Cheniere Energy Partners LP

Volumes loaded and recognized from the Liquefaction Project

Net income

Net income declined by $1.7 billion during the year ended December 31, 2024 as compared to the same period of 2023 and was primarily attributable to $1.7 billion of decreases in gains from changes in fair value of derivatives. The majority of the decrease was attributable to our IPM agreement with Tourmaline Oil Marketing Corp, where the associated gains that are primarily included in cost of sales decreased from $1.8 billion during the year ended December 31, 2023 to $251 million 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 gas prices and spreads narrowed as a result of market rebalancing. The remaining $189 million of decreases in gains from changes in fair value of derivatives during the comparable years was primarily due to an unfavorable shift in long-term U.S. natural gas basis spreads.

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

Revenues

The $960 million decrease in revenues during the year ended December 31, 2024 as compared to the same period of 2023 was primarily attributable to a $1.1 billion decrease from lower pricing per MMBtu as a result of declining Henry Hub pricing, partially offset by a $188 million increase from higher production volume largely due to reduced maintenance activities compared to the same period of 2023 and cooler weather.

Operating costs and expenses

The increase in operating costs and expenses of $796 million during the year ended December 31, 2024 as compared to the same period of 2023 was primarily attributable to $1.7 billion of decreases in gains from changes in fair value of derivatives included in cost of sales, as discussed above under Net income. The unfavorable variance between the comparative years was partially offset by a $740 million 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 during the year ended December 31, 2024 as compared to the same period of 2023.

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 7—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.