Cheniere Energy, Inc. [LNG] Filings

10-Q 1 lng-20240930.htm 10-Q lng-20240930

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 September 30, 2024

☐ 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.)

845 Texas Avenue, Suite 1250

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	New York Stock Exchange

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 October 25, 2024, the issuer had 224,365,066 shares of Common Stock outstanding.

CHENIERE ENERGY, INC.

TABLE OF CONTENTS

























	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) and Redeemable Non-Controlling Interest	5
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
	Note 1—Nature of Operations and Basis of Presentation	8

	Note 2—Trade and Other Receivables, Net of Current Expected Credit Losses	9
	Note 3—Inventory	9
	Note 4—Property, Plant and Equipment, Net of Accumulated Depreciation	9
	Note 5—Derivative Instruments	10

	Note 6—Non-Controlling Interests and Variable Interest Entities	14
	Note 7—Accrued Liabilities	16
	Note 8—Debt	17
	Note 9—Leases	19
	Note 10—Revenues	20
	Note 11—Related Party Transactions	22
	Note 12—Income Taxes	22

	Note 13—Net Income per Share Attributable to Common Stockholders	23

	Note 14—Share Repurchase Programs	23
	Note 15—Customer Concentration	23
	Note 16—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	37

Part II. Other Information
Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

	Signatures	40

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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/d						billion cubic feet per day

Bcfe						billion cubic feet equivalent
CAMT						corporate alternative minimum tax

DOE						U.S. Department of Energy
EPC						engineering, procurement and construction
ESG						environmental, social and governance
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 U.S. dollars 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 or natural gas index price, less a fixed liquefaction fee, shipping and other costs

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 September 30, 2024, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:

Unless the context requires otherwise, references to 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

BES

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CHENIERE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues
LNG revenues	$	3,554	$	3,974	$	10,633	$	14,984
Regasification revenues	34		34		102		101
Other revenues	175		151		532		486

Total revenues	3,763		4,159		11,267		15,571

Operating costs and expenses (recoveries)
Cost (recovery) of sales (excluding items shown separately below)	1,255		556		4,275		(71)

Operating and maintenance expense	450		445		1,364		1,376

Selling, general and administrative expense	99		102		299		296
Depreciation and amortization expense	306		298		912		892



Other operating costs and expenses	6		3		28		24

Total operating costs and expenses	2,116		1,404		6,878		2,517

Income from operations	1,647		2,755		4,389		13,054

Other income (expense)
Interest expense, net of capitalized interest	(247)		(283)		(770)		(871)
Gain (loss) on modification or extinguishment of debt	—		(3)		(9)		15

Interest and dividend income	41		58		149		147
Other income (expense), net	(3)		4		(1)		7
Total other expense	(209)		(224)		(631)		(702)

Income before income taxes and non-controlling interest	1,438		2,531		3,758		12,352
Less: income tax provision	231		440		550		2,119
Net income	1,207		2,091		3,208		10,233
Less: net income attributable to non-controlling interest	314		390		933		1,729
Net income attributable to Cheniere	$	893	$	1,701	$	2,275	$	8,504

Net income per share attributable to common stockholders—basic (1)	$	3.95	$	7.08	$	9.91	$	35.12
Net income per share attributable to common stockholders—diluted	$	3.93	$	7.03	$	9.88	$	34.87

Weighted average number of common shares outstanding—basic	226.3		240.2		229.6		242.1
Weighted average number of common shares outstanding—diluted	227.0		242.0		230.3		243.9
___________________

(1)Earnings per share may not recalculate 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)


	September 30,		December 31,

	2024		2023
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	2,663	$	4,066
Restricted cash and cash equivalents	413		459
Trade and other receivables, net of current expected credit losses	680		1,106

Inventory	394		445
Current derivative assets	94		141
Margin deposits	102		18

Other current assets, net	109		96
Total current assets	4,455		6,331


Property, plant and equipment, net of accumulated depreciation	33,219		32,456
Operating lease assets	2,859		2,641

Derivative assets	1,661		863

Deferred tax assets	26		26
Other non-current assets, net	855		759
Total assets	$	43,075	$	43,076

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	137	$	181
Accrued liabilities	1,654		1,780

Current debt, net of unamortized discount and debt issuance costs	700		300
Deferred revenue	189		179
Current operating lease liabilities	621		655
Current derivative liabilities	801		750
Other current liabilities	54		43
Total current liabilities	4,156		3,888

Long-term debt, net of unamortized discount and debt issuance costs	22,546		23,397
Operating lease liabilities	2,234		1,971
Finance lease liabilities	495		467

Derivative liabilities	2,217		2,378
Deferred tax liabilities	1,626		1,545
Other non-current liabilities	448		410
Total liabilities	33,722		34,056


Redeemable non-controlling interest	6		—

Stockholders’ equity
Preferred stock: $0.0001 par value, 5.0 million shares authorized, none issued	—		—
Common stock: $0.003 par value, 480.0 million shares authorized; 278.5 million shares and 277.9 million shares issued at September 30, 2024 and December 31, 2023, respectively	1		1



Treasury stock: 53.1 million shares and 40.9 million shares at September 30, 2024 and December 31, 2023, respectively, at cost	(5,853)		(3,864)
Additional paid-in-capital	4,436		4,377
Retained earnings	6,518		4,546
Total Cheniere stockholders’ equity	5,102		5,060
Non-controlling interest	4,245		3,960
Total stockholders’ equity	9,347		9,020
Total liabilities, redeemable non-controlling interest and stockholders’ equity	$	43,075	$	43,076

(1)Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), substantially all of which are related to CQP, as further discussed in Note 6—Non-Controlling Interests and Variable Interest Entities. As of September 30, 2024, total assets and liabilities of our VIEs were $17.2 billion and $18.0 billion, respectively, including $331 million of cash and cash equivalents and $103 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) AND REDEEMABLE NON-CONTROLLING INTEREST

(in millions)

(unaudited)


Three and Nine Months Ended September 30, 2024
	Total Stockholders’ Equity
	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Non-controlling Interest		Total Equity		Redeemable Non-Controlling Interest (1)
	Shares	Par Value Amount		Shares	Amount





















Balance at December 31, 2023	237.0	$	1	40.9	$	(3,864)	$	4,377	$	4,546	$	3,960	$	9,020	$	—
Vesting of share-based compensation awards	0.6	—		—	—		—		—		—		—		—
Share-based compensation	—	—		—	—		34		—		—		34		—
Issued shares withheld from employees related to share-based compensation, at cost	—	—		—	—		(40)		—		—		(40)		—
Shares repurchased, at cost	(7.5)	—		7.5	(1,203)		—		—		—		(1,203)		—

Net income	—	—		—	—		—		502		337		839		—
Contributions from redeemable non-controlling interest	—	—		—	—		—		—		—		—		4
Distributions to non-controlling interest	—	—		—	—		—		—		(253)		(253)		—
Dividends declared ($0.435 per common share)	—	—		—	—		—		(103)		—		(103)		—

Balance at March 31, 2024	230.1	1		48.4	(5,067)		4,371		4,945		4,044		8,294		4
Share-based compensation	—	—		—	—		36		—		—		36		—
Issued shares withheld from employees related to share-based compensation, at cost	—	—		—	—		(1)		—		—		(1)		—
Shares repurchased, at cost	(3.1)	—		3.1	(501)		—		—		—		(501)		—
Net income	—	—		—	—		—		880		282		1,162		—
Contributions from redeemable non-controlling interest	—	—		—	—		—		—		—		—		2
Distributions to non-controlling interest	—	—		—	—		—		—		(198)		(198)		—
Dividends declared ($0.435 per common share declared on April 26, 2024 and $0.435 per common share declared on June 17, 2024)	—	—		—	—		—		(200)		—		(200)		—
Balance at June 30, 2024	227.0	1		51.5	(5,568)		4,406		5,625		4,128		8,592		6

Share-based compensation	—	—		—	—		34		—		—		34		—
Issued shares withheld from employees related to share-based compensation, at cost	—	—		—	—		(4)		—		—		(4)		—
Shares repurchased, at cost	(1.6)	—		1.6	(285)		—		—		—		(285)		—
Net income	—	—		—	—		—		893		314		1,207		—

Distributions to non-controlling interest	—	—		—	—		—		—		(197)		(197)		—


Balance at September 30, 2024	225.4	$	1	53.1	$	(5,853)	$	4,436	$	6,518	$	4,245	$	9,347	$	6

(1)Redeemable non-controlling interest represents the economic interest held by a third party in one of our consolidated VIEs that is redeemable for cash under certain circumstances, including those that are outside of our control. As such, the economic interest is not a component of permanent equity on our Consolidated Balance Sheets.

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

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Three and Nine Months Ended September 30, 2023
	Total Stockholders’ Equity (Deficit)
	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Non-controlling Interest		Total Equity (Deficit)		Redeemable Non-Controlling Interest
	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	—	—		—	—		—		5,434		1,001		6,435		—
Distributions to non-controlling interest	—	—		—	—		—		—		(261)		(261)		—
Dividends declared ($0.395 per common share)	—	—		—	—		—		(98)		—		(98)		—

Balance at March 31, 2023	243.2	1		34.5	(2,821)		4,328		394		3,538		5,440		—

Share-based compensation	—	—		—	—		36		—		—		36		—
Issued shares withheld from employees related to share-based compensation, at cost	—	—		—	—		(1)		—		—		(1)		—
Shares repurchased, at cost	(2.3)	—		2.3	(341)		—		—		—		(341)		—
Net income	—	—		—	—		—		1,369		338		1,707		—
Distributions to non-controlling interest	—	—		—	—		—		—		(252)		(252)		—
Dividends declared ($0.395 per common share)	—	—		—	—		—		(97)		—		(97)		—

Balance at June 30, 2023	240.9	1		36.8	(3,162)		4,363		1,666		3,624		6,492		—
Vesting of share-based compensation awards	0.1	—		—	—		—		—		—		—		—
Share-based compensation	—	—		—	—		37		—		—		37		—
Issued shares withheld from employees related to share-based compensation, at cost	—	—		—	—		(6)		—		—		(6)		—
Shares repurchased, at cost	(2.2)	—		2.2	(360)		—		—		—		(360)		—
Net income	—	—		—	—		—		1,701		390		2,091		—
Distributions to non-controlling interest	—	—		—	—		—		—		(251)		(251)		—
Dividends declared ($0.395 per common share)	—	—		—	—		—		(96)		—		(96)		—
Balance at September 30, 2023	238.8	$	1	39.0	$	(3,522)	$	4,394	$	3,271	$	3,763	$	7,907	$	—

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)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities
Net income	$	3,208	$	10,233
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized foreign currency exchange loss (gain), net	4		(2)
Depreciation and amortization expense	912		892
Share-based compensation expense	140		128

Amortization of discount and debt issuance costs	32		34
Reduction of right-of-use assets	500		464
Loss (gain) on modification or extinguishment of debt	9		(15)
Total gains on derivative instruments, net	(861)		(6,839)
Net cash used for settlement of derivative instruments	—		(96)


Deferred taxes	93		2,015

Other, net	14		3
Changes in operating assets and liabilities:
Trade and other receivables	427		1,134

Inventory	50		422
Margin deposits	(85)		61

Other non-current assets	(55)		(35)
Accounts payable and accrued liabilities	(207)		(1,261)

Total deferred revenue	24		27
Total operating lease liabilities	(489)		(456)

Other, net	37		(11)
Net cash provided by operating activities	3,753		6,698

Cash flows from investing activities
Property, plant and equipment, net	(1,669)		(1,430)

Investment in equity method investments	(12)		(36)
Other	(25)		(12)
Net cash used in investing activities	(1,706)		(1,478)

Cash flows from financing activities
Proceeds from issuances of debt	2,725		1,397
Redemptions, repayments and repurchases of debt	(3,171)		(2,548)



Distributions to non-controlling interest	(648)		(764)

Payments related to tax withholdings for share-based compensation	(45)		(62)
Repurchase of common stock	(1,981)		(1,132)
Dividends to stockholders	(300)		(291)

Other, net	(73)		(26)
Net cash used in financing activities	(3,493)		(3,426)

Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents	(3)		2

Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents	(1,449)		1,796
Cash, cash equivalents and restricted cash and cash equivalents—beginning of period	4,525		2,487
Cash, cash equivalents and restricted cash and cash equivalents—end of period	$	3,076	$	4,283

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. We also own and operate a 94-mile natural gas supply pipeline that interconnects the Sabine Pass LNG Terminal with several large interstate and intrastate pipelines (the “Creole Trail Pipeline”). As of September 30, 2024, we owned 100% of the general partner interest, a 48.6% limited partner interest and 100% of the incentive distribution rights of 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”) consisting of seven midscale Trains with an expected total production capacity of over 10 mtpa of LNG. We also own a 21.5-mile natural gas supply pipeline that interconnects the Corpus Christi LNG Terminal with several large interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the existing assets at the Corpus Christi LNG Terminal and the Corpus Christi Stage 3 Project, the “CCL Project”).

We are pursuing expansion projects to provide additional liquefaction capacity at the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”), and we have commenced commercialization to support the additional liquefaction capacity associated with these potential expansion projects. 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, these Consolidated Financial Statements 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, 2023.

Results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2024.

Recent Accounting Standards

ASU 2023-07

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280). This guidance requires a public entity, including entities with a single reportable segment, to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. We plan to adopt this guidance and conform with the applicable disclosures retrospectively when it becomes mandatorily effective for our annual report for the year ending December 31, 2024.

ASU 2023-09

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740). This guidance further enhances income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. We plan to adopt this guidance and conform with the disclosure requirements when it becomes mandatorily effective for our annual report for the year ending December 31, 2025.

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 2—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):


	September 30,		December 31,

	2024		2023
Trade receivables
SPL and CCL	$	364	$	525

Cheniere Marketing	242		451
Other	4		4
Other receivables	70		126
Total trade and other receivables, net of current expected credit losses	$	680	$	1,106

NOTE 3—INVENTORY

Inventory consisted of the following (in millions):


	September 30,		December 31,

	2024		2023
Materials	$	220	$	207
LNG	74		88
LNG in-transit	80		112
Natural gas	18		35
Other	2		3
Total inventory	$	394	$	445

NOTE 4—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

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


	September 30,		December 31,

	2024		2023
Terminal and related assets
Terminal and interconnecting pipeline facilities	$	34,209	$	34,069
Land	466		463
Construction-in-process	4,934		3,480
Accumulated depreciation	(6,948)		(6,099)
Total terminal and related assets, net of accumulated depreciation	32,661		31,913
Fixed assets and other
Computer and office equipment	39		37
Furniture and fixtures	31		31
Computer software	129		125
Leasehold improvements	44		43

Other	24		21
Accumulated depreciation	(196)		(183)
Total fixed assets and other, net of accumulated depreciation	71		74
Assets under finance leases
Marine assets	583		532
Accumulated depreciation	(96)		(63)
Total assets under finance leases, net of accumulated depreciation	487		469
Property, plant and equipment, net of accumulated depreciation	$	33,219	$	32,456

Depreciation expense was $304 million and $296 million during the three months ended September 30, 2024 and 2023, respectively, and $907 million and $887 million during the nine months ended September 30, 2024 and 2023, respectively.

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(unaudited)

NOTE 5—DERIVATIVE INSTRUMENTS

We have entered into the following derivative instruments:

•commodity derivatives consisting of the following (collectively, “Commodity Derivatives”):

◦natural gas and power supply contracts, including those under our IPM agreements, for the development, commissioning and operation of the Liquefaction Projects and expansion projects, as well as the associated economic hedges (collectively, the “Liquefaction Supply Derivatives”); and,

◦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 U.S. 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, fair value or net investment 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.

The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis, distinguished by the fair value hierarchy levels prescribed by GAAP (in millions):


	Fair Value Measurements as of
	September 30, 2024								December 31, 2023
	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)	$	(2)	$	2	$	(1,268)	$	(1,268)	$	25	$	36	$	(2,178)	$	(2,117)
LNG Trading Derivatives asset (liability)	(4)		13		—		9		30		(20)		—		10
FX Derivatives liability	—		(4)		—		(4)		—		(17)		—		(17)

We value the Liquefaction Supply Derivatives and LNG Trading Derivatives using a market or option-based approach incorporating present value techniques, as needed, which incorporates 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.

We include a significant portion of the 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 may use in valuing the asset or liability. To the extent valued using an option pricing model, we consider the future prices of energy units for unobservable periods to be a significant unobservable input to estimated net fair value. In estimating the future prices of energy units, we make judgments about market risk related to liquidity of commodity indices and volatility utilizing available market data. Changes in facts and circumstances or additional information may result in revised estimates and judgments, and actual results may differ from these estimates and judgments. We derive our volatility assumptions based on observed historical settled global LNG market pricing or accepted proxies for global LNG market pricing as well as settled domestic natural gas pricing. Such volatility assumptions also contemplate, as of the balance sheet date, observable forward curve data of such indices, as well as evolving available industry data and independent studies.

In developing our volatility assumptions, we acknowledge that the global LNG industry is inherently influenced by events such as unplanned supply constraints, geopolitical incidents, unusual climate events including drought and uncommonly mild, by historical standards, winters and summers, and real or threatened disruptive operational impacts to global energy

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

infrastructure. Our current estimate of volatility includes the impact of otherwise rare events unless we believe market participants would exclude such events on account of their assertion that those events were specific to our company and deemed within our control. As applicable to our natural gas supply contracts, our fair value estimates incorporate market participant-based assumptions pertaining to certain contractual uncertainties, including those related to the availability of market information for delivery points, as well as the timing of satisfaction of certain events or development of infrastructure to support natural gas gathering and transport. We may recognize changes in fair value through earnings that could significantly impact our results of operations if and when such uncertainties are resolved.

The Level 3 fair value measurements of our natural gas positions within the 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 the Level 3 Liquefaction Supply Derivatives as of September 30, 2024:

Net Fair Value Liability

(in millions)

Valuation Approach

Significant Unobservable Input

Range of Significant Unobservable Inputs / Weighted Average (1)

Liquefaction Supply Derivatives

$(1,268)

Market approach incorporating present value techniques

Henry Hub basis spread

$(1.230) - $0.481 / $(0.117)

Option pricing model

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

70% - 411% / 186%

(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 the Liquefaction Supply Derivatives.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Balance, beginning of period	$	(1,729)	$	(4,611)	$	(2,178)	$	(9,924)
Realized and change in fair value gains (losses) included in net income (1):
Included in cost of sales, existing deals (2)	256		1,197		470		5,350
Included in cost of sales, new deals (3)	(4)		8		11		26
Purchases and settlements:
Purchases (4)	—		—		—		—
Settlements (5)	204		187		426		1,323


Transfers out of level 3 (6)	5		3		3		9
Balance, end of period	$	(1,268)	$	(3,216)	$	(1,268)	$	(3,216)
Favorable changes in fair value relating to instruments still held at the end of the period	$	252	$	1,205	$	481	$	5,376

(1)Does not include the realized value associated with derivative instruments that settle through physical delivery, as settlement is equal to the contractually fixed price from trade date multiplied by contractual volume. See settlements line item in this table.

(2)Impact to earnings on deals that existed at the beginning of the period and continue to exist at the end of the period.

(3)Impact to earnings on deals that were entered into during the reporting period and continue to exist at the end of the period.

(4)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.

(5)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.

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(6)Transferred out of Level 3 as a result of observable market for the underlying natural gas purchase agreements.

Commodity Derivatives

We hold Liquefaction Supply Derivatives which are primarily indexed to the natural gas market and international LNG indices. As of September 30, 2024, the remaining fixed terms of the Liquefaction Supply Derivatives ranged up to approximately 15 years, some of which commence or accelerate upon the satisfaction of certain events or development of infrastructure to support natural gas gathering and transport.

Cheniere Marketing has historically entered into, and may from time to time enter into, LNG transactions that provide for contractual net settlement. Such transactions are accounted for as LNG Trading Derivatives along with financial commodity contracts in the form of swaps or futures. The terms of LNG Trading Derivatives range up to approximately one year.

The following table shows the notional amounts of our Commodity Derivatives:

September 30, 2024

December 31, 2023

Liquefaction Supply Derivatives (1)

LNG Trading Derivatives

Liquefaction Supply Derivatives (1)

LNG Trading Derivatives

Notional amount, net (in TBtu)

13,025

14,019

(1)Inclusive of amounts under contracts with unsatisfied contractual conditions and exclusive of extension options that were uncertain to be taken as of both September 30, 2024 and December 31, 2023.

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)	Three Months Ended September 30,				Nine Months Ended September 30,
		2024		2023		2024		2023

LNG Trading Derivatives	LNG revenues	$	(3)	$	19	$	14	$	34
LNG Trading Derivatives	Recovery (cost) of sales	(7)		(8)		(27)		(95)
Liquefaction Supply Derivatives (2)	LNG revenues	(2)		1		—		(5)
Liquefaction Supply Derivatives (2)	Recovery (cost) of sales	490		1,403		869		6,900

(1)Fair value fluctuations associated with activities of our Commodity Derivatives 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 the Liquefaction Supply Derivatives that settle through physical delivery.

FX Derivatives

Cheniere Marketing holds FX Derivatives to protect against the volatility in future cash flows attributable to changes in international currency exchange rates. The FX Derivatives are executed primarily to economically hedge the foreign currency exposure arising from cash flows expended for both physical and financial LNG transactions that are denominated in a currency other than the U.S. dollar. The terms of FX Derivatives range up to approximately one year.

The total notional amount of our FX Derivatives was $507 million and $789 million as of September 30, 2024 and December 31, 2023, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table shows the effect and location of our FX Derivatives recorded on our Consolidated Statements of Operations (in millions):


		Gain (Loss) Recognized in Consolidated Statements of Operations
	Consolidated Statements of Operations Location	Three Months Ended September 30,				Nine Months Ended September 30,
		2024		2023		2024		2023
FX Derivatives	LNG revenues	$	(10)	$	13	$	5	$	5

Fair Value and Location of Derivative Assets and Liabilities on the Consolidated Balance Sheets

All existing counterparty derivative contracts provide for the unconditional right of set-off in the event of default. We have elected to report derivative assets and liabilities arising from those derivative contracts with the same counterparty and the unconditional contractual right of set-off on a net basis. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments, in instances when our derivative instruments are in an asset position. Additionally, counterparties are at risk that we will be unable to meet our commitments in instances where our derivative instruments are in a liability position. We incorporate both our own nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements depending on the position of the derivative. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of any applicable credit enhancements, such as collateral postings, set-off rights and guarantees.

The following table shows the fair value and location of our derivative instruments on our Consolidated Balance Sheets (in millions):


	September 30, 2024
	Liquefaction Supply Derivatives (1)		LNG Trading Derivatives (2)		FX Derivatives		Total
Consolidated Balance Sheets Location
Current derivative assets	$	62	$	32	$	—	$	94
Derivative assets	1,661		—		—		1,661
Total derivative assets	1,723		32		—		1,755

Current derivative liabilities	(774)		(23)		(4)		(801)
Derivative liabilities	(2,217)		—		—		(2,217)
Total derivative liabilities	(2,991)		(23)		(4)		(3,018)

Derivative asset (liability), net	$	(1,268)	$	9	$