaction Projects, during the testing phase for its construction. We did not realize any offsets to LNG terminal costs during the three months ended March 31, 2020.

 

We have entered into the following derivative instruments that are reported at fair value:

•

interest rate swaps (“CCH Interest Rate Derivatives”) to hedge the exposure to volatility in a portion of the floating-rate interest payments on CCH’s amended and restated credit facility (the “CCH Credit Facility”) and to hedge against changes in interest rates that could impact anticipated future issuance of debt by CCH, which is anticipated by the end of 2020 (“CCH Interest Rate Forward Start Derivatives” and, collectively with the CCH Interest Rate Derivatives, the “Interest Rate Derivatives”);

•	commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the Liquefaction Projects and potential future development of Corpus Christi Stage 3 (“Physical Liquefaction Supply Derivatives”) and associated economic hedges (collectively, the “Liquefaction Supply Derivatives”);

•	financial derivatives to hedge the exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG (“LNG Trading Derivatives”); and

•	foreign currency exchange (“FX”) contracts to hedge exposure to currency risk associated with both LNG Trading Derivatives and operations in countries outside of the United States (“FX Derivatives”).

We recognize our derivative instruments as either assets or liabilities and measure those instruments at fair value. None of our derivative instruments are designated as cash flow or fair value hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Operations to the extent not utilized for the commissioning process.

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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 March 31, 2020 and December 31, 2019, which are classified as derivative assets, non-current derivative assets, derivative liabilities or non-current derivative liabilities in our Consolidated Balance Sheets (in millions):

	Fair Value Measurements as of
	March 31, 2020																December 31, 2019
	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
CCH Interest Rate Derivatives liability	$	—			$	(197	)		$	—			$	(197	)		$	—			$	(81	)		$	—			$	(81	)
CCH Interest Rate Forward Start Derivatives liability	—				(92		)		—				(92		)		—				(8		)		—				(8		)
Liquefaction Supply Derivatives asset	1				3				674				678				5				6				138				149
LNG Trading Derivatives asset (liability)	(3		)		188				—				185				—				165				—				165
FX Derivatives asset	—				23				—				23				—				4				—				4

We value our Interest Rate Derivatives using an income-based approach utilizing observable inputs to the valuation model including interest rate curves, risk adjusted discount rates, credit spreads and other relevant data. We value our LNG Trading Derivatives and our Liquefaction Supply Derivatives using a market or option-based approach incorporating present value techniques, as needed, using observable commodity price curves, when available, and other relevant data. We value our FX Derivatives with a market approach using observable FX rates and other relevant data.

The fair value of our Physical Liquefaction Supply Derivatives is predominantly driven by observable and unobservable market commodity prices and, as applicable to our natural gas supply contracts, our assessment of the associated events deriving fair value, including evaluating whether the respective market is available as pipeline infrastructure is developed. The fair value of our Physical Liquefaction Supply Derivatives incorporates risk premiums related to the satisfaction of conditions precedent, such as completion and placement into service of relevant pipeline infrastructure to accommodate marketable physical gas flow. As of March 31, 2020 and December 31, 2019, some of our Physical Liquefaction Supply Derivatives existed within markets for which the pipeline infrastructure was under development to accommodate marketable physical gas flow.

We include a portion of our Physical 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 would use in valuing the asset or liability. This includes assumptions about market risks, such as future prices of energy units for unobservable periods, liquidity, volatility and contract duration.

The Level 3 fair value measurements of natural gas positions within our Physical Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas and international LNG prices. The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of March 31, 2020:

		Net Fair Value Asset (in millions)		Valuation Approach		Significant Unobservable Input		Range of Significant Unobservable Inputs / Weighted Average (1)
Physical Liquefaction Supply Derivatives		$674		Market approach incorporating present value techniques		Henry Hub basis spread		$(0.619) - $0.054 / (0.027)
				Option pricing model		International LNG pricing spread, relative to Henry Hub (2)		48% - 154% / 117%

(1)    Unobservable inputs were weighted by the relative fair value of the instruments.

(2)    Spread contemplates U.S. dollar-denominated pricing.

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Increases or decreases in basis or pricing spreads, in isolation, would decrease or increase, respectively, the fair value of our Physical Liquefaction Supply Derivatives.

The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives during the three months ended March 31, 2020 and 2019 (in millions):

		Three Months Ended March 31,
		2020				2019
Balance, beginning of period		$	138			$	(29	)
Realized and mark-to-market gains:
Included in cost of sales		534				12
Purchases and settlements:
Purchases		1				1
Settlements		—				47
Transfers out of Level 3 (1)		1				—
Balance, end of period		$	674			$	31
Change in unrealized gains relating to instruments still held at end of period		$	534			$	12

(1)    Transferred to Level 2 as a result of observable market for the underlying natural gas purchase agreements.

Derivative assets and liabilities arising from our derivative contracts with the same counterparty are reported on a net basis, as all counterparty derivative contracts provide for the unconditional right of set-off in the event of default. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments in instances when our derivative instruments are in an asset position. Additionally, counterparties are at risk that we will be unable to meet our commitments in instances where our derivative instruments are in a liability position. We incorporate both our own nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of any applicable credit enhancements, such as collateral postings, set-off rights and guarantees.

Interest Rate Derivatives

As of March 31, 2020, we had the following Interest Rate Derivatives outstanding:

Notional Amounts

March 31, 2020

December 31, 2019

Effective Date

Maturity Date

Weighted Average Fixed Interest Rate Paid

Variable Interest Rate Received

CCH Interest Rate Derivatives

$4.7 billion

$4.5 billion

May 20, 2015

May 31, 2022

2.30%

One-month LIBOR

CCH Interest Rate Forward Start Derivatives

$750 million

$750 million

September 30, 2020

December 31, 2030

2.06%

Three-month LIBOR

The following table shows the fair value and location of the Interest Rate Derivatives on our Consolidated Balance Sheets (in millions):

	March 31, 2020												December 31, 2019
	CCH Interest Rate Derivatives				CCH Interest Rate Forward Start Derivatives				Total				CCH Interest Rate Derivatives				CCH Interest Rate Forward Start Derivatives				Total
Consolidated Balance Sheet Location
Derivative liabilities	$	(92	)		$	(92	)		$	(184	)		$	(32	)		$	(8	)		$	(40	)
Non-current derivative liabilities	(105		)		—				(105		)		(49		)		—				(49		)
Total derivative liabilities	$	(197	)		$	(92	)		$	(289	)		$	(81	)		$	(8	)		$	(89	)

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The following table shows the changes in the fair value and settlements of our Interest Rate Derivatives recorded in interest rate derivative loss, net on our Consolidated Statements of Operations during the three months ended March 31, 2020 and 2019 (in millions):

		Three Months Ended March 31,
		2020				2019
CCH Interest Rate Derivatives loss		$	(123	)		$	(35	)
CCH Interest Rate Forward Start Derivatives loss		(85		)		—

Commodity Derivatives

SPL, CCL and CCL Stage III have entered into physical natural gas supply contracts and associated economic hedges to purchase natural gas for the commissioning and operation of the Liquefaction Projects and potential future development of Corpus Christi Stage 3, respectively, which are primarily indexed to the natural gas market and international LNG indices. The remaining terms of the index-based physical natural gas supply contracts range up to approximately 15 years, some of which commence upon the satisfaction of certain events or states of affairs.

We have entered into, and may from time to time enter into, financial LNG Trading Derivatives in the form of swaps, forwards, options or futures to economically hedge exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG. We have entered into LNG Trading Derivatives to secure a fixed price position to minimize future cash flow variability associated with LNG purchase and sale transactions.

The following table shows the fair value and location of our Liquefaction Supply Derivatives and LNG Trading Derivatives (collectively, “Commodity Derivatives”) on our Consolidated Balance Sheets (in millions, except notional amount):

	March 31, 2020												December 31, 2019
	Liquefaction Supply Derivatives (1)				LNG Trading Derivatives (2)				Total				Liquefaction Supply Derivatives (1)				LNG Trading Derivatives (2)				Total
Consolidated Balance Sheet Location
Derivative assets	$	113			$	190			$	303			$	93			$	225			$	318
Non-current derivative assets	665				35				700				174				—				174
Total derivative assets	778				225				1,003				267				225				492
Derivative liabilities	(19		)		(40		)		(59		)		(16		)		(60		)		(76		)
Non-current derivative liabilities	(81		)		—				(81		)		(102		)		—				(102		)
Total derivative liabilities	(100		)		(40		)		(140		)		(118		)		(60		)		(178		)
Derivative asset, net	$	678			$	185			$	863			$	149			$	165			$	314
Notional amount, net (in TBtu) (3)	10,988				22								9,177				4

    

(1)

Does not include collateral posted with counterparties by us of $11 million and $7 million for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, respectively. Includes derivative assets of $4 million and $3 million as of March 31, 2020 and December 31, 2019, respectively, and non-current assets of $2 million as of both March 31, 2020 and December 31, 2019 for natural gas supply contracts that SPL and CCL have with related parties.

(2)	Does not include collateral posted with counterparties by us of $11 million and $5 million deposited for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, respectively.

(3)	Includes 198 TBtu and 120 TBtu as of March 31, 2020 and December 31, 2019, respectively, for natural gas supply contracts that SPL and CCL have with related parties.

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The following table shows the changes in the fair value, settlements and location of our Commodity Derivatives recorded on our Consolidated Statements of Operations during the three months ended March 31, 2020 and 2019 (in millions):

	Consolidated Statements of Operations Location (1)		Three Months Ended March 31,
			2020				2019
LNG Trading Derivatives gain	LNG revenues		$	140			$	64
LNG Trading Derivatives loss	Cost of sales		(34		)		—
Liquefaction Supply Derivatives gain (loss) (2)	LNG revenues		(1		)		2
Liquefaction Supply Derivatives gain (2)(3)	Cost of sales		537				82

(1)	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.

(2)	Does not include the realized value associated with derivative instruments that settle through physical delivery.

(3)

CCL recorded $23 million and $10 million in cost of sales under a natural gas supply contract with a related party during the three months ended March 31, 2020 and 2019, respectively, including $1 million of Liquefaction Supply Derivatives gain and $2 million of Liquefaction Supply Derivatives loss, respectively. As of March 31, 2020 and December 31, 2019, $7 million and $3 million, respectively, were included in accrued liabilities related to this contract.

FX Derivatives

Cheniere Marketing has entered into FX Derivatives to protect against the volatility in future cash flows attributable to changes in international currency exchange rates. The FX Derivatives economically hedge the foreign currency exposure arising from cash flows expended for both physical and financial LNG transactions.

The following table shows the fair value and location of our FX Derivatives on our Consolidated Balance Sheets (in millions):

			Fair Value Measurements as of
	Consolidated Balance Sheet Location		March 31, 2020				December 31, 2019
FX Derivatives	Derivative assets		$	19			$	5
FX Derivatives	Non-current derivative assets		5				—
FX Derivatives	Derivative liabilities		(1		)		(1		)

The total notional amount of our FX Derivatives was $496 million and $827 million as of March 31, 2020 and December 31, 2019, respectively.

    

The following table shows the changes in the fair value, settlements and location of our FX Derivatives recorded on our Consolidated Statements of Operations during the three months ended March 31, 2020 and 2019 (in millions):

			Three Months Ended March 31,
	Consolidated Statements of Operations Location		2020				2019
FX Derivatives gain	LNG revenues		$	25			$	9

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Consolidated Balance Sheet Presentation

Our derivative instruments are presented on a net basis on our Consolidated Balance Sheets as described above. The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions):

		Gross Amounts Recognized				Gross Amounts Offset in the Consolidated Balance Sheets				Net Amounts Presented in the Consolidated Balance Sheets
Offsetting Derivative Assets (Liabilities)
As of March 31, 2020
CCH Interest Rate Derivatives		$	(197	)		$	—			$	(197	)
CCH Interest Rate Forward Start Derivatives		(92		)		—				(92		)
Liquefaction Supply Derivatives		796				(18		)		778
Liquefaction Supply Derivatives		(104		)		4				(100		)
LNG Trading Derivatives		225				—				225
LNG Trading Derivatives		(47		)		7				(40		)
FX Derivatives		27				(3		)		24
FX Derivatives		(1		)		—				(1		)
As of December 31, 2019
CCH Interest Rate Derivatives		$	(81	)		$	—			$	(81	)
CCH Interest Rate Forward Start Derivatives		(8		)		—				(8		)
Liquefaction Supply Derivatives		281				(14		)		267
Liquefaction Supply Derivatives		(126		)		8				(118		)
LNG Trading Derivatives		229				(4		)		225
LNG Trading Derivatives		(60		)		—				(60		)
FX Derivatives		9				(4		)		5
FX Derivatives		(6		)		5				(1		)

As of March 31, 2020 and December 31, 2019, other non-current assets, net consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
Advances made to municipalities for water system enhancements		$	86			$	87
Advances and other asset conveyances to third parties to support LNG terminals		60				55
Advances made under EPC and non-EPC contracts		7				29
Equity method investments		197				108
Debt issuance costs and debt discount, net		48				45
Tax-related payments and receivables		20				20
Other		58				44
Total other non-current assets, net		$	476			$	388

Equity Method Investments

Our equity method investments consist of interests in privately-held companies. In 2017, we acquired an equity interest in Midship Holdings, LLC (“Midship Holdings”), which manages the business and affairs of Midship Pipeline Company, LLC (“Midship Pipeline”), which we account for as an equity method investment. See Note 8—Other Non-Current Assets of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2019 for further information.

Our investment in Midship Holdings, net of impairment losses, was $195 million and $105 million at March 31, 2020 and December 31, 2019, respectively.

Cheniere LNG O&M Services, LLC (“O&M Services”), our wholly owned subsidiary provides the development, construction, operation and maintenance services associated with the Midship Project pursuant to agreements in which O&M Services receives an agreed upon fee and reimbursement of costs incurred. O&M Services recorded $3 million and $4 million in the three months ended March 31, 2020 and 2019, respectively, of other revenues and $2 million and $3 million of accounts

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receivable as of March 31, 2020 and December 31, 2019, respectively, for services provided to Midship Pipeline under these agreements. CCL has entered into a transportation precedent agreement and a negotiated rate agreement with Midship Pipeline to secure firm pipeline transportation capacity for a period of 10 years following commencement of the Midship Project. In March 2020, CCH and CCL entered into a guaranty agreement whereby CCH absolutely and irrevocably guarantees CCL’s obligation under the transportation precedent agreement with Midship Pipeline.

We own a 48.6% limited partner interest in Cheniere Partners in the form of 104.5 million common units and 135.4 million subordinated units, with the remaining non-controlling interest held by Blackstone CQP Holdco LP (“Blackstone CQP Holdco”) and the public. We also own 100% of the general partner interest and the incentive distribution rights in Cheniere Partners. Cheniere Partners is accounted for as a consolidated variable interest entity. See Note 9—Non-Controlling Interest and Variable Interest Entity of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2019 for further information.

The following table presents the summarized assets and liabilities (in millions) of Cheniere Partners, our consolidated VIE, which are included in our Consolidated Balance Sheets. The assets in the table below may only be used to settle obligations of Cheniere Partners. In addition, there is no recourse to us for the consolidated VIE’s liabilities. The assets and liabilities in the table below include third-party assets and liabilities of Cheniere Partners only and exclude intercompany balances that eliminate in consolidation.

		March 31,				December 31,
		2020				2019
ASSETS
Current assets
Cash and cash equivalents		$	1,734			$	1,781
Restricted cash		109				181
Accounts and other receivables		259				297
Other current assets		160				184
Total current assets		2,262				2,443
Property, plant and equipment, net		16,476				16,368
Other non-current assets, net		309				309
Total assets		$	19,047			$	19,120
LIABILITIES
Current liabilities
Accrued liabilities		$	569			$	709
Current debt		1,996				—
Other current liabilities		120				210
Total current liabilities		2,685				919
Long-term debt, net		15,591				17,579
Other non-current liabilities		88				104
Total liabilities		$	18,364			$	18,602

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As of March 31, 2020 and December 31, 2019, accrued liabilities consisted of the following (in millions): 

		March 31,				December 31,
		2020				2019
Interest costs and related debt fees		$	380			$	293
Accrued natural gas purchases		318				460
LNG terminals and related pipeline costs		120				327
Compensation and benefits		42				115
Accrued LNG inventory		14				6
Other accrued liabilities		48				80
Total accrued liabilities		$	922			$	1,281

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As of March 31, 2020 and December 31, 2019, our debt consisted of the following (in millions): 

		March 31,				December 31,
		2020				2019
Long-term debt:
SPL
5.625% Senior Secured Notes due 2021 (“2021 SPL Senior Notes”)		$	—			$	2,000
6.25% Senior Secured Notes due 2022 (“2022 SPL Senior Notes”)		1,000				1,000
5.625% Senior Secured Notes due 2023 (“2023 SPL Senior Notes”)		1,500				1,500
5.75% Senior Secured Notes due 2024 (“2024 SPL Senior Notes”)		2,000				2,000
5.625% Senior Secured Notes due 2025 (“2025 SPL Senior Notes”)		2,000				2,000
5.875% Senior Secured Notes due 2026 (“2026 SPL Senior Notes”)		1,500				1,500
5.00% Senior Secured Notes due 2027 (“2027 SPL Senior Notes”)		1,500				1,500
4.200% Senior Secured Notes due 2028 (“2028 SPL Senior Notes”)		1,350				1,350
5.00% Senior Secured Notes due 2037 (“2037 SPL Senior Notes”)		800				800
$1.2 billion SPL Working Capital Facility executed in 2020 (“2020 SPL Working Capital Facility”)		—				—
Cheniere Partners
5.250% Senior Notes due 2025 (“2025 CQP Senior Notes”)		1,500				1,500
5.625% Senior Notes due 2026 (“2026 CQP Senior Notes”)		1,100				1,100
4.500% Senior Notes due 2029 (“2029 CQP Senior Notes”)		1,500				1,500
CQP Credit Facilities executed in 2019 (“2019 CQP Credit Facilities”)		—				—
CCH
7.000% Senior Secured Notes due 2024 (“2024 CCH Senior Notes”)		1,250				1,250
5.875% Senior Secured Notes due 2025 (“2025 CCH Senior Notes”)		1,500				1,500
5.125% Senior Secured Notes due 2027 (“2027 CCH Senior Notes”)		1,500				1,500
4.80% Senior Secured Notes due 2039 (“4.80% CCH Senior Notes”)		727				727
3.925% Senior Secured Notes due 2039 (“3.925% CCH Senior Notes”)		475				475
3.700% Senior Secured Notes due 2029 (“2029 CCH Senior Notes”)		1,500				1,500
CCH Credit Facility		3,283				3,283
CCH HoldCo II
11.0% Convertible Senior Secured Notes due 2025 (“2025 CCH HoldCo II Convertible Senior Notes”)		1,278				1,578
Cheniere
4.875% Convertible Unsecured Notes due 2021 (“2021 Cheniere Convertible Unsecured Notes”)		1,278				1,278
4.25% Convertible Senior Notes due 2045 (“2045 Cheniere Convertible Senior Notes”)		625				625
$1.25 billion Cheniere Revolving Credit Facility (“Cheniere Revolving Credit Facility”)		455				—
Unamortized premium, discount and debt issuance costs, net		(681		)		(692		)
Total long-term debt, net		28,940				30,774
Current debt:
2021 SPL Senior Notes		2,000				—
$1.2 billion SPL Working Capital Facility executed in 2015 (“2015 SPL Working Capital Facility”)		—				—
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”)		141				—
Cheniere Marketing trade finance facilities		—				—
Unamortized premium, discount and debt issuance costs, net		(4		)		—
Total current debt		2,137				—
Total debt, net		$	31,077			$	30,774

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2020 Material Debt Activities

2020 SPL Working Capital Facility

In March 2020, SPL entered into the 2020 SPL Working Capital Facility with aggregate commitments of $1.2 billion, which replaced the 2015 SPL Working Capital Facility. The 2020 SPL Working Capital Facility is intended to be used for loans to SPL (“SPL Revolving Loans”), swing line loans to SPL (“SPL Swing Line Loans”) and the issuance of letters of credit on behalf of SPL, primarily for (1) the refinancing of the 2015 SPL Working Capital Facility, (2) fees and expenses related to the 2020 SPL Working Capital Facility, (3) SPL’s gas purchase obligations and (4) SPL and certain of its future subsidiaries’ general corporate purposes. SPL may, from time to time, request increases in the commitments under the 2020 SPL Working Capital Facility of up to $800 million.

Loans under the 2020 SPL Working Capital Facility accrue interest at a variable rate per annum equal to LIBOR or the base rate (equal to the highest of the senior facility agent’s published prime rate, the federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.50% and one month LIBOR plus 0.50%), plus the applicable margin. The applicable margin for LIBOR loans under the 2020 SPL Working Capital Facility is 1.125% to 1.750% per annum (depending on the then-current rating of SPL), and the applicable margin for base rate loans under the 2020 SPL Working Capital Facility is 0.125% to 0.750% per annum (depending on the then-current rating of SPL). Interest on LIBOR loans is due and payable at the end of each applicable LIBOR period, and interest on base rate loans is due and payable at the end of each fiscal quarter.

SPL pays a commitment fee equal to an annual rate of 0.1% to 0.3% (depending on the then-current rating of SPL), which accrues on the daily amount of the total commitment less the sum of (1) the outstanding principal amount of SPL Revolving Loans, (2) letters of credit issued and (3) the outstanding principal amount of SPL Swing Line Loans. If draws are made upon a letter of credit issued under the 2020 SPL Working Capital Facility and SPL does not elect for such draw to be deemed an SPL LC Loan (an “SPL LC Draw”), SPL is required to pay the full amount of the SPL LC Draw on or prior to noon eastern time on the business day of the SPL LC Draw. An SPL LC Draw accrues interest at the base rate plus the applicable margin. As of March 31, 2020, no SPL LC Draws had been made upon any letters of credit issued under the 2020 SPL Working Capital Facility.

The 2020 SPL Working Capital Facility matures on March 19, 2025, but may be extended with consent of the lenders. The 2020 SPL Working Capital Facility provides for mandatory prepayments under customary circumstances.

The 2020 SPL Working Capital Facility contains customary conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. SPL is restricted from making certain distributions under agreements governing its indebtedness generally until, among other requirements, satisfaction of a 12-month forward-looking and backward-looking 1.25:1.00 debt service reserve ratio test. The obligations of SPL under the 2020 SPL Working Capital Facility are secured by substantially all of the assets of SPL as well as a pledge of all of the membership interests in SPL and certain future subsidiaries of SPL on a pari passu basis by a first priority lien with the SPL Senior Notes.

2025 CCH HoldCo II Convertible Senior Notes

In February 2020, the amended and restated note purchase agreement for the 2025 CCH HoldCo II Convertible Senior Notes was amended to allow CCH HoldCo II the option to redeem all or a portion of the outstanding notes with cash at a price of $1,080 per $1,000 principal amount, at the time of any CCH HoldCo II- or noteholder-initiated conversion through September 2, 2020. In March 2020, CCH HoldCo II redeemed an aggregate outstanding principal amount of $300 million with cash. CCH HoldCo II retains the ability to convert the 2025 CCH HoldCo II Convertible Senior Notes into our common stock at a conversion price equal to the lower of (1) a 10% discount to the average of the daily volume-weighted average price (“VWAP”) of our common stock for the 90 trading day period prior to the date on which notice of conversion is provided and (2) a 10% discount to the closing price of our common stock on the trading day preceding the date on which notice of conversion is provided. The noteholders retain the ability to request conversion into our common stock at a conversion price equal to the average of the daily VWAP of our common stock for the 90 trading day period preceding the date on which notice of requested conversion is provided. Conversions remain subject to various limitations and conditions.

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Credit Facilities

Below is a summary of our credit facilities outstanding as of March 31, 2020 (in millions):

		2020 SPL Working Capital Facility				2019 CQP Credit Facilities				CCH Credit Facility				CCH Working Capital Facility				Cheniere Revolving Credit Facility
Original facility size		$	1,200			$	1,500			$	8,404			$	350			$	750
Incremental commitments		—				—				1,566				850				500
Less:
Outstanding balance		—				—				3,283				141				455
Commitments prepaid or terminated		—				750				6,687				—				—
Letters of credit issued		414				—				—				399				365
Available commitment		$	786			$	750			$	—			$	660			$	430
Interest rate on available balance		LIBOR plus 1.125% - 1.750% or base rate plus 0.125% - 0.750%				LIBOR plus 1.25% - 2.125% or base rate plus 0.25% - 1.125%				LIBOR plus 1.75% or base rate plus 0.75%				LIBOR plus 1.25% - 1.75% or base rate plus 0.25% - 0.75%				LIBOR plus 1.75% - 2.50% or base rate plus 0.75% - 1.50%
Weighted average interest rate of outstanding balance		n/a				n/a				2.74%				2.77%				2.70%
Maturity date		March 19, 2025				May 29, 2024				June 30, 2024				June 29, 2023				December 13, 2022

Convertible Notes

Below is a summary of our convertible notes outstanding as of March 31, 2020 (in millions):

		2021 Cheniere Convertible Unsecured Notes				2025 CCH HoldCo II Convertible Senior Notes				2045 Cheniere Convertible Senior Notes
Aggregate original principal		$	1,000			$	1,000			$	625
Add: interest paid-in-kind		278				578				—
Less: aggregate principal redeemed		—				(300		)		—
Aggregate remaining principal		$	1,278			$	1,278			$	625
Debt component, net of discount and debt issuance costs		$	1,230			$	1,250			$	315
Equity component		$	211			$	—			$	194
Interest payment method		Paid-in-kind				Paid-in-kind / cash (1)				Cash
Conversion by us (2)		—				(3)				(4)
Conversion by holders (2)		(5)				(3)				(6)
Conversion basis		Cash and/or stock				Cash and/or stock				Cash and/or stock
Conversion value in excess of principal		$	—			n/a				$	—
Maturity date		May 28, 2021				May 13, 2025				March 15, 2045
Contractual interest rate		4.875		%		11.0		%		4.25		%
Effective interest rate (7)		8.2		%		12.2		%		9.4		%
Remaining debt discount and debt issuance costs amortization period (8)		1.2 years				0.5 years				25.0 years

(1)	Prior to the substantial completion of Train 2 of the CCL Project in August 2019, interest was paid entirely in kind. Following substantial completion, the interest has been paid in cash; however, a portion of the interest may, in the future, be paid in kind under certain specified circumstances.

(2)	Conversion is subject to various limitations and conditions.

(3)

Convertible into cash or stock at our option on or after March 1, 2020 until September 2, 2020, and into stock upon conversion notice by us or note holders after September 2, 2020, provided that our market capitalization is not less than $10.0 billion (“Eligible Conversion Date”). The conversion price for stock is the lower of (1) a 10% discount to the average of the VWAP of our common stock for the 90 trading day period prior to the date notice is provided, and (2) a

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10% discount to the closing price of our common stock on the trading day preceding the date notice is provided. The conversion price for cash is $1,080 per $1,000 principal amount of the notes. In March 2020, we delivered our first notice to convert notes in an aggregate outstanding principal amount of $300 million into cash.

(4)	Redeemable at any time after March 15, 2020 at a redemption price payable in cash equal to the accreted amount of the 2045 Cheniere Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to such redemption date.

(5)	Initially convertible at $93.64 (subject to adjustment upon the occurrence of certain specified events), provided that the closing price of our common stock is greater than or equal to the conversion price on the conversion date.

(6)

Prior to December 15, 2044, convertible only under certain circumstances as specified in the indenture; thereafter, holders may convert their notes regardless of these circumstances. The conversion rate will initially equal 7.2265 shares of our common stock per $1,000 principal amount of the 2045 Cheniere Convertible Senior Notes, which corresponds to an initial conversion price of approximately $138.38 per share of our common stock (subject to adjustment upon the occurrence of certain specified events).

(7)	Rate to accrete the discounted carrying value of the convertible notes to the face value over the remaining amortization period.

(8)	We amortize any debt discount and debt issuance costs using the effective interest over the period through contractual maturity except for the 2025 CCH HoldCo II Convertible Senior Notes, which are amortized through the date they are first convertible by holders into our common stock.

Restrictive Debt Covenants

As of March 31, 2020, each of our issuers was in compliance with all covenants related to their respective debt agreements.

Interest Expense

Total interest expense, including interest expense related to our convertible notes, consisted of the following (in millions):

		Three Months Ended March 31,
		2020				2019
Interest cost on convertible notes:
Interest per contractual rate		$	63			$	62
Amortization of debt discount		14				10
Amortization of debt issuance costs		3				3
Total interest cost related to convertible notes		80				75
Interest cost on debt and finance leases excluding convertible notes		391				373
Total interest cost		471				448
Capitalized interest		(59		)		(201		)
Total interest expense, net		$	412			$	247

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Fair Value Disclosures

The following table shows the carrying amount and estimated fair value of our debt (in millions):

		March 31, 2020								December 31, 2019
		Carrying Amount				Estimated Fair Value				Carrying Amount				Estimated Fair Value
Senior notes (1)		$	22,700			$	20,805			$	22,700			$	24,650
2037 SPL Senior Notes (2)		800				709				800				934
4.80% CCH Senior Notes (2)		727				594				727				830
3.925% CCH Senior Notes (2)		475				350				475				495
Credit facilities (3)		3,879				3,879				3,283				3,283
2021 Cheniere Convertible Unsecured Notes (2)		1,278				1,248				1,278				1,312
2025 CCH HoldCo II Convertible Senior Notes (2)		1,278				1,406				1,578				1,807
2045 Cheniere Convertible Senior Notes (4)		625				281				625				498

(1)	Includes the SPL Senior Notes except the 2037 SPL Senior Notes, the CQP Senior Notes and the 144A CCH Senior Notes. The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments.

(2)	The Level 3 estimated fair value was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market.

(3)

Includes 2015 SPL Working Capital Facility, 2020 SPL Working Capital Facility, 2019 CQP Credit Facilities, CCH Credit Facility, CCH Working Capital Facility, Cheniere Revolving Credit Facility and Cheniere Marketing trade finance facilities. The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.

(4)	The Level 1 estimated fair value was based on unadjusted quoted prices in active markets for identical liabilities that we had the ability to access at the measurement date.

Our leased assets consist primarily of (1) LNG vessel time charters (“vessel charters”), (2) tug vessels, (3) office space and facilities and (4) land sites, all of which are classified as operating leases except for our tug vessels at the Corpus Christi LNG terminal, which are classified as finance leases.

The following table shows the classification and location of our right-of-use assets and lease liabilities on our Consolidated Balance Sheets (in millions):

	Consolidated Balance Sheet Location		March 31, 2020				December 31, 2019
Right-of-use assets—Operating	Operating lease assets, net		$	350			$	439
Right-of-use assets—Financing	Property, plant and equipment, net		55				56
Total right-of-use assets			$	405			$	495
Current operating lease liabilities	Current operating lease liabilities		$	178			$	236
Current finance lease liabilities	Other current liabilities		1				1
Non-current operating lease liabilities	Non-current operating lease liabilities		164				189
Non-current finance lease liabilities	Non-current finance lease liabilities		58				58
Total lease liabilities			$	401			$	484

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The following table shows the classification and location of our lease cost on our Consolidated Statements of Operations (in millions):

	Consolidated Statement of Operations Location		Three Months Ended March 31,
			2020				2019
Operating lease cost (1)	Operating costs and expenses (2)		$	141			$	137
Finance lease cost:
Amortization of right-of-use assets	Depreciation and amortization expense		1				1
Interest on lease liabilities	Interest expense, net of capitalized interest		2				2
Total lease cost			$	144			$	140

(1)	Includes $35 million and $47 million of short-term lease costs during the three months ended March 31, 2020 and 2019, respectively, and $5 million of variable lease costs paid to the lessor during each of the three months ended March 31, 2020 and 2019.

(2)	Presented in cost of sales, operating and maintenance expense or selling, general and administrative expense consistent with the nature of the asset under lease.

Future annual minimum lease payments for operating and finance leases as of March 31, 2020 are as follows (in millions): 

Years Ending December 31,	Operating Leases (1)				Finance Leases
2020	$	158			$	8
2021	58				10
2022	23				10
2023	22				10
2024	22				10
Thereafter	166				136
Total lease payments	449				184
Less: Interest	(107		)		(125		)
Present value of lease liabilities	$	342			$	59

(1)	Does not include $2.0 billion of legally binding minimum lease payments primarily for vessel charters which were executed as of March 31, 2020 but will commence in future period primarily in the next two years and have fixed minimum lease terms of up to seven years.

The following table shows the weighted-average remaining lease term (in years) and the weighted-average discount rate for our operating leases and finance leases:

	March 31, 2020				December 31, 2019
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Weighted-average remaining lease term (in years)	9.8		18.4		8.4		18.7
Weighted-average discount rate (1)	5.0%		16.2%		5.2%		16.2%

(1)	The finance leases commenced prior to the adoption of the current leasing standard under GAAP. In accordance with previous accounting guidance, the implied rate is based on the fair value of the underlying assets.

The following table includes other quantitative information for our operating and finance leases (in millions):

	Three Months Ended March 31,
	2020				2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	94			$	90
Operating cash flows from finance leases	2				2
Financing cash flows from finance leases	—				—
Right-of-use assets obtained in exchange for new operating lease liabilities	8				64

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LNG Vessel Subcharters

From time to time, we sublease certain LNG vessels under charter to third parties while retaining our existing obligation to the original lessor. As of March 31, 2020 and December 31, 2019, we had $3 million and $9 million in future minimum sublease payments to be received from LNG vessel subcharters, respectively, which will be recognized entirely within 2020. We recognized $52 million and $37 million of sublease income, including $15 million and $5 million of variable lease payments, during the three months ended March 31, 2020 and 2019, respectively, in other revenues on our Consolidated Statements of Operations.

The following table represents a disaggregation of revenue earned from contracts with customers during the three months ended March 31, 2020 and 2019 (in millions):

		Three Months Ended March 31,
		2020				2019
LNG revenues (1)		$	2,404			$	2,068
Regasification revenues		67				66
Other revenues		22				15
Total revenues from customers		2,493				2,149
Net derivative gains (2)		164				75
Other (3)		52				37
Total revenues		$	2,709			$	2,261

(1)

LNG revenues include revenues for LNG cargoes in which our customers exercised their contractual right to not take delivery but remained obligated to pay fixed fees irrespective of such election. Revenue associated with canceled LNG cargoes is generally recognized upon notice of customer cancellation because our customers have no contractual right to take delivery of canceled LNG cargoes in future periods and our performance obligations with respect to such canceled LNG cargoes have been satisfied.

(2)	See Note 6—Derivative Instruments for additional information about our derivatives.

(3)	Includes revenues from LNG vessel subcharters. See Note 11—Leases for additional information about our subleases.

Contract Assets and Liabilities

The following table shows our contract assets, which are classified as other non-current assets, net on our Consolidated Balance Sheets (in millions):

		March 31,				December 31,
		2020				2019
Contract assets		$	34			$	18

Contract assets represent our right to consideration for transferring goods or services to the customer under the terms of a sales contract when the associated consideration is not yet due. Changes in contract assets during the three months ended March 31, 2020 were primarily attributable to revenue recognized due to the delivery of LNG under certain SPAs for which the associated consideration was not yet due.

The following table reflects the changes in our contract liabilities, which we classify as deferred revenue on our Consolidated Balance Sheets (in millions):

		Three Months Ended March 31, 2020
Deferred revenues, beginning of period		$	161
Cash received but not yet recognized		94
Revenue recognized from prior period deferral		(161		)
Deferred revenues, end of period		$	94

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Transaction Price Allocated to Future Performance Obligations

Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied as of March 31, 2020 and December 31, 2019:

		March 31, 2020						December 31, 2019
		Unsatisfied Transaction Price (in billions)				Weighted Average Recognition Timing (years) (1)		Unsatisfied Transaction Price (in billions)				Weighted Average Recognition Timing (years) (1)
LNG revenues		$	105.4			11		$	106.4			11
Regasification revenues		2.3				5		2.4				5
Total revenues		$	107.7					$	108.8

(1)    The weighted average recognition timing represents an estimate of the number of years during which we shall have recognized half of the unsatisfied transaction price.

We have elected the following exemptions which omit certain potential future sources of revenue from the table above:

(1)	We omit from the table above all performance obligations that are part of a contract that has an original expected duration of one year or less.

(2)

The table above excludes substantially all variable consideration under our SPAs and TUAs. We omit from the table above all variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance obligation qualifies as a series. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. We have not included such variable consideration in the transaction price to the extent the consideration is considered constrained due to the uncertainty of ultimate pricing and receipt. Approximately 42% and 58% of our LNG revenues from contracts with a duration of over one year during the three months ended March 31, 2020 and 2019, respectively, were related to variable consideration received from customers. During each of the three months ended March 31, 2020 and 2019, approximately 3% of our regasification revenues were related to variable consideration received from customers.

We have entered into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching FID on a certain liquefaction Train, obtaining financing or achieving substantial completion of a Train and any related facilities. These contracts are considered completed contracts for revenue recognition purposes and are included in the transaction price above when the conditions are considered probable of being met.

We recorded an income tax provision of $131 million and $3 million during the three months ended March 31, 2020 and 2019, respectively. The effective tax rate for the three months ended March 31, 2020 was 17.8%, which is lower than the 21% federal statutory rate primarily due to income allocated to non-controlling interest that is not taxable to Cheniere, partially offset by a one-time discrete event related to an internal tax restructuring. The discrete item resulted in expense of $38 million for the three months ended March 31, 2020. The effective tax rate for the three months ended March 31, 2019 was 0.9%, which is lower than the 21% federal statutory rate primarily due to maintaining a valuation allowance against our federal deferred tax assets.

  

We have granted restricted stock shares, restricted stock units, performance stock units and phantom units to employees and non-employee directors under the 2011 Incentive Plan, as amended (the “2011 Plan”) and the 2015 Employee Inducement Incentive Plan.

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For the three months ended March 31, 2020, we granted 1.2 million restricted stock units and 0.3 million performance stock units at target performance under the 2011 Plan to certain employees. Additionally, 0.2 million incremental shares of our common stock were issued based on performance results from previously-granted performance stock unit awards. Restricted stock units are stock awards that vest over a service period of three years and entitle the holder to receive shares of our common stock upon vesting, subject to restrictions on transfer and to a risk of forfeiture if the recipient terminates employment with us prior to the lapse of the restrictions. Performance stock units provide for cliff vesting after a period of three years with payouts based on metrics dependent upon market and performance achieved over the period from January 1, 2020 through December 31, 2022 compared to pre-established performance targets. The settlement amounts of the awards are based on market and performance metrics which include cumulative distributable cash flow per share, and in certain circumstances, absolute total shareholder return (“ATSR”) of our common stock. Where applicable, the compensation for performance stock units is based on fair value assigned to the market metric of ATSR using a Monte Carlo model upon grant, which remains constant through the vesting period, and a performance metric, which will vary due to changing estimates regarding the expected achievement of the performance metric of cumulative distributable cash flow per share. The number of shares that may be earned at the end of the vesting period ranges from 0% up to 300% of the target award amount. Both restricted stock units and performance stock units will be settled in Cheniere common stock (on a one-for-one basis) and are classified as equity awards.

Total share-based compensation consisted of the following (in millions):

		Three Months Ended March 31,
		2020				2019
Share-based compensation costs, pre-tax:
Equity awards		$	30			$	29
Liability awards		—				3
Total share-based compensation		30				32
Capitalized share-based compensation		(1		)		(4		)
Total share-based compensation expense		$	29			$	28
Tax benefit associated with share-based compensation expense		$	18			$	1

Basic net income per share attributable to common stockholders (“EPS”) excludes dilution and is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects potential dilution and is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the potential common shares had been issued. The dilutive effect of unvested stock is calculated using the treasury-stock method and the dilutive effect of convertible securities is calculated using the if-converted method.

The following table reconciles basic and diluted weighted average common shares outstanding for the three months ended March 31, 2020 and 2019 (in millions, except per share data):

		Three Months Ended March 31,
		2020				2019
Weighted average common shares outstanding:
Basic		253.0				257.1
Dilutive unvested stock		1.1				1.4
Dilutive convertible securities		45.5				—
Diluted		299.6				258.5
Basic net income per share attributable to common stockholders		$	1.48			$	0.55
Diluted net income per share attributable to common stockholders		$	1.43			$	0.54

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Potentially dilutive securities that were not included in the diluted net income per share computations because their effects would have been anti-dilutive were as follows (in millions):

		Three Months Ended March 31,
		2020			2019
Unvested stock (1)		2.1			2.4
Convertible notes (2)		—			17.7
Total potentially dilutive common shares		2.1			20.1

(1)	Does not include 0.7 million shares and 0.6 million shares for the three months ended March 31, 2020 and 2019, respectively, of unvested stock because the performance conditions had not yet been satisfied as of the respective dates.

(2)	Includes number of shares in aggregate issuable upon conversion of the 2021 Cheniere Convertible Unsecured Notes and the 2045 Cheniere Convertible Senior Notes for all periods presented and additionally the 2025 CCH HoldCo II Convertible Senior Notes for the three months ended March 31, 2020, following the substantial completion of Train 2 of the CCL Project in August 2019.

On June 3, 2019, we announced that our Board authorized a 3-year, $1.0 billion share repurchase program. During the three months ended March 31, 2020, we repurchased an aggregate of 2.9 million shares of our common stock for $155 million, for a weighted average price per share of $53.88.

As of March 31, 2020, we had up to $596 million of the share repurchase program available. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The timing and amount of any shares of our common stock that are repurchased under the share repurchase program will be determined by our management based on market conditions and other factors.  The share repurchase program does not obligate us to acquire any particular amount of common stock, and may be modified, suspended or discontinued at any time or from time to time at our discretion.

We have various contractual obligations which are recorded as liabilities in our Consolidated Financial Statements. Other items, such as certain purchase commitments and other executed contracts which do not meet the definition of a liability as of March 31, 2020, are not recognized as liabilities but require disclosures in our Consolidated Financial Statements.

Environmental and Regulatory Matters

Our LNG terminals and pipelines are subject to extensive regulation under federal, state and local statutes, rules, regulations and laws. These laws require that we engage in consultations with appropriate federal and state agencies and that we obtain and maintain applicable permits and other authorizations. Failure to comply with such laws could result in legal proceedings, which may include substantial penalties. We believe that, based on currently known information, compliance with these laws and regulations will not have a material adverse effect on our results of operations, financial condition or cash flows.

Legal Proceedings

We are, and may in the future be, involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. While the results of these litigation matters and claims cannot be predicted with certainty, we believe the reasonably possible losses from such matters, individually and in the aggregate, are not material. Additionally, we believe the probable final outcome of such matters will not have a material adverse effect on our consolidated results of operations, financial position or cash flows.

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The following table shows customers with revenues of 10% or greater of total revenues from external customers and customers with accounts receivable balances of 10% or greater of total accounts receivable from external customers:

	Percentage of Total Revenues from External Customers				Percentage of Accounts Receivable from External Customers
	Three Months Ended March 31,				March 31,		December 31,
	2020		2019		2020		2019
Customer A	16%		20%		12%		13%
Customer B	*		12%		*		*
Customer C	*		12%		15%		13%
Customer D	*		14%		*		*

* Less than 10%

The following table provides supplemental disclosure of cash flow information (in millions): 

		Three Months Ended March 31,
		2020				2019
Cash paid during the period for interest on debt, net of amounts capitalized		$	295			$	108
Cash paid for income taxes		1				20

The balance in property, plant and equipment, net funded with accounts payable and accrued liabilities was $255 million and $509 million as of March 31, 2020 and 2019, respectively.

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ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•	statements that we expect to commence or complete construction of our proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thereof, by certain dates, or at all;

•

statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products;

•	statements regarding any financing transactions or arrangements, or our ability to enter into such transactions;

•	statements regarding the amount and timing of share repurchases;

•	statements relating to the construction of our Trains and pipelines, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto;

•	statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, natural gas liquefaction or storage capacities that are, or may become, subject to contracts;

•	statements regarding counterparties to our commercial contracts, construction contracts, and other contracts;

•	statements regarding our planned development and construction of additional Trains or pipelines, including the financing of such Trains or pipelines;

•	statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;

•	statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change;

•	statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions;

•	statements regarding our anticipated LNG and natural gas marketing activities;

•

statements regarding the outbreak of COVID-19 and its impact on our business and operating results, including any customers not taking delivery of LNG cargoes, the ongoing credit worthiness of our contractual counterparties, any disruptions in our operations or construction of our Trains and the health and safety of our employees, and on our customers, the global economy and the demand for LNG; and

•	any other statements that relate to non-historical or future information.

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•	Overview of Business

•	Overview of Significant Events

•	Impact of COVID-19 and Market Environment

•	Liquidity and Capital Resources

•	Results of Operations

•	Off-Balance Sheet Arrangements

•	Summary of Critical Accounting Estimates

•	Recent Accounting Standards

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•	In April 2020, Midship Pipeline Company, LLC, in which we have an equity investment, placed into service the Midship natural gas pipeline and related compression and interconnect facilities.

•	As of April 27, 2020, more than 1,100 cumulative LNG cargoes totaling over 75 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Projects.

•	In March 2020, SPL entered into a $1.2 billion Working Capital Revolving Credit and Letter of Credit Reimbursement Agreement (the “2020 SPL Working Capital Facility”), which refinanced its previous working capital facility, reduced the interest rate and extended the maturity date to March 2025.

•

In February 2020, the amended and restated note purchase agreement for the 11.0% Convertible Senior Secured Notes due 2025 (the “2025 CCH HoldCo II Convertible Senior Notes”) was amended to allow CCH HoldCo II the option to redeem all or a portion of the outstanding notes with cash at a price of $1,080 per $1,000 principal amount, at the time of any CCH HoldCo II- or noteholder-initiated conversion through September 2, 2020. In March 2020, CCH HoldCo II redeemed an aggregate outstanding principal amount of $300 million with cash.

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•	SPL through project debt and borrowings, operating cash flows and equity contributions from Cheniere Partners;

•	Cheniere Partners through operating cash flows from SPLNG, SPL and CTPL and debt or equity offerings;

•	CCH Group through operating cash flows from CCL and CCP, project debt and borrowings and equity contributions from Cheniere; and

•	Cheniere through existing unrestricted cash, debt and equity offerings by us or our subsidiaries, operating cash flows, borrowings, services fees from our subsidiaries and distributions from our investment in Cheniere Partners.

(1)

Amounts presented include balances held by our consolidated variable interest entity (“VIE”), Cheniere Partners as discussed in Note 8—Non-controlling Interest and Variable Interest Entity of our Notes to Consolidated Financial Statements. As of March 31, 2020 and December 31, 2019, assets of Cheniere Partners, which are included in our Consolidated Balance Sheets, included $1.7 billion and $1.8 billion, respectively, of cash and cash equivalents.

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•	Trains 1 through 4—FTA countries for a 30-year term, which commenced in May 2016, and non-FTA countries for a 20-year term, which commenced in June 2016, in an amount up to a combined total of the equivalent of 16 mtpa (approximately 803 Bcf/yr of natural gas).

•	Trains 1 through 4—FTA countries for a 25-year term and non-FTA countries for a 20-year term, both of which commenced in December 2018, in an amount up to a combined total of the equivalent of approximately 203 Bcf/yr of natural gas (approximately 4 mtpa).

•	Trains 5 and 6—FTA countries and non-FTA countries for a 20-year term, which partially commenced in June 2019 and the remainder commenced in September 2019, in an amount up to a combined total of 503.3 Bcf/yr of natural gas (approximately 10 mtpa).

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(1)

Includes SPL’s 5.625% Senior Secured Notes due 2021, 6.25% Senior Secured Notes due 2022, 5.625% Senior Secured Notes due 2023, 5.75% Senior Secured Notes due 2024, 5.625% Senior Secured Notes due 2025, 5.875% Senior Secured Notes due 2026 (the “2026 SPL Senior Notes”), 5.00% Senior Secured Notes due 2027 (the “2027 SPL Senior Notes”), 4.200% Senior Secured Notes due 2028 (the “2028 SPL Senior Notes”) and 5.00% Senior Secured Notes due 2037 (the “2037 SPL Senior Notes”) (collectively, the “SPL Senior Notes”), as well as CQP’s $1.5 billion of 5.250% Senior Notes due 2025 (the “2025 CQP Senior Notes”), $1.1 billion of 5.625% Senior Notes due 2026 (the “2026 CQP Senior Notes”) and the 4.500% Senior Notes due 2029 (the “2029 CQP Senior Notes”) (collectively, the “CQP Senior Notes”).

(2)	Includes outstanding balances under the 2015 SPL Working Capital Facility, 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities, inclusive of any portion of the 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities that may be used for general corporate purposes.

(3)	Consists of 2015 SPL Working Capital Facility, 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities.

(4)	Does not include equity contributions that may be available from Cheniere’s borrowings under its convertible notes, which may be used for the Sabine Pass LNG Terminal.

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•	CCL Project—FTA countries for a 25-year term and to non-FTA countries for a 20-year term, both of which commenced in June 2019, up to a combined total of the equivalent of 767 Bcf/yr (approximately 15 mtpa) of natural gas.

•	Corpus Christi Stage 3—FTA countries for a 25-year term and to non-FTA countries for a 20-year term in an amount equivalent to 582.14 Bcf/yr (approximately 11 mtpa) of natural gas.

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(1)

Includes CCH’s 7.000% Senior Secured Notes due 2024 (the “2024 CCH Senior Notes”), 5.875% Senior Secured Notes due 2025 (the “2025 CCH Senior Notes”), 5.125% Senior Secured Notes due 2027 (the “2027 CCH Senior Notes”), 3.700% Senior Secured Notes due 2029 (the "2029 CCH Senior Notes"), 4.80% Senior Secured Notes due 2039 (the “4.80% CCH Senior Notes”) and 3.925% Senior Secured Notes due 2039 (the "3.925% CCH Senior Notes") (collectively, the “CCH Senior Notes”).

(2)	Aggregate original principal amount before debt discount and debt issuance costs and interest paid-in-kind.

(3)	Includes CCH’s amended and restated credit facility (“CCH Credit Facility”) and CCH Working Capital Facility.

(4)	Does not include equity contributions that may be available from Cheniere’s borrowings under the 4.875% Convertible Unsecured Notes due 2021 (the “2021 Cheniere Convertible Unsecured Notes”), 4.25% Convertible Senior Notes due 2045 (the “2045 Cheniere Convertible Senior Notes”) and Cheniere Revolving Credit Facility, which may be used for the CCL Project.

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•	$455 million of borrowings under the Cheniere Revolving Credit Facility;

•	$141 million of borrowings under the CCH Working Capital Facility;

•	$300 million principal amount of the 2025 CCH HoldCo II Convertible Senior Notes converted into cash;

•	$154 million of distributions to non-controlling interest by Cheniere Partners;

•	$155 million paid to repurchase approximately 3 million shares of our common stock under the share repurchase program; and

•	$39 million paid for tax withholdings for share-based compensation.

•	$491 million of borrowings under the CCH Credit Facility;

•	$201 million of borrowings and $369 million in repayments under the CCH Working Capital Facility;

•	$72 million of net repayments related to our Cheniere Marketing trade financing facilities;

•	$144 million of distributions to non-controlling interest by Cheniere Partners; and

•	$12 million paid for tax withholdings for share-based compensation.

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(1)	Long-term agreements include agreements with a tenure of 12 months or more. LNG revenues include revenues with no corresponding volumes attributable to LNG cargoes contractually canceled by our customers, with revenue generally recognized upon notice of customer cancellation.

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ITEM 4.	CONTROLS AND PROCEDURES

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ITEM 1A.	RISK FACTORS

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ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(1)	Includes issued shares surrendered to us by participants in our share-based compensation plans for payment of applicable tax withholdings on the vesting of share-based compensation awards. Associated shares surrendered by participants are repurchased pursuant to terms of the plan and award agreements and not as part of the publicly announced share repurchase plan.

(2)	The price paid per share was based on the average trading price of our common stock on the dates on which we repurchased the shares.

(3)	On June 3, 2019, we announced that our Board authorized a 3-year, $1 billion share repurchase program. For additional information, see Note 16—Share Repurchase Program.

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ITEM 6.	EXHIBITS

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