Cheniere Energy Inc

Consolidated results of operations

Volumes loaded and recognized from the Liquefaction Projects

Components of LNG revenues and corresponding LNG volumes delivered

(1)Long-term agreements include agreements with an initial tenor of 12 months or more.

Net income attributable to common stockholders

The favorable variance of $8.5 billion for the year ended December 31, 2023 as compared to the same period of 2022 was primarily attributable to a favorable variance of $14.4 billion (before tax and the impact of non-controlling interest), from changes in fair value and settlement of derivatives between the periods. The majority of the variance related to derivatives was due to non-cash favorable changes in fair value of our IPM agreements as a result of lower volatility in international gas prices and declines in international forward commodity curves, which changed from a loss of $5.0 billion in the year ended December 31, 2022 to a gain of $7.0 billion in the year ended December 31, 2023.

The favorable variance was partially offset by:

•decrease in LNG revenues, net of cost of sales and excluding the effect of derivatives (as further described above), of $2.4 billion, the majority of which was attributable to lower margins on LNG delivered;

•unfavorable variance of $2.1 billion in income tax provision due to higher taxable earnings; and

•unfavorable variance of $971 million in net income attributable to non-controlling interest due to an increase in CQP’s consolidated net income between the comparable periods.

The following is an additional discussion of the significant drivers of the variance in net income attributable to common stockholders by line item:

Revenues

The decrease of $13.0 billion between the years ended December 31, 2023 and 2022 was primarily attributable to:

•$9.1 billion decrease in Henry Hub pricing, to which the majority of our long-term LNG sales contracts are indexed;

•decrease in revenues generated by our marketing function of $2.5 billion due to declining international prices and a reduction of volumes sold under short-term agreements; and

•decrease in regasification revenues of $933 million due to the accelerated recognition of revenues associated with the termination of one of our TUA agreements in December 2022. See Note 13—Revenues of our Notes to Consolidated Financial Statements for additional information on the termination agreement.

Operating costs and expenses (recoveries)

The $24.0 billion favorable variance between the years ended December 31, 2023 and 2022 was primarily attributable to:

•$14.0 billion favorable variance from changes in fair value and settlements of derivatives included in cost of sales, from $6.2 billion of loss in the year ended December 31, 2022 to $7.8 billion of gain in the year ended December 31, 2023, primarily related to non-cash favorable changes in fair value of our IPM agreements as described above under the caption Net income attributable to common stockholders; and

•$10.3 billion decrease in cost of sales excluding the effect of derivative changes described above, primarily as a result of $9.6 billion in decreased cost of natural gas feedstock largely due to lower U.S. natural gas prices.

The favorable variance was partially offset by an increase in operating and maintenance expense of $154 million between the comparable periods, which was due to the completion of planned large-scale maintenance activities on two trains at the SPL Project during June 2023, other third party service and maintenance contract costs and natural gas transportation and storage capacity demand charges.

Other income (expense)

The $554 million favorable variance between the years ended December 31, 2023 and 2022 was primarily attributable to:

•$265 million decrease in interest expense, net of capitalized interest, primarily as a result of lower debt balances due to $1.2 billion of repayment of debt in 2023, which excludes prepayments associated with debt refinancing;

•$154 million increase in interest and dividend income as a result of higher interest income earned on cash and cash equivalents from higher interest rates in 2023; and

•$81 million favorable variance in gain (loss) on modification or extinguishment of debt, primarily due to higher losses recognized from the amendment and restatement of CCH’s term loan facility agreement (the“CCH Credit Facility”) and CCH’s working capital facility agreement (the“CCH Working Capital Facility”) during the second quarter of 2022 and the redemption of our 4.25% Convertible Senior Notes due 2045 (the“2045 Cheniere Convertible Senior Notes”) during the first quarter of 2022. Further contributing to the favorable variance during the year ended December 31, 2023 was a reduction in premiums paid for the early redemption or repayment of debt principal, as a result of near-maturity debt being redeemed or repaid or repurchased in the open market resulting in lower make-whole payments, as further detailed under Financing Cash Flows in Sources and Uses of Cash within Liquidity and Capital Resources.

Income tax provision

The $2.1 billion unfavorable variance between the years ended December 31, 2023 and 2022 was primarily attributable to an increase in pre-tax income.

Our effective tax rate was 17.3% and 14.8% for the years ended December 31, 2023 and 2022, respectively. The effective tax rate for both the years ended December 31, 2023 and 2022 was lower than the statutory rate of 21% primarily due to CQP’s income that is not taxable to us.

In December 2021, the OECD released a framework for Pillar Two model rules, which introduced a global minimum corporate tax rate of 15% for large multinational groups. We are a large multinational group with substantial operations in the U.S. and U.K. The U.K. enacted legislation implementing Pillar Two on July 18, 2023, effective beginning January 1, 2024. The U.S. has not enacted legislation implementing Pillar Two. We are continuing to evaluate the Pillar Two rules and their potential impact on future periods, but we do not expect the rules to have a material impact on our effective tax rate.

Net income attributable to non-controlling interest

The $971 million increase between the years ended December 31, 2023 and 2022 was primarily attributable to $1.8 billion increase in CQP’s consolidated net income between the years ended December 31, 2023 and 2022.

Significant factors affecting our results of operations

Below are significant factors that affect our results of operations.

Gains and losses on derivative instruments

Derivative instruments, which in addition to managing exposure to commodity-related marketing and price risks, are utilized to manage exposure to changing interest rates and foreign exchange volatility, are reported at fair value on our Consolidated Financial Statements. For commodity derivative instruments related to our IPM agreements, the underlying LNG sales being economically hedged are accounted for under the accrual method of accounting, whereby revenues expected to be derived from the future LNG sales are recognized only upon delivery or realization of the underlying transaction. Notwithstanding the operational intent to mitigate risk exposure over time, the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure, and given the significant volumes, long-term duration and volatility in price basis for certain of our derivative contracts, the use of derivative instruments may result in continued volatility of our results of operations based on changes in market pricing, counterparty credit risk and other relevant factors that may be outside of our control. For example, as described in Note 7—Derivative Instruments of our Notes to Consolidated Financial Statements, the fair value of our Liquefaction Supply Derivatives and LNG Trading Derivatives incorporates, as applicable to our natural gas supply contracts, market participant-based assumptions pertaining to certain contractual uncertainties, including those related to the availability of market information for delivery points, which may require future development of infrastructure, as well as the timing of both satisfaction of contractual events or states of affairs and delivery commencement. We may recognize changes in fair value through earnings that could be significant to our results of operations if and when such uncertainties are resolved.

Commissioning cargoes

Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process, because these amounts are earned or loaded during the testing phase for the construction of that Train. During the year ended December 31, 2022, we realized offsets to LNG terminal costs of $204 million corresponding to 15 TBtu attributable to the sale of commissioning cargoes from Train 6 of the SPL Project. We did not have any commissioning cargoes during the year ended December 31, 2023.