November 13, 2024 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

_________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-42282

_________________________

BKV CORPORATION

(Exact name of registrant as specified in its charter)

_________________________


Delaware						85-0886382
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1200 17th Street, Suite 2100 Denver, Colorado						80202
(Address of Principal Executive Offices)						(Zip Code)

(720) 375-9680

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	BKV	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o No x

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

As of November 8, 2024, 84,600,301 shares of the registrant's common stock were outstanding.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS			2

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS			3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS			4

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND MEZZANINE EQUITY			6

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			27

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			44

ITEM 4. CONTROLS AND PROCEDURES			46

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS			47

ITEM 1A. RISK FACTORS			47

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			47

ITEM 3. DEFAULTS UPON SENIOR SECURITIES			47

ITEM 4. MINE SAFETY DISCLOSURES			47

ITEM 5. OTHER INFORMATION			47

ITEM 6. EXHIBITS			48

SIGNATURES			50

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact contained in this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management and dividend policy, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “expect,” “project,” “estimate,” “believe,” “anticipate,” “intend,” “budget,” “plan,” “seek,” “envision,” “forecast,” “target,” “predict,” “may,” “should,” “would,” “could,” “will,” the negative of these term and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our business strategy;

•our reserves;

•our financial strategy, liquidity and capital required for our development programs;

•our relationship with Banpu, including future agreements with Banpu;

•actual and potential conflicts of interest relating to Banpu, its affiliates and other entities in which members of our officers and directors are or may become involved;

•volatility in natural gas, NGL and oil prices;

•our dividend policy;

•our drilling plans and the timing and amount of future production of natural gas, NGL and oil;

•our hedging strategy and results;

•competition and government regulation;

•legal, regulatory or environmental matters;

•marketing of natural gas, NGL and oil;

•business or leasehold acquisitions and integration of acquired businesses;

•our ability to develop existing prospects;

•costs of developing our properties and of conducting our operations;

•our plans to establish midstream contracts that allow us to supply our own natural gas directly to the Temple Plants;

•our plan to continue to build out our power generation business and to expand into retail power;

•our ability to develop, produce, and sell Carbon Sequestered Gas;

•our ability to effectively operate and grow our CCUS business;

•our ability to forecast annual CO2e sequestration rates for our CCUS projects;

•our ability to reach final investment decision and execute and complete any of our pipeline of identified CCUS projects;

•our ability to identify and complete additional CCUS projects as we expand our upstream operations;

•our ability to effectively operate and grow our retail power business;

•our anticipated Scope 1, Scope 2 and Scope 3 emissions from our owned and operated upstream and natural gas midstream businesses and our sustainability plans and goals, including our plans to offset our Scope 1, Scope 2 and Scope 3 emissions from our owned and operated upstream and natural gas midstream businesses;

•our ESG strategy and initiatives, including those relating to the generation and marketing of environmental attributes or new products seeking to benefit from ESG-related activities, and the continuation of government tax incentives applicable thereto;

•the impact of the COVID-19 pandemic and its effects on our business and financial condition;

•general economic conditions;

•cost inflation;

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•credit markets;

•our ability to service our indebtedness;

•our ability to expand our business, including through the recruitment and retention of skilled personnel;

•our future operating results;

•the remediation of our material weaknesses; and

•our plans, objectives, expectations and intentions.

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under “Risk Factors” in our final prospectus dated September 25, 2024. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. Any forward-looking statement speaks only as of the date on which such statement is made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

BKV CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

(Unaudited)

Table of Contents


	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 assets	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 ( Note 10 )
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


The accompanying notes are an integral part of these condensed consolidated financial statements.			2

BKV CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

(Unaudited)

Table of Contents


	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


The accompanying notes are an integral part of these condensed consolidated financial statements.			3

BKV CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

(Unaudited)

Table of Contents


	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


The accompanying notes are an integral part of these condensed consolidated financial statements.			4

BKV CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

(Unaudited)

Table of Contents


	Nine Months Ended September 30,
Supplemental cash flow information:	2024		2023
Cash payments for:
Interest	$	55,558	$	36,069
Income tax	$	6	$	100
Non-cash investing and financing activities:
Conversion of mezzanine equity to common stock upon initial public offering	$	42,995	$	—
Conversion of equity-based compensation to common stock upon initial public offering	$	74,993	$	—
Reclassification of deferred offering costs to common stock upon initial public offering	$	11,649	$	—
Increase (decrease) in accrued capital expenditures	$	4,546	$	(13,482)
Additions to asset retirement obligations	$	21	$	89
Lease liabilities arising from obtaining right-of-use assets	$	494	$	3,061
Increase (decrease) in accrued offering costs	$	1,588	$	(763)
Adjustment of minority ownership puttable shares to redemption value	$	16,989	$	7,591
Adjustment of equity-based compensation to redemption value	$	9,310	$	14,374
Impact of redemption of shares issued in settlement of equity-based compensation and other on additional paid-in capital, common stock, and treasury stock	$	2,081	$	602


The accompanying notes are an integral part of these condensed consolidated financial statements.			5

BKV CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND MEZZANINE EQUITY
(in thousands)

(Unaudited)

Table of Content s


	Stockholders' Equity											Mezzanine Equity
	Common Stock			Treasury		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity		Common Stock			Equity-based Compensation		Total Mezzanine Equity
	Shares	Amount										Shares	Amount
Balance, December 31, 2023	63,873	$	1,283	$	(4,582)	$	1,034,144	$	267,368	$	1,298,213	2,403	$	59,988	$	126,966	$	186,954
Net loss	—	—		—		—		(38,585)		(38,585)		—	—		—		—
Adjustment of minority ownership puttable shares to redemption value	—	—		—		(1,548)		—		(1,548)		—	1,548		—		1,548
Adjustment of equity-based compensation to redemption value	—	—		—		(495)		—		(495)		—	—		495		495
Common stock issued upon settlement of RSUs	—	—		—		—		—		—		69	—		—		—
Equity-based compensation	—	—		—		—		—		—		—	—		1,073		1,073
Balance, March 31, 2024	63,873	$	1,283	$	(4,582)	$	1,032,101	$	228,783	$	1,257,585	2,472	$	61,536	$	128,534	$	190,070
Net loss	—	—		—		—		(59,697)		(59,697)		—	—		—		—
Adjustment of minority ownership puttable shares to redemption value	—	—		—		1,060		—		1,060		—	(1,060)		—		(1,060)
Adjustment of equity-based compensation to redemption value	—	—		—		194		—		194		—	—		(194)		(194)
Common stock issued upon settlement of RSUs	—	—		—		—		—		—		9	—		—		—
Equity-based compensation	—	—		—		—		—		—		—	—		1,072		1,072
Balance, June 30, 2024	63,873	$	1,283	$	(4,582)	$	1,033,355	$	169,086	$	1,199,142	2,481	$	60,476	$	129,412	$	189,888
Net income	—	—		—		—		12,869		12,869		—	—		—		—
Adjustment of minority ownership puttable shares to redemption value	—	—		—		17,477		—		17,477		—	(17,477)		—		(17,477)
Adjustment of equity-based compensation to redemption value	—	—		—		9,611		—		9,611		—	—		(9,611)		(9,611)
Redemption of common stock issued upon vesting of equity-based compensation	—	1		(2,077)		2,076		—		—		(73)	—		(2,077)		(2,077)
Common stock issued upon settlement of RSUs, net of shares withheld	—	—		—		—		—		—		2,618	—		(53,239)		(53,239)
Redemption of common stock issued from employee stock purchase plan	—	—		(4)		4		—		—		—	(4)		—		(4)
Issuance of common stock upon initial public offering, net of offering costs	15,000	150		—		241,826		—		241,976		—	—		—		—
Mezzanine equity conversion	5,026	71		—		117,917		—		117,988		(5,026)	(42,995)		(74,993)		(117,988)
Equity-based compensation	—	—		—		166		—		166		—	—		10,508		10,508
Balance, September 30, 2024	83,899	$	1,505	$	(6,663)	$	1,422,432	$	181,955	$	1,599,229	—	$	—	$	—	$	—


The accompanying notes are an integral part of these condensed consolidated financial statements.			6

BKV CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND MEZZANINE EQUITY
(in thousands)

(Unaudited)

Table of Content s


	Stockholders' Equity											Mezzanine Equity
	Common Stock			Treasury		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity			Common Stock			Equity-based Compensation		Total Mezzanine Equity
	Shares	Amount											Shares	Amount
Balance, December 31, 2022	56,373	$	1,132	$	(3,974)	$	896,433	$	150,450	$	1,044,041		2,290	$	62,712	$	89,171	$	151,883
Net income	—	—		—		—		96,162		96,162			—	—		—		—
Redemption of common stock issued upon vesting of equity-based compensation and other	—	1		(527)		659		—		133			(18)	(2)		(525)		(527)
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes	—	—		—		—		—		—			122	—		(2,736)		(2,736)
Adjustment of minority ownership puttable shares to redemption value	—	—		—		6,871		—		6,871			—	(6,871)		—		(6,871)
Adjustment of equity-based compensation to redemption value	—	—		—		10,346		—		10,346			—	—		(10,346)		(10,346)
Equity-based compensation	—	—		—		—		—		—			—	—		3,797		3,797
Balance, March 31, 2023	56,373	$	1,133	$	(4,501)	$	914,309	$	246,612	$	1,157,553		2,394	$	55,839	$	79,361	$	135,200
Net loss	—	—		—		—		(35,348)		(35,348)			—	—		—		—
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes	—	—		—		—		—		—			11	—		(219)		(219)
Adjustment of minority ownership puttable shares to redemption value	—	—		—		(86)		—		(86)			—	86		—		86
Adjustment of equity-based compensation to redemption value	—	—		—		(584)		—		(584)			—	—		584		584
Equity-based compensation	—	—		—				—		—			—	—		6,498		6,498
Balance, June 30, 2023	56,373	$	1,133	$	(4,501)	$	913,639	$	211,264	$	1,121,535		2,405	$	55,925	$	86,224	$	142,149
Net income	—	—		—		—		18,564		18,564			—	—		—		—
Redemption of common stock issued upon vesting of equity-based compensation and other	—	—		(75)		75		—		—			(3)	—		(75)		(75)
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes	—	—		—		—		—		—			1	—		(6)		(6)
Adjustment of minority ownership puttable shares to redemption value	—	—		—		806		—		806			—	(806)		—		(806)
Adjustment of equity-based compensation to redemption value	—	—		—		4,612		—		4,612			—	—		(4,612)		(4,612)
Equity-based compensation	—	—		—		—		—		—			—	—		7,097		7,097
Issuance of common stock	7,500	150		—		149,855		—		150,005			—	—		—
Balance, September 30, 2023	63,873	$	1,283	$	(4,576)	$	1,068,987	$	229,828	$	1,295,522		2,403	$	55,119	$	88,628	$	143,747


The accompanying notes are an integral part of these condensed consolidated financial statements.			7

Table of Co ntents

BKV Corporation

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 1 - Business and Basis of Presentation

General

BKV Corporation (“BKV Corp”) was formed on May 1, 2020 and is a corporation registered with the State of Delaware. BKV Corp is a growth driven energy company focused on creating value for its shareholders through organic development of its properties, as well as accretive acquisitions. BKV Corp’s core business is to produce natural gas from its owned and operated upstream businesses.

The majority shareholder of BKV Corp is Banpu North America Corporation (“BNAC”). BKV Corp's ultimate parent company is Banpu Public Company Limited, a public company listed in the Stock Exchange of Thailand. As of November 13, 2024, the date these condensed consolidated financial statements were available to be issued, BNAC owned 75.5% of BKV Corp's shares. The remaining 24.5% of shares of common stock of BKV Corp were owned by non-controlling members of management, members of the board of directors, and employee and non-employee shareholders.

Basis of Presentation of the Unaudited Condensed Consolidated Financial Statements

These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts for BKV Corp's wholly-owned subsidiaries. The condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s 2023 Consolidated Financial Statements (“Annual Financial Statements”), included in our final prospectus dated September 25, 2024 (“Prospectus”), as certain disclosures and information required by GAAP for complete consolidated financial statements have been condensed or omitted. The condensed consolidated financial statements, in the opinion of management, reflect all adjustments, which include normal and recurring adjustments, necessary to fairly state the Company’s financial position, results of operations, and cash flows for the periods presented herein. The interim results are not necessarily indicative of results to be expected for the year ending December 31, 2024 or for any other future annual or interim period. The December 31, 2023 condensed consolidated balance sheet was derived from the audited Annual Financial Statements of the Company, but does not include all disclosures required by GAAP for annual financial statements.

BKV Upstream Midstream, LLC (“BKV Upstream Midstream”), a limited liability company, was formed on May 21, 2024 and is registered in the state of Delaware. This entity is a wholly-owned subsidiary of BKV Corp. Since its formation, all of the midstream and upstream entities of BKV Corp are wholly-owned subsidiaries of BKV Upstream Midstream and include BKV Operating, LLC, BKV Barnett, LLC, BKV Chelsea, LLC, BKV Midstream, LLC, BKV North Texas, LLC, and Kalnin Ventures, LLC.

On June 14, 2024, BKV sold BKV Chaffee Corners, LLC (“Chaffee”), and on June 28, 2024, sold its non-operated upstream assets in BKV Chelsea, LLC (“Chelsea”). See Note 3 - Natural Gas Properties & Other Property and Equipment for further discussion.

Together, BKV Corp and its wholly-owned subsidiaries are referred to collectively as “BKV” or the “Company.” All intercompany balances and transactions between these entities have been eliminated within the condensed consolidated financial statements. Current and deferred income taxes and related tax expense have been determined based on the stand-alone results of BKV by applying the separate return method to BKV’s operations as if it were a separate taxpayer. The Company is organized, managed, and identified as one operating segment and one reportable segment.

Reclassification

A reclassification was made in the prior period's condensed consolidated statements of cash flows within the net cash provided by (used in) investing activities and within net cash provided by operating activities to conform to the current period presentation. A reclassification was also made to the prior period's condensed consolidated statements of operations to reclassify the gains on sale of assets out of other income into revenues to conform with the current presentation. These reclassifications had no impact on previously reported balance sheets, net income, net cash flows, or stockholders' equity.


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Initial Public Offering

On September 27, 2024, the Company completed its initial public offering (the “IPO”) of 15,000,000 shares of common stock at a price to the public of $18.00 per share. After underwriting discounts and commissions of $16.2 million, the Company received net proceeds from the offering of $253.8 million. The Company also granted the IPO underwriters a 30-day option to purchase up to 2,250,000 additional shares of common stock on the same terms. The underwriters partially exercised the option and on October 28, 2024, purchased 701,003 additional shares of common stock, resulting in additional net proceeds of $11.9 million, after deducting underwriting discounts and commissions of $0.8 million.

Upon consummation of the IPO, 5,026,638 mezzanine shares were converted into common stock.

Deferred Offering Costs

The Company capitalized legal and other third party fees directly related to the Company's IPO on the condensed consolidated balance sheets, and on September 27, 2024, the Company recognized these costs as a reduction to the proceeds received from the IPO in the amount of $11.6 million.

Liquidity

As of September 30, 2024, the Company held $31.3 million of cash and cash equivalents. The Company’s working capital deficit as of September 30, 2024 was $13.3 million, and for the nine months ended September 30, 2024, cash flows provided by operating activities was $74.8 million. The Company intends to make the payments related to its debt and investments in capital expenditures with cash flows from operations. During the nine months ended September 30, 2024, the Company also sold call options with a counterparty and received a premium of $23.5 million, and early terminated a portion of its derivative contracts and received cash on the gain of $13.3 million. For further discussion on the derivative transactions, see Note 5 - Derivative Instruments.

On June 11, 2024, BKV Upstream Midstream entered into the RBL Credit Agreement (as defined below) and drew down $425.0 million in revolver borrowings. The Company then repaid the amounts outstanding under (i) its Credit Agreement previously entered into in June 2022 with a syndicate of banks and Bangkok Bank Public Company Limited (New York Branch) as the administrative agent (the “Term Loan Credit Agreement”), (ii) its revolving credit facility previously entered into in August 2022 with Bangkok Bank Public Company Limited (New York Branch) (the “Revolving Credit Agreement”), and (iii) its loan agreement previously entered into in March 2022 with Standard Charter Bank (the “SCB Credit Facility”), in each case with proceeds from the loans under the RBL Credit Agreement and cash on hand. The Term Loan Credit Agreement, the Revolving Credit Agreement, and the SCB Credit Facility were terminated concurrently with the repayment of the remaining amounts owed thereunder. See Note 2 - Debt for further discussion on the RBL Credit Agreement and these transactions.

On June 14, 2024, the Company sold its non-operated interests in Chaffee, a wholly-owned subsidiary, for a purchase price of $106.7 million, subject to adjustment, and on June 28, 2024, sold its non-operated upstream assets in Chelsea for a purchase price of $25.0 million, subject to adjustment. See Note 3 - Natural Gas Properties & Other Property and Equipment for further discussion on these transactions.

Significant Judgments and Accounting Estimates

The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. There have been no significant changes to the Company's accounting estimates from those disclosed in the Company's Annual Financial Statements.

Significant Accounting Policies

The Company's significant accounting policies are described in the notes to the consolidated financial statements for the year ended December 31, 2023 disclosed in the Annual Financial Statements within the Prospectus. There have been no significant changes in accounting policies during the nine months ended September 30, 2024.


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Restricted Cash

As of December 31, 2023, restricted cash included amounts to fund the debt service reserve account, which equaled the current portion of the Term Loan Credit Agreement plus accrued interest to comply with the Company's financial covenant under the Term Loan Credit Agreement. Due to the repayment of the Term Loan Credit Agreement, there was no restricted cash as of September 30, 2024. See Note 2 - Debt. The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the condensed consolidated balance sheets and condensed consolidated statements of cash flows:


	September 30,		December 31,		September 30,
(in thousands)	2024		2023		2023
Cash and cash equivalents	$	31,318	$	25,407	$	54,133
Restricted cash	—		139,662		138,300
Cash, cash equivalents, and restricted cash	$	31,318	$	165,069	$	192,433

Common Shares Issued and Outstanding

As of September 30, 2024 and December 31, 2023, the Company had common shares issued and outstanding of 83,899,298 and 66,275,866, respectively.

Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Standards Accounting Board issued a new accounting pronouncement regarding segment reporting. The standard requires that public entities expand reportable segment disclosures, primarily through enhanced disclosures around segment expenses. This standard is effective for annual periods beginning January 1, 2024 and interim periods beginning January 1, 2025, with early adoption permitted. Management is currently evaluating the impact of this standard on the Company's disclosures and is in the process of preparing to comply with the new disclosure requirements.

In December 2023, the Financial Standards Accounting Board issued a new accounting pronouncement regarding income tax disclosures. The standard requires public entities disclose more consistent and detailed categories in their statutory to effective income tax rate reconciliations and further disaggregate income taxes paid by jurisdiction. For each annual period presented, the new standard requires disclosure of the year-to-date amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign. It also requires additional disaggregated information on income taxes paid (net of refunds received) to an individual jurisdiction equal to or greater than 5% of total income taxes paid (net of refunds received). The standard is effective January 1, 2025, with early adoption permitted. Management is currently evaluating the impact this standard will have on the Company's disclosures.

Note 2 - Debt


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The following table summarizes the debt balances (refer to the Company's Annual Financial Statements disclosed in the Prospectus for definitions and further description of the Company's debt instruments):


(in thousands)	September 30, 2024		December 31, 2023
Credit facilities
SCB Credit Facility	$	—	$	31,000
Revolving Credit Agreement	—		96,000

Term loan
Current portion of Term Loan Credit Agreement	—		114,000
Current portion of unamortized debt issuance costs	—		(1,627)
Total current debt, net	—		239,373

RBL Credit Agreement	190,000		—
Term Loan Credit Agreement	—		342,000
Long-term portion of unamortized debt issuance costs	—		(2,337)
Total long-term debt, net	190,000		339,663

Total debt, net	$	190,000	$	579,036

On June 11, 2024, the Company paid down the outstanding balances, including interest, and concurrently terminated the SCB Credit Facility, the Revolving Credit Agreement, and the Term Loan Credit Agreement, with proceeds from the revolving borrowings on the RBL Credit Agreements and cash on hand. Due to the early termination of the Revolving Credit Agreement and the Term Loan Credit Agreement, the Company recorded a loss of $13.9 million, which was included in loss on early extinguishment of debt in the condensed consolidated statements of operations during the nine months ended September 30, 2024.

RBL Credit Agreement

On June 11, 2024, the Company and BKV Upstream Midstream entered into a reserve-based lending agreement (the “RBL Credit Agreement”) with Citibank, N.A., as the administrative agent, and the financial institutions party thereto, and with BKV Upstream Midstream as the borrower and BKV Corp as the guarantor on the RBL Credit Agreement. The RBL Credit Agreement includes a maximum credit commitment of $1.5 billion. As of September 30, 2024, the RBL Credit Agreement has a borrowing base of $800.0 million and an elected commitment of $600.0 million. The loans may be borrowed, repaid, and reborrowed during the term of the RBL Credit Agreement. The RBL Credit Agreement matures on June 12, 2028. The obligations under the RBL Credit Agreement are secured and guaranteed on a secured basis by all of BKV Upstream Midstream's current and future material subsidiaries. Loans under the RBL Credit Agreement bear interest at one, three, or six-month term secured overnight financing rate (“SOFR”) or an alternative base rate, as applicable, plus a credit spread adjustment of 0.10% for SOFR borrowings, plus an applicable margin per annum. Interest is payable on the last day of each interest period and at maturity. BKV Upstream Midstream is obligated to pay certain fees to the lenders and administrative agent under the RBL Credit Agreement, including commitment fees on the average daily amount of the undrawn portion of the commitments.

The RBL Credit Agreement contains various restrictive covenants that, among other things, limit BKV Upstream Midstream's ability and the ability of its restricted subsidiaries to, subject to certain exceptions: (i) incur indebtedness; (ii) incur liens; (iii) acquire or merge with any other company; (iv) sell assets or equity interests of its subsidiaries; (v) make investments; (vi) pay dividends or make other restricted payments; (vii) change its lines of business; (viii) enter into certain hedge agreements; (ix) enter into transactions with affiliates; (x) own any subsidiary that is not organized in the United States; (xi) prepay any unsecured senior or subordinated indebtedness; (xii) engage in certain marketing activities; and (xiii) allow, on a net basis, gas imbalances, take-or-pay or other prepayments with respect to proved oil and gas properties. Beginning with the fiscal quarter ending


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September 30, 2024, the RBL Credit Agreement requires BKV Upstream Midstream to always hedge not less than 50% of projected production from our proved developed producing reserves for the subsequent 24 calendar month period immediately following such required delivery date.

The RBL Credit Agreement also includes financial covenants that require BKV Upstream Midstream to maintain:

• on a quarterly basis, a minimum Current Ratio (as defined in the RBL Credit Agreement) of no less than 1.00 to 1.00; and

• on a quarterly basis, a Net Leverage Ratio (as defined in the RBL Credit Agreement) of no greater than 3.25 to 1.00.

The RBL Credit Agreement includes customary equity cure rights that will enable BKV Upstream Midstream to cure certain breaches of the minimum current ratio covenant or the maximum net leverage ratio covenant. As of September 30, 2024, BKV Upstream Midstream was in compliance with the terms and covenants of the RBL Credit Agreement.

The RBL Credit Agreement generally includes customary events of default for a reserve-based credit facility, some of which allow for an opportunity to cure. If an event of default relating to bankruptcy or other insolvency events occurs, the revolving loans will immediately become due and payable; if any other event of default exists, the administrative agent or the requisite lenders will be permitted to accelerate the maturity of the revolving loans. The RBL Credit Agreement is secured by substantially all of BKV Upstream Midstream's assets and those of the guarantors, and upon an event of default the agent under the RBL Credit Agreement could commence foreclosure proceedings.

During the nine months ended September 30, 2024, BKV Upstream Midstream paid $8.1 million in financing costs, which have been deferred and capitalized as debt issuance costs included within other assets and are amortized over the life of the RBL Credit Agreement. As of September 30, 2024, $7.4 million of unamortized debt issuance costs remains outstanding. As of September 30, 2024, the effective interest rate on the RBL Credit Agreement was 8.46% and the outstanding letters of credit was $14.6 million. On September 30, 2024, in conjunction with the IPO, the Company paid down $200.0 million of principal on the RBL Credit Agreement, including interest, with proceeds from the IPO.

Subordinated Intercompany Loan Agreement

On June 18, 2024, the Company paid down $25.0 million of the $75.0 million outstanding on the related party loan with BNAC, including interest, and on September 30, 2024, the Company repaid the outstanding balance of $50.0 million, including interest, with proceeds from the IPO.

Note 3 - Natural Gas Properties & Other Property and Equipment

Accumulated depreciation, depletion, and amortization for developed natural gas properties as of September 30, 2024 and December 31, 2023 was $656.8 million and $560.0 million, respectively. Depreciation, depletion, and amortization expense for developed natural gas properties was $50.4 million and $45.7 million for the three months ended September 30, 2024 and 2023, respectively, and $148.6 million and $110.6 million for the nine months ended September 30, 2024 and 2023, respectively.

Accumulated depreciation for midstream assets as of September 30, 2024 and December 31, 2023 was $15.7 million and $19.4 million, respectively. Depreciation expense on midstream assets was $1.6 million and $1.9 million for the three months ended September 30, 2024 and 2023, respectively, and $5.3 million and $5.6 million for the nine months ended September 30, 2024 and 2023, respectively.


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Other property and equipment consisted of the following:


(in thousands)	September 30, 2024		December 31, 2023
Carbon capture, utilization, and sequestration	$	66,800	$	59,142
Buildings	15,707		15,707
Furniture, fixtures, equipment, and vehicles	17,131		15,101
Computer software	5,595		4,844
Leasehold improvements	1,685		1,685
Land	3,090		3,090
Construction in process	1,324		76
Total	111,332		99,645
Accumulated depreciation	(20,098)		(15,710)
Other property and equipment, net	$	91,234	$	83,935

Depreciation expense for other property and equipment was $1.7 million and $1.3 million for the three months ended September 30, 2024 and 2023, respectively, and $4.6 million and $4.1 million for the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024, the Company received proceeds on the sale of other properties of $1.7 million, and recognized a gain on sale of these properties of $0.8 million, which is included in the gains (losses) on sales of assets in the condensed consolidated statements of operations. During the nine months ended September 30, 2023, the Company received proceeds on the sale of other properties of $1.6 million, and recognized a gain on sale of these properties of $0.3 million, which is included in the gains (losses) on sales of assets in the condensed consolidated statements of operations.

Sales of BKV Chaffee Corners, LLC and BKV Chelsea, LLC

On June 14, 2024, the Company sold its wholly owned subsidiary, Chaffee, representing a non-operated interest in approximately 9,800 net acres and 116 gross (24.2 net) wells and 122 Bcfe of proved reserves in the Marcellus Shale in the Appalachian Basin of Northeast Pennsylvania (“NEPA”), as well as our interest in the Repsol Oil and Gas operated midstream system, for $106.7 million. The Company recognized a gain on the sale of $6.0 million, net of transaction costs of approximately $3.5 million, which is included in the gains (losses) on sales of assets in the condensed consolidated statements of operations.

On June 28, 2024, Chelsea sold certain of its non-operated upstream assets, including interest in approximately 6,800 net acres and 214 gross (15.4 net) wells and 35 Bcfe of proved reserves in NEPA, for a purchase price of $25.0 million and transaction costs of approximately $0.4 million. Due to the immateriality of the upstream assets sold, the Company utilized the practical expedient to account for the sale of Chelsea's non-operated upstream assets sold as a normal retirement with no gain or loss recognized as sale of these assets did not significantly impact the depletion rate with respect to the total reserves retained in NEPA.

Following the divestiture of these assets, the Company holds approximately 19,480 net acres in NEPA, approximately 98% of which is held by production.

Note 4 - Fair Value Measurements

As the Company uses the market approach to determine the fair value of its derivative instruments, these fair values are also compared to the values given by counterparties for reasonableness. Since natural gas and NGL swaps do not include optionality and therefore generally have no unobservable inputs, they are classified as Level 2. The Company factors its own non-performance risk into the valuation of derivatives using current published credit default swap rates. As of September 30, 2024 and December 31, 2023, the impact of the non-performance risk adjustment to the Company's fair value of commodity derivative liabilities was $3.1 million and $1.0 million, respectively.

Contingent consideration, minority ownership puttable shares, and equity-based compensation from the 2021 Plan (as defined in Note 8 - Stockholders' Equity) are measured at fair value using Level 3 valuation techniques. There were no transfers between fair value levels during the three and nine months ended September 30, 2024 and 2023.


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The following tables set forth by level within the fair value hierarchy, the financial assets and liabilities that were accounted for at fair value on a recurring basis:


	As of September 30, 2024
	Fair Value Measurements Using:
(in thousands)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets
Derivative instruments	$	25,644	$	—	$	25,644
Financial liabilities
Derivative instruments	28,741		—		28,741
Contingent consideration	—		19,703		19,703


	As of December 31, 2023
	Fair Value Measurements Using:
(in thousands)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets
Derivative instruments	$	102,547	$	—	$	102,547
Financial liabilities

Contingent consideration	—		29,676		29,676
Mezzanine equity
Minority ownership puttable shares	—		59,988		59,988
Equity-based compensation	—		126,966		126,966

The contingent consideration was generated from the 2019 acquisition of interest in proved reserves and related upstream assets in the Barnett formation from Devon Energy Corporation (the “Devon Barnett Acquisition”) and the 2022 acquisition of natural gas upstream and the associated midstream infrastructure in the Barnett from XTO Energy, Inc and Barnett Gathering, LLC, subsidiaries of Exxon Mobil Corporation (the “Exxon Barnett Acquisition”). The fair value of the contingent consideration as of September 30, 2024 and December 31, 2023 represents management’s best estimate if a third party were paid to assume the contingency. The fair values were determined using Monte Carlo simulations, which use observable (Level 2) inputs based on forecasted monthly Henry Hub Prices and West Texas Intermediate (“WTI”) prices, as applicable, and unobservable (Level 3) inputs. The Devon Barnett Acquisition and the Exxon Barnett Acquisition contingencies are described further in Note 10 - Commitments and Contingencies.

The minority ownership puttable shares were recorded at fair value upon initial recognition in mezzanine equity on the condensed consolidated balance sheets. The fair market value of the Company's common stock was used to determine the initial carrying value and redemption value of the minority ownership puttable shares in mezzanine equity on the condensed consolidated balance sheets as of December 31, 2023. Prior to the Company's IPO, its common stock was valued using both observable (Level 2) and unobservable (Level 3) inputs. The minority ownership puttable shares are further described in Note 8 - Stockholders' Equity.

Equity-based compensation is recorded at fair market value on the grant date. The underlying market condition was valued using the application of Monte Carlo simulations using both observable (Level 2) and unobservable (Level 3) inputs. Prior to the Company's IPO, the remaining components of the awards were valued based on the fair market value of the common stock of the Company, which is valued consistent with valuation methodologies described for the minority ownership puttable shares. As of


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December 31, 2023, the fair market values of the Company's market condition and common stock were used to determine the redemption value or fair market value of equity-based compensation in mezzanine equity on the condensed consolidated balance sheets. Equity-based compensation is further described in Note 8 - Stockholders' Equity.

Quantitative data regarding the Company's Level 3 unobservable inputs are as follows:


(in thousands, except per share amounts)	Fair Value		Valuation Technique	Unobservable Input	Range or Actual
Common stock - per share value - as of December 31, 2023(1)	$	28.25	Enterprise value	Discount rate	11.5% -12.5%

Contingent consideration, as of December 31, 2023	$	29,676	Monte Carlo Simulation	Risk free rate(2)	5.2%
				Credit spread	4.7%
				Discount rate	9.9%

Common stock - per share value, as of March 31, 2024(1)	$	28.98	Enterprise value	Discount rate	11.5% - 12.5%

Contingent consideration, as of March 31, 2024	$	23,082	Monte Carlo Simulation	Risk free rate(2)	5.4%
				Credit spread	4.8%
				Discount rate	10.2%

Common stock - per share value, as of June 30, 2024(1)	$	28.48	Enterprise value	Discount rate	11.5% - 12.5%

Contingent consideration, as of June 30, 2024	$	23,606	Monte Carlo Simulation	Risk free rate(2)	5.2%
				Credit spread	4.8%
				Discount rate	10.0%

Contingent consideration, as of September 30, 2024	$	19,703	Monte Carlo Simulation	Risk free rate(2)	4.2%
				Credit spread	4.8%
				Discount rate	9.0%

________________________________________

(1) The Company uses the midpoint of valuation results when estimating the fair value of common stock.

(2) Represents an observable input.

The table below sets forth the changes in the Company's Level 3 fair value measurements:






	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2024		2023		2024		2023
Balance, beginning of period	$	213,494	$	207,290	$	216,630	$	239,934
Mezzanine equity conversion	(117,988)		—

Form: 10-Q

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