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 Cheniere

Net income attributable to Cheniere declined $6.6 billion for the year ended December 31, 2024 as compared to the same period of 2023 and was primarily attributable to $6.7 billion of decreases in gains (before tax and the impact of non-controlling interests) from changes in fair value of derivatives. The majority of the decrease was attributable to our IPM agreements, where the associated gains that are primarily included in cost of sales decreased from $7.0 billion during the year ended December 31, 2023 to $1.5 billion during the year ended December 31, 2024, mainly due to the impact on fair value of the decline and sustained moderation of global LNG and gas price volatility and more subdued changes in the current period relative to the same period of 2023 as global prices and spreads narrowed as a result of market rebalancing. The remaining change in fair value of derivatives was primarily due to an unfavorable shift in long-term U.S. natural gas basis spreads. In addition, there was a $2.8 billion decrease in LNG revenues, net of cost of sales and excluding the effect of derivatives, for the year ended December 31, 2024 as compared to the same period of 2023, the majority of which was attributable to 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.

These unfavorable variances were partially offset by:

•$1.7 billion favorable variance in income tax provision between the year ended December 31, 2024 as compared to the same period of 2023, primarily due to lower taxable earnings as described above; and

•$938 million reduction in net income attributable to non-controlling interests during the year ended December 31, 2024 as compared to the same period of 2023, substantially all of which is due to a decrease in CQP’s consolidated net income between the comparable periods from declining gains related to changes in fair value of derivatives between the years.

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

Revenues

The $4.7 billion decrease in revenues between the year ended December 31, 2024 compared to the same period of 2023 was primarily attributable to:

•$3.8 billion decrease in revenues generated by our marketing function under short-term agreements between the comparative years due to declining global LNG and gas prices and a reduction of volumes sold under short-term agreements as a result of additional long-term agreements commencing in 2024 as compared to 2023; and

•$676 million decrease in revenues attributable to declining Henry Hub pricing, to which the majority of our long-term LNG sales contracts are indexed, between the years.

Operating costs and expenses

The $4.7 billion unfavorable variance between the year ended December 31, 2024 compared to the same period of 2023 was primarily attributable to:

•$6.5 billion of decreases in gains from changes in fair value of derivatives included in cost of sales, with the primary drivers of the variance described above under the caption Net income attributable to Cheniere;

This unfavorable variance was partially offset by:

•$1.7 billion decrease between the periods in cost of sales excluding the effect of derivative changes described above, primarily as a result of a $1.6 billion decrease in cost of natural gas feedstock largely due to the decline and sustained moderation of global LNG and gas prices as well as lower U.S. natural gas prices in the current year compared to the prior year.

Other income (expense)

The $86 million favorable variance between the year ended December 31, 2024 as compared to the same period of 2023 was primarily attributable to:

•$131 million decrease in interest expense, net of capitalized interest, between the comparable years primarily due to a $92 million increase in 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;

These favorable variances were partially offset by:

•$24 million increase in losses on modification or extinguishment of debt between the comparable years from debt reduction activities, as further detailed under Financing Cash Flows in Sources and Uses of Cash within Liquidity and Capital Resources; and

•$22 million decrease in interest and dividend income between the comparable years, primarily as a result of lower average cash and cash equivalents balances between the respective periods.

Income tax provision

The $1.7 billion favorable variance between the years ended December 31, 2024 and 2023 was primarily attributable to a $9.3 billion decrease in pre-tax income and, to a lesser extent, a lower effective tax rate between the periods.

Our effective tax rate was 15.3% and 17.3% for years ended December 31, 2024 and 2023, respectively. Our effective tax rate decreased between the comparable periods and was lower than the statutory rate of 21.0% 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 $938 million decrease between the year ended December 31, 2024 as compared to the same period of 2023 was primarily attributable to a $1.7 billion decrease in CQP’s consolidated net income, primarily due to $1.5 billion of decreases in gains from the fair value of its IPM agreements accounted for as derivatives.

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 we use to manage certain risks, are reported at fair value in our Consolidated Financial Statements. For commodity derivative instruments, including those 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 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.