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Fair value
9 Months Ended
Sep. 30, 2019
Fair value [Abstract]  
Fair value
5.
Fair value
 
Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:
 
Level 1 – observable inputs such as quoted prices in active markets for identical assets or liabilities.
 
Level 2 – inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.
 
Level 3 – unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants price the asset or liability.
 
The valuation techniques that may be used to measure fair value are as follows:
 
Market approach – uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
 
Income approach – uses valuation techniques, such as discounted cash flow technique, to convert future amounts to a single present amount based on current market expectations about those future amounts.
 
Cost approach – based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).
 
The following table presents the Company’s financial assets and financial liabilities that are measured at fair value as of September 30, 2019:
 
  
September 30, 2019
  
Level 1
  
Level 2
  
Level 3
  
Total
 
Valuation technique
Assets
                 
Cash and cash equivalents
 
$
178,187
  
$
  
$
  
$
178,187
 
Market approach
Restricted cash
  
65,871
   
   
   
65,871
 
Market approach
Investment in equity securities
  
1,529
   
   
   
1,529
 
Market approach
Total
 
$
245,587
  
$
  
$
  
$
245,587
  
Liabilities
                
Derivative liability(1)
 
$
  
$
  
$
9,729
  
$
9,729
 
Income approach
Equity agreement(2)
  
   
   
16,904
   
16,904
 
Income approach
Total
 
$
  
$
  
$
26,633
  
$
26,633
  


(1)
Consideration due to the sellers of Shannon LNG (as defined in “Note 11. Intangible Assets” below) once first gas is supplied from the terminal to be built.
(2)
To be paid in shares at the earlier of agreed-upon date in 2020 or the commencement of significant construction activities specified in the Shannon LNG Agreement.
 
The following table presents the Company’s financial assets and financial liabilities that are measured at fair value as of December 31, 2018:
 
  
December 31, 2018
  
Level 1
  
Level 2
  
Level 3
  
Total
 
Valuation technique
Assets
            
Cash and cash equivalents
 
$
78,301
  
$
  
$
  
$
78,301
 
Market approach
Restricted cash
  
22,552
   
   
   
22,552
 
Market approach
Investment in equity securities
  
3,656
   
   
   
3,656
 
Market approach
Total
 
$
104,509
  
$
  
$
  
$
104,509
 
Liabilities
                
Derivative liability
 
$
  
$
  
$
9,835
  
$
9,835
 
Income approach
Equity agreement
      
   
16,924
   
16,924
 
Income approach
Total
 
$
  
$
  
$
26,759
  
$
26,759
  
 
The Company estimates fair value of the derivative liability and equity agreement using a discounted cash flows method with discount rates based on the average yield curve for bonds with similar credit ratings and matching terms to the discount periods as well as a probability of the contingent event occurring. The Company recorded a total loss from fair value adjustment on the derivative liability and equity agreement of $1,144 and $988 within Other expense, net in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2019, respectively. During the three and nine months ended September 30, 2019, the Company had no settlements of the equity agreement or derivative liability or any transfers in or out of Level 3 in the fair value hierarchy.
 
The Company estimates fair value of outstanding debt using a discounted cash flow method based on current market interest rates for debt issuances with similar remaining years to maturity and adjusted for credit risk. The Company has estimated that the carrying value each of the New Term Loan Facility, Senior Secured Bonds, and Senior Unsecured Bonds (all defined below in “Note 15. Debt”) approximate fair value. The fair value estimate is classified as Level 3 in the fair value hierarchy.