Derivative Instruments (Tables)
|
6 Months Ended |
Jun. 30, 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 June 30, 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 |
|
June 30, 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 |
$ |
— |
|
|
$ |
(191 |
) |
|
$ |
— |
|
|
$ |
(191 |
) |
|
$ |
— |
|
|
$ |
(81 |
) |
|
$ |
— |
|
|
$ |
(81 |
) |
CCH Interest Rate Forward Start Derivatives liability |
— |
|
|
(102 |
) |
|
— |
|
|
(102 |
) |
|
— |
|
|
(8 |
) |
|
— |
|
|
(8 |
) |
Liquefaction Supply Derivatives asset (liability) |
11 |
|
|
(1 |
) |
|
590 |
|
|
600 |
|
|
5 |
|
|
6 |
|
|
138 |
|
|
149 |
|
LNG Trading Derivatives asset (liability) |
(2 |
) |
|
153 |
|
|
— |
|
|
151 |
|
|
— |
|
|
165 |
|
|
— |
|
|
165 |
|
FX Derivatives asset |
— |
|
|
15 |
|
|
— |
|
|
15 |
|
|
— |
|
|
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 June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
Net Fair Value Asset
(in millions)
|
|
Valuation Approach |
|
Significant Unobservable Input |
|
Range of Significant Unobservable Inputs / Weighted Average (1) |
Physical Liquefaction Supply Derivatives |
|
$590 |
|
Market approach incorporating present value techniques |
|
Henry Hub basis spread |
|
$(0.546) - $0.172 / $(0.023) |
|
|
|
|
Option pricing model |
|
International LNG pricing spread, relative to Henry Hub (2) |
|
46% - 171% / 126% |
|
|
(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 and six months ended June 30, 2020 and 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Balance, beginning of period |
|
$ |
674 |
|
|
$ |
31 |
|
|
$ |
138 |
|
|
$ |
(29 |
) |
Realized and mark-to-market gains: |
|
|
|
|
|
|
|
|
Included in cost of sales |
|
(84 |
) |
|
7 |
|
|
452 |
|
|
23 |
|
Purchases and settlements: |
|
|
|
|
|
|
|
|
Purchases |
|
(4 |
) |
|
50 |
|
|
(3 |
) |
|
50 |
|
Settlements |
|
1 |
|
|
1 |
|
|
(1 |
) |
|
45 |
|
Transfers into Level 3, net (1) |
|
3 |
|
|
— |
|
|
4 |
|
|
— |
|
Balance, end of period |
|
$ |
590 |
|
|
$ |
89 |
|
|
$ |
590 |
|
|
$ |
89 |
|
Change in unrealized gains (losses) relating to instruments still held at end of period |
|
$ |
(84 |
) |
|
$ |
7 |
|
|
$ |
452 |
|
|
$ |
23 |
|
(1)
Transferred into Level 3 as a result of unobservable market, or out of Level 3 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 June 30, 2020 |
|
|
|
|
|
|
CCH Interest Rate Derivatives |
|
$ |
(191 |
) |
|
$ |
— |
|
|
$ |
(191 |
) |
CCH Interest Rate Forward Start Derivatives |
|
(102 |
) |
|
— |
|
|
(102 |
) |
Liquefaction Supply Derivatives |
|
715 |
|
|
(18 |
) |
|
697 |
|
Liquefaction Supply Derivatives |
|
(102 |
) |
|
5 |
|
|
(97 |
) |
LNG Trading Derivatives |
|
163 |
|
|
(2 |
) |
|
161 |
|
LNG Trading Derivatives |
|
(21 |
) |
|
11 |
|
|
(10 |
) |
FX Derivatives |
|
22 |
|
|
(7 |
) |
|
15 |
|
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 June 30, 2020, we had the following Interest Rate Derivatives outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts |
|
|
|
|
|
|
|
|
June 30, 2020 |
|
December 31, 2019 |
|
Term |
|
Weighted Average Fixed Interest Rate Paid |
|
Variable Interest Rate Received |
CCH Interest Rate Derivatives |
|
$4.7 billion |
|
$4.5 billion |
|
May 31, 2022 (1) |
|
2.30% |
|
One-month LIBOR |
CCH Interest Rate Forward Start Derivatives |
|
$250 million |
|
$250 million |
|
September 30, 2020 (2) |
|
2.05% |
|
Three-month LIBOR |
CCH Interest Rate Forward Start Derivatives |
|
$500 million |
|
$500 million |
|
December 31, 2020 (2) |
|
2.06% |
|
Three-month LIBOR |
|
|
(1) |
Represents the maturity date. |
|
|
(2) |
Represents the effective date. These forward start derivatives have terms of 10 years with a mandatory termination date consistent with the effective date.
|
|
| 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 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 Sheets Location |
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
$ |
(100 |
) |
|
$ |
(102 |
) |
|
$ |
(202 |
) |
|
$ |
(32 |
) |
|
$ |
(8 |
) |
|
$ |
(40 |
) |
Non-current derivative liabilities |
(91 |
) |
|
— |
|
|
(91 |
) |
|
(49 |
) |
|
— |
|
|
(49 |
) |
Total derivative liabilities |
$ |
(191 |
) |
|
$ |
(102 |
) |
|
$ |
(293 |
) |
|
$ |
(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 and six months ended June 30, 2020 and 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
CCH Interest Rate Derivatives loss |
|
$ |
(15 |
) |
|
$ |
(67 |
) |
|
$ |
(138 |
) |
|
$ |
(102 |
) |
CCH Interest Rate Forward Start Derivatives loss |
|
(10 |
) |
|
(7 |
) |
|
(95 |
) |
|
(7 |
) |
|
| 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020 |
|
December 31, 2019 |
|
Liquefaction Supply Derivatives (1) |
|
LNG Trading Derivatives (2) |
|
Total |
|
Liquefaction Supply Derivatives (1) |
|
LNG Trading Derivatives (2) |
|
Total |
Consolidated Balance Sheets Location |
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
$ |
133 |
|
|
$ |
138 |
|
|
$ |
271 |
|
|
$ |
93 |
|
|
$ |
225 |
|
|
$ |
318 |
|
Non-current derivative assets |
564 |
|
|
23 |
|
|
587 |
|
|
174 |
|
|
— |
|
|
174 |
|
Total derivative assets |
697 |
|
|
161 |
|
|
858 |
|
|
267 |
|
|
225 |
|
|
492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
(27 |
) |
|
(10 |
) |
|
(37 |
) |
|
(16 |
) |
|
(60 |
) |
|
(76 |
) |
Non-current derivative liabilities |
(70 |
) |
|
— |
|
|
(70 |
) |
|
(102 |
) |
|
— |
|
|
(102 |
) |
Total derivative liabilities |
(97 |
) |
|
(10 |
) |
|
(107 |
) |
|
(118 |
) |
|
(60 |
) |
|
(178 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative asset, net |
$ |
600 |
|
|
$ |
151 |
|
|
$ |
751 |
|
|
$ |
149 |
|
|
$ |
165 |
|
|
$ |
314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount, net (in TBtu) (3) |
10,264 |
|
|
19 |
|
|
|
|
9,177 |
|
|
4 |
|
|
|
|
|
(1) |
Does not include collateral posted with counterparties by us of $2 million and $7 million for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, respectively. Includes derivative assets of $5 million and $3 million as of June 30, 2020 and December 31, 2019,
|
respectively, and non-current assets of $2 million as of both June 30, 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 $17 million and $5 million deposited for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, respectively.
|
(3)
Includes 182 TBtu and 120 TBtu as of June 30, 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 and six months ended June 30, 2020 and 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations Location (1) |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
LNG Trading Derivatives gain (loss) |
LNG revenues |
|
$ |
(34 |
) |
|
$ |
94 |
|
|
$ |
106 |
|
|
$ |
158 |
|
LNG Trading Derivatives gain (loss) |
Cost of sales |
|
34 |
|
|
(51 |
) |
|
— |
|
|
(51 |
) |
Liquefaction Supply Derivatives gain (loss) (2) |
LNG revenues |
|
(13 |
) |
|
(1 |
) |
|
(14 |
) |
|
1 |
|
Liquefaction Supply Derivatives gain (loss) (2)(3) |
Cost of sales |
|
(62 |
) |
|
57 |
|
|
475 |
|
|
139 |
|
|
|
(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 $25 million and $24 million in cost of sales under a natural gas supply contract with a related party during the three months ended June 30, 2020 and 2019, respectively, including $1 million of Liquefaction Supply Derivatives gain and $1 million of Liquefaction Supply Derivatives loss, respectively. During the six months ended June 30, 2020 and 2019, CCL recorded $48 million and $36 million in cost of sales under a natural gas supply contract with a related party, respectively, including $2 million of Liquefaction Supply Derivatives gain and $3 million of Liquefaction Supply Derivatives loss, respectively. As of June 30, 2020 and December 31, 2019, $8 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 Sheets Location |
|
June 30, 2020 |
|
December 31, 2019 |
FX Derivatives |
Derivative assets |
|
$ |
13 |
|
|
$ |
5 |
|
FX Derivatives |
Non-current derivative assets |
|
2 |
|
|
— |
|
FX Derivatives |
Derivative liabilities |
|
— |
|
|
(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 and six months ended June 30, 2020 and 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
Consolidated Statements of Operations Location |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
FX Derivatives gain |
LNG revenues |
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
27 |
|
|
$ |
9 |
|
|