BKV Corporation Reports Third Quarter 2024 Financial and Operational Results

November 12, 2024

DENVER–(BUSINESS WIRE)–BKV Corporation (NYSE: BKV) (“BKV” or the “Company”), today reported financial and operational results for the third quarter of 2024, its first earnings report as a publicly traded company.

Third Quarter 2024 Highlights

Completed initial public offering of 15,000,000 shares of common stock on September 27, 2024
Net income of $12.9 million, or $0.18 per diluted share
Adjusted EBITDAX of $51.0 million (excluding Power JV)
Net cash provided by operating activities of $65.0 million, Adjusted Free Cash Flow of $19.6 million, and Adjusted Free Cash Flow Margin of 14.2%
De-levered balance sheet, achieving net debt of $158.7 million and net leverage ratio of 0.8x
Total net production of 762.6 MMcfe per day

“It is incredibly exciting for me to release our first earnings report as a public company,” said Chris Kalnin, Chief Executive Officer of BKV. “I would like to thank our investors and the entire BKV team whose hard work and dedication to our Company made this dream a reality. The Company has been on an incredible journey since its founding. Now, as we enter a new era for BKV as a public company, we will continue to work together towards the same ambitious goals, strategically growing our business and driving shareholder value.”

“In the third quarter of 2024, BKV demonstrated strong business performance, driven by our strategic positioning as a leading energy solutions company – a large natural gas producer, with significant power generation and carbon capture, utilization and sequestration assets,” continued Kalnin. “We believe that the increasing demand for clean power, particularly to support the rapidly growing AI data center boom, will support significant growth across all our business lines, and continue to grow the market for our carbon sequestered gas product. Our disciplined operational approach and healthy balance sheet position us to capitalize on these macro tailwinds.”

Financial Results

Third Quarter and Year-to-Date 2024

For the third quarter of 2024, total revenues and other operating income for BKV was $173.1 million. This compares to total revenues and other operating income of $191.4 million for the third quarter of 2023. The decrease was due primarily to lower natural gas prices, excluding hedges, as well as lower production volumes. For the nine months ended September 30, 2024 and 2023 total revenues and other operating income were $461.2 million and $678.0 million, respectively. The decrease in revenue was largely due to production volumes as well as unrealized losses during 2024.

For the third quarter of 2024, net income for BKV was $12.9 million, or $0.18 per diluted share. This compares to net income of $18.6 million, or $0.30 per diluted share for the third quarter of 2023. The decrease was due to lower income from operations resulting from a decrease in natural gas prices period over period. Net income for the third quarter of 2024 included $50.6 million of earnings from the Power JV and $3.0 million of unrealized commodity derivative losses. Excluding these items and other non-recurring items primarily related to the Company’s IPO, Adjusted Net Loss for the third quarter 2024 was $18.6 million, or $(0.27) per diluted share.

For the nine months ended September 30, 2024, net loss was $85.4 million, or $(1.28) per diluted share. For the nine months ended September 30, 2023, net income was $79.4 million, or $1.27 per diluted share. The decrease was attributable to lower commodity pricing and production volumes as well as unrealized losses on derivatives during 2024. Net loss for the nine months ended September 30, 2024 included earnings from the Power JV of $27.6 million, unrealized commodity derivative losses of $82.1 million, and $13.3 million of commodity derivative contract termination gains. Excluding these items and other non-recurring items, Adjusted Net Loss for the nine months ended September 30, 2024 was $40.3 million, or $(0.60) per diluted share.

Adjusted Free Cash Flow for the third quarter of 2024 was $19.6 million, which was a $30.8 million increase compared to negative Adjusted Free Cash Flow in the third quarter of 2023 of $11.2 million. The increase was due to higher net cash provided by operating activities, excluding changes in working capital, and a decrease in cash capital expenditures during the third quarter 2024 compared to the same period in 2023. Adjusted Free Cash Flow Margin was 14.2%. Adjusted Free Cash Flow for the nine months ended September 30, 2024 was $86.2 million, compared to negative $22.7 million for the same period in the prior year. Adjusted Free Cash Flow Margin was 19.7% for the nine months ended September 30, 2024.

Average realized natural gas price for the third quarter of 2024 was $1.58/MMBtu, excluding the impact of derivatives, which was down from $1.97/MMBtu for the same period in the prior year. Including the impact of hedges, average realized price was $2.21/MMBtu compared to $2.00/MMBtu in the same quarter in 2023. Average realized natural gas prices year-to-date, excluding the impact of derivatives, was $1.55/MMBtu, down meaningfully from the prior year realized prices, excluding hedges, of $2.01/MMBtu. Including the impact of derivatives, average realized price was $2.06/MMBtu for the nine months ended September 30, 2024 compared to $2.19/MMBtu for the same period in the prior year.

	Three Months Ended September 30,						Nine Months Ended September 30,
($ Millions, except EPS)⁽¹⁾	2024			2023			2024			2023
Net income (loss)	$	12.9		$	18.6		$	(85.4	)	$	79.4
Adjusted Net Loss, non-GAAP	$	(18.6	)	$	(11.3	)	$	(40.3	)	$	(16.3	)
Adjusted EBITDAX, non-GAAP	$	51.0		$	66.7		$	159.8		$	183.7
Diluted earnings per share (EPS)	$	0.18		$	0.30		$	(1.28	)	$	1.27
Adjusted earnings per share (EPS), non-GAAP	$	(0.27	)	$	(0.19	)	$	(0.60	)	$	(0.28	)
Net cash provided by operating activities	$	65.0		$	34.5		$	74.8		$	115.4
Adjusted Free Cash Flow, non-GAAP	$	19.6		$	(11.2	)	$	86.2		$	(22.7	)
Free Cash Flow Margin, non-GAAP		14.2	%		(6.2	)%		19.7	%		(4.1	)%
Capital expenditures (accrued)	$	24.4		$	33.8		$	57.3		$	147.6
____________________________________________________ (1) Adjusted Net Loss, Adjusted EBITDAX, Adjusted EPS, Adjusted Free Cash Flow and Free Cash Flow Margin are each non-GAAP financial measures. For a definition of each of these non-GAAP financial measures and reconciliations of such non-GAAP financial measures to their comparable GAAP metrics, please see “Supplemental Non-GAAP Financial Measures” below.

“BKV’s third quarter results were positive and are illustrative of the Company’s differentiated and competitive integrated business model,” commented John Jimenez, BKV’s Chief Financial Officer. “Our results for the year have been impacted by fluctuating natural gas prices, partially mitigated by our successful hedging program. As we look to the future, BKV will continue our systematic and disciplined approach toward capital deployment and creating shareholder value through all our business lines.”

Operational Results

Third Quarter and Year-to-Date 2024

Total production for the three and nine months ended September 30, 2024 was 762.6 MMcfe/d and 792.5 MMcfe/d, respectively, consisting of 79% natural gas and 21% NGLs for both periods as compared to production for the three and nine months ended September 30, 2023 of 844.7 MMcfe/d and 866.9 MMcfe/d, respectively. The decrease for both periods is attributable to the sale in the second quarter 2024 of the Company’s non-operated upstream assets in the Marcellus Shale in the Appalachian Basin of Northeastern Pennsylvania (“NEPA”), which impacted volumes by approximately 28 MMcfe/d, as well as a significant reduction in capital spending in response to lower commodity pricing. Since natural gas prices retreated in early 2023, the Company has maintained capital discipline as its focus remains on free cash flow generation.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Production
Net production per day (MMcfe/d)		762.6			844.7			792.5			866.9
Natural gas (MMcf)		55,456			61,792			172,213			188,690
NGL (MBbls)		2,428			2,625			7,415			7,905
Oil (MBbls)		23			29			75			92
Total (MMcfe)		70,162			77,716			217,153			236,672
Natural Gas Pricing
Average NYMEX price	$	2.16		$	2.55		$	2.10		$	2.69
Differential	$	(0.58	)	$	(0.58	)	$	(0.55	)	$	(0.68	)
Realized prices, excluding derivatives	$	1.58		$	1.97		$	1.55		$	2.01
Realized prices, including derivatives	$	2.21		$	2.00		$	2.06		$	2.19
Average Operating Cash Costs per Mcfe
Lease operating and workover	$	0.48		$	0.44		$	0.47		$	0.48
Taxes other than income	$	0.15		$	0.23		$	0.15		$	0.25
Gathering and transportation costs	$	0.78		$	0.80		$	0.77		$	0.77
Total	$	1.41		$	1.47		$	1.39		$	1.50

Carbon Capture Utilization and Sequestration (“CCUS”)

The Company’s Barnett Zero project began first injection in November 2023 and injected approximately 50,000 metric tons of CO₂ during the three months ended September 30, 2024. The Barnett Zero facility has now injected approximately 140,000 metric tons of CO₂ since project start up. BKV’s Cotton Cove project remains on track for first injection in the first half of 2026.

BKV’s de-levered balance sheet and expected operating cash flow enable the Company to self-fund its near-term CCUS projects. In addition, BKV continues to evaluate potential third-party investments in its CCUS business, which would help diversify risk, provide additional capital, and potentially augment the Company’s deep bench of potential CCUS projects.

Power

For the third quarter 2024, capacity factor across the Temple I & II power generation facilities was 73% and total generation was 2,400 GWh, with average pricing of $35.30/MWh. Average natural gas cost was $2.07/MMBtu, with an average spark spread of $20.66/MWh.

The third quarter of 2024 was characterized by moderate temperatures and adverse weather events affecting both of the Temple facilities. Despite poor environmental market conditions, BKV’s implied proportionate share of Net Income and Power JV Adjusted EBITDA¹ from our power joint venture, BKV-BPP Power, LLC, was $50.6 million and $10.1 million, respectively, for the three months ended September 30, 2024. BKV’s implied proportionate share of Net Income and Power JV Adjusted EBITDA from the power joint venture was $49.1 million and $86.8 million, respectively, for the three months ended September 30, 2023.

BKV sees significant opportunity for growth in the Company’s power business, driven by multiple factors including the rapid expansion of the AI data center market. Growing demand for power solutions is supportive of BKV’s strategic goals, and the Company’s ongoing evaluation of both organic and inorganic opportunities within the power business line.

Capital Expenditures

Capital expenditures in the third quarter of 2024 were $24.4 million, which included $14.6 million for development capital, $3.0 million for CCUS, and $6.8 million for other expenditures. Capital expenditures for the same period in 2023 were $33.8 million, which included $7.3 million for development capital, $23.5 million for CCUS, and $3.0 million for other expenditures.

Capital expenditures for the nine months ended September 30, 2024 were $57.3 million, which included $39.2 million for development capital, $7.7 million for CCUS, and $10.4 million for other expenditures. Capital expenditures for the same period in 2023 were $147.6 million, which included $97.3 million for development capital, $44.4 million for CCUS, and $5.9 million for other expenditures.

Liquidity

As of September 30, 2024, BKV had cash and cash equivalents of $31.3 million, compared to $54.1 million of cash and cash equivalents and restricted cash of $138.3 million as of September 30, 2023.

Total debt as of September 30, 2024 was $190.0 million, which was made up solely of the amount outstanding under the Company’s reserve-based lending agreement (the “RBL”). Net debt as of September 30, 2024 was $158.7 million, and net leverage ratio was 0.8x (net debt to annualized third quarter Adjusted EBITDAX). BKV’s long-term net leverage target is to manage between 1.0x to 1.5x. As of September 30, 2024, total liquidity for BKV was $426.7 million. Total liquidity consists of $31.3 million in cash and cash equivalents and $395.4 million available under the Company’s RBL. RBL availability is based on the elected commitment amount of $600.0 million, less $190.0 million of draws, and $14.6 million of letters of credit. Total liquidity, as of November 8, 2024, is substantially the same.

__________________________

¹ Power JV Adjusted EBITDA is a non-GAAP financial measure. Please see “Supplemental Non-GAAP Financial Measures” below.

Fourth Quarter 2024 Guidance

Accrued Capital Expenditures and Net Production ($ Millions)
Development	$45 – $50
CCUS and Other	$20 – $30
Total capital expenditures	$65 – $80

Net Production (MMcfe/d)	720 – 750

Per Unit Operating Costs ($/Mcfe)
Lease operating and workover	$0.49 – $0.53
Gathering and transportation	$0.80 – $0.84
Depreciation, depletion, amortization, and accretion	$0.82 – $0.87
General and administrative (excl. stock comp)	$0.36 – $0.40
General and administrative (stock comp)	$0.06 – $0.07

Natural Gas Price ($/Mcfe)
Average differential	$(0.60) – $(0.70)

Power ($ Millions)
Power JV Adjusted EBITDA attributable to BKV (50%)	$2 – $6

Third Quarter 2024 Earnings Conference Call

The Company plans to host a conference call to discuss results today, November 12, 2024 at 10 AM EST. To access the conference call, participants may dial (877) 407-0779 (US) or (201) 389-0914 (international). Participants can also listen to a live webcast of the call by going to the Investors section on the BKV website at www.ir.bkv.com. A replay will be available shortly after the live conference call and can be accessed on the Company’s website or by dialing (844) 512-2921 (US) or (412) 317-6671 (international). The passcode for the replay is 13749659. The replay will be available for 60 days after the call.

About BKV Corporation

Headquartered in Denver, Colorado, BKV Corporation is a forward-thinking, growth-driven energy company focused on creating value for its stockholders. BKV’s core business is to produce natural gas from its owned and operated upstream assets. BKV’s overall business is organized into four business lines: natural gas production; natural gas gathering, processing and transportation; power generation; and carbon capture, utilization and sequestration. BKV (and its predecessor entity) was founded in 2015, and BKV and its employees are committed to building a different kind of energy company. BKV is one of the top 20 gas-weighted natural gas producers in the United States and the largest natural gas producer by gross operated volume in the Barnett Shale. BKV Corporation is the parent company for the BKV family of companies. For more information, visit the BKV website at www.bkv.com.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, which are not historical facts, include statements regarding BKV’s strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management, and often contain words such as “expect,” “project,” “estimate,” “believe,” “anticipate,” “intend,” “budget,” “plan,” “seek,” “aspire,” “envision,” “forecast,” “target,” “predict,” “may,” “should,” “would,” “could,” “will,” and similar expressions. Actual results and future events could differ materially from those anticipated in such statements, and such forward-looking statements may not prove to be accurate. All forward-looking statements, expressed or implied, in this press release are based only on information currently available to BKV and speak only as of the date on which they are made. BKV undertakes no obligation to release publicly any update to any of these forward-looking statements except as required by federal securities laws. Forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to assumptions, risks and uncertainties regarding our ability to successfully fund, pursue and develop our CCUS business; expected increase in demand for power and our ability to serve that demand from our power business, our ability to develop, market and sell our carbon sequestered gas product; and management’s outlook guidance or forecasts of future events, including projected capital expenditures, production volumes, operating costs, pricing differentials, and Power JV Adjusted EBITDA. For further discussions of risks and uncertainties applicable to forward-looking statements, you should refer to BKV’s filings with the Securities and Exchange Commission (the “SEC”), including the “Risk Factors” section of the prospectus filed by BKV with the SEC pursuant to Rule 424(b) of the Securities Act on September 26, 2024.

BKV CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)

	September 30, 2024			December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	31,318		$	25,407
Restricted cash		—			139,662
Accounts receivable, net		49,228			48,500
Accounts receivable, related parties		11,343			559
Commodity derivative assets, current		21,326			84,039
Other current assets		12,517			13,990
Total current assets		125,732			312,157
Natural gas properties and equipment
Developed properties		2,262,858			2,370,156
Undeveloped properties		10,544			15,846
Midstream assets		276,592			318,855
Accumulated depreciation, depletion, and amortization		(672,483	)		(579,415	)
Total natural gas properties, net		1,877,511			2,125,442
Other property and equipment, net		91,234			83,935
Goodwill		18,417			18,417
Investment in joint venture		132,352			104,750
Commodity derivative asset		4,318			18,508
Other noncurrent assets		17,993			19,937
Total assets	$	2,267,557		$	2,683,146

Liabilities, mezzanine equity, and stockholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	112,183		$	149,173
Contingent consideration payable		19,703			20,000
Income taxes payable to related party		2,068			864
Credit facilities		—			127,000
Current portion of long-term debt, net		—			112,373
Other current liabilities		5,043			2,849
Total current liabilities		138,997			412,259
Asset retirement obligations		195,240			193,205
Contingent consideration		—			29,676
Note payable to related party		—			75,000
Deferred tax liability, net		105,252			136,524
Long-term debt, net		190,000			339,663
Other noncurrent liabilities		38,839			11,652
Total liabilities		668,328			1,197,979
Commitments and contingencies
Mezzanine equity
Common stock – minority ownership puttable shares; 0 and 2,403 authorized shares as of September 30, 2024 and December 31, 2023, respectively; and 0 and 2,403 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		—			59,988
Equity-based compensation		—			126,966
Total mezzanine equity		—			186,954
Stockholders’ equity
Common stock, $0.01 par value; 300,000 authorized shares; 83,899 and 63,873 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		1,505			1,283
Treasury stock, shares at cost; 214 shares and 213 shares as of September 30, 2024 and December 31, 2023, respectively		(6,663	)		(4,582	)
Additional paid-in capital		1,422,432			1,034,144
Retained earnings		181,955			267,368
Total stockholders’ equity		1,599,229			1,298,213
Total liabilities, mezzanine equity, and stockholders’ equity	$	2,267,557		$	2,683,146

BKV CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Revenues and other operating income
Natural gas, NGL, and oil sales	$	126,952		$	174,414		$	394,493		$	527,321
Midstream revenues		2,662			3,799			10,168			12,227
Derivative gains, net		35,308			9,327			24,143			126,274
Marketing revenues		1,738			1,936			8,705			6,668
Gains (losses) on sales of assets		—			(31	)		6,784			308
Related party and other		6,427			1,922			16,906			5,236
Total revenues and other operating income		173,087			191,367			461,199			678,034
Operating expenses
Lease operating and workover		33,588			33,470			102,228			114,193
Taxes other than income		10,688			17,725			31,903			59,221
Gathering and transportation		54,705			62,488			167,810			183,074
Depreciation, depletion, amortization, and accretion		57,366			52,269			168,845			130,623
General and administrative		33,602			28,477			73,543			80,965
Other		4,126			2,233			15,402			10,716
Total operating expenses		194,075			196,662			559,731			578,792
Income (loss) from operations		(20,988	)		(5,295	)		(98,532	)		99,242
Other income (expense)
Gains on contingent consideration liabilities		3,903			1,203			9,973			24,113
Earnings from equity affiliate		50,562			49,067			27,602			34,792
Loss on early extinguishment of debt		—			—			(13,877	)		—
Interest expense		(9,197	)		(20,069	)		(40,443	)		(54,446	)
Interest expense, related party		(1,329	)		(2,000	)		(5,181	)		(5,083	)
Interest income		202			419			3,606			1,555
Other income		1,019			395			1,369			2,246
Income (loss) before income taxes		24,172			23,720			(115,483	)		102,419
Income tax benefit (expense)		(11,303	)		(5,156	)		30,070			(23,041	)
Net income (loss)	$	12,869		$	18,564		$	(85,413	)	$	79,378

Net income (loss) per common share:
Basic	$	0.19		$	0.31		$	(1.28	)	$	1.35
Diluted	$	0.18		$	0.30		$	(1.28	)	$	1.27

Weighted average number of common shares outstanding:
Basic		68,023			59,021			66,891			58,861
Diluted		70,637			62,247			66,891			62,373

BKV CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2024			2023
Cash flows from operating activities:
Net income (loss)	$	(85,413	)	$	79,378
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion, amortization, and accretion		169,111			131,389
Equity-based compensation expense		12,819			17,392
Deferred income tax (benefit) expense		(31,272	)		22,050
Unrealized (gains) losses on derivatives, net		82,142			(55,280	)
Gains on contingent consideration liabilities		(9,973	)		(24,113	)
Settlement of contingent consideration		(20,000	)		(65,000	)
Proceeds from the sale of call options		23,502			—
Gains on sales of assets		(6,784	)		(308	)
Transaction costs from sales of assets		(3,898	)		—
Earnings from equity affiliate		(27,602	)		(34,792	)
Loss on early extinguishment of debt		13,877			—
Other, net		2,453			2,687
Changes in operating assets and liabilities:
Accounts receivable, net		(3,412	)		94,010
Accounts payable and accrued liabilities		(30,841	)		(49,962	)
Other changes in operating assets and liabilities		(9,933	)		(2,020	)
Net cash provided by operating activities		74,776			115,431
Cash flows from investing activities:
Acquisition of natural gas properties		—			(4,889	)
Capital expenditures		(52,774	)		(161,068	)
Proceeds from sales of assets		133,426			1,576
Loan advanced to equity affiliate		—			(8,000	)
Loan repayment from equity affiliate		—			8,000
Other investing activities, net		(23	)		8,090
Net cash provided by (used in) investing activities		80,629			(156,291	)
Cash flows from financing activities:
Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commissions		253,800			—
Proceeds from the issuance of common stock		—			150,005
Proceeds from notes payable from related party		—			17,000
Payments on notes payable to related party		(75,000	)		(17,000	)
Proceeds under RBL Credit Agreement		520,000			—
Payments on RBL Credit Agreement		(330,000	)		—
Payment on term loan agreement		(456,000	)		(114,000	)
Payment of debt issuance costs		(8,054	)		—
Proceeds from draws on credit facilities		44,000			258,500
Payments on credit facilities		(171,000	)		(208,500	)
Payments of deferred offering costs		(1,369	)		(2,455	)
Debt extinguishment costs		(10,213	)		—
Redemption of common stock issued upon vesting of equity-based compensation and other		(2,081	)		(424	)
Net share settlements, equity-based compensation		(53,239	)		(2,961	)
Net cash provided by (used in) financing activities		(289,156	)		80,165
Net increase (decrease) in cash, cash equivalents, and restricted cash		(133,751	)		39,305
Cash, cash equivalents, and restricted cash, beginning of period		165,069			153,128
Cash, cash equivalents, and restricted cash, end of period	$	31,318		$	192,433