[Executive Summary & Strategic Updates](index=1&type=section&id=Executive%20Summary%20%26%20Strategic%20Updates) BKV reported strong Q2 2025 results, updated FY guidance, and announced a strategic acquisition and CSG deal [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) BKV reported strong Q2 2025 financial results, including net income of $104.6 million and combined Adjusted EBITDAX of $88.2 million, alongside operational achievements like 811.0 MMcfe/d average net production and significant carbon sequestration - Net income attributable to BKV: **$104.6 million** or **$1.23 per diluted share**[4](index=4&type=chunk) - Combined Adjusted EBITDAX attributable to BKV: **$88.2 million**[4](index=4&type=chunk) - Average net production: **811.0 MMcfe/d**[4](index=4&type=chunk) - Barnett Zero quarterly sequestration: **~30,400 metric tons of CO2 equivalent**[4](index=4&type=chunk) - Net leverage ratio: **0.63x**[4](index=4&type=chunk) [FY 2025 Updated Guidance Highlights](index=1&type=section&id=FY%202025%20Updated%20Guidance%20Highlights) BKV updated its full-year 2025 guidance, projecting increased net production and decreased capital expenditures at the mid-point, reflecting improved operational efficiency - Net production: **790-810 MMcfe/d**, reflecting a **4% increase** at the mid-point[4](index=4&type=chunk) - Capital expenditures: **$290-$350 million**, reflecting a **9% decrease** at the mid-point[4](index=4&type=chunk) [Strategic Barnett Shale Acquisition Highlights](index=1&type=section&id=Strategic%20Barnett%20Shale%20Acquisition%20Highlights) BKV announced a definitive agreement to acquire Bedrock Production, LLC's Barnett Shale assets for approximately $370 million, significantly expanding its acreage, production, and reserves in the region, with expected accretion to cash flow per share in 2026 - Acquisition value: Approximately **$370 million**[4](index=4&type=chunk) - Expected additions: **~97,000 net acres**, **~108 MMcfe/d** of production, **1,121 producing locations**, nearly **1 Tcfe** of 1P reserves, **~50 new drill locations**, **~80 refrac locations**[4](index=4&type=chunk) - Strategic benefits: **Extends BKV's lead in Barnett**, **improves inventory**, **enables longer laterals**, **potential for LOE reduction**[28](index=28&type=chunk) - Funding: Combination of cash and up to **$110.0 million** in BKV common stock, funded from cash on hand and existing RBL capacity[4](index=4&type=chunk)[5](index=5&type=chunk)[29](index=29&type=chunk) - Expected closing: **Early Q4 2025**[5](index=5&type=chunk)[29](index=29&type=chunk) [Carbon Sequestered Gas Deal Highlights](index=2&type=section&id=Carbon%20Sequestered%20Gas%20Deal%20Highlights) BKV signed a significant Carbon Sequestered Gas (CSG) deal with Gunvor, a leading commodities trader, committing Gunvor to purchase, market, and sell CSG, leveraging BKV's growing CCUS business for a premium carbon-neutral energy product - Partner: **Gunvor**, a leading commodities trader[5](index=5&type=chunk)[9](index=9&type=chunk) - Product: **Carbon Sequestered Gas (CSG)**, a differentiated, premium commodity market product supported by BKV's growing CCUS business[5](index=5&type=chunk)[9](index=9&type=chunk) - Commitment: Gunvor to purchase, market, and sell CSG, covering up to **10,000 MMbtu/d**[9](index=9&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) CEO Chris Kalnin highlighted the advancement of BKV's closed-loop strategy, strong upstream performance, and strategic expansion through the Bedrock acquisition and the Gunvor CSG deal. CFO David Tameron emphasized financial discipline, free cash flow funding growth initiatives, and the company's position to capitalize on strong macroeconomic trends - CEO Chris Kalnin: "advancing our **differentiated closed loop strategy**, while also performing exceptionally well in each of our base businesses"[5](index=5&type=chunk) - CEO Chris Kalnin: Upstream business delivered **production ahead of plan** with **capital spend at the lower end of the guided range**, driven by drilling efficiencies and improved designs[5](index=5&type=chunk) - CFO David Tameron: "**Adjusted Free Cash Flow** from our upstream business fully funding our growth initiatives in CCUS and Power"[14](index=14&type=chunk) - CFO David Tameron: Company is positioned to "take advantage of the currently **strong macroeconomic backdrop** for natural gas, power, and CCUS"[14](index=14&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) BKV achieved significant financial improvements in Q2 and YTD 2025, with revenue growth and positive net income [Second Quarter 2025 Financial Results](index=2&type=section&id=Financial%20Results_Q2_2025) BKV reported total revenues of $322.0 million and net income attributable to BKV of $104.6 million for Q2 2025, a significant improvement from a net loss in Q2 2024, primarily driven by unrealized hedging gains. Adjusted Net Income was $32.8 million - Total revenues and other operating income: **$322.0 million** (including **$9.3 million** realized hedging gains)[6](index=6&type=chunk) - Net income attributable to BKV: **$104.6 million** (**$1.23 per diluted share**), including **$102.9 million** unrealized hedging gains[6](index=6&type=chunk) - Adjusted Net Income: **$32.8 million**[6](index=6&type=chunk) - Combined Adjusted EBITDAX attributable to BKV: **$88.2 million**[6](index=6&type=chunk) - Average realized natural gas price (excluding derivatives): **$2.67/MMBtu**[7](index=7&type=chunk) - Average realized equivalent price (including derivatives): **$2.83/Mcfe**[7](index=7&type=chunk) [Year-to-Date 2025 Financial Results](index=2&type=section&id=Financial%20Results_YTD_2025) For the first six months of 2025, BKV's total revenues were $400.9 million, with net income attributable to BKV of $25.9 million, a substantial improvement from a net loss in the prior year period. Adjusted Net Income was $60.4 million - Total revenues and other operating income: **$400.9 million** (including **$8.9 million** realized hedging losses)[8](index=8&type=chunk) - Net income attributable to BKV: **$25.9 million** (**$0.30 per diluted share**), including **$31.1 million** unrealized hedging losses[8](index=8&type=chunk) - Adjusted Net Income: **$60.4 million**[8](index=8&type=chunk)[10](index=10&type=chunk) - Combined Adjusted EBITDAX attributable to BKV: **$188.9 million**[10](index=10&type=chunk) - Average realized natural gas price (excluding derivatives): **$2.88/MMBtu**[11](index=11&type=chunk) - Average realized equivalent price (including derivatives): **$2.86/Mcfe**[11](index=11&type=chunk) [Key Financial and Operational Metrics](index=3&type=section&id=Key%20Financial%20and%20Operational%20Metrics) The company demonstrated significant improvements in profitability metrics year-over-year for both Q2 and YTD 2025, with Net Income and Adjusted Net Income turning positive from losses. However, Adjusted Free Cash Flow attributable to BKV decreased compared to the prior year Key Financial and Operational Metrics | Metric | Q2 2025 ($M) | Q2 2024 ($M) | YTD 2025 ($M) | YTD 2024 ($M) | | :--------------------------------------- | :------ | :------ | :------- | :------- | | Net income (loss) attributable to BKV | 104.6 | (59.7) | 25.9 | (98.3) | | Adjusted Net Income (Loss) | 32.8 | (22.8) | 60.4 | (39.3) | | Adjusted EBITDAX | 70.8 | 61.7 | 161.7 | 108.8 | | Combined Adjusted EBITDAX attributable to BKV | 88.2 | 74.8 | 188.9 | 132.2 | | Net income (loss) per diluted share ($) | 1.23 | (0.90) | 0.30 | (1.48) | | Adjusted EPS ($) | 0.39 | (0.34) | 0.71 | (0.59) | | Adjusted Free Cash Flow attributable to BKV | 2.1 | 19.3 | 8.2 | 66.6 | | Total capital expenditures (accrued) | 78.8 | 14.9 | 136.8 | 32.9 | | Power JV Net income (loss) | 18.1 | (30.5) | (1.0) | (45.9) | | Power JV Adjusted EBITDA | 35.5 | 26.3 | 55.1 | 46.8 | [Operational Review](index=4&type=section&id=Operational%20Review) BKV's operational review highlights improved Power JV performance, strategic CCUS advancements, and strong upstream production bolstered by the Bedrock acquisition [Power JV Operations](index=4&type=section&id=Power%20JV) The Power JV's Temple

Core Viewpoint - The article emphasizes the importance of confirming the sustainability of stock trends for successful short-term investing, highlighting that price movements should be supported by strong fundamentals and positive earnings estimates [1][2]. Group 1: Stock Performance - BKV has shown a solid price increase of 43.3% over the past 12 weeks, indicating strong investor interest and potential upside [4]. - The stock has also increased by 14% in the last four weeks, suggesting that the upward trend is still intact [5]. - Currently, BKV is trading at 80.7% of its 52-week high-low range, indicating it may be on the verge of a breakout [5]. Group 2: Fundamental Strength - BKV holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises [6]. - The stock has an Average Broker Recommendation of 1 (Strong Buy), reflecting high optimism from the brokerage community regarding its near-term price performance [7]. Group 3: Investment Strategy - The "Recent Price Strength" screen is a useful tool for identifying stocks like BKV that are on an uptrend supported by strong fundamentals [3]. - The article suggests that investors should consider other stocks that meet similar criteria for potential investment opportunities [8].

Group 1: Energy Sector Overview - Energy stocks, represented by the Energy Select Sector SPDR Fund (XLE), faced a challenging first half of 2025, with a decline of over 5% year-to-date as of late May due to tariff uncertainties and geopolitical factors [1] - Despite the overall downturn, demand for oil and gas products continues to rise, although prices have fallen since the start of the year due to increased production [2] Group 2: Sable Offshore - Sable Offshore Corp. (SOC) has seen a significant rally, with shares up about 42% in the last month and more than 19% year-to-date, following a sell-off in April [3][5] - The company is restarting oil production at its Santa Ynez Unit at a rate of approximately 6,000 barrels per day, with plans to fill its capacity of 540,000 barrels by June and relaunch oil sales by July [4] - Despite a quarterly net loss of over $109 million and outstanding debt of nearly $855 million, investor optimism remains strong, with a consensus price target suggesting about 10% upside potential [5] Group 3: California Resources Corp. - California Resources Corp. (CRC) has a 12-month stock price forecast of $61.27, indicating a potential upside of 38.63% [6] - The company has benefited from its merger with Aera Energy, expected to yield $185 million in collaborative gains through the last three quarters of 2025 [8] - CRC generated $131 million in free cash flow in the first quarter while funding $223 million in share and debt repurchases and $35 million in dividends [9] Group 4: BKV Corp. - BKV Corp. has a 12-month stock price forecast of $28.13, suggesting a 30.94% upside [10] - The company has secured $500 million in funding for its carbon sequestration projects, which is expected to accelerate growth in this area [11] - BKV shares have declined year-to-date by 7% but have rallied nearly 21% in the last month, with unanimous Buy ratings from eight analysts [12]

Production and Revenue - Natural gas production for Q1 2025 was 54,121 MMcf, down from 59,644 MMcf in Q1 2024, representing a decrease of approximately 4.2%[146] - Total production for Q1 2025 was 68.5 Bcfe, averaging 761.1 MMcfe/d, compared to 74.7 Bcfe and 821.1 MMcfe/d in Q1 2024, indicating a decline of about 8.5% in total volumes[139][146] - Natural gas revenues increased by 74% to $168.0 million in Q1 2025, up from $96.3 million in Q1 2024, primarily due to commodity price increases[150][151] - NGL revenues rose by 3% to $44.7 million in Q1 2025, compared to $43.4 million in Q1 2024, driven by higher commodity prices despite lower production volumes[150][152] - Oil revenues surged by 79% to $3.5 million in Q1 2025, up from $1.9 million in Q1 2024, mainly due to increased production volumes[150][153] - Marketing revenues rose by approximately $1.6 million, or 32%, to $6.5 million for the three months ended March 31, 2025, driven by a higher pricing environment[157] Financial Performance - The company reported a net loss of $(78.7) million for Q1 2025, compared to a net cash provided by operating activities of $22.6 million[144] - Net cash provided by operating activities increased to $22.6 million for the three months ended March 31, 2025, up from $19.3 million in the same period of 2024, driven by a $24.7 million increase in income from operations and a $20.4 million increase in working capital[178] - Net cash used in investing activities rose to $56.0 million for the three months ended March 31, 2025, compared to $19.9 million in 2024, primarily due to a $39.7 million increase in capital expenditures[180] - Net cash provided by financing activities was $33.8 million for the three months ended March 31, 2025, consisting of net borrowings on debt of $35.0 million, compared to a net cash outflow of $1.6 million in 2024[182] - As of March 31, 2025, the company had a net working capital deficit of $148.5 million, compared to a deficit of $71.6 million as of December 31, 2024[183] Expenses and Costs - Total operating expenses decreased to $172.5 million for the three months ended March 31, 2025, from $186.3 million in 2024, reflecting a reduction in various expense categories[162] - General and administrative expenses increased by approximately $4.6 million, or 22%, to $25.3 million for the three months ended March 31, 2025, due to growth initiatives[167] - Interest expense decreased to $5.1 million for the three months ended March 31, 2025, down from $16.1 million in 2024, primarily due to lower interest rates[171] - Income tax benefit increased to $29.2 million for the three months ended March 31, 2025, up from $13.0 million in 2024, driven by higher net losses and excess tax benefits[174] Capital Expenditures and Investments - Cash paid for capital expenditures was $57.4 million for the three months ended March 31, 2025, compared to $19.9 million in 2024, with an estimated budget for 2025 capital expenditures between $320 million and $380 million[176] - The company expects to fund up to 50% of its CCUS business from external sources, including joint ventures and federal grants, with the remainder from cash flows from operations[177] Debt and Credit Agreements - The company entered into a Second Amendment to the RBL Credit Agreement, increasing the borrowing base by $100 million and the elected commitment by $65 million on May 6, 2025[137] - The RBL Credit Agreement has a maximum credit commitment of $1.5 billion, with a borrowing base of $750.0 million and an elected commitment of $600.0 million as of March 31, 2025[185] - The company has outstanding borrowings of $200.0 million on its RBL Credit Agreement, which has a floating interest rate[213] Derivative Instruments and Risk Management - The company entered into financial derivative instruments to mitigate the impact of commodity price fluctuations, with contracts covering portions of projected positions through 2027[202] - The company mitigates price volatility through derivative contracts, which limit benefits from increases in commodity prices above fixed hedge prices[208] - The company actively monitors counterparty credit risk related to derivative contracts, requiring minimum credit standards for all counterparties[209] - Mark-to-market adjustments of derivative instruments cause earnings volatility but have no cash flow impact until contracts are settled[207] Environmental and Strategic Initiatives - A strategic CCUS joint venture was formed with C Squared Solutions, contributing to the development of CCUS projects, with BKV holding a 51% interest[138] - The company aims for net zero Scope 1 and Scope 2 emissions by the early 2030s and net zero Scope 1, 2, and 3 emissions by the late 2030s[136] - Section 45Q tax credits increased to $3.3 million for the three months ended March 31, 2025, up from $2.3 million in the same period in 2024, due to more CO2 waste sequestered[158] Market Conditions - The company has experienced volatility in natural gas and NGL prices, which are influenced by supply and demand dynamics, pipeline constraints, and seasonal factors[179] - A hypothetical increase of $0.10 per Mcf in NYMEX would have resulted in a $2.7 million decrease in natural gas hedge revenues for the three months ended March 31, 2025[204] - A 1.0% increase in average interest rates would have resulted in an increase of $0.5 million in interest expense for the three months ended March 31, 2025[213]

Financial Data and Key Metrics Changes - BKV reported a net loss of $79 million or a loss of $0.93 per diluted share for Q1 2025, while adjusted net income was $35 million or a positive $0.41 per diluted share [30] - Combined adjusted EBITDAX was just over $100 million, with $90 million from upstream operations and $10 million from the power segment [29] - Cash and cash equivalents at the end of Q1 were approximately $15 million, with net leverage standing at less than 0.7 times net debt to adjusted EBITDAX [32] Business Line Data and Key Metrics Changes - The upstream business produced 761 million cubic feet equivalent per day, exceeding guidance, with development CapEx at $48 million, 26% below the midpoint of guidance [15][16] - Power joint venture adjusted EBITDA was $20 million, with BKV's share at $10 million, driven by higher pricing due to cold weather [27] - The carbon capture business is on track with significant milestones, including a partnership with Comstock Resources and a $500 million investment commitment from Copenhagen Infrastructure Partners [11][12] Market Data and Key Metrics Changes - ERCOT revised its 2031 load forecast higher by 68 gigawatts, a 45% increase from 2024 projections, primarily driven by data centers [26] - The demand for low carbon gas is expected to grow, supported by decarbonization efforts and the increasing need for power driven by cloud computing and AI [4][5] Company Strategy and Development Direction - BKV is focused on vertical integration across its four business lines: upstream, midstream, carbon capture, and power generation, aiming to create premium margins and differentiated products [5] - The company is leveraging its position in the Barnett Shale, which has over 15 years of inventory and is strategically located near LNG export markets and data centers [8][15] - BKV aims to deliver decarbonized energy solutions and capitalize on the growing demand for carbon capture and storage [12][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the robustness of the 45Q tax credit and the bipartisan support for carbon capture initiatives [45] - Despite macroeconomic headwinds, BKV's proactive supply chain management is expected to minimize disruptions and cost impacts [5] - The company anticipates a ramp-up in production in the second half of 2025, with natural gas pricing remaining elevated [18] Other Important Information - BKV's CCUS strategy is validated by recent partnerships and project advancements, with a goal of achieving a 1 million ton per year CO2 injection rate by the end of 2027 [23][60] - The company has a disciplined capital investment framework, with expectations for total CapEx in Q2 2025 between $75 million and $100 million [31] Q&A Session Summary Question: Thoughts on the resiliency of the 45Q tax credit and momentum in CCUS projects - Management believes the 45Q tax credit is robust and enjoys bipartisan support, which is critical for energy competitiveness in the U.S. [45][46] - There is strong momentum in carbon capture, particularly in natural gas processing, with several projects in the pipeline [49] Question: Clarification on CapEx for CCUS and project timing - Management indicated that while the overall CapEx for CCUS remains robust, the timing may shift as they optimize capital spending with their JV partner [58][60] Question: Upstream production growth inclination - Management remains committed to disciplined capital investment, with a focus on commodity price ranges, and anticipates production growth in the latter half of 2025 [65][66] Question: Details on the Comstock partnership and project development - Management explained that the partnership with Comstock will follow a phased approach, capturing CO2 from their plants as production grows [73] Question: Macroeconomic conditions affecting the power segment - Management highlighted inflation in construction costs and bullish sentiment for data center investments as key factors influencing the power business [75][77] Question: Funding mechanisms for the new JV with CIP - Management confirmed that there is an upfront capital component to the JV, which will be drawn down as projects are deployed over the next 12 to 24 months [84]

Financial Data and Key Metrics Changes - BKV reported a net loss of $79 million or a loss of $0.93 per diluted share for Q1 2025, while adjusted net income was $35 million or a positive $0.41 per diluted share [30] - Combined adjusted EBITDAX was just over $100 million, with $90 million from upstream operations and $10 million from the power segment [29] - Accrued capital expenditures for the quarter were $58 million, significantly below the low end of the guidance range of $75 million [30] Business Line Data and Key Metrics Changes - The upstream business produced 761 million cubic feet equivalent per day, exceeding the midpoint of guidance [15] - Development capital expenditures for upstream were $48 million, 26% below the midpoint of the guided range [16] - Power joint venture adjusted EBITDA was $20 million, with BKV's share being $10 million, driven by higher pricing due to cold weather [27] Market Data and Key Metrics Changes - ERCOT revised its 2031 load forecast higher by 68 gigawatts, a 45% increase from 2024 projections, primarily driven by data centers [26] - Power prices averaged $54.52 per megawatt hour, with an average realized spark spread of $25.39 per megawatt hour [28] Company Strategy and Development Direction - BKV is focused on vertical integration across its four business lines: upstream, midstream, carbon capture, and power generation, aiming to create premium margins [5] - The company is leveraging its position in the Barnett Shale, which has over 15 years of inventory and is geographically advantaged for natural gas supply [8] - BKV is actively pursuing partnerships to enhance its carbon capture business, including a significant investment from Copenhagen Infrastructure Partners [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the robustness of the 45Q tax credit and the ongoing demand for low carbon gas amid global decarbonization efforts [4] - The company anticipates continued strong demand growth in the power sector, particularly in Texas, driven by data centers and industrial growth [9] - Despite macroeconomic headwinds, BKV's proactive supply chain management is expected to minimize disruptions and cost impacts [5] Other Important Information - BKV's CCUS strategy is gaining momentum, with multiple projects on track for CO2 injection in the coming years [20][21] - The company has a strong balance sheet with net leverage of less than 0.7 times net debt to adjusted EBITDAX [32] Q&A Session Summary Question: Thoughts on the resiliency of the 45Q tax credit and momentum behind CCUS projects - Management believes the 45Q tax credit is robust and enjoys bipartisan support, which is critical for energy competitiveness in the U.S. [45] - There is strong momentum in carbon capture, particularly for natural gas processing projects, with BKV positioned as a leader in this space [47] Question: Clarification on CapEx for CCUS and project timing - Management indicated that while the overall CapEx for CCUS remains robust, the timing may shift as they optimize capital spending with their JV partner [58] Question: Upstream production growth inclination - Management reiterated a disciplined approach to capital investment, with a commitment to 2% to 3% growth in production by Q4 2025 compared to Q4 2024 [66] Question: Details on the Comstock partnership and project development - Management explained that the partnership with Comstock will follow a phased approach, allowing BKV to grow with Comstock's production [75] Question: Insights on the power business and macroeconomic conditions - Management highlighted that inflation in construction costs could impact power prices, but there is a bullish outlook for data center investments in the U.S. [78]

Financial Data and Key Metrics Changes - BKV reported a net loss of $79 million or a loss of $0.93 per diluted share for Q1 2025, while adjusted net income was $35 million or a positive $0.41 per diluted share after removing unrealized derivative losses [27] - Combined adjusted EBITDAX was just over $100 million, with $90 million from upstream operations and $10 million from the Power joint venture [26][30] - Accrued capital expenditures for the quarter were $58 million, significantly below the low end of the guidance range of $75 million [27] Business Line Data and Key Metrics Changes - The upstream business produced 761 million cubic feet equivalent per day, exceeding the midpoint of guidance, with development CapEx spending at $48 million, 26% below the midpoint of the guided range [13][14] - The Power joint venture's adjusted EBITDA was $20 million for the quarter, with BKV's implied 50% share being $10 million, driven by higher pricing due to cold weather [24] - The carbon capture business is on track with significant milestones, including a partnership with Comstock Resources and a $500 million investment commitment from Copenhagen Infrastructure Partners [10][11][20] Market Data and Key Metrics Changes - ERCOT revised its 2031 load forecast higher by 68 gigawatts, a 45% increase from 2024 projections, primarily driven by data centers [23] - Power prices averaged $54.52 per megawatt hour, with an average realized spark spread of $25.39 per megawatt hour [25] Company Strategy and Development Direction - BKV is focused on vertical integration across its four business lines: upstream, midstream, carbon capture, and power generation, aiming to create premium margins and differentiated products [5] - The company is leveraging its position in the Barnett Shale, which is experiencing a renaissance, to optimize capital expenditures and enhance operational efficiencies [12][13] - BKV aims to capitalize on the growing demand for decarbonized energy solutions, particularly in the context of data centers and the broader energy transition [11][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the robustness of the 45Q tax credit and the bipartisan support for carbon capture initiatives, which are expected to drive growth in the CCUS sector [4][43] - The company anticipates continued strong demand for natural gas and power, particularly in Texas, driven by economic development and the expansion of data centers [8][23] - Management remains cautious about macroeconomic headwinds, including inflation and potential tariffs, but believes in the resilience of its business model [5][30] Other Important Information - BKV's cash and cash equivalents at the end of Q1 were approximately $15 million, with a net leverage ratio of less than 0.7 times [28] - The company has a strong balance sheet and increased its borrowing base to $850 million, reflecting confidence in its financial position [29] Q&A Session Summary Question: Thoughts on the resiliency of the 45Q tax credit and momentum behind CCUS projects - Management believes the 45Q tax credit is robust and enjoys bipartisan support, which is critical for energy competitiveness in the U.S. [43][44] - There is strong momentum in carbon capture, particularly for natural gas processing projects, with BKV positioned as a leader in this space [45][46] Question: CapEx for CCUS and potential changes - Management indicated that while the internal CapEx for CCUS remains unchanged, the timing may shift as they optimize capital spending with their new JV partner [54][55] Question: Upstream production growth inclination - Management reiterated a disciplined approach to capital investment, with a commitment to 2% to 3% growth in production by Q4 2025 compared to Q4 2024, while monitoring macroeconomic conditions [60][62] Question: Differences in project timing with Comstock - Management explained that the development of projects with Comstock will follow a phased approach, allowing for growth as Comstock increases production [68][70] Question: Funding mechanisms for the new JV with CIP - Management confirmed that there is an upfront capital component associated with the JV, which will be drawn down over the next 12 to 24 months as projects are deployed [82][83] Question: Willingness to pay a premium for decarbonized power and gas - Management noted that while not all customers are willing to pay a premium, there is a segment, particularly large tech companies, that are very interested in decarbonized energy solutions [85][86]

Business Strategy and Operations - BKV is the largest producer in the Barnett and a top 5 gas producer in Texas, with approximately 13 billion cubic feet per day (Bcf/d) of production from other smaller operators in the play[15] - BKV has a highly contiguous position with opportunities for growth in acreage[18] - BKV has taken an early lead in the Carbon Capture, Utilization, and Storage (CCUS) space[21] - BKV has a strategic joint venture with Copenhagen Infrastructure Partners (CIP) for CCUS projects, with CIP covering 100% of JV expenses until their contributions equal 49% of the total value[27, 33] - BKV manages and consolidates the JV, initially receiving pro-rata distributions, which increase to 60% after CIP achieves minimum return targets[33] Power and Market Position - BKV-BPP Power Joint Venture supplies power to the ERCOT market[35] - The ERCOT (Texas) market has a power capacity of 6,082 MW[38, 99] - BKV has a 2.5 MWac solar facility jointly owned through a JV with Banpu Power US[92] - ERCOT forecasts substantial demand growth, with a projected increase of +67% for Oil and Gas and +132% for Industrial/Hydrogen from 2025 to 2031[97] Financial Performance - The company's financial highlights for the first quarter of 2025 include $689.8 million in revenue and $653.6 million in adjusted EBITDAX[105] - The company's financial strategy focuses on disciplined growth and shareholder returns[107] - The company's Barnett development has an average 1st Year Decline of 45% for New Drill D&C and 58% for Refracs[53]

Financial Performance - Total revenues for the first quarter of 2025 were $78.8 million, with a net loss of $78.7 million or $(0.93) per diluted share[4]. - Adjusted Net Income for the first quarter was $35.0 million, resulting in an Adjusted EPS of $0.41[6]. - The company reported revenues of $216.1 million for natural gas, NGL, and oil sales in Q1 2025, compared to $141.7 million in Q1 2024[33]. - BKV incurred a net loss of $78.7 million in Q1 2025, with a loss per share of $0.93, compared to a net loss of $38.6 million and a loss per share of $0.58 in Q1 2024[33]. - The company reported total operating expenses of $172.5 million in Q1 2025, a decrease from $186.3 million in Q1 2024[33]. - Net loss for Q1 2025 was $78.666 million, compared to a net loss of $38.585 million in Q1 2024, representing an increase of 104%[49]. - Adjusted EBITDAX for Q1 2025 was $90.895 million, significantly higher than $47.132 million in Q1 2024, indicating an increase of 93%[62]. - Combined Adjusted EBITDAX for Q1 2025 was $100.685 million, compared to $57.385 million in Q1 2024, showing an increase of 75%[62]. Production and Pricing - Average realized natural gas price for the first quarter was $3.10/MMBtu, while the average realized price including derivatives was $2.86/MMBtu[5]. - Total hydrocarbon production for the first quarter was 761.1 MMcfe/d, a decrease from 821.1 MMcfe/d in the same period of 2024[18]. Capital Expenditures and Investments - Capital expenditures in the first quarter of 2025 were $58.0 million, significantly higher than $18.0 million in the same period of 2024[21]. - For Q2 2025, BKV expects total capital expenditures to be between $77 million and $103 million, with net production projected at 775 to 805 MMcfe/d[24]. - Cash paid for capital expenditures in Q1 2025 was $57.374 million, significantly higher than $19.861 million in Q1 2024, an increase of 189%[57]. Cash Flow and Liquidity - Net cash provided by operating activities was $22.6 million, compared to $19.3 million in the same period of 2024[6]. - The company generated net cash provided by operating activities of $22,620,000, an increase from $19,251,000 in the prior year, reflecting a 12% growth[35]. - As of March 31, 2025, BKV had cash and cash equivalents of $15.3 million and total liquidity of $401.2 million[22][23]. - The total cash, cash equivalents, and restricted cash at the end of the period was $15,299,000, a decrease from $162,846,000 at the beginning of the period[35]. Debt and Leverage - Total debt as of March 31, 2025, was $200.0 million, with a net leverage ratio of 0.67x, below the long-term target of 1.0x to 1.5x[23]. - The company plans to increase its borrowing base by $100 million and the elected commitment amount by $65 million as of May 6, 2025[23]. Strategic Initiatives - The company announced a strategic joint venture with Copenhagen Infrastructure Partners to develop CCUS projects, with an initial commitment of $500 million[14]. - The company has a long-term strategy focused on natural gas production, midstream services, power generation, and carbon capture technologies[27]. - The Barnett Zero Project sequestered 38,787 metric tons of CO2 equivalent in the first quarter, totaling 212,112 metric tons since its inception[17]. Derivative Activities - The company had unrealized derivative losses of $133,985,000 for the quarter, compared to $40,143,000 in the previous year, highlighting increased volatility in derivative activities[42]. - The company has significant derivative activities with a total volume of natural gas commodity derivatives of 78,400,000 MMBtu for 2025, with a weighted average price of $3.41[36]. - The fair value of natural gas liquids commodity derivatives as of March 31, 2025, was negative $4,115,000 for OPIS Purity Ethane Mont Belvieu, indicating potential losses in this segment[38]. Performance Metrics - Adjusted Free Cash Flow for Q1 2025 decreased to $6.094 million from $47.265 million in Q1 2024, a decline of 87%[57]. - Adjusted Free Cash Flow Margin for Q1 2025 was 2.6%, down from 30.4% in Q1 2024, indicating a significant decrease in efficiency[57]. - Power JV Adjusted EBITDA was $19.6 million for the first quarter, exceeding the high end of the guidance range[12]. - BKV's Power JV Adjusted EBITDA is projected to be between $20 million and $30 million for Q2 2025, and $130 million to $170 million for FY 2025[24]. - Power JV Adjusted EBITDA for Q1 2025 was $19.579 million, slightly lower than $20.505 million in Q1 2024, a decrease of 4.5%[60].

Production and Reserves - Total production volumes for the company in 2024 were 288.4 Bcfe, a decrease of 8.1% from 313.8 Bcfe in 2023[142]. - Estimated proved reserves as of December 31, 2024, were 3,131,909 MMcfe, down from 4,093,791 MMcfe in 2023, a decrease of 23.5%[149]. - The company experienced a decrease of 961.9 Bcfe in proved reserves during 2024, primarily due to lower commodity pricing and changes in planned drilling activity[151]. - Proved undeveloped reserves scheduled for development within five years as of December 31, 2024, totaled 262,555 MMcfe, down from 706,373 MMcfe in 2023[149]. - Proved reserves decreased by 2,042.1 Bcfe in 2023, primarily due to decreased commodity pricing and changes in drilling activity, resulting in total downward revisions of 1,986.3 Bcfe[158]. - The company produced 288.4 Bcfe during the year ended December 31, 2024[151]. - The company produced 313.8 Bcfe during the year ended December 31, 2023[158]. - Extensions and discoveries added 139.2 Bcfe of proved undeveloped reserves across 98.0 gross (89.4 net) locations, driven by optimized capital allocation and enhanced drilling programs[155]. - Improved recoveries added 52.2 Bcfe of proved developed reserves through enhanced recovery techniques applied to producing wells in 2024[155]. Financial Performance - Average sales price for natural gas (excluding derivative settlements) decreased to $1.87 per Mcf in 2024 from $2.28 per Mcf in 2023, representing a decline of 17.9%[142]. - The Standardized Measure of proved reserves value decreased to $633 million in 2024 from $1,062 million in 2023, a decline of 40.4%[149]. - The average production cost for the total company was $1.25 per Mcfe in 2024, slightly down from $1.27 per Mcfe in 2023[142]. - The company plans to finance future development costs of approximately $135.1 million through cash flow from operations and/or borrowings under its RBL Credit Agreement[150]. - The Standardized Measure of estimated proved reserves is $1,990 million, while the PV-10 value is $2,446 million as of December 31, 2024[168]. Regulatory and Environmental Compliance - The company is in material compliance with current environmental laws, with no expected material impact on financial condition from existing regulations[198]. - The company is subject to the Oil Pollution Act, which imposes strict liability for containment and cleanup costs related to oil spills, potentially affecting financial condition and cash flows[203]. - Compliance with the Clean Water Act may lead to increased costs due to restrictions on wastewater disposal options for hydraulic fracturing waste[204]. - The Safe Drinking Water Act requires permits for disposal wells, and any leakage could result in significant remediation costs and operational delays[205]. - The company engages third parties for hydraulic fracturing services, which may face increased regulatory scrutiny and operational delays due to potential induced seismicity concerns[205]. - The EPA's Class VI well classification for CO2 sequestration projects requires a lengthy permitting process, potentially delaying CCUS project development[207]. - Increased regulation of hydraulic fracturing could lead to operational delays and higher compliance costs, adversely impacting financial results[211]. - The Clean Air Act mandates permits for new and modified sources of air pollutants, with potential fines for non-compliance impacting operations[212]. - The EPA's recent Methane Rule imposes new requirements for methane emissions, which could increase compliance costs and operational impacts[213]. - The company may face significant costs and operational modifications due to evolving greenhouse gas regulations and climate change legislation[215]. - The EPA's "Final Mandatory Reporting of Greenhouse Gases" Rule requires operators of facilities emitting over established thresholds to report GHG emissions annually on a facility basis[220]. - The U.S. NDC aims for a 50-52% reduction in net GHG emissions from 2005 levels by 2030, with specific measures yet to be established[221]. - The Inflation Reduction Act imposes a fee on GHG emissions from certain facilities, potentially increasing operating costs and accelerating the transition away from fossil fuels[222]. - California's new climate disclosure laws require businesses with over $1 billion in annual revenue to report GHG emissions and those with over $500 million to prepare biennial risk reports[223]. - The company may face increased costs and operational impacts due to compliance with current and future climate change regulations[224]. - The presence of endangered species could lead to increased costs and limitations on exploration and production activities[226]. - The National Environmental Policy Act requires environmental assessments for major agency actions, which could delay oil and gas projects[227]. - The establishment of the White House Office of Environmental Justice may impede the development of fossil fuel assets and CCUS projects[228]. Human Resources and Safety - The company employs a total of 366 employees as of December 31, 2024, and hires independent contractors as needed[188]. - The company emphasizes safety as a top priority, conducting routine maintenance and offering annual specialized training to staff on spill prevention[189]. - The company has implemented a compensation framework to ensure competitive pay, reflecting employee skills, experience, and performance[190]. - The company is committed to diversity and inclusion, fostering a safe and inclusive working environment[192]. Risk Management and Financial Instruments - The company has a net liability of $67.6 million for commodity derivative instruments as of December 31, 2024, compared to a net asset of $102.5 million as of December 31, 2023[672]. - A hypothetical increase or decrease of $0.10 per Mcf in NYMEX would have resulted in a $9.7 million, $1.6 million, and $7.7 million decrease or increase in natural gas hedge revenues for the years ended December 31, 2024, 2023, and 2022, respectively[668]. - The company enters into financial derivative instruments to mitigate the impact of commodity price fluctuations, covering portions of projected positions through 2027[667]. - The estimated fair value of the company's commodity derivative instruments is subject to volatility, impacting earnings but not cash flows until contracts are settled[672]. - The company has a hedging strategy that limits benefits from increases in commodity prices above fixed hedge prices while mitigating negative effects of falling prices[673]. - The company requires specific minimum credit standards for counterparties and actively monitors their credit ratings to manage counterparty credit risk[674]. - The company utilizes ISDA Master Agreements with derivative counterparties to provide rights of set-off upon defined acts of default[675]. - The company relies on a third-party marketer to sell its natural gas production, which consists of credit-worthy counterparties[676]. - The company’s financial hedging activities include commodity price swaps, basis differential swaps, call options, and producer collar agreements[666]. - The company is exposed to basis risk in its operations when derivative contracts settle financially and physical electricity is delivered on different terms[669]. Debt and Borrowing - As of December 31, 2024, the company had $165.0 million of outstanding borrowings on its RBL Credit Agreement, which has a floating interest rate[677]. - As of December 31, 2023, the company had $75.0 million of outstanding borrowings with BNAC, $456.0 million under the Term Loan Credit Agreement, $31.0 million under the SCB Credit Facility, and $96.0 million under the Revolving Credit Agreement[677]. - The average annualized interest rate on outstanding borrowings was approximately 9.3% for 2024 and 8.7% for 2023[677]. - A 1.0% increase in average interest rates would have resulted in an increase of $4.9 million in interest expense for 2024 and $7.8 million for 2023[677].