Fair value

6 Months Ended

Jun. 30, 2020

Fair value [Abstract]

Fair value

6. Fair value

Fair value measurements and disclosures require the use of valuation techniques 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 June 30, 2020 and December 31, 2019:

	June 30, 2020
	Level 1		Level 2		Level 3		Total		Valuation technique
Assets
Cash and cash equivalents	$	167,316	$	-	$	-	$	167,316	Market approach
Restricted cash		56,077		-		-		56,077	Market approach
Investment in equity securities		323		-		-		323	Market approach
Total	$	223,716	$	-	$	-	$	223,716
Liabilities
Derivative liability¹	$	-	$	-	$	9,686	$	9,686	Income approach
Equity agreement²		-		-		16,678		16,678	Income approach
Total	$	-	$	-	$	26,364	$	26,364

	December 31, 2019
	Level 1		Level 2		Level 3		Total		Valuation technique
Assets
Cash and cash equivalents	$	27,098	$	-	$	-	$	27,098	Market approach
Restricted cash		65,937		-		-		65,937	Market approach
Investment in equity securities		2,540		-		-		2,540	Market approach
Total	$	95,575	$	-	$	-	$	95,575
Liabilities
Derivative liability¹	$	-	$	-	$	9,800	$	9,800	Income approach
Equity agreement²		-		-		16,800		16,800	Income approach
Total	$	-	$	-	$	26,600	$	26,600

(1) Consideration due to the sellers of Shannon LNG once first gas is supplied from the terminal to be built.

(2) To be paid in shares at the earlier of agreed-upon date or the commencement of significant construction activities specified in the Shannon LNG Agreement.

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 table below summarizes the fair value adjustment, recorded within Other expense (income), net in the condensed consolidated statements of operations and comprehensive loss, and currency translation adjustment, recorded within the Other comprehensive loss, for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020			2019
Fair value adjustment - Loss/(gain)	$	1,323	$	478	$	(294	)	$	(155	)
Currency translation adjustment - Loss		595		-		58			-

During the three and six months ended June 30, 2020 and 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 liability associated with the equity agreement of $16,678 and $16,800 as of June 30, 2020 and December 31, 2019, respectively, is recorded within Other current liabilities on the condensed consolidated balance sheets. The liability associated with the derivative liability of $9,686 and $9,800 as of June 30, 2020 and December 31, 2019, respectively, is recorded within Other long-term liabilities on the condensed consolidated balance sheets.

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 for each of the Credit Agreement, Senior Secured Bonds, and Senior Unsecured Bonds (all defined below in “Note 16. Debt”) approximate fair value. The fair value estimate is classified as Level 3 in the fair value hierarchy.