Preliminary Sections Glossary of Commonly Used Terms This section defines technical and company-specific terms, including abbreviations for measurements, business entities, operational concepts, and financial agreements - Key defined terms relate to the company's natural gas operations, its carbon capture, utilization, and sequestration (CCUS) business, and its various joint ventures and credit facilities111830 Cautionary Note Regarding Forward-Looking Statements This section cautions that forward-looking statements are subject to risks and uncertainties, advising readers to consult the 2024 Annual Report on Form 10-K risk factors - Forward-looking statements cover business strategy, reserves, drilling plans, hedging, CCUS business growth, and anticipated benefits of the Bedrock acquisition394043 PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents BKV Corporation's unaudited condensed consolidated financial statements for Q2 and H1 2025, including balance sheets, operations, cash flows, equity, and accounting notes Condensed Consolidated Financial Statements Unaudited financial statements show total assets at $2.30 billion, net income of $25.9 million, and $98.8 million net cash from operations for H1 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $21,426 | $14,868 | | Total current assets | $98,436 | $94,610 | | Total natural gas properties, net | $1,938,337 | $1,888,281 | | Total assets | $2,304,427 | $2,231,088 | | Total current liabilities | $174,731 | $166,205 | | Long-term debt, net | $200,000 | $165,000 | | Total liabilities | $716,369 | $671,514 | | Total stockholders' equity | $1,590,131 | $1,559,574 | Condensed Consolidated Statement of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Natural gas, NGL, and oil sales | $199,729 | $125,854 | $415,855 | $267,541 | | Total revenues | $322,044 | $136,198 | $400,864 | $288,112 | | Income (loss) from operations | $128,398 | $(43,181) | $34,695 | $(77,544) | | Net income (loss) attributable to BKV | $104,572 | $(59,697) | $25,906 | $(98,282) | | Diluted EPS | $1.23 | $(0.90) | $0.30 | $(1.48) | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $98,783 | $9,782 | | Net cash provided by (used in) investing activities | $(129,654) | $101,633 | | Net cash provided by (used in) financing activities | $37,429 | $(267,287) | | Net increase (decrease) in cash | $6,558 | $(155,872) | Notes to the Condensed Consolidated Financial Statements These notes detail accounting policies, debt structure, derivative instruments, the BKV-CIP Joint Venture consolidation, commitments, contingencies, and significant subsequent events like a new acquisition agreement - On May 8, 2025, the company formed the BKV-CIP Joint Venture with Copenhagen Infrastructure Partners (CIP) to develop CCUS projects, consolidating the JV as a Variable Interest Entity (VIE) due to BKV's controlling interest and asset contribution136138 - The final $20.0 million contingent consideration payment related to the Devon Barnett Acquisition was made on January 8, 202593144 - Subsequent to quarter end, on August 7, 2025, the company agreed to acquire Barnett shale assets from Bedrock Production, LLC for approximately $370.0 million, comprising $260.0 million in cash and up to $110.0 million in BKV common stock153 Derivative Positions as of June 30, 2025 (Natural Gas - NYMEX Henry Hub) | Year | Instrument | MMBtu | Weighted Avg Price/Ceiling (USD) | | :--- | :--- | :--- | :--- | | 2025 | Swap | 48,960,000 | $3.41 | | | Collars | 6,120,000 | $4.11 | | 2026 | Swap | 71,575,000 | $3.71 | | | Call options | 36,500,000 | $5.00 | | | Put options | 36,500,000 | $3.00 (Floor) | | 2027 | Swap | 36,500,000 | $3.96 | | | Call options | 36,500,000 | $5.00 | | | Put options | 36,500,000 | $3.00 (Floor) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, liquidity, and capital resources, focusing on commodity prices, production, and strategic initiatives including CCUS and the Bedrock acquisition Overview and Recent Developments BKV is a growth-driven energy company focused on natural gas, midstream, power generation, and CCUS, aiming for net-zero emissions, with recent strategic moves including a CCUS joint venture, a new CCUS project, and the Bedrock acquisition - The company's core business is natural gas production, with a vertically integrated strategy targeting net-zero emissions for Scope 1 and 2 by the early 2030s and Scope 1, 2, and 3 by the late 2030s156 - On August 7, 2025, BKV agreed to acquire Bedrock's Barnett assets for $370.0 million, adding approximately 108 MMcfe/d of production and nearly 1 Tcfe of 1P reserves161 - A new CCUS project announced on July 21, 2025, is expected to capture and sequester approximately 70,000 metric tons of CO2 per year starting in 2027158 Results of Operations Financial results significantly improved due to higher realized natural gas prices, with Q2 2025 natural gas revenues up 88% and net income of $104.6 million, while G&A expenses increased due to growth initiatives and DD&A decreased from a depletion rate adjustment Comparison of Operating Revenues (Three Months Ended June 30, in thousands) | Revenue Line | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Natural gas revenues | $155,562 | $82,840 | $72,722 | 88% | | NGL revenues | $41,630 | $41,216 | $414 | 1% | | Derivative gains (losses), net | $112,208 | $(7,486) | $119,694 | N/A | - The $72.7 million (88%) increase in Q2 2025 natural gas revenue was primarily driven by a $71.0 million positive impact from higher commodity prices, with a smaller $1.7 million contribution from increased production volumes175 Comparison of Operating Expenses (Three Months Ended June 30, in thousands) | Expense Line | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Gathering and transportation | $63,026 | $53,714 | $9,312 | 17% | | DD&A, and accretion | $38,044 | $59,313 | $(21,269) | (36)% | | General and administrative | $30,516 | $19,296 | $11,220 | 58% | - General and administrative expenses increased by $11.2 million (58%) in Q2 2025 compared to Q2 2024, driven by costs related to company-wide growth initiatives, including higher labor, consulting, and severance costs193 Liquidity and Capital Resources The company's liquidity relies on operating cash flow and its RBL Credit Agreement, with $98.8 million in operating cash flow for H1 2025, a $76.3 million working capital deficit, and $200.0 million outstanding on an $850.0 million borrowing base - Net cash provided by operating activities for the first six months of 2025 was $98.8 million, a significant increase from $9.8 million in the same period of 2024, primarily due to higher income from operations and lower interest payments230 - Accrued capital expenditures for the six months ended June 30, 2025, were $136.8 million, a substantial increase from $32.9 million in the prior-year period167234 RBL Credit Agreement Status (as of June 30, 2025) | Metric | Amount (in millions) | | :--- | :--- | | Borrowing Base | $850.0 | | Elected Commitment | $665.0 | | Outstanding Balance | $200.0 | | Letters of Credit | $14.1 | | Available Capacity (as of Aug 12, 2025) | $368.9 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages commodity price volatility for natural gas and NGLs using derivative instruments, while also addressing counterparty credit risk and interest rate risk from its floating-rate RBL Credit Agreement - The company hedges a portion of its production to manage cash flow volatility, with the fair value of its commodity derivative instruments being a net liability of $82.5 million as of June 30, 2025254261 - A hypothetical $0.10 per Mcf change in NYMEX natural gas prices would have resulted in a $7.0 million change in natural gas hedge revenues for the six months ended June 30, 2025257 - The company is exposed to interest rate risk on its $200.0 million of outstanding floating-rate debt under the RBL Credit Agreement, where a 1.0% increase in average interest rates would have increased interest expense by $1.1 million for the first half of 2025266 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2025, due to a material weakness in internal control over financial reporting related to income tax accounting - A material weakness in internal control over financial reporting related to the accounting for income taxes continued to exist as of June 30, 2025269 - The weakness stems from controls not being designed with sufficient precision to prepare and review the income tax provision, related balances, and disclosures, leading to past audit adjustments and financial statement revisions270 - The company is actively working on remediating the material weakness by designing and implementing additional internal controls related to its income tax accounting processes272 PART II OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 11 of the financial statements for legal proceedings, stating that while subject to various claims, their ultimate liability is not expected to have a material adverse effect - Information on legal proceedings is incorporated by reference from Note 11 - Commitments and Contingencies in the financial statements276142 Item 1A. Risk Factors This section updates risk factors, highlighting new risks associated with the pending Bedrock acquisition, including potential failure to close and difficulties in integration and realizing anticipated benefits - A new material risk factor has been added concerning the pending Bedrock acquisition, which is expected to close in late Q3 or early Q4 2025277278 - Risks include the potential failure to satisfy closing conditions, which are not entirely within the company's control, and the negative consequences of a failed transaction, such as incurred expenses and adverse market reactions278 - Even if completed, the company faces integration risks, such as the inability to achieve anticipated synergies and cost savings, and potential unknown liabilities associated with the acquired assets279281 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities280 Item 5. Other Information The company disclosed that no director or executive officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading agreement during Q2 2025 - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the quarter282 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including credit agreement amendments, the BKV dCarbon Project LLC agreement, CEO and CFO certifications, and XBRL data files - Key exhibits filed include the Limited Liability Company Agreement of BKV dCarbon Project, LLC, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act283
Bkv Corporation(BKV) - 2025 Q2 - Quarterly Report