Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments (Tables)

v3.20.1
Derivative Instruments (Tables)
3 Months Ended
Mar. 31, 2020
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 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


Fair Value Measurement Inputs and Valuation Techniques The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of 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.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation
The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives during the three 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 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):
 
 
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
)

Interest Rate Derivatives [Member]  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Schedule of Notional Amounts of Outstanding Derivative Positions
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

Fair Value of Derivative Instruments by Balance Sheet Location
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
)

Derivative Instruments, Gain (Loss)
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 [Member]  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Fair Value of Derivative Instruments by Balance Sheet Location
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.
Derivative Instruments, Gain (Loss)
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 [Member]  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Fair Value of Derivative Instruments by Balance Sheet Location
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
)

Derivative Instruments, Gain (Loss)
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