Annual report pursuant to Section 13 and 15(d)

Derivative Instruments (Tables)

v3.22.4
Derivative Instruments (Tables)
 12 Months Ended
Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Fair Value of Derivative Assets and Liabilities
The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis (in millions):
Fair Value Measurements as of
December 31, 2022 December 31, 2021
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
Interest Rate Derivatives liability $ —  $ —  $ —  $ —  $ —  $ (40) $ —  $ (40)
Liquefaction Supply Derivatives asset (liability) (66) (29) (9,924) (10,019) 7  (9) (4,036) (4,038)
LNG Trading Derivatives asset (liability) 1  (47) —  (46) (22) (378) —  (400)
FX Derivatives asset (liability) —  (28) —  (28) —  12  —  12 
Fair Value Measurement Inputs and Valuation Techniques The following table includes quantitative information for the unobservable inputs for our Level 3 Liquefaction Supply Derivatives as of December 31, 2022:
Net Fair Value Liability
(in millions)		 Valuation Approach Significant Unobservable Input Range of Significant Unobservable Inputs / Weighted Average (1)
Liquefaction Supply Derivatives $(9,924) Market approach incorporating present value techniques Henry Hub basis spread
$(1.775) - $0.660 / $(0.154)
Option pricing model International LNG pricing spread, relative to Henry Hub (2)
73% - 532% / 163%
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
(2)Spread contemplates U.S. dollar-denominated pricing.
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
The following table shows the changes in the fair value of our Level 3 Liquefaction Supply Derivatives and LNG Trading Derivatives (in millions):
Year Ended December 31,
2022
2021 (1)
 2020
Balance, beginning of period $ (4,036) $ 241  $ 138 
Realized and change in fair value gains (losses) included in net income (2):
Included in cost of sales, existing deals (3) (5,120) (2,509) 156 
Included in cost of sales, new deals (4) (1,373) (1,796) — 
Purchases and settlements:
Purchases (5) —  (1) 5 
Settlements (6) 605  29  (65)
Transfers in and/or out of level 3
Transfers into level 3 (7) —  —  7 
Balance, end of period $ (9,924) $ (4,036) $ 241 
Favorable (unfavorable) changes in fair value relating to instruments still held at the end of the period
 $ (6,493) $ (4,305) $ 156 
(1)Includes amounts recorded related to natural gas supply contracts that CCL had with a related party. The agreement ceased to be considered a related party agreement during 2021, as discussed in Note 14—Related Party Transactions.
(2)Does not include the realized value associated with derivative instruments that settle through physical delivery, as settlement is equal to contractually fixed price from trade date multiplied by contractual volume.  See settlements line item in this table.
(3)Impact to earnings on deals that existed at the beginning of the period and continue to exist at the end of the period.
(4)Impact to earnings on deals that were entered into during the reporting period and continue to exist at the end of the period.
(5)Includes any day one gain (loss) recognized during the reporting period on deals that were entered into during the reporting period which continue to exist at the end of the period, in addition to any derivative contracts acquired from entities at a value other than zero on acquisition date, such as derivatives assigned or novated during the reporting period and continuing to exist at the end of the period.
(6)Roll-off in the current period of amounts recognized in our Consolidated Balance Sheets at the end of the previous period due to settlement of the underlying instruments in the current period.
(7)Transferred into level 3 as a result of unobservable market for the underlying natural gas purchase agreements.
Fair Value of Derivative Instruments by Balance Sheet Location
The following table shows the fair value and location of our derivative instruments on our Consolidated Balance Sheets (in millions):
December 31, 2022
CCH Interest Rate Derivatives
Liquefaction Supply Derivatives (1)
LNG Trading Derivatives (2)
FX Derivatives
 Total
Consolidated Balance Sheets Location
Current derivative assets $ —  $ 36  $ 84  $ —  $ 120 
Derivative assets —  35  —  —  35 
Total derivative assets —  71  84  —  155 
Current derivative liabilities —  (2,143) (130) (28) (2,301)
Derivative liabilities —  (7,947) —  —  (7,947)
Total derivative liabilities —  (10,090) (130) (28) (10,248)
Derivative liability, net $ —  $ (10,019) $ (46) $ (28) $ (10,093)
December 31, 2021
CCH Interest Rate Derivatives
Liquefaction Supply Derivatives (1)
LNG Trading Derivatives (2)
FX Derivatives
 Total
Consolidated Balance Sheets Location
Current derivative assets $ —  $ 38  $ 2  $ 15  $ 55 
Derivative assets —  69  —  —  69 
Total derivative assets —  107  2  15  124 
Current derivative liabilities (40) (644) (402) (3) (1,089)
Derivative liabilities —  (3,501) —  —  (3,501)
Total derivative liabilities (40) (4,145) (402) (3) (4,590)
Derivative asset (liability), net $ (40) $ (4,038) $ (400) $ 12  $ (4,466)
(1)Does not include collateral posted with counterparties by us of $111 million and $20 million as of December 31, 2022 and 2021, respectively, which are included in margin deposits in our Consolidated Balance Sheets.
(2)Does not include collateral posted with counterparties by us of $23 million and $745 million, as of December 31, 2022 and 2021, respectively, which are included in margin deposits in our Consolidated Balance Sheets.
Derivative Net Presentation on Consolidated Balance Sheets
The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions) for our derivative instruments that are presented on a net basis on our Consolidated Balance Sheets:
Liquefaction Supply Derivatives
LNG Trading Derivatives
FX Derivatives
As of December 31, 2022
Gross assets $ 76  $ 87  $ — 
Offsetting amounts (5) (3) — 
Net assets $ 71  $ 84  $ — 
Gross liabilities $ (10,436) $ (132) $ (29)
Offsetting amounts 346  2  1 
Net liabilities $ (10,090) $ (130) $ (28)
As of December 31, 2021
Gross assets $ 155  $ 10  $ 48 
Offsetting amounts (48) (8) (33)
Net assets $ 107  $ 2  $ 15 
Gross liabilities $ (4,382) $ (551) $ (10)
Offsetting amounts 237  149  7 
Net liabilities $ (4,145) $ (402) $ (3)
Interest Rate Derivatives [Member]  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Schedule of Notional Amounts of Outstanding Derivative Positions
CCH previously entered into the following Interest Rate Derivatives to protect against volatility of future cash flows and hedge a portion of the variable interest payments on the CCH Credit Facility, which expired in May 2022:
Notional Amounts
December 31, 2022 December 31, 2021 Weighted Average Fixed Interest Rate Paid Variable Interest Rate Received
CCH Interest Rate Derivatives $— $4.5 billion 2.30% One-month LIBOR
Derivative Instruments, Gain (Loss)
The following table shows the effect and location of our Interest Rate Derivatives on our Consolidated Statements of Operations (in millions):
Gain (Loss) Recognized in Consolidated Statements of Operations
Consolidated Statements of Operations Location Year Ended December 31,
2022 2021 2020
CCH Interest Rate Derivatives Interest rate derivative gain (loss), net $ 2  $ (1) $ (138)
CCH Interest Rate Forward Start Derivatives Interest rate derivative gain (loss), net —  —  (95)
Commodity Derivatives [Member]  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Schedule of Notional Amounts of Outstanding Derivative Positions
The following table shows the notional amounts of our Liquefaction Supply Derivatives and LNG Trading Derivatives (collectively, “Commodity Derivatives”):
December 31, 2022 December 31, 2021
Liquefaction Supply Derivatives (1) LNG Trading Derivatives Liquefaction Supply Derivatives LNG Trading Derivatives
Notional amount, net (in TBtu) 14,504  50  11,238  33 
(1)Excludes notional amounts associated with extension options that were uncertain to be taken as of December 31, 2022.
Derivative Instruments, Gain (Loss)
The following table shows the effect and location of our Commodity Derivatives recorded on our Consolidated Statements of Operations (in millions):
Gain (Loss) Recognized in Consolidated Statements of Operations
Consolidated Statements of Operations Location (1) Year Ended December 31,
2022 2021 2020
LNG Trading Derivatives LNG revenues $ (387) $ (1,812) $ (26)
LNG Trading Derivatives Cost of sales (2) 91  (42)
Liquefaction Supply Derivatives (2) LNG revenues 2  3  (1)
Liquefaction Supply Derivatives (2) Cost of sales (3) (6,203) (4,303) 94 
(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 value associated with derivative instruments that settle through physical delivery.
(3)Includes amounts recorded related to natural gas supply contracts that CCL had with a related party. The agreement ceased to be considered a related party agreement during 2021, as discussed in Note 14—Related Party Transactions.
FX Derivatives [Member]  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Derivative Instruments, Gain (Loss)
The following table shows the effect and location of our FX Derivatives recorded on our Consolidated Statements of Operations (in millions):
Gain Recognized in Consolidated Statements of Operations
Consolidated Statements of Operations Location Year Ended December 31,
2022 2021 2020
FX Derivatives LNG revenues $ 57  $ 33  $ (3)