Earnings call transcript: BKV Corp Q3 2025 sees earnings rise, stock climbs

BKV Corp reported its third-quarter 2025 earnings, surpassing expectations with an adjusted earnings per share (EPS) of $0.50, aligning with analysts' forecasts. Revenue reached $277.86 million. Following the announcement, BKV's stock rose 4.73% in pre-market trading, reflecting positive investor sentiment. The company highlighted significant growth in its power generation capabilities and carbon capture projects, positioning itself strongly in the evolving energy market.

Key Takeaways

• BKV's Q3 2025 adjusted EPS met forecasts at $0.50.
• Revenue for the quarter was $277.86 million.
• Stock price increased by 4.73% in pre-market trading.
• BKV expanded its power generation ownership to 75%.
• The company is advancing carbon capture initiatives.

Company Performance

BKV Corp showcased robust performance in Q3 2025, with net income reaching $76.9 million. The company's strategic acquisitions and focus on innovative energy solutions have bolstered its market position. BKV's upstream production increased by 9% year-over-year, and its efforts in carbon capture and power generation have created a diversified energy portfolio. The company's unique approach of integrating natural gas, power, and carbon capture sets it apart in the energy sector.

Financial Highlights

• Revenue: $277.86 million.
• Net income: $76.9 million, or $0.90 per diluted share.
• Adjusted earnings: $0.50 per diluted share.
• Combined adjusted EBITDA: $91.8 million, a 50% increase from Q3 2024.
• Capital expenditures: $79.6 million, 6% below the midpoint of guidance.

Earnings vs. Forecast

BKV's Q3 2025 adjusted EPS of $0.50 met analysts' expectations, while revenue slightly exceeded forecasts. The alignment with EPS forecasts and revenue beat indicates solid operational performance, contributing to the positive stock movement.

Market Reaction

BKV's stock rose 4.73% in pre-market trading, reaching $26 per share. This movement reflects investor confidence in the company's strategic direction and growth potential. The stock's increase is notable given its proximity to the 52-week high of $26.78, signaling strong market sentiment.

Outlook & Guidance

BKV is targeting the injection of 1 million tons of CO2 by the end of 2027, aiming for meaningful free cash flow in 2026. The company plans to expand power generation at its Temple site and continues to pursue accretive acquisitions in the Barnett Shale. Future EPS and revenue forecasts for upcoming quarters show a positive growth trajectory.

Executive Commentary

CEO Chris Callan remarked, "BKV stands at the precipice of some of the most exciting megatrends in energy." He emphasized the transformative potential of the company's integrated energy solutions. CFO David Tamron added, "We see our current structure as ideally positioned for long-term growth."

Risks and Challenges

• Potential regulatory changes impacting energy markets.
• Fluctuations in natural gas prices affecting profitability.
• Competition in the carbon capture sector.
• Execution risks associated with new acquisitions.
• Economic uncertainties influencing energy demand.

Q&A

During the earnings call, analysts inquired about BKV's power JV acquisition strategy and the implications of Senate Bill 6 on the power market. Executives detailed the company's carbon capture project pipeline and capital allocation strategies, addressing investor concerns and outlining future growth plans.

Full transcript - BKV Corp (BKV) Q3 2025:

Conference Operator: Good morning, everyone, and welcome to BKV's third quarter 2025 earnings conference call. As a reminder, today's call is being recorded, and at this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation. I would now like to turn the call over to your host, Mr. Michael Hall, Vice President of Investor Relations. Please go ahead.

Michael Hall, Vice President of Investor Relations, BKV Corporation: Thank you, Operator, and good morning, everyone. Thank you for joining BKV Corporation's third quarter 2025 earnings conference call. With me today are Chris Callan, Chief Executive Officer; Eric Jacobson, President of Upstream; and David Tamron, Chief Financial Officer. Before we provide our prepared remarks, I'd like to remind all participants that our comments today will include forward-looking statements which are subject to certain risks, uncertainties, and assumptions. Actual results could differ materially from those in any forward-looking statements. In addition, we may refer to non-GAAP measures.

For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, including those associated with the closing of our acquisition of a majority-controlled position in the Power JV, which remains subject to customary closing conditions, including approval by at least 75% of the disinterested shareholders of Banpu Power, and the integration of the upstream assets we recently acquired in our Bedrock acquisition into our existing portfolio, as well as the reconciliations of non-GAAP financial measures. Please see the company's public filings, including the Form 8-K filed today. I would also point listeners to the updated investor presentation posted this morning on our Investor Relations website. We encourage everyone listening to review those slides for further information on our business, operations, and results from the quarter. I'd now like to turn the call over to our CEO, Chris Callan.

Chris Callan, Chief Executive Officer, BKV Corporation: Thank you, Michael, and thank you, everyone, for joining us to discuss our third quarter results. BKV delivered another strong quarter, reinforcing our said-did culture and disciplined execution of our strategy. The third quarter was marked by several notable achievements that reinforced the strength of our business model and accelerated momentum of our closed-loop strategy. I want to begin this quarter by highlighting significant progress in our power business. At the end of October, we announced that we have entered into a definitive agreement to acquire one-half of Banpu Power's interest in our power joint venture for an equivalent value of approximately $1,000 per kilowatt of generation capacity. At the close of the transaction, which is expected to occur in Q1 2026, BKV will increase our overall ownership in the JV to 75%, giving us over 1.1 gigawatts of low-heat rate equity power generation in the ERCOT market.

We are thrilled to have reached this agreement to acquire the majority and controlling stake in the Power JV, as it's a critical step to advancing our closed-loop strategy and enhances our growth flexibility. I would like to thank the Banpu Power team for their strong partnership in our successful joint venture. We are excited about our ability to drive growth in our power business, and we are confident that our differentiated business model has ideally positioned us to benefit from the macro energy tailwinds that are driving the U.S. markets. Controlling the Power JV transforms it into a strategic growth engine, allowing us to consolidate results, align strategy, and accelerate our ability to create long-term value. Looking ahead to 2026 and beyond, ERCOT's long-term fundamentals remain exceptionally strong. Texas continues to experience unprecedented load growth from AI data centers, industrial expansion, and steady residential demand.

The state of Texas remains open for business and is proactively facilitating, and in some cases, fast-tracking interconnections to meet this surge in electricity demand. The passage of Senate Bill 6 is aimed at improving interconnection planning and grid reliability to support this growth. For BKV, this combination creates a durable, expanding market for our existing Temple assets and a clearer pathway to secure premium PPAs. Our confidence in the power business is grounded in the tangible progress we've made in discussions with hyperscalers, data centers, and other potential customers. We are encouraged by the unique, tailored energy solutions that BKV is able to offer these potential counterparties. In particular, our capability to provide a one-stop offering that combines power, natural gas, and carbon capture is a true winning formula and is resonating deeply with long-term AI and data center customers, as evidenced by recent announcements from major hyperscalers.

We also continue to actively negotiate with OEMs to secure additional power generation capacity to serve future load growth from potential customers backed by secure commercial agreements. In our carbon capture business, we are experiencing strong momentum. Importantly, we are seeing a significant uptick in interest from potential PPA customers that are interested in the combination of gas-fired generation and carbon capture. Further, we are making meaningful progress towards our goal of an injection rate of 1 million tons per annum by year-end 2027. Existing projects are advancing on schedule, and we expect to have two more operational projects within the first half of 2026. Overall, there is optimism following the One Big Beautiful Bill Act by emitters across the sector. BKV's carbon capture business has demonstrated strong leadership.

In particular, our strong partnerships with Copenhagen Infrastructure Partners, Comstock Resources, Gunvor, and a large midstream company, and others, all underscore both the credibility and the momentum of our carbon capture business. Our upstream business remains a core cash engine for the company. Our Barnett and NEPA assets outperformed expectations again, delivering strong overall results, including outperforming on production, cost, and capital efficiency. In the third quarter, we successfully closed our Bedrock acquisition, materially expanding our operational footprint in the Fort Worth Basin. This transaction reinforces our position as the leading operator in the play and underscores our role as the natural consolidator of the Barnett. We believe the Barnett sits at the sweet spot of all the shale plays, positioned at the epicenter of U.S. demand growth in and around the premium markets of the Gulf Coast.

We continue making strong progress integrating the Bedrock assets into our portfolio and are excited to realize the benefits from the combined operations. The Bedrock acquisition brings high-quality assets for both existing production and new developments, including new wells and refract candidates. We are excited to demonstrate the creative nature of this transaction over the quarters to come. BKV's closed-loop strategy, combining gas, power, and carbon capture, is a winning formula that is in line with the biggest trends in energy. The ability to offer carbon-neutral power solutions, in Texas in particular, positions us uniquely in discussions with many customers who are willing to pay premiums for these energy solutions. We remain confident in our business and our ability to capitalize on the mega trends in the market, which are driving the future of energy.

With that, I'd like to hand the call over to BKV's President of Upstream, Eric Jacobson, to discuss our operational performance for the quarter.

Eric Jacobson, President of Upstream, BKV Corporation: Thanks, Chris. The third quarter was another outstanding one for our operations, as we further capitalized on momentum in both our upstream and CCUS business lines. Our upstream business delivered another excellent quarter, beating our production guidance in the midpoint, with volumes up 9% year-over-year and 2% sequentially, at 7% below our guided CapEx midpoint. As a reminder, we raised full-year 2025 production guidance by approximately 4% at the end of last quarter and have continued to maintain the same base business capital range. We remain a leader in managing low-base decline through the leveraging of data, analytics, and artificial intelligence, outdelivering new well performance expectations, and setting the standard for sustained, capital-efficient production in the Barnett. Moving to the close of the Bedrock acquisition, BKV has already captured value from these newly acquired Bedrock assets.

Integration has been seamless, and our teams are already applying our proven operating playbook to enhance value through improved performance, reduced costs, and accelerated efficiency gains, all of which we call torque, or delivering value even better than underwriting assumptions. The Bedrock acquisition also adds a meaningful development runway, including at least 50 equivalent new drilling locations and 80 refract opportunities, creating substantial near-term value potential. You'll see us continue to drive these development and torque initiatives in the quarters ahead, further proving BKV's leadership strength in the Barnett. During the third quarter, we drilled eight new wells, completed eight wells, and performed 11 refracts, bringing our total to-date refract count to over 400, distinguishing ourselves as the refract leader in North America.

Our year-to-date Barnett D&C cost average is $545 per lateral foot, representing a further 3% reduction from our second quarter performance and a 14% reduction from our 2023 to 2024 program average. This cost improvement was achieved while drilling longer laterals and implementing enhanced completion designs that have resulted in excellent well performance and accelerated turn-in lines. Further, during 2025, we turned in three of the 25 best one-month peak wells in the entire recorded history of the Barnett, including two of the top three this decade, a clear proof point of our subsurface completions and operational excellence, reflecting the technical acumen of our teams. Our teams have delivered all of this within expected capital investment, as we continuously find new ways to increase efficiencies and outperform expectations. In fact, our total full-year corporate capital guidance remains unchanged at $290-$350 million.

Within that corporate CapEx range, we continue to see legacy development capital at the high end of our previously guided range, and we have added approximately $10 million of development capital to kickstart our Bedrock torque initiatives. We've delivered substantially more activity and strong results while exercising highly disciplined and capital-efficient investments. For the fourth quarter, we expect production to average 910 million cubic feet equivalent per day, with a range of 885-935 million cubic feet equivalent per day, representing the full integration of our Bedrock assets and continued strong performance from our base business. The production guidance component of our base business, excluding Bedrock assets, is 810 million cubic feet equivalent per day, which would bring full-year base production slightly above even our previous raised guidance midpoint.

Our continued effective and efficient upstream performance, coupled with the Barnett positioning to supply gas to high-margin Gulf Coast demand centers, enables continued strong financial performance for the long term. We're not only driving the success of our core upstream operations; we're fueling the growth of our other business lines. Turning to our CCUS business, we are well-positioned in this rapidly expanding segment. Since the passage of the One Big Beautiful Bill Act, we have received a significant increase in inquiries from potential emitter partners. These discussions are ongoing, and we're encouraged by the quality of opportunities entering our pipeline. Combined with the projects already advancing through various stages of development, we believe the growth potential for this business remains strong while adhering to our capital framework.

The Barnett Zero facility has now been operational for nearly two full years and once again achieved strong quarterly performance, maintaining over 99% uptime and injecting approximately 44,000 metric tons of CO2. Since project inception, approximately 286,000 tons of CO2 have been injected. Barnett Zero continues to serve as a vital proof point of concept for our broader CCUS strategy, showcasing BKV's technical expertise and providing tangible validation to current and prospective partners. The project we announced on our last earnings call, the East Texas project with a leading midstream company, is moving forward, and we expect FID for that project in 2026. As a reminder, we anticipate that approximately 70,000 metric tons per year of CO2 could be captured on that project. This is the second project we are developing with that same midstream company. The previously FIDed Eagle Ford and Cotton Cove projects both remain on schedule.

These projects are expected to achieve average sequestration rates of approximately 90,000 and 32,000 metric tons per year of CO2 equivalent, respectively. The Cotton Cove injection well was successfully drilled in September, and both projects have received EPA approval of their measurement, reporting, and verification, or MRV, plans. I also want to address recent developments in Louisiana, a strategic focal point for our CCUS business, where the governor signed a temporary moratorium on the consideration of new CCUS project permits. We view this as a constructive step that brings focus and clarity to the permitting process and advantages those like BKV that have already submitted quality permit applications. The state's decision to prioritize existing applications is helping to distinguish credible developers with technically sound, near-term projects that can deliver real benefits to Louisiana.

All six of BKV's permit applications, five from our large-scale High West project adjacent to New Orleans and one from Donaldsonville near Baton Rouge, have been classified as administratively complete and are among those advancing towards approval under Louisiana's primacy. We're encouraged by the state's active engagement and recent movement on permit issuances, which signal growing regulatory momentum and confidence in responsible carbon capture development. We remain on track to reach 1 million metric tons per year of CO2 injection by the end of 2027 and see the related capital requirements as very manageable within cash flow under our existing capital plan. Together with our CIP partnership and a robust project pipeline, this positions us for meaningful free cash flow generation from CCUS later this decade. I'll now turn the call over to our CFO, David Tamron, for a review of our power business and financial results.

David Tamron, Chief Financial Officer, BKV Corporation: Thank you, Eric. Turning to our power business, as Chris mentioned, we are thrilled to announce our pending acquisition of a majority control position on our Power JV. Increasing our ownership to a 75% equity stake means we will have over 1.1 gigawatts of power generation capacity in the growing ERCOT market. As previously disclosed, the total purchase price will be $376 million, which includes the assumption of $145 million of debt. The remaining $231 million will be funded 50% in cash and 50% in BKV stock, which equates to 5.3 million shares based on a predetermined fee-watt price. This transaction sets a clear marker on the value of this business line within BKV's portfolio and positions power as a core growth engine for our company. The increased ownership will also come with an updated and aligned governance structure and will unlock additional potential for commercial opportunities.

Following the close, which is expected to occur in the first quarter of 2026, we expect to include the Power JV results within BKV's consolidated financials, providing greater transparency into the business's strong cash flow generation and enabling investors to better recognize the value it brings to our overall portfolio. While third quarter Power JV adjusted EBITDA was below our guidance, operational performance remains very strong. We are incredibly proud of our Temple team, which has set a high bar for performance and has established a solid foundation for our growing power business. Pricing did disappoint during the quarter, largely reflecting milder weather in Texas as third quarter cooling degree days were 15% lower than the five-year average. While this resulted in lower-than-expected prices, market strains remained evident, and robust load growth continues to support long-term ERCOT fundamentals.

Power prices averaged $46.29 per megawatt hour during the quarter, with natural gas costs averaging $2.87 per MMBTU, resulting in an average spark spread of $25.82 as compared to $20.82 a year ago. For the quarter, BKV's share of Power JV adjusted EBITDA was $20.4 million, with gross Power JV EBITDA coming in at $40.9 million. For the fourth quarter, we expect gross Power JV EBITDA of $10-$30 million, reflecting typical seasonal patterns and continued operational execution. Shifting to BKV's corporate financial performance, we delivered another outstanding quarter highlighted by our upstream outperformance, disciplined capital spending, and a strengthened balance sheet. Net income for the third quarter was $76.9 million, or $0.90 per diluted share, with adjusted earnings of $0.50 per diluted share.

Combined adjusted EBITDA contributable to BKV, including our proportionate share of the Power JV adjusted EBITDA, was $91.8 million, representing a 50% increase from third quarter of 2024. These results were driven by higher production volumes, improved realized pricing, and continued cost reductions across our upstream operations. Accrued capital expenditures totaled $79.6 million for the quarter, 6% below the midpoint of guidance. The spending included $56 million for upstream development and another $24 million for CCUS and other. Our teams continue to deliver strong results and higher activity levels while maintaining capital discipline. During the quarter, we achieved 9% year-on-year production growth, advanced investments in our CCUS partnership and project pipeline, and reduced debt levels in our Power JV. With regard to the balance sheet, we closed the third quarter in a strong financial position.

Several positive developments further strengthened our capital structure, leaving us well-positioned to fund and advance our growth initiatives. A key highlight was the successful execution of our inaugural bond offering. We issued $500 million of 7.5% senior notes, marking an important milestone in our capital market strategy. Proceeds from the bond were used to fund the cash portion of the purchase price for a Bedrock Shale acquisition, as well as pay off the outstanding RBL balance. During the quarter, we also strengthened our liquidity position by expanding our elective commitments under the RBL, increasing it from $665 million to $800 million. The increase primarily reflects the additional borrowing-based capacity associated with the Bedrock acquisition and underscores the continued support and confidence of our lending partners. Our balance sheet remains straightforward and conservatively positioned, with $500 million of senior notes outstanding and no borrowings under our $800 million RBL.

Our net leverage ratio as of September 30th stood at 1.3 times, within our stated leverage target of 1-1.5 times. Cash and cash equivalents totaled $83 million at quarter end, and combined with remaining RBL availability, total liquidity stood at $868 million. In addition to this strong liquidity position, we continue to manage commodity price risk through our prudent hedging program. For our updated hedge positions, as well as fourth quarter 2025 guidance ranges, you can refer to our press release and our updated investor presentation, which were both posted on our website this morning. We will release 2026 guidance in February, but an early look at our budget, prior to considering any successful PPA negotiations, we see our newly combined business generating meaningful free cash flow. This is driven by both our upstream and power businesses, which more than fund the capital needs of our CCUS business.

With that, I'd like to turn it back over to Chris for his concluding remarks.

Chris Kalnin, CEO, BKV Corporation: Thanks, David. The third quarter of 2025 exemplifies BKV's said-did culture and positions the company for sustained long-term profitable growth. Our achievements this quarter span all aspects of our business. In power, we announced the purchase of a controlling interest in the Power JV, increasing our ownership to 75%, which we expect to close in the first quarter of 2026. In upstream, we successfully closed the Bedrock acquisition while continuing to drive highly competitive capital efficiency and production growth. In CCUS, we have additional momentum with high-quality projects supported by our CIP partnership. Financially, we successfully priced our first corporate bond and maintained a strong balance sheet. The ongoing integration of our gas, power, and carbon capture capabilities creates unique energy solutions that are increasingly valued in today's market. Looking ahead, we remain excited about the multiple growth vectors of our business.

I want to thank our exceptional team for their continued dedication and excellence in execution, and our shareholders and partners for their ongoing support of BKV's vision and long-term strategy. We look forward to updating you on our continued progress in the quarters ahead. Operator, we are now ready to take questions from the audience.

Conference Operator: Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you'd like to remove your question from the queue. As a reminder, we ask that you please limit to one question and one follow-up. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we poll for questions. Our first question comes from Betty Yang with Barclays. Please proceed with your question.

Betty Yang, Analyst, Barclays: Good morning. Thank you for taking my question. Congratulations with the acquisition of a controlling stake in the power business. Can we just start from there and talk to how gaining control of the power unit going forward would change your conversation or how you have that conversation with hyperscalers and growing the power business over time?

Chris Callan, Chief Executive Officer, BKV Corporation: Yeah, Betty, thank you. First of all, we're really pleased with the acquisition. It's clear to us that the power markets in Texas are poised for very strong growth, and our move into buying 50% of Banpu Power's position is a signal of our optimism in the market. I think the ability to kind of control the JV and consolidate does a number of things for our discussions. Number one, it allows us to bring together in a very seamless way the energy solutions that we uniquely provide between power, gas, and carbon capture so that we can structure commercial agreements in a singular, holistic energy solution package that a lot of these hyperscalers and data center companies are very interested in. That's the first thing.

The second thing is it positions us to really provide the transparency around our financials that investors are looking for, and I think also that allows us to be able to disclose a lot more information financially around what we're doing with the JV. The third angle is the way we've set it up from a growth or a strategic flexibility engine for investments or additional opportunities, acquisitions, et cetera, on this 75-25 structure really is the right mix in our minds for long-term growth, and that allows us to deploy capital. When you think about expansions under the back of additional commercial agreements or additional acquisitions, it really does position us ideally, and that's a key part of these discussions with hyperscalers as well and potential data center companies.

Betty Yang, Analyst, Barclays: Got it. That makes sense. My follow-up is staying with power. I want to ask about SB6. I understand that law might have some changes in how the power discussion of a potential PPA could be struck. Can you just speak to how that might be impacting your conversation with the hyperscalers and then the optionality and other solutions that you can bring to the market despite that policy change?

Chris Callan, Chief Executive Officer, BKV Corporation: Yeah. First of all, I think SB6 is really something that's constructed by the state of Texas. It's an effort to high-grade the types of projects that are in the queue. A lot of folks have been applying for interconnections, but not all interconnection requests are created equal. SB6 has a framework that's being evolved to really streamline and high-grade the types of interconnections that are being requested in the state of Texas to get to the real demand that's coming in and allow that demand to materialize because, in general, the posture of Texas is open for business, and we see this desire to streamline and enhance grid reliability while encouraging AI and data center investment in particular in the state of Texas. We think SB6 goes a good step of the way to get there.

Clearly, the rules are being laid down as we speak, and BKV is very actively involved in evaluating and participating in that process. With regards to the hyperscalers and the data center companies, I think the bet that what we're seeing is the bet is that Texas figures this out pretty quickly relative to other grid regulators across the nation. We feel like it's something that everyone wants to understand and understand how to deal with the rules. I think what we're seeing is that there's a general feeling that this actually helps to streamline the process. When it comes to companies like BKV with existing power-generating assets at 1.1 gigawatt of equity power today, I think it puts us in a great position to high-grade potential projects that we're looking at relative to kind of the broad universe of the interconnection request.

I think, in general, I would say it's positive. Again, the rules are still being finalized, but we see this as a positive move by Texas to encourage investment in the power sector, encourage investment from the data centers and the hyperscalers. In general, the belief is that Texas is open for business and will figure this out quicker than potentially other regulators across the country.

Betty Yang, Analyst, Barclays: That's a very helpful color. Thank you.

Conference Operator: Our next question comes from Michael Furrow with Pickering Energy Partners. Please proceed with your question.

Michael Furrow, Analyst, Pickering Energy Partners: Hello. Good morning. Thanks for taking my questions. Look, BKV has been able to put together quite the position in the Barnett relatively quickly, as well as work down well costs and improve margins on the assets. Bringing it back to the consolidation of the power JV, the company's now trading at an expanded multiple. Looking at it simplistically, this should ease further consolidation of the basin. Would you agree with that comment, or are there certain dynamics of the Barnett M&A market that just may not be as clear to those of us on the outside looking in?

Chris Callan, Chief Executive Officer, BKV Corporation: Yeah, Michael, it's a good question. If you look at what's happening in the Barnett, I think one is whenever you look at a deal, for me and for the team here, it's about fundamental economics, right? Multiples are helpful, but it's about what is the hold-to-maturity return as the last owner. We're looking at deals that will be accretive from both the purchase price perspective, the strip, but also what can you do with those assets from an optimization, a synergy, a drop in cost, enhancing the development. You saw what we were able to do in the Bedrock transaction that we closed recently, and I think there's nearly a BCF plus of opportunities in and around the Barnett.

We believe that at our current multiple and with our position in the Barnett, that we can continue to acquire accretive transactions in the market, and we're very optimistic about continuing to be able to do that.

Michael Furrow, Analyst, Pickering Energy Partners: That's great. I appreciate the color. And just to follow up on the power JV, I mean, look, the Temple assets really appear to be running on all cylinders. The availability factors look great. I think you disclosed only three and a half days of downtime. So beyond adding incremental sort of around-the-clock baseload capacity, what else can the company do operationally to improve margins at the power plants outside of a changing spark spread?

Chris Callan, Chief Executive Officer, BKV Corporation: Yeah. I mean, Michael, clearly, the number one thing is to get additional long-term contracted demand, right, in the form of commercial arrangements or PPAs. That's going to be front and center for the company. That's where we see the most near-term capital-efficient accretive transactions that we could pursue. That's definitely the priority. Beyond that, if you look at Temple originally, Temple was designed for three power plants. Today, there are two power plants there. We've got ample land, space, water, gas. It's flat, and we're on the fiber optic superhighway between San Antonio, Austin, and Dallas-Fort Worth. We think it's ideally positioned. You could imagine there's room for another power plant on the back of commercial arrangements that could be added, similar size and scale.

There is just a lot of areas of growth and reflected in our optimism about the power business and the fact that BKV is going big in power.

Michael Furrow, Analyst, Pickering Energy Partners: Understood. Thanks for the time.

Chris Callan, Chief Executive Officer, BKV Corporation: Thank you.

Conference Operator: As a reminder, if you'd like to ask a question, please press Star 1 on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Neil Dingman with William Blair. Please proceed with your question.

Neil Dingman, Analyst, William Blair: Good morning, guys. Nice quarter. Chris, my first question just really is interesting on capital allocation specifically. Could you or maybe David speak to how you all are thinking about managing all your opportunities throughout the closed-loop strategy? What I'm getting at, you all seem to have more opportunities when you look at the upstream opportunities. And how do you think about managing this or the power opportunities along with potential shareholder return and maintaining a solid balance sheet?

Chris Callan, Chief Executive Officer, BKV Corporation: Yeah. Good morning, Neil. First off, let's talk about near-term, right? 2026 is going to be a strong year as far as free cash flow generation. Obviously, Eric and his team, right, on the upstream side, we have that cash flow engine that's been there. I think once we consolidate the power results and people start to see those show up in the numbers, that's another source of funding. That more than covers CCUS and any spend needed there. We do have significant free cash flow that we have options with, right? To your point, do you delever? Do you use that for strategic investments on the power side? We do have options with that cash. If you think about additional flexibility in 2026, we do have the power debt that's going to be available to refinance mid-year.

We have additional flexibility now with the, as Chris mentioned in his prepared remarks and I did as well, the bond and the upsize of the RBL. A number of avenues to triggers and levers to pull as we think about financing. Finally, as it relates to power, obviously, if you start thinking about some type of commercial opportunities, that gives you financial flexibility depending on the level of counterparty you engage with. We expect that to be a very solid counterparty if and when we get to that point. A lot of flexibility, significant free cash flow generation, and still levers to pull if you think about 2026-2027. We look at our current structure of how we have our debt and capital structure of each entity, if you will, lined up.

They're all thickened with the life cycle and maturity of each of the respective business units. We feel good. We feel very good, actually, about where we're at today as we head into 2026. Does that answer your question, Neil?

Neil Dingman, Analyst, William Blair: It does. A lot of opportunities. I love the perfect answer. Just secondly, on looking at slide 32, just on the forecasted sequestration, I'm just wondering, besides those projects, I think there's four or five announced. Are there others that are currently in the works? When I'm looking at that slide and you're talking about the forecasted sequestration volumes, is that just what's known or maybe just anything you could comment on that about potential upside?

Chris Callan, Chief Executive Officer, BKV Corporation: Yeah, sure. Good morning, Neil. Eric Jacobson here. Thanks for your question. On page 32, you're referencing the target of 1 million tons of CO2 injection run rate by the end of 2027. Yes, we list the five or so projects that have either been FIDed or announced and on track towards FID. All of those would contribute nicely to that 1 million ton per year run rate. There are a large number of other projects in our portfolio, some of which have been brought through the CIP partnership, which has been exciting for us, some of which we've been working for quite a while. They continue to follow our trajectory of natural gas processing, large industrial, and then sort of ethanol and renewables.

All told, you can see where we have high confidence in that portfolio of projects growing above and beyond the 1 million tons towards an ultimate kind of 16 million tons a year or so of annual run rate by the early 2030s, as we have announced. You can see on page 34 where one of the projects we are very excited about as we look to really ramp our injection volumes is our High West project in Louisiana, where we are excited about the focus the state has brought to permitting there, as well as being located in what we believe is a world-class reservoir in what I call one of the best emitter neighborhoods in the world, 30 million tons of CO2 within a 30 mi radius. You can see where that can really step change.

Those sorts of projects, namely High West and some other class sixes that we've submitted already, can really step change in a nice combination with the other portfolio projects we have around natural gas processing, other industrials, and ethanol. All told, Michael—excuse me, Neil—we have very high confidence in that 1 million tons and then growing from there with a great portfolio project and a great investment partner in CIP to kind of split the 49% share of that check and keep our capital allocation right in line with where we want to be on CCUS.

Neil Dingman, Analyst, William Blair: Perfect. Thanks, Eric. Thanks, Dan.

Conference Operator: Our next question comes from Jacob Roberts with TPH & Company. Please proceed with your question.

Chris Kalnin, CEO, BKV Corporation: Good morning.

Chris Callan, Chief Executive Officer, BKV Corporation: Hey, Jake.

Chris Kalnin, CEO, BKV Corporation: Hey, Chris. I was wondering if you could spend some time talking about the incremental autonomy that the increase in the stake in the power JV will give you, maybe less so about pursuing the closed-loop strategy with customers, but really specifically on capital allocation to the power segment as a whole.

Chris Callan, Chief Executive Officer, BKV Corporation: Yeah, Jake, it's a good question. As you know, and we shared in our press release, the governance has changed, right, on the JV. Pro forma for close would give us majority control. That allows us to very efficiently decide how much capital goes into the power business, how quickly we want to grow that business, while also diversifying 25% of that capital to our partner, Banpu Power. I think what it does for us is it gives us very strong control with the ability to flex. Clearly, we're going to work with our partner in the joint venture in terms of how much capital we deploy or how much debt we pay down. Right now, the power plant is delevering debt. It's generating cash. We're excited about that.

As we look to grow into commercial agreements, increase the capacity factor, and potentially add additional generation capacity on the back of commercial arrangements, we're going to have a lot of ability to kind of time, optimize, and size that capital in a way that fits with our overall portfolio capital allocation strategy.

Chris Kalnin, CEO, BKV Corporation: Great. I appreciate the color. I'm wondering if there's a possibility of future power investments or spin-ups or inorganic opportunities that might come to the business outside of this JV.

Chris Callan, Chief Executive Officer, BKV Corporation: Yeah. So we're really happy with the JV structure today. I think the way we've restructured it in that 75-25 setup really does give us the vehicle for growth. Jake, if you look at how we've set up our business, we've got the upstream and midstream business 100% owned by BKV Corporation. We're 51% of the carbon capture business in our joint venture there with CIP. And then in the power business, we're 75% owners pro forma for the close and 25% Banpu Power. That gives us an ability to grow both the power and the carbon capture alongside of the upstream, which is our cash engine, but to do it accretively.

As we think about additional acquisitions, which we believe are there on the market and will be evaluating very closely, and about some potential additional organic new generation assets on the back of commercial arrangements, we believe that the joint venture is the right structure for us to utilize because it does give us that capital allocation optimization, and it gives us a platform that is already working and winning in the marketplace. We see that as the right vehicle for growth. We will obviously evaluate that from time to time going forward.

Chris Kalnin, CEO, BKV Corporation: Thank you very much. I appreciate the time, guys.

Chris Callan, Chief Executive Officer, BKV Corporation: Thanks, Jake.

Thanks, Jake.

Conference Operator: Thank you, Jake. We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Chris Kalnin, BKV CEO, for closing comments.

Chris Callan, Chief Executive Officer, BKV Corporation: Thank you. Thank you, everyone, for joining our call. We really appreciate the fact that you've spent time to evaluate BKV. We're excited about the future. BKV stands at the precipice of some of the most exciting megatrends in energy. We are at the epicenter of the macro trends that are driving energy demand, particularly in the state of Texas. We see our combination of natural gas, power, and carbon capture as a winning formula that is going to transform and reshape the energy industry going forward. We're excited. We're pleased about our results this quarter, and we look forward to future results as we continue to deliver on our closed-loop strategy. Before I close, I would like to take a moment to recognize our veterans, all those who have served. We thank you for your service.

At BKV, we hold dear the sacrifice that many families and individuals have made in protection of our country and freedoms. We want to thank you as we go into Veterans Day tomorrow, and we want to recognize you. Thank you, everyone, for joining the call. Thank you, veterans. Thank you, and we will look forward to future announcements.

Conference Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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