lng-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-16383

CHENIERE ENERGY, INC.

(Exact name of registrant as specified in its charter)


Delaware			95-4352386
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

700 Milam Street, Suite 1900

Houston, Texas 77002

(Address of principal executive offices) (Zip Code)

(713) 375-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $ 0.003 par value	LNG	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 26, 2023, the issuer had 242,958,190 shares of Common Stock outstanding.

CHENIERE ENERGY, INC.

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	Definitions	1
Part I. Financial Information
Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Operations	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Stockholders’ Equity (Deficit)	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
	Note 1—Nature of Operations and Basis of Presentation	7
	Note 2—Restricted Cash and Cash Equivalents	8
	Note 3—Trade and Other Receivables, Net of Current Expected Credit Losses	8
	Note 4—Inventory	8
	Note 5—Property, Plant and Equipment, Net of Accumulated Depreciation	9
	Note 6—Derivative Instruments	9

	Note 7—Non-Controlling Interest and Variable Interest Entity	14
	Note 8—Accrued Liabilities	15
	Note 9—Debt	16
	Note 10—Leases	18
	Note 11—Revenues	20
	Note 12—Related Party Transactions	22
	Note 13—Income Taxes	22

	Note 14—Net Income (Loss ) per Share Attributable to Common Stockholders	23

	Note 15—Stock Repurchase Programs	23
	Note 16—Customer Concentration	24
	Note 17—Supplemental Cash Flow Information	24

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36

Item 4.	Controls and Procedures	36

Part II. Other Information
Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 6.	Exhibits	38

	Signatures	39

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DEFINITIONS

As used in this quarterly report, the terms listed below have the following meanings:

Common Industry and Other Terms


ASU						Accounting Standards Update
Bcf						billion cubic feet
Bcf/d						billion cubic feet per day
Bcf/yr						billion cubic feet per year
Bcfe						billion cubic feet equivalent
DOE						U.S. Department of Energy
EPC						engineering, procurement and construction
FASB						Financial Accounting Standards Board
FERC						Federal Energy Regulatory Commission
FID						final investment decision
FTA countries						countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas
GAAP						generally accepted accounting principles in the United States
Henry Hub						the final settlement price (in USD per MMBtu) for the New York Mercantile Exchange’s Henry Hub natural gas futures contract for the month in which a relevant cargo’s delivery window is scheduled to begin
IPM agreements						integrated production marketing agreements in which the gas producer sells to us gas on a global LNG index price, less a fixed liquefaction fee, shipping and other costs
LIBOR						London Interbank Offered Rate
LNG						liquefied natural gas, a product of natural gas that, through a refrigeration process, has been cooled to a liquid state, which occupies a volume that is approximately 1/600th of its gaseous state
MMBtu						million British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
mtpa						million tonnes per annum

non-FTA countries						countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted
SEC						U.S. Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate
SPA						LNG sale and purchase agreement
TBtu						trillion British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
Train						an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG
TUA						terminal use agreement

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Abbreviated Legal Entity Structure

The following diagram depicts our abbreviated legal entity structure as of March 31, 2023, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:

Unless the context requires otherwise, references to “Cheniere,” the “Company,” “we,” “us” and “our” refer to Cheniere Energy, Inc. and its consolidated subsidiaries, including our publicly traded subsidiary, CQP.

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PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CHENIERE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)


	Three Months Ended March 31,
		2023		2022
Revenues
LNG revenues		$	7,091	$	7,340
Regasification revenues		34		68
Other revenues		185		76

Total revenues		7,310		7,484

Operating costs and expenses (recovery)
Cost (recovery) of sales (excluding items shown separately below)		(1,539)		7,336

Operating and maintenance expense		444		389
Selling, general and administrative expense		107		96
Depreciation and amortization expense		297		271


Development expense		10		5


Total operating costs and expenses (recovery)		(681)		8,097

Income (loss) from operations		7,991		(613)

Other income (expense)
Interest expense, net of capitalized interest		(297)		(349)
Gain (loss) on modification or extinguishment of debt		20		(18)
Interest rate derivative gain, net		—		3
Other income, net		37		5
Total other expense		(240)		(359)

Income (loss) before income taxes and non-controlling interest		7,751		(972)
Less: income tax provision (benefit)		1,316		(191)
Net income (loss)		6,435		(781)
Less: net income attributable to non-controlling interest		1,001		84
Net income (loss) attributable to common stockholders		$	5,434	$	(865)

Net income (loss) per share attributable to common stockholders—basic		$	22.28	$	(3.41)
Net income (loss) per share attributable to common stockholders—diluted (1)		$	22.10	$	(3.41)

Weighted average number of common shares outstanding—basic		243.9		254.0
Weighted average number of common shares outstanding—diluted		245.8		254.0

(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.

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (1)

(in millions, except share data)



	March 31,		December 31,
	2023		2022
ASSETS	(unaudited)
Current assets
Cash and cash equivalents	$	2,948	$	1,353
Restricted cash and cash equivalents	495		1,134
Trade and other receivables, net of current expected credit losses	929		1,944

Inventory	465		826
Current derivative assets	78		120
Margin deposits	63		134

Other current assets	70		97
Total current assets	5,048		5,608


Property, plant and equipment, net of accumulated depreciation	31,747		31,528
Operating lease assets	2,553		2,625

Derivative assets	200		35
Goodwill	77		77
Deferred tax assets	35		864
Other non-current assets, net	605		529
Total assets	$	40,265	$	41,266

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	93	$	124
Accrued liabilities	1,328		2,679

Current debt, net of discount and debt issuance costs	61		813
Deferred revenue	108		234
Current operating lease liabilities	604		616
Current derivative liabilities	1,292		2,301
Other current liabilities	40		28
Total current liabilities	3,526		6,795

Long-term debt, net of premium, discount and debt issuance costs	23,928		24,055
Operating lease liabilities	1,919		1,971
Finance lease liabilities	487		494

Derivative liabilities	4,407		7,947
Deferred tax liabilities	388		—
Other non-current liabilities	170		175



Stockholders’ equity (deficit)
Preferred stock: $0.0001 par value, 5.0 million shares authorized, none issued	—		—
Common stock: $0.003 par value, 480.0 million shares authorized; 277.7 million shares and 276.7 million shares issued at March 31, 2023 and December 31, 2022, respectively	1		1



Treasury stock: 34.5 million shares and 31.2 million shares at March 31, 2023 and December 31, 2022, respectively, at cost	(2,821)		(2,342)
Additional paid-in-capital	4,328		4,314
Accumulated income (deficit)	394		(4,942)
Total Cheniere stockholders’ equity (deficit)	1,902		(2,969)
Non-controlling interest	3,538		2,798
Total stockholders’ equity (deficit)	5,440		(171)
Total liabilities and stockholders’ equity (deficit)	$	40,265	$	41,266

(1)Amounts presented include balances held by our consolidated variable interest entity (“VIE”), CQP, as further discussed in Note 7—Non-controlling Interest and Variable Interest Entity. As of March 31, 2023, total assets and liabilities of CQP were $18.4 billion and $19.7 billion, respectively, including $834 million of cash and cash equivalents and $160 million of restricted cash and cash equivalents.

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in millions)

(unaudited)


Three Months Ended March 31, 2023
	Total Stockholders’ Equity (Deficit)
	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Income (Deficit)		Non-controlling Interest		Total Equity (Deficit)
	Shares	Par Value Amount		Shares	Amount




















Balance at December 31, 2022	245.5	1		31.2	(2,342)		4,314		(4,942)		2,798		(171)



















Vesting of share-based compensation awards	1.0	—		—	—		—		—		—		—
Share-based compensation	—	—		—	—		43		—		—		43
Issued shares withheld from employees related to share-based compensation, at cost	(0.2)	—		0.2	(26)		(29)		—		—		(55)
Shares repurchased, at cost	(3.1)	—		3.1	(453)		—		—		—		(453)

Net income attributable to non-controlling interest	—	—		—	—		—		—		1,001		1,001

Distributions to non-controlling interest	—	—		—	—		—		—		(261)		(261)
Dividends declared ($0.395 per common share)	—	—		—	—		—		(98)		—		(98)

Net income attributable to common stockholders	—	—		—	—		—		5,434		—		5,434
Balance at March 31, 2023	243.2	$	1	34.5	$	(2,821)	$	4,328	$	394	$	3,538	$	5,440


Three Months Ended March 31, 2022
	Total Stockholders’ Deficit
	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Deficit		Non-controlling Interest		Total Deficit
	Shares	Par Value Amount		Shares	Amount
Balance at December 31, 2021	253.6	$	1	21.6	$	(928)	$	4,377	$	(6,021)	$	2,538	$	(33)
Vesting of share-based compensation awards	1.3	—		—	—		—		—		—		—
Share-based compensation	—	—		—	—		38		—		—		38
Issued shares withheld from employees related to share-based compensation, at cost	(0.3)	—		0.3	(35)		(18)		—		—		(53)
Shares repurchased, at cost	(0.2)	—		0.2	(25)		—		—		—		(25)
Adoption of ASU 2020-06, net of tax	—	—		—	—		(153)		4		—		(149)
Net income attributable to non-controlling interest	—	—		—	—		—		—		84		84
Distributions to non-controlling interest	—	—		—	—		—		—		(171)		(171)
Dividends declared ($0.33 per common share)	—	—		—	—		—		(85)		—		(85)
Net loss attributable to common stockholders	—	—		—	—		—		(865)		—		(865)
Balance at March 31, 2022	254.4	$	1	22.1	$	(988)	$	4,244	$	(6,967)	$	2,451	$	(1,259)

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities
Net income (loss)	$	6,435	$	(781)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized foreign currency exchange gain, net	(2)		—
Depreciation and amortization expense	297		271
Share-based compensation expense	49		43
Non-cash interest expense	2		2
Amortization of debt issuance costs, premium and discount	12		15
Reduction of right-of-use assets	161		134
Loss (gain) on modification or extinguishment of debt	(20)		18
Total losses (gains) on derivative instruments, net	(4,641)		3,592
Net cash used for settlement of derivative instruments	(31)		(314)

Loss on equity method investments	(1)		(5)
Deferred taxes	1,232		(206)
Repayment of paid-in-kind interest related to repurchase of convertible notes	—		(13)

Changes in operating assets and liabilities:
Trade and other receivables, net of current expected credit losses	1,016		(16)

Inventory	361		133
Margin deposits	71		309

Other current assets	31		99
Accounts payable and accrued liabilities	(1,277)		(386)

Total deferred revenue	(126)		(24)
Total operating lease liabilities	(154)		(134)

Other, net	6		(82)
Net cash provided by operating activities	3,421		2,655

Cash flows from investing activities
Property, plant and equipment	(712)		(178)

Investment in equity method investment	(10)		—
Other	(5)		—
Net cash used in investing activities	(727)		(178)

Cash flows from financing activities
Proceeds from issuances of debt	—		575
Redemptions, repayments and repurchases of debt	(896)		(1,615)

Debt modification or extinguishment gains (costs)	26		(13)

Distributions to non-controlling interest	(261)		(171)
Payments related to tax withholdings for share-based compensation	(55)		(53)
Repurchase of common stock	(450)		(25)
Dividends to stockholders	(99)		(86)
Payments of finance lease liabilities	(5)		—

Net cash used in financing activities	(1,740)		(1,388)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents	2		—

Net increase in cash, cash equivalents and restricted cash and cash equivalents	956		1,089
Cash, cash equivalents and restricted cash and cash equivalents—beginning of period	2,487		1,817
Cash, cash equivalents and restricted cash and cash equivalents—end of period	$	3,443	$	2,906

Balances per Consolidated Balance Sheet:


	March 31, 2023
Cash and cash equivalents	$	2,948
Restricted cash and cash equivalents	495

Total cash, cash equivalents and restricted cash and cash equivalents	$	3,443

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION

We operate two natural gas liquefaction and export facilities located in Cameron Parish, Louisiana at Sabine Pass and near Corpus Christi, Texas (respectively, the “Sabine Pass LNG Terminal” and “Corpus Christi LNG Terminal”).

CQP owns the Sabine Pass LNG Terminal, which has natural gas liquefaction facilities consisting of six operational Trains, for a total production capacity of approximately 30 mtpa of LNG (the “SPL Project”). The Sabine Pass LNG Terminal also has operational regasification facilities that include five LNG storage tanks, vaporizers and three marine berths. The Sabine Pass LNG Terminal also includes a 94-mile pipeline owned by CTPL, a subsidiary of CQP, that interconnects our facilities with a number of large interstate and intrastate pipelines. As of March 31, 2023, we owned 100% of the general partner interest and a 48.6% limited partner interest in CQP.

The Corpus Christi LNG Terminal currently has three operational Trains for a total production capacity of approximately 15 mtpa of LNG, three LNG storage tanks and two marine berths. Additionally, we are constructing an expansion of the Corpus Christi LNG Terminal (the “Corpus Christi Stage 3 Project”) for up to seven midscale Trains with an expected total production capacity of over 10 mtpa of LNG. Through our subsidiary CCP, we also own a 21.5-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 Corpus Christi LNG Terminal and the Corpus Christi Stage 3 Project, the “CCL Project”).

We have increased available liquefaction capacity at the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”) as a result of debottlenecking and other optimization projects. 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. In March 2023, certain of our subsidiaries submitted an application with the FERC under the Natural Gas Act for an expansion adjacent to the CCL Project consisting of two midscale Trains with an expected total production capacity of approximately 3 mtpa of LNG. In February 2023, certain subsidiaries of CQP initiated the pre-filing review process with the FERC under the National Environmental Policy Act for an expansion adjacent to the SPL Project consisting of up to three Trains with an expected total production capacity of approximately 20 mtpa of LNG. 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 positive FID.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Cheniere have been prepared in accordance with GAAP for interim financial information and in accordance with Rule 10-01 of Regulation S-X and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the financial results for the interim periods presented. 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 fiscal year ended December 31, 2022.

Results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2023.

Recent Accounting Standards

ASU 2020-04

In March 2020, the FASB issued 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 contracts expected to arise from the market transition from LIBOR to alternative reference rates. The temporary optional expedients under the standard became effective March 12, 2020 and will be available until December 31, 2024 following a subsequent amendment to the standard.

We have various credit facilities indexed to LIBOR, as further described in Note 9—Debt. To date, we have amended certain of our credit facilities to incorporate a replacement rate or a fallback replacement rate indexed to SOFR as a result of the

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

expected LIBOR transition. We elected to apply the optional expedients as applicable to certain modified facilities; however, the impact of applying the optional expedients was not material, and we do not expect the transition to SOFR or other replacement rate indexes to have a material impact on our future cash flows. We will apply the optional expedients to qualifying contract modifications in the future; however, we do not expect the impact of such application to be material.

NOTE 2—RESTRICTED CASH AND CASH EQUIVALENTS

Restricted cash and cash equivalents consisted of the following (in millions):



	March 31,		December 31,
	2023		2022
Restricted cash and cash equivalents
SPL Project	$	160	$	92

CCL Project	93		738
Cash held by our subsidiaries that is restricted to Cheniere	242		304
Total restricted cash and cash equivalents	$	495	$	1,134

Pursuant to the accounts agreements entered into with the collateral trustees for the benefit of SPL’s debt holders and CCH’s debt holders, SPL and CCH are required to deposit all cash received into reserve accounts controlled by the collateral trustees. The usage or withdrawal of such cash is restricted to the payment of liabilities related to the Liquefaction Projects and other restricted payments. The majority of the cash held by our subsidiaries that is restricted to Cheniere relates to advance funding for operation and construction needs of the Liquefaction Projects.

NOTE 3—TRADE AND OTHER RECEIVABLES, NET OF CURRENT EXPECTED CREDIT LOSSES

Trade and other receivables, net of current expected credit losses consisted of the following (in millions):



	March 31,		December 31,
	2023		2022
Trade receivables
SPL and CCL	$	391	$	922

Cheniere Marketing	468		917
Other receivables	70		105
Total trade and other receivables, net of current expected credit losses	$	929	$	1,944

NOTE 4—INVENTORY

Inventory consisted of the following (in millions):



	March 31,		December 31,
	2023		2022
LNG in-transit	$	102	$	356
LNG	120		212
Materials	198		194
Natural gas	41		60
Other	4		4
Total inventory	$	465	$	826

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 5—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

Property, plant and equipment, net of accumulated depreciation consisted of the following (in millions):



	March 31,		December 31,
	2023		2022
LNG terminal
Terminal and interconnecting pipeline facilities	$	33,867	$	33,815
Site and related costs	451		451
Construction-in-process	2,143		1,685
Accumulated depreciation	(5,263)		(4,985)
Total LNG terminal, net of accumulated depreciation	31,198		30,966
Fixed assets and other
Computer and office equipment	34		33
Furniture and fixtures	20		20
Computer software	122		121
Leasehold improvements	51		48
Land	1		1
Other	19		19
Accumulated depreciation	(196)		(191)
Total fixed assets and other, net of accumulated depreciation	51		51
Assets under finance leases
Marine assets	526		533
Accumulated depreciation	(28)		(22)
Total assets under finance lease, net of accumulated depreciation	498		511
Property, plant and equipment, net of accumulated depreciation	$	31,747	$	31,528

The following table shows depreciation expense and offsets to LNG terminal costs (in millions):


	Three Months Ended March 31,
		2023		2022
Depreciation expense		$	296	$	270
Offsets to LNG terminal costs (1)		—		204

(1)We recognize offsets to LNG terminal costs 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.

NOTE 6—DERIVATIVE INSTRUMENTS

We have entered into the following derivative instruments:

•commodity derivatives consisting of natural gas and power supply contracts, including those under our IPM agreements, for the development, commissioning and operation of the Liquefaction Projects and associated economic hedges (collectively, “Liquefaction Supply Derivatives”);

•LNG derivatives in which we have contractual net settlement and economic hedges on the exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG (collectively, “LNG Trading Derivatives”); and

•foreign currency exchange (“FX”) contracts to hedge exposure to currency risk associated with cash flows denominated in currencies other than United States dollar (“FX Derivatives”), associated with both LNG Trading Derivatives and operations in countries outside of the United States.

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, in which case such changes are capitalized.

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis (in millions):


	Fair Value Measurements as of
	March 31, 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)	$	34	$	42	$	(5,426)	$	(5,350)	$	(66)	$	(29)	$	(9,924)	$	(10,019)
LNG Trading Derivatives asset (liability)	(16)		(49)		—		(65)		1		(47)		—		(46)
FX Derivatives liability	—		(6)		—		(6)		—		(28)		—		(28)

We value our Liquefaction Supply Derivatives and LNG Trading 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 Liquefaction Supply Derivatives and LNG Trading Derivatives are 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, but not limited to, evaluation of whether the respective market exists from the perspective of market participants as infrastructure is developed.

We include a significant portion of our 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 and volatility.

The Level 3 fair value measurements of our natural gas positions within our 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 Liquefaction Supply Derivatives as of March 31, 2023:

Net Fair Value Liability
(in millions)

Valuation Approach

Significant Unobservable Input

Range of Significant Unobservable Inputs / Weighted Average (1)

Liquefaction Supply Derivatives

$(5,426)

Market approach incorporating present value techniques

Henry Hub basis spread

$(1.173) - $0.370 / $(0.085)

Option pricing model

International LNG pricing spread, relative to Henry Hub (2)

86% - 574% / 178%

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

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

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

Table of Contents

CHENIERE ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table shows the changes in the fair value of our Level 3 Liquefaction Supply Derivatives and LNG Trading Derivatives (in millions):


	Three Months Ended March 31,
		2023	2022
Balance, beginning of period