Derivative Instruments

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

As of September 30, 2022, the Company held a series of call options (“the Call Options”) for the purchase of natural gas related to customer commitments. The Call Options are for a total of 2.0 million MMBtu (million British thermal units) of natural gas over a period of approximately two years. The Company purchased the Call Options to manage the risk of increasing natural gas prices above what it can charge its customers. The Company recognizes all of its derivative instruments as either assets or liabilities which are recorded at fair value on its Condensed Consolidated Balance Sheet. The fair value of the Call Options are predominantly determined from broker quotes and are considered a level 2 fair value measurement. The following table presents the location and fair value of the Call Options at September 30, 2022 and December 31, 2021 (in thousands):


Location on Condensed Consolidated Balance Sheet	September 30, 2022(1)		December 31, 2021(2)
Prepaid expenses and other current assets (3)	$	1,190	$	—
Right-of-use assets and other noncurrent assets (3)	538		—
	$	1,728	$	—

_______________

(1) Amounts are presented on a gross basis.

(2) The Company did not have any derivative instruments at December 31, 2021.

(3) The classification between current and noncurrent assets is based upon when the Call Options mature.

The Company has not designated the Call Options as a hedge under U.S. GAAP and all resulting gains and losses from changes in the fair value of its derivative instruments are included within change in unrealized loss on natural gas derivatives

within the Company's Condensed Consolidated Statements of Operations. The table below presents the changes in the fair value of the Call Options for the three and nine months ended September 30, 2022 as well as their net realized gains and losses.


	Three Months Ended September 30,				Nine Months Ended September 30,
Changes in fair value of derivatives	2022		2021(1)		2022		2021(1)
Fair value of natural gas derivatives, beginning of period	$	1,126	$	—	$	—	$	—
Purchases of natural gas derivatives	—		—		2,241		—
Unrealized gains (losses) transferred to realized gains (losses), net	(324)		—		(540)		—
Change in unrealized gain on natural gas derivatives (2)	926		—		27		—
Fair value of natural gas derivatives, end of period	$	1,728	$	—	$	1,728	$	—

	Three Months Ended September 30,				Nine Months Ended September 30,
Realized gain (loss) from derivative instruments	2022		2021(1)		2022		2021(1)
Unrealized gains (losses) transferred to realized gains (losses), net	$	(324)	$	—	$	(540)	$	—
Derivative settlement payments received (2)	682		—		1,062		—
Realized gain (loss) from natural gas derivatives, net (3)	$	358	$	—	$	522	$	—

_______________

(1) The Company did not have any derivative instruments at December 31, 2021.

(2) Amounts are presented as their own separate line item within the Company's Condensed Consolidated Statement of Operations and Condensed Consolidated Statement of Cash Flows.

(3) Amounts are included within cost of LNG product on the Company's Condensed Consolidated Statement of Operations.

The Company may enter into forward sales contracts for the delivery of LNG to its customers. These contracts are not accounted for as derivatives, but accounted for under the normal purchase normal sales exclusion under U.S. GAAP and are not measured at fair value each reporting period.