Cheniere Energy Inc

Results of Operations

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 Cheniere

Substantially all of the unfavorable variance of $4.9 billion in net income attributable to Cheniere for the three months ended March 31, 2024 as compared to the same period of 2023 was attributable to unfavorable changes in fair value and settlements of derivatives of $4.9 billion (before tax and the impact of non-controlling interest) between the periods. The majority of the derivative variance was due to non-recurrence of a prior period gain attributable to our IPM agreements, which changed from a gain of $4.0 billion in the three months ended March 31, 2023 to a loss of $295 million in the three months ended March 31, 2024, due to moderation of changes in volatility in international gas prices in the current period relative to the same period of 2023.

Additionally, there was a $1.9 billion decrease in LNG revenues, net of cost of sales and excluding the aforementioned effect of derivatives, the majority of which was attributable to lower margins on LNG delivered as further described in Revenues below. The unfavorable variance was partially offset by:

•$1.2 billion favorable variance in income tax provision primarily due to lower taxable earnings; and

•$664 million favorable variance in net income attributable to non-controlling interest, substantially all of which is due to a decrease in CQP’s consolidated net income between the comparable periods from nonrecurrence of favorable changes in fair value of derivatives between the 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 $3.1 billion between the three months ended March 31, 2024 as compared to the same period of 2023 was primarily attributable to:

•$2.3 billion decrease in revenues generated by our marketing function under short-term agreements due to moderating international prices and a reduction of volumes sold under short-term agreements as a result of additional long-term agreements commencing in the current period; and

•$697 million decrease in Henry Hub pricing, to which the majority of our long-term LNG sales contracts are indexed.

Operating costs and expenses (recoveries)

The $3.8 billion unfavorable variance between the three months ended March 31, 2024 as compared to the same period of 2023 was primarily attributable to a $4.9 billion unfavorable variance from changes in fair value and settlements of derivatives included in cost of sales, from a $4.6 billion gain in the three months ended March 31, 2023 to a $287 million loss in the three months ended March 31, 2024, primarily due to moderating volatility in international gas prices during the current period resulting in decreased non-cash gain in fair value of our commodity derivatives indexed to such prices during the three months ended March 31, 2024, specifically associated with our IPM agreements as described above under the caption Net income attributable to Cheniere. This unfavorable variance was partially offset by a $1.1 billion decrease in cost of sales excluding the effect of derivative changes described above, primarily as a result of a $948 million decrease in cost of natural gas feedstock largely due to lower U.S. natural gas prices.

Other income (expense)

The $34 million favorable variance between the three months ended March 31, 2024 as compared to the same period of 2023 was primarily attributable to:

•$31 million decrease in interest expense, net of capitalized interest, primarily due to an increase in the extent of interest costs qualifying for capitalization, given the higher carrying value of assets under construction.

•$26 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 2024.

For the three months ended March 31, 2023, we recognized a $20 million gain on extinguishment of debt related to the repurchase of a portion of CCH’s senior notes at prices below par. Such gain did not recur in 2024, partially offsetting the favorable variances referenced above.

Income tax provision

The $1.2 billion favorable variance between the three months ended March 31, 2024 as compared to the same period of 2023 was primarily attributable to a decrease in pre-tax income.

Additionally, our effective tax rate was 11.5% and 17.0% for the three months ended March 31, 2024 and 2023, respectively. The effective tax rate for both the three months ended March 31, 2024 and 2023 was lower than the statutory rate of 21% primarily due to CQP’s income that is not taxable to us.

Net income attributable to non-controlling interests

The $664 million decrease between the three months ended March 31, 2024 as compared to the same period of 2023 was attributable to a $1.3 billion decrease in CQP’s consolidated net income between the three months ended March 31, 2024 and 2023 that was substantially all due to the nonrecurrence of favorable changes in fair value of derivatives between the periods.

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 6—Derivative Instruments of our Notes to Consolidated Financial Statements, the fair value of the 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 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.