BKV's Q3 2025: Contradictions Emerge on Power Business Control, Capital Allocation, CCUS Timing, and CapEx Assumptions

Date of Call: November 10, 2025

Financials Results

• EPS: $0.90 per diluted share (net income); adjusted $0.50 per diluted share

Guidance:

• Q4 production expected to average 910 MMcfe/d (range 885–935 MMcfe/d).
• Q4 gross Power JV adjusted EBITDA expected to be $10M–$30M.
• Full-year 2025 corporate CapEx maintained at $290M–$350M.
• 2026 guidance to be released in February; early 2026 budget expects the combined business to generate meaningful free cash flow (pre-PPA assumptions).
• Expectation to consolidate Power JV results after close (Q1 2026), which will affect 2026 financials and cash-flow visibility.

Business Commentary:

* Power Business Expansion: - BKV Corporation announced the acquisition of a 50% stake in its Power joint venture, increasing ownership to 75%, resulting in over 1.1 gigawatts of low heat rate equity power generation in the ERCOT market. - This move is aimed at advancing its closed-loop strategy and enhancing growth flexibility, driven by strong Texas market fundamentals and the ability to consolidate results.

• Upstream Production and Cost Efficiency:
• The upstream business delivered another excellent quarter with production up 9% year-over-year and 2% sequentially, beating production guidance at the midpoint.

• This was achieved through effective data analytics, artificial intelligence, and sustained capital efficiency in the Barnett, ensuring the company's position as a leading operator.

• Capital Expenditure and Financing:

• Accrued capital expenditures totaled $79.6 million for the quarter, 6% below the midpoint of guidance, with investments in upstream development and CCUS projects.

• The company issued $500 million of 7.5% senior notes, strengthening its balance sheet and refining its capital market strategy.

• Carbon Capture and Sequestration Goals:

• BKV aims for an injection rate of 1 million tons per annum by the end of 2027 for its CCUS projects, with plans to reach 16 million tons by the early 2030s.
• Continued progress in projects, partnership with Copenhagen Infrastructure Partners, and advancements in CCUS regulations are key drivers for achieving these targets.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly described the quarter as "strong" and "outstanding," reported net income of $76.9M ($0.90/sh) and adjusted EBITDAX up 50% YOY, announced a definitive agreement to increase Power JV ownership to 75%, and highlighted production growth (+9% YOY) and Bedrock integration gains — all framed as drivers of future free cash flow and growth.

Q&A:

• Question from Wei Jiang (Barclays Bank PLC): 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?
  Response: Majority control lets BKV present integrated, one‑stop energy solutions (power + gas + carbon capture), provide greater financial transparency, and flex capital deployment to pursue commercial agreements and growth with hyperscalers.

• Question from Wei Jiang (Barclays Bank PLC): My follow-up, staying with power, and I want to ask about SB6. I understand that law might have some changes in how the power discussion and 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?
  Response: SB6 is constructive—it should high‑grade and streamline interconnections, which BKV views as positive for accelerating credible projects; BKV is actively engaged in the rulemaking and sees Texas resolving faster than other jurisdictions.

• Question from Michael Furrow (Pickering Energy Partners LP): Bringing back to the consolidation of the Power JV, the company is now trading at an expanded multiple and looking at it simplistically, this should ease further consolidation of the basin. So 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?
  Response: BKV evaluates deals on hold‑to‑maturity economics and expects to continue pursuing accretive Barnett acquisitions given their ability to optimize assets, reduce costs and extract synergies as demonstrated in the Bedrock deal.

• Question from Michael Furrow (Pickering Energy Partners LP): Beyond adding incremental around‑the‑clock baseload capacity, what else can the company do operationally to improve margins at the power plants outside of changing spark spread?
  Response: Priority is securing long‑term contracted demand (PPAs/commercial agreements) to raise capacity factor and margins; there is also room to add additional generation at Temple if warranted by commercial demand.

• Question from Neal Dingmann (William Blair & Company L.L.C., Research Division): Could you maybe, David, speak to how you all are thinking about managing all your opportunities throughout the closed‑loop strategy? How do you think about managing this or the power opportunities along with potential shareholder return and maintaining a solid balance sheet?
  Response: Management expects significant free cash flow in 2026 from upstream and consolidated power, which—combined with financing levers (bond proceeds, expanded RBL, refinancing power debt)—provides flexibility to fund CCUS, pursue strategic investments, or consider deleveraging/returns while maintaining a conservative balance sheet.

• Question from Neal Dingmann (William Blair & Company L.L.C., Research Division): On Slide 32, on the forecasted sequestration, besides those announced projects, are there others in the works or upside beyond what's shown?
  Response: Yes—beyond the 4–5 announced/FID projects, BKV has a broad pipeline (including High West) and CIP partnership; management is confident in achieving 1 Mtpa by end‑2027 with upside toward a multi‑Mtpa pathway (~16 Mtpa long‑term).

• Question from Jacob Roberts (Tudor, Pickering, Holt & Co.): Could you spend some time talking about the incremental autonomy that the increase in the stake in the Power JV will give you, specifically on capital allocation to the power segment as a whole?
  Response: Majority ownership provides governance control to efficiently decide capital pacing, sizing and timing for Power (deleveraging vs. growth), while still coordinating with the 25% partner—enabling flexible, portfolio‑aligned capital allocation.

• Question from Jacob Roberts (Tudor, Pickering, Holt & Co.): Is there a possibility of future power investments or inorganic opportunities that might come to the business outside of this JV?
  Response: The 75:25 JV is viewed as the preferred growth vehicle for both organic and inorganic opportunities; BKV will continue to evaluate acquisitions and add generation on the back of commercial arrangements opportunistically.

Contradiction Point 1

Power Business Control and Growth Strategy

It highlights inconsistencies in the company's stated control over and strategic direction for its Power business, which could impact investments and partnerships.

How will acquiring the Power business affect your discussions with hyperscalers and scaling the Power business? - Wei Jiang (Barclays Bank PLC, Research Division)

2025Q3: Gaining control of the Power business allows BKV to offer bundled energy solutions more efficiently, providing a single holistic energy solution package. It also enhances financial transparency and strategic flexibility, positioning BKV for further growth through expansions and acquisitions. - Christopher Kalnin(CEO & Director)

Can you discuss potential strategies to improve capacity factors and spark spreads in the Power segment? - Jonathan S. Mardini (KeyBanc Capital Markets)

2025Q2: The capacity factors and spark spreads can be improved through partnerships with hyperscalers and data centers, potentially involving behind-the-meter structures. The partnering can involve fixed pricing or tolling arrangements, leveraging BKV's flexibility as a gas and power producer. - Christopher Kalnin(CEO & Director)

Contradiction Point 2

Capital Allocation and Flexibility

It involves differing statements on the company's capital allocation strategy and flexibility, which are crucial for financial planning and investor expectations.

What additional autonomy does the increased Power JV stake provide, especially in capital allocation? - Jacob Roberts (Tudor, Pickering, Holt & Co. Securities, LLC, Research Division)

2025Q3: The 75:25 JV structure provides strong control over capital allocation, enabling BKV to optimize decision-making on capital deployment in the Power business. It enhances flexibility in aligning with overall portfolio strategy and partner engagement. - Christopher Kalnin(CEO & Director)

How does the Bedrock acquisition affect maintenance CapEx, and can you detail turbine slots? - Christopher Moore Baker (Evercore ISI)

2025Q2: The Bedrock acquisition fits well with BKV's acreage, contributing low decline assets with accretive near-term inventory. It will increase maintenance CapEx by around $20 million-$25 million, keeping it low compared to the acquisition's benefits. - Eric S. Jacobsen (President of Upstream)

Contradiction Point 3

CCUS Project Timing and Inclusion in JV

It involves the timing and inclusion of CCUS projects in the JV with CIP, which has implications for the company's strategic direction and capital allocation.

What additional autonomy does the increased stake in the Power JV provide, especially in capital allocation? - Jacob Roberts (Tudor, Pickering, Holt & Co. Securities, LLC, Research Division)

2025Q3: The 75:25 JV structure provides strong control over capital allocation, enabling BKV to optimize decision-making on capital deployment in the Power business. - Christopher Kalnin(CEO & Director)

Is momentum for CCUS projects increasing, particularly in gas processing? Did timing influence project selection in the CIP joint venture? - Scott Gruber (Citigroup)

2025Q1: The timing of including projects in the JV was due to certain timing criteria, and more projects are expected to be included in future phases of the JV. - Eric Jacobsen(President, Upstream)

Contradiction Point 4

Power Business Growth and Strategy

It reflects differing perspectives on the growth strategy for the power business, which is crucial for the company's overall growth and market positioning.

Does the Power JV consolidation enhance BKV's ability to consolidate further in the Barnett? - Michael Furrow (Pickering Energy Partners LP)

2025Q3: The Power JV consolidation does not inherently affect the Barnett M&A market. BKV will continue to evaluate acquisitions based on fundamental economics, focusing on optimization and synergies rather than multiples. - Christopher Kalnin(CEO & Director)

How will CCUS capital expenditures change with the announced joint venture? How does the upstream business plan to grow production given the firming strip prices? - Tim Rezvan (KeyBanc Capital Markets)

2025Q1: Eric Jacobsen noted that BKV's growth model depends on price ranges. They are watching macroeconomic trade-offs and could invest more in the back half of the year if conditions remain favorable. - **Traceability:** (2025Q3-3, 2025Q1-2)

Contradiction Point 5

cci Capital Expenditure (CapEx) Assumptions

It involves differing assumptions about the capital expenditure for CCUS projects, which could impact financial planning and strategic decision-making.

How do you plan to allocate capital within your closed-loop strategy? - Neal Dingmann (William Blair & Company L.L.C., Research Division)

2025Q3: We anticipate strong free cash flow in 2026, driven by upstream and power businesses. Capital allocation includes potential debt refinancing and additional flexibility from the bond and RBL. Power commercial agreements will offer financial flexibility. - David Tameron(Chief Financial Officer)

What assumptions are included in your CCUS capital spending guidance? Are you assuming joint venture or full ownership of the CapEx? - Nitin Kumar (Mizuho Securities)

2024Q4: The CCUS capital guidance includes $90 million for FID developments, assuming 100% CapEx at this time. - Eric Jacobsen(President of Upstream)