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Financial Instruments (Tables)
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9 Months Ended |
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Sep. 30, 2012
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] |
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| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis |
The following table (in thousands) shows the fair value of our derivative assets and liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011, which are classified as other current assets, other current liabilities and other non-current liabilities in our Consolidated Balance Sheets.
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Fair Value Measurements as of |
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September 30, 2012 |
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December 31, 2011 |
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Quoted Prices in Active Markets
(Level 1)
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Significant Other Observable Inputs (Level 2) |
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Significant Unobservable Inputs (Level 3) |
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Total |
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Quoted Prices in Active Markets
(Level 1)
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Significant Other Observable Inputs (Level 2) |
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Significant Unobservable Inputs (Level 3) |
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Total |
LNG Inventory Derivatives asset (liability) |
$ |
— |
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$ |
(222 |
) |
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$ |
— |
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$ |
(222 |
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$ |
— |
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$ |
1,951 |
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$ |
— |
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$ |
1,951 |
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Fuel Derivatives asset (liability) |
— |
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60 |
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— |
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60 |
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— |
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(1,415 |
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— |
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(1,415 |
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Interest Rate Derivatives (liability) |
— |
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(29,676 |
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— |
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(29,676 |
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— |
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— |
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— |
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— |
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| Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance |
The following table (in thousands) shows the changes in the fair value and settlements of our LNG Inventory Derivatives recorded in marketing and trading revenues (losses) on our Consolidated Statements of Operations during the three and nine months ended September 30, 2012 and 2011:
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2012 |
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2011 |
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2012 |
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2011 |
LNG Inventory Derivatives |
$ |
(265 |
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$ |
838 |
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$ |
599 |
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$ |
384 |
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The following table (in thousands) shows the changes in the fair value and settlements of our Fuel Derivatives recorded in derivative gain (loss) on our Consolidated Statements of Operations during the three and nine months ended September 30, 2012 and 2011:
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2012 |
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2011 |
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2012 |
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2011 |
Fuel Derivatives |
$ |
287 |
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$ |
(716 |
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$ |
(288 |
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$ |
(1,164 |
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| Schedule of Notional Amounts of Outstanding Derivative Positions |
At September 30, 2012, Sabine Pass Liquefaction had the following Interest Rate Derivatives outstanding that converted $20.0 million of the Liquefaction Credit Facility from a variable to a fixed interest rate. Sabine Pass Liquefaction pays a fixed interest rate on the swap and in exchange receives a variable interest rate based on the one-month LIBOR.
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Initial Notional Amount |
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Maximum Notional Amount |
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Effective Date |
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Maturity Date |
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Weighted Average Fixed Interest Rate Paid |
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Variable Interest Rate Received |
$20.0 million |
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$2.9 billion |
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August 14, 2012 |
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July 31, 2019 |
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1.98% |
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One-month LIBOR |
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| Schedule of Interest Rate Derivatives |
The following table (in thousands) shows our Interest Rate Derivatives market adjustments recorded during the three and nine months ended September 30, 2012:
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Gain (Loss) in Other Comprehensive Income |
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Gain (Loss) Reclassified from Accumulated OCI into Interest Expense (Effective Portion) |
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Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
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2012 |
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2011 |
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2012 |
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2011 |
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2012 |
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2011 |
Interest Rate Derivatives |
$ |
(29,676 |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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| Fair Value, by Balance Sheet Grouping |
The following table (in thousands) shows the fair value of our interest rate swaps:
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Fair Value Measurements as of |
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Balance Sheet Location |
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September 30, 2012 |
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December 31, 2011 |
Interest Rate Derivatives |
Other current liabilities |
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$ |
(292 |
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$ |
— |
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Interest Rate Derivatives |
Non-current derivative liabilities |
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(29,384 |
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| Schedule of Financial Instruments |
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September 30, 2012 |
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December 31, 2011 |
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Carrying
Amount
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Estimated
Fair Value
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Carrying
Amount
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Estimated
Fair Value
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2013 Notes (1) |
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$ |
550,000 |
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$ |
585,750 |
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$ |
550,000 |
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$ |
555,500 |
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2016 Notes, net of discount (1) |
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1,645,939 |
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1,773,499 |
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1,642,418 |
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1,650,630 |
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Convertible Senior Unsecured Notes, net of discount (2) |
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— |
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— |
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194,724 |
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186,740 |
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2007 Term Loan (3) |
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— |
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— |
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298,000 |
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292,728 |
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2008 Loans (4) |
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— |
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— |
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282,293 |
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282,293 |
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Liquefaction Credit Facility (5) |
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100,000 |
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100,000 |
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— |
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— |
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(1) |
The Level 2 estimated fair value of the Senior Notes, net of discount, was based on quotations obtained from broker-dealers who make markets in these and similar instruments based on the closing trading prices on September 30, 2012 and December 31, 2011, as applicable.
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(2) |
The Level 2 estimated fair value of our Convertible Senior Unsecured Notes was based on the closing trading price on December 31, 2011. We repaid in full the Convertible Senior Unsecured Notes in August 2012.
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(3) |
The 2007 Term Loan was closely held by few holders, and purchases and sales were infrequent and were conducted on a bilateral basis without price discovery by us. This loan was not rated and had unique covenants and collateral packages such that comparisons to other instruments were imprecise. Nonetheless, we provided an estimate of the fair value of this loan as of December 31, 2011 based on an index of the yield to maturity of CCC rated debt of other companies in the energy sector, resulting in Level 3 categorization. In January 2012, the 2007 Term Loan was paid in full.
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(4) |
The Level 3 estimated fair value of the 2008 Loans as of December 31, 2011 was determined to be the same as the carrying amount due to our ability to call the debt (other than the debt held by Scorpion) at anytime without penalty or a make-whole payment for an early redemption. In April 2012, Scorpion exchanged all $8.4 million of its loan for 1.7 million shares of Cheniere common stock and $1.4 million cash. In June 2012, the 2008 Loans were paid in full and the credit agreement and related agreements were terminated.
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(5) |
The Level 3 estimated fair value of the Liquefaction Credit Facility was determined to be the carrying amount due to our ability to call this debt at anytime without penalty. |
The following table (in thousands) shows the fair value and location of our LNG Inventory and Fuel Derivatives on our Consolidated Balance Sheets:
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Fair Value Measurements as of |
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Balance Sheet Location |
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September 30, 2012 |
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December 31, 2011 |
LNG Inventory Derivatives asset (liability) |
Prepaid expenses and other (other current liabilities) |
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$ |
(222 |
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$ |
1,951 |
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Fuel Derivatives asset (liability) |
Prepaid expenses and other (other current liabilities) |
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60 |
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(1,415 |
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