Cheniere Energy Partners LP

Volumes loaded and recognized from the Liquefaction Project

Net income

Net income declined by $156 million and $1.5 billion between the three and nine months ended September 30, 2024, respectively, as compared to the same periods of 2023. The decline between the respective three and nine month periods was primarily attributable to unfavorable changes in fair value of derivatives of $215 million and $1.6 billion, respectively, principally attributable to our IPM agreement with Tourmaline Oil Marketing Corp, which decreased from $217 million and $1.5 billion during the three and nine months ended September 30, 2023, respectively, to $32 million and $238 million during the three and nine months ended September 30, 2024, respectively, due to the nonrecurrence of significant declines of historic volatility in international gas prices and moderated and sustained spot prices during the current periods relative to the same periods of 2023. The remaining unfavorable changes in fair value of derivatives of $30 million and $352 million during the three and nine month periods ended September 30, 2024, respectively, as compared to the same periods of 2023 were primarily due to an unfavorable shift in long-term U.S. natural gas forward prices.

Partially offsetting the aforementioned unfavorable changes between the three month periods was an increase in LNG revenues, net of cost of sales excluding the aforementioned changes in fair value of derivatives, of $51 million due to an increase in production volume compared to the same period of 2023. Partially offsetting the aforementioned unfavorable changes between the nine month periods was a decrease in maintenance expense of $70 million due to reduced operating and maintenance activities compared to the same period of 2023.

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

Revenues

We had $73 million and $734 million decreases in revenues between the three and nine months ended September 30, 2024, respectively, as compared to the same periods of 2023, which was primarily attributable to $137 million and $997 million decreases, respectively, from lower pricing per MMBtu as a result of declining Henry Hub pricing, partially offset by $82 million and $287 million increases, respectively, from higher production volume largely due to reduced maintenance activities compared to the same periods of 2023 and cooler weather.

Operating costs and expenses

The increases in operating costs and expenses of $88 million and $733 million between the three and nine months ended September 30, 2024, respectively, as compared to the same periods of 2023, was primarily attributable to $215 million and $1.6 billion unfavorable variances, respectively, over the same periods from changes in fair value of derivatives included in cost of sales, as discussed above under Net income. The unfavorable variances were partially offset by $125 million and $766 million decreases between the comparative three and nine month periods, respectively, in cost of sales excluding the effect of derivative changes, primarily as a result of $99 million and $661 million decreases, respectively, in cost of natural gas feedstock largely due to lower U.S. natural gas prices.

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 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 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.