Cheniere Energy Partners LP

Results of Operations

Volumes loaded and recognized from the Liquefaction Project

Net income

Substantially all of the unfavorable variance of $1.3 billion in net income 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 $1.2 billion between the periods. The derivative variance was substantially all due to significant decrease in gains attributable to our IPM agreement with Tourmaline Oil Marketing Corp, which changed from a gain of $1.0 billion in the three months ended March 31, 2023 to a gain of $6 million in the three months ended March 31, 2024, due to moderation of changes in volatility in international gas prices during the current period relative to the same period of 2023. Excluding the aforementioned changes in fair value and settlements of derivatives, LNG revenues, net of cost of sales was relatively consistent between the comparable periods.

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

Revenues

We had a $622 million decrease in revenues between the three months ended March 31, 2024 as compared to the same period of 2023, which was primarily attributable to a $731 million decrease from lower pricing per MMBtu as a result of decreased Henry Hub pricing, partially offset by a $104 million increase from higher production volume largely due to reduced operating and maintenance activities compared to the same period of 2023 and colder weather.

Operating costs and expenses

The $632 million increase between the three months ended March 31, 2024 and 2023 was attributable to a $1.2 billion unfavorable variance from changes in fair value and settlements of derivatives included in cost of sales, from a $1.3 billion gain in the three months ended March 31, 2023 to a $55 million gain 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 gains in fair value of our commodity derivatives indexed to such prices during the three months ended March 31, 2024, specifically associated with the Tourmaline IPM Agreement as discussed above under Net income. This increase was partially offset by a $567 million decrease in cost of sales excluding the effect of derivative changes described above, primarily as a result of a $515 million decrease in cost of natural gas feedstock largely due to lower U.S. natural gas prices.

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 are utilized to manage our exposure to commodity-related marketing and price risks and 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 the Liquefaction Supply Derivatives incorporates 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.