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

Net income attributable to Cheniere declined $489 million and $5.4 billion for the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023. There was a $630 million and $2.6 billion decrease in LNG revenues, net of cost of sales and excluding the effect of derivatives, for the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023, the majority of which was attributable to declining international LNG and gas prices and a reduction of volumes sold under short-term agreements as a higher proportion of our LNG was sold under long-term contracts, as further described in Revenues below. The decline between the six month periods was primarily attributable to unfavorable changes in fair value and settlements of derivatives of $5.0 billion (before tax and the impact of non-controlling interest), principally attributable to our IPM agreements, where the associated gains decreased from $4.6 billion during the six months ended June 30, 2023 to $582 million during the six months ended June 30, 2024, mainly due to the impact on fair value of moderating changes in volatility in international gas prices in the current period relative to the same period of 2023. These unfavorable variances were partially offset by:

•$153 million and $1.4 billion favorable variances in income tax provision between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023, primarily due to lower taxable earnings; and

•$56 million and $720 million reduction in net income attributable to non-controlling interest between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023, substantially all of which is due to a decrease in CQP’s consolidated net income between the comparable periods from decreased revenues, net of cost of sales, between the three month periods and from declining gains from changes in fair value and settlements of derivatives between the six month 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 decreases of $851 million and $3.9 billion between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023 were primarily attributable to:

•$940 million and $3.3 billion decreases in revenues generated by our marketing function under short-term agreements between the three and six month periods, respectively, due to declining international LNG and gas prices and a reduction of volumes sold under short-term agreements as a result of additional long-term agreements commencing after the second quarter of 2023; and

•$694 million decrease in revenues attributable to declining Henry Hub pricing between the six month periods, to which the majority of our long-term LNG sales contracts are indexed. Although there was a decrease in revenue from Henry Hub pricing between the three month periods, it was mostly offset by the increase in volume from the higher proportion of our volumes sold under long-term agreements.

Operating costs and expenses (recoveries)

There was a $131 million favorable variance between the three months ended June 30, 2024 and 2023 primarily as a result of a $307 million decrease in cost of natural gas feedstock largely due to lower U.S. natural gas prices, partially offset by a $176 million unfavorable variance from changes in fair value and settlements of derivatives included in cost of sales.

There was a $3.6 billion unfavorable variance between the six months ended June 30, 2024 and 2023 primarily attributable to a $5.1 billion unfavorable variance from changes in fair value and settlements of derivatives included in cost of sales. $4.0 billion of such unfavorable variance resulted from the moderating volatility in international gas prices during the current period, resulting in decreased non-cash gain in fair value of our IPM agreements indexed to such prices during the six month periods, as described above under the caption Net income attributable to Cheniere, and the remainder of the variance resulted from decreased gains from changes in fair value and settlements of the derivatives associated with other term supply natural gas and power supply contracts. This unfavorable variance was partially offset by a $1.4 billion decrease between the periods in cost of sales excluding the effect of derivative changes described above, primarily as a result of a $1.3 billion decrease in cost of natural gas feedstock largely due to lower U.S. natural gas prices.

Other income (expense)

The $22 million and $56 million favorable variances between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023 were primarily attributable to:

•$34 million and $65 million decreases in interest expense, net of capitalized interest, between the three and six month periods, respectively, primarily due to increases in the extent of interest costs qualifying for capitalization, given the higher carrying value of assets under construction, and additionally due to lower overall interest cost due to debt reduction activities associated with our long-term capital allocation plan.

•$7 million and $27 million increases in loss on modification or extinguishment of debt between the three and six month periods, respectively, from debt reduction activities, as further detailed under Financing Cash Flows in Sources and Uses of Cash within Liquidity and Capital Resources.

•$8 million decrease in interest and dividend income between the three month periods as a result of lower average cash and cash equivalents balances between the respective periods, partially offset by higher interest rates in 2024, and a $19 million increase in interest and dividend income between the six month periods as a result of higher interest income earned on cash and cash equivalents from higher interest rates in 2024.

Income tax provision

The $153 million and $1.4 billion favorable variances between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023, were primarily attributable to decreases in pre-tax income.

We recorded an income tax provision of $210 million and $319 million during the three and six months ended June 30, 2024, respectively, and an income tax provision of $363 million and $1.7 billion for the same periods of 2023, respectively, which was calculated using the annual effective tax rate method.

Our effective tax rate was 15.3% and 13.8% for the three and six months ended June 30, 2024, respectively, as compared to 17.5% and 17.1% for the same periods of 2023, respectively. The effective tax rate for the periods was lower than the statutory rate of 21.0% primarily due to CQP’s income that is not taxable to us. Our effective tax rate decreased between both comparable periods because a larger percentage of pre-tax income was attributable to CQP’s income that is not taxable to us.

Net income attributable to non-controlling interests

The $56 million and $720 million decreases between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023 were attributable to a $52 million decrease in CQP’s consolidated net income between the three month periods primarily from decreased revenues, net of cost of sales, and a $1.3 billion decrease in CQP’s consolidated net income between the six month periods primarily from unfavorable changes in fair value and settlements of derivatives, of which $1.0 billion was related to the IPM agreement with Tourmaline Oil Marketing Corp.

Significant factor affecting our results of operations

Below is a significant factor that affects 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 5—Derivative Instruments of our Notes to Consolidated Financial Statements, the fair value of the Liquefaction Supply Derivatives incorporates, as applicable, 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.