We have commodity derivatives consisting of natural gas supply contracts, including those under our IPM agreements, for the operation of the Liquefaction Project and expansion project, as well as the associated economic hedges (collectively, the “Liquefaction Supply Derivatives”).

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.


	Fair Value Measurements as of
	June 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)	$	(11)	$	(4)	$	(1,495)	$	(1,510)	$	18	$	1	$	(1,676)	$	(1,657)

We value the Liquefaction Supply 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 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 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. 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 June 30, 2024:

Net Fair Value Liability

(in millions)

Valuation Approach

Significant Unobservable Input

Range of Significant Unobservable Inputs / Weighted Average (1)

Liquefaction Supply Derivatives

$(1,495)

Market approach incorporating present value techniques

Henry Hub basis spread

$(0.648) - $0.415 / $0.007

Option pricing model

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

23% - 394% / 151%


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Balance, beginning of period	$	(1,635)	$	(2,502)	$	(1,676)	$	(3,719)
Realized and change in fair value gains included in net income (1):
Included in cost of sales, existing deals (2)	106		173		98		1,116
Included in cost of sales, new deals (3)	7		3		7		5
Purchases and settlements:
Purchases (4)	—		—		—		—
Settlements (5)	27		71		76		340


Transfers out of level 3 (6)	—		—		—		3
Balance, end of period	$	(1,495)	$	(2,255)	$	(1,495)	$	(2,255)
Favorable changes in fair value relating to instruments still held at the end of the period	$	113	$	176	$	105	$	1,121

(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.

We hold Liquefaction Supply Derivatives which are primarily indexed to the natural gas market and international LNG indices. As of June 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.

The forward notional amount for the Liquefaction Supply Derivatives was approximately 6,053 TBtu and 6,245 TBtu as of June 30, 2024 and December 31, 2023, respectively, inclusive of amounts under contracts with unsatisfied contractual conditions, and exclusive of extension options that were uncertain to be taken as of June 30, 2024.

(1)Does not include the realized value associated with the Liquefaction Supply Derivatives that settle through physical delivery. 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.

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.




	Fair Value Measurements as of (1)
Consolidated Balance Sheets Location	June 30, 2024		December 31, 2023
Current derivative assets	$	18	$	30
Derivative assets	26		40
Total derivative assets	44		70

Current derivative liabilities	(235)		(196)
Derivative liabilities	(1,319)		(1,531)
Total derivative liabilities	(1,554)		(1,727)

Derivative liability, net	$	(1,510)	$	(1,657)

(1)Does not include collateral posted with counterparties by us of $27 million and zero as of June 30, 2024 and December 31, 2023, respectively, which is included in other current assets, net on our Consolidated Balance Sheets, and collateral posted by counterparties to us of zero and $4 million as of June 30, 2024 and December 31, 2023, respectively, which is included in other current liabilities on our Consolidated Balance Sheets.


	Liquefaction Supply Derivatives
	June 30, 2024		December 31, 2023
Gross assets	$	62	$	88
Offsetting amounts	(18)		(18)
Net assets	$	44	$	70

Gross liabilities	$	(1,601)	$	(1,746)
Offsetting amounts	47		19
Net liabilities	$	(1,554)	$	(1,727)