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BKV Corporation Reports Third Quarter 2024 Financial and Operational Results

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

Third Quarter 2024 Highlights

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

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

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

Financial Results

Third Quarter and Year-to-Date 2024

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

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

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

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

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

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

($ Millions, except EPS)(1)

2024

 

2023

 

2024

 

2023

Net income (loss)

$

12.9

 

 

$

18.6

 

 

$

(85.4

)

 

$

79.4

 

Adjusted Net Loss, non-GAAP

$

(18.6

)

 

$

(11.3

)

 

$

(40.3

)

 

$

(16.3

)

Adjusted EBITDAX, non-GAAP

$

51.0

 

 

$

66.7

 

 

$

159.8

 

 

$

183.7

 

Diluted earnings per share (EPS)

$

0.18

 

 

$

0.30

 

 

$

(1.28

)

 

$

1.27

 

Adjusted earnings per share (EPS), non-GAAP

$

(0.27

)

 

$

(0.19

)

 

$

(0.60

)

 

$

(0.28

)

Net cash provided by operating activities

$

65.0

 

 

$

34.5

 

 

$

74.8

 

 

$

115.4

 

Adjusted Free Cash Flow, non-GAAP

$

19.6

 

 

$

(11.2

)

 

$

86.2

 

 

$

(22.7

)

Free Cash Flow Margin, non-GAAP

 

14.2

%

 

 

(6.2

)%

 

 

19.7

%

 

 

(4.1

)%

Capital expenditures (accrued)

$

24.4

 

 

$

33.8

 

 

$

57.3

 

 

$

147.6

 

____________________________________________________

(1) Adjusted Net Loss, Adjusted EBITDAX, Adjusted EPS, Adjusted Free Cash Flow and Free Cash Flow Margin are each non-GAAP financial measures. For a definition of each of these non-GAAP financial measures and reconciliations of such non-GAAP financial measures to their comparable GAAP metrics, please see “Supplemental Non-GAAP Financial Measures” below.

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

Operational Results

Third Quarter and Year-to-Date 2024

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

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2024

 

2023

 

2024

 

2023

Production

 

 

 

 

 

 

 

Net production per day (MMcfe/d)

 

762.6

 

 

 

844.7

 

 

 

792.5

 

 

 

866.9

 

Natural gas (MMcf)

 

55,456

 

 

 

61,792

 

 

 

172,213

 

 

 

188,690

 

NGL (MBbls)

 

2,428

 

 

 

2,625

 

 

 

7,415

 

 

 

7,905

 

Oil (MBbls)

 

23

 

 

 

29

 

 

 

75

 

 

 

92

 

Total (MMcfe)

 

70,162

 

 

 

77,716

 

 

 

217,153

 

 

 

236,672

 

Natural Gas Pricing

 

 

 

 

 

 

 

Average NYMEX price

$

2.16

 

 

$

2.55

 

 

$

2.10

 

 

$

2.69

 

Differential

$

(0.58

)

 

$

(0.58

)

 

$

(0.55

)

 

$

(0.68

)

Realized prices, excluding derivatives

$

1.58

 

 

$

1.97

 

 

$

1.55

 

 

$

2.01

 

Realized prices, including derivatives

$

2.21

 

 

$

2.00

 

 

$

2.06

 

 

$

2.19

 

Average Operating Cash Costs per Mcfe

 

 

 

 

 

 

 

Lease operating and workover

$

0.48

 

 

$

0.44

 

 

$

0.47

 

 

$

0.48

 

Taxes other than income

$

0.15

 

 

$

0.23

 

 

$

0.15

 

 

$

0.25

 

Gathering and transportation costs

$

0.78

 

 

$

0.80

 

 

$

0.77

 

 

$

0.77

 

Total

$

1.41

 

 

$

1.47

 

 

$

1.39

 

 

$

1.50

 

Carbon Capture Utilization and Sequestration (“CCUS”)

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

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

Power

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

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

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

Capital Expenditures

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

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

Liquidity

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

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

__________________________

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

Fourth Quarter 2024 Guidance

Accrued Capital Expenditures and Net Production ($ Millions)

 

Development

$45 - $50

CCUS and Other

$20 - $30

Total capital expenditures

$65 - $80

 

 

Net Production (MMcfe/d)

720 - 750

 

 

Per Unit Operating Costs ($/Mcfe)

 

Lease operating and workover

$0.49 - $0.53

Gathering and transportation

$0.80 - $0.84

Depreciation, depletion, amortization, and accretion

$0.82 - $0.87

General and administrative (excl. stock comp)

$0.36 - $0.40

General and administrative (stock comp)

$0.06 - $0.07

 

 

Natural Gas Price ($/Mcfe)

 

Average differential

$(0.60) - $(0.70)

 

 

Power ($ Millions)

 

Power JV Adjusted EBITDA attributable to BKV (50%)

$2 - $6

Third Quarter 2024 Earnings Conference Call

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

About BKV Corporation

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

Forward-Looking Statements

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

BKV CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)

 

September 30,

2024

 

December 31,

2023

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

31,318

 

 

$

25,407

 

Restricted cash

 

 

 

 

139,662

 

Accounts receivable, net

 

49,228

 

 

 

48,500

 

Accounts receivable, related parties

 

11,343

 

 

 

559

 

Commodity derivative assets, current

 

21,326

 

 

 

84,039

 

Other current assets

 

12,517

 

 

 

13,990

 

Total current assets

 

125,732

 

 

 

312,157

 

Natural gas properties and equipment

 

 

 

Developed properties

 

2,262,858

 

 

 

2,370,156

 

Undeveloped properties

 

10,544

 

 

 

15,846

 

Midstream assets

 

276,592

 

 

 

318,855

 

Accumulated depreciation, depletion, and amortization

 

(672,483

)

 

 

(579,415

)

Total natural gas properties, net

 

1,877,511

 

 

 

2,125,442

 

Other property and equipment, net

 

91,234

 

 

 

83,935

 

Goodwill

 

18,417

 

 

 

18,417

 

Investment in joint venture

 

132,352

 

 

 

104,750

 

Commodity derivative asset

 

4,318

 

 

 

18,508

 

Other noncurrent assets

 

17,993

 

 

 

19,937

 

Total assets

$

2,267,557

 

 

$

2,683,146

 

 

 

 

 

Liabilities, mezzanine equity, and stockholders' equity

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities

$

112,183

 

 

$

149,173

 

Contingent consideration payable

 

19,703

 

 

 

20,000

 

Income taxes payable to related party

 

2,068

 

 

 

864

 

Credit facilities

 

 

 

 

127,000

 

Current portion of long-term debt, net

 

 

 

 

112,373

 

Other current liabilities

 

5,043

 

 

 

2,849

 

Total current liabilities

 

138,997

 

 

 

412,259

 

Asset retirement obligations

 

195,240

 

 

 

193,205

 

Contingent consideration

 

 

 

 

29,676

 

Note payable to related party

 

 

 

 

75,000

 

Deferred tax liability, net

 

105,252

 

 

 

136,524

 

Long-term debt, net

 

190,000

 

 

 

339,663

 

Other noncurrent liabilities

 

38,839

 

 

 

11,652

 

Total liabilities

 

668,328

 

 

 

1,197,979

 

Commitments and contingencies

 

 

 

Mezzanine equity

 

 

 

Common stock - minority ownership puttable shares; 0 and 2,403 authorized shares as of September 30, 2024 and December 31, 2023, respectively; and 0 and 2,403 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

 

 

 

 

59,988

 

Equity-based compensation

 

 

 

 

126,966

 

Total mezzanine equity

 

 

 

 

186,954

 

Stockholders' equity

 

 

 

Common stock, $0.01 par value; 300,000 authorized shares; 83,899 and 63,873 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

 

1,505

 

 

 

1,283

 

Treasury stock, shares at cost; 214 shares and 213 shares as of September 30, 2024 and December 31, 2023, respectively

 

(6,663

)

 

 

(4,582

)

Additional paid-in capital

 

1,422,432

 

 

 

1,034,144

 

Retained earnings

 

181,955

 

 

 

267,368

 

Total stockholders' equity

 

1,599,229

 

 

 

1,298,213

 

Total liabilities, mezzanine equity, and stockholders' equity

$

2,267,557

 

 

$

2,683,146

 

 

BKV CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 

Three Months Ended September 30,

 

Nine months ended September 30,

 

 

2024

 

2023

 

2024

 

2023

Revenues and other operating income

 

 

 

 

 

 

 

 

Natural gas, NGL, and oil sales

 

$

126,952

 

 

$

174,414

 

 

$

394,493

 

 

$

527,321

 

Midstream revenues

 

 

2,662

 

 

 

3,799

 

 

 

10,168

 

 

 

12,227

 

Derivative gains, net

 

 

35,308

 

 

 

9,327

 

 

 

24,143

 

 

 

126,274

 

Marketing revenues

 

 

1,738

 

 

 

1,936

 

 

 

8,705

 

 

 

6,668

 

Gains (losses) on sales of assets

 

 

 

 

 

(31

)

 

 

6,784

 

 

 

308

 

Related party and other

 

 

6,427

 

 

 

1,922

 

 

 

16,906

 

 

 

5,236

 

Total revenues and other operating income

 

 

173,087

 

 

 

191,367

 

 

 

461,199

 

 

 

678,034

 

Operating expenses

 

 

 

 

 

 

 

 

Lease operating and workover

 

 

33,588

 

 

 

33,470

 

 

 

102,228

 

 

 

114,193

 

Taxes other than income

 

 

10,688

 

 

 

17,725

 

 

 

31,903

 

 

 

59,221

 

Gathering and transportation

 

 

54,705

 

 

 

62,488

 

 

 

167,810

 

 

 

183,074

 

Depreciation, depletion, amortization, and accretion

 

 

57,366

 

 

 

52,269

 

 

 

168,845

 

 

 

130,623

 

General and administrative

 

 

33,602

 

 

 

28,477

 

 

 

73,543

 

 

 

80,965

 

Other

 

 

4,126

 

 

 

2,233

 

 

 

15,402

 

 

 

10,716

 

Total operating expenses

 

 

194,075

 

 

 

196,662

 

 

 

559,731

 

 

 

578,792

 

Income (loss) from operations

 

 

(20,988

)

 

 

(5,295

)

 

 

(98,532

)

 

 

99,242

 

Other income (expense)

 

 

 

 

 

 

 

 

Gains on contingent consideration liabilities

 

 

3,903

 

 

 

1,203

 

 

 

9,973

 

 

 

24,113

 

Earnings from equity affiliate

 

 

50,562

 

 

 

49,067

 

 

 

27,602

 

 

 

34,792

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

(13,877

)

 

 

 

Interest expense

 

 

(9,197

)

 

 

(20,069

)

 

 

(40,443

)

 

 

(54,446

)

Interest expense, related party

 

 

(1,329

)

 

 

(2,000

)

 

 

(5,181

)

 

 

(5,083

)

Interest income

 

 

202

 

 

 

419

 

 

 

3,606

 

 

 

1,555

 

Other income

 

 

1,019

 

 

 

395

 

 

 

1,369

 

 

 

2,246

 

Income (loss) before income taxes

 

 

24,172

 

 

 

23,720

 

 

 

(115,483

)

 

 

102,419

 

Income tax benefit (expense)

 

 

(11,303

)

 

 

(5,156

)

 

 

30,070

 

 

 

(23,041

)

Net income (loss)

 

$

12,869

 

 

$

18,564

 

 

$

(85,413

)

 

$

79,378

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.19

 

 

$

0.31

 

 

$

(1.28

)

 

$

1.35

 

Diluted

 

$

0.18

 

 

$

0.30

 

 

$

(1.28

)

 

$

1.27

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

68,023

 

 

 

59,021

 

 

 

66,891

 

 

 

58,861

 

Diluted

 

 

70,637

 

 

 

62,247

 

 

 

66,891

 

 

 

62,373

 

 

BKV CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

Nine Months Ended September 30,

 

 

2024

 

2023

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$

(85,413

)

 

$

79,378

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

Depreciation, depletion, amortization, and accretion

 

 

169,111

 

 

 

131,389

 

Equity-based compensation expense

 

 

12,819

 

 

 

17,392

 

Deferred income tax (benefit) expense

 

 

(31,272

)

 

 

22,050

 

Unrealized (gains) losses on derivatives, net

 

 

82,142

 

 

 

(55,280

)

Gains on contingent consideration liabilities

 

 

(9,973

)

 

 

(24,113

)

Settlement of contingent consideration

 

 

(20,000

)

 

 

(65,000

)

Proceeds from the sale of call options

 

 

23,502

 

 

 

 

Gains on sales of assets

 

 

(6,784

)

 

 

(308

)

Transaction costs from sales of assets

 

 

(3,898

)

 

 

 

Earnings from equity affiliate

 

 

(27,602

)

 

 

(34,792

)

Loss on early extinguishment of debt

 

 

13,877

 

 

 

 

Other, net

 

 

2,453

 

 

 

2,687

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

 

(3,412

)

 

 

94,010

 

Accounts payable and accrued liabilities

 

 

(30,841

)

 

 

(49,962

)

Other changes in operating assets and liabilities

 

 

(9,933

)

 

 

(2,020

)

Net cash provided by operating activities

 

 

74,776

 

 

 

115,431

 

Cash flows from investing activities:

 

 

 

 

Acquisition of natural gas properties

 

 

 

 

 

(4,889

)

Capital expenditures

 

 

(52,774

)

 

 

(161,068

)

Proceeds from sales of assets

 

 

133,426

 

 

 

1,576

 

Loan advanced to equity affiliate

 

 

 

 

 

(8,000

)

Loan repayment from equity affiliate

 

 

 

 

 

8,000

 

Other investing activities, net

 

 

(23

)

 

 

8,090

 

Net cash provided by (used in) investing activities

 

 

80,629

 

 

 

(156,291

)

Cash flows from financing activities:

 

 

 

 

Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commissions

 

 

253,800

 

 

 

 

Proceeds from the issuance of common stock

 

 

 

 

 

150,005

 

Proceeds from notes payable from related party

 

 

 

 

 

17,000

 

Payments on notes payable to related party

 

 

(75,000

)

 

 

(17,000

)

Proceeds under RBL Credit Agreement

 

 

520,000

 

 

 

 

Payments on RBL Credit Agreement

 

 

(330,000

)

 

 

 

Payment on term loan agreement

 

 

(456,000

)

 

 

(114,000

)

Payment of debt issuance costs

 

 

(8,054

)

 

 

 

Proceeds from draws on credit facilities

 

 

44,000

 

 

 

258,500

 

Payments on credit facilities

 

 

(171,000

)

 

 

(208,500

)

Payments of deferred offering costs

 

 

(1,369

)

 

 

(2,455

)

Debt extinguishment costs

 

 

(10,213

)

 

 

 

Redemption of common stock issued upon vesting of equity-based compensation and other

 

 

(2,081

)

 

 

(424

)

Net share settlements, equity-based compensation

 

 

(53,239

)

 

 

(2,961

)

Net cash provided by (used in) financing activities

 

 

(289,156

)

 

 

80,165

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

(133,751

)

 

 

39,305

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

165,069

 

 

 

153,128

 

Cash, cash equivalents, and restricted cash, end of period

 

$

31,318

 

 

$

192,433

 

 

Supplementary Non-GAAP Financial Measures

Adjusted Net Income (Loss) and Adjusted EPS

The Company defines Adjusted Net Income (Loss) as net income (loss) before (i) non-cash derivative gains (losses), (ii) earnings or losses from equity affiliate, (iii) gains (losses) on contingent consideration liabilities, (iv) certain equity-based compensation expense, (v) the portion of settlements paid (received) for early-terminated derivative contracts that relate to future periods, (vi) other nonrecurring transactions, and (vii) the tax impact on these adjustments using a 23% statutory rate.

We believe Adjusted Net Income (Loss) and Adjusted EPS are useful performance measures because they allow us to effectively evaluate our operating performance and results of operations from period to period and against our peers, without regard to our financing methods, corporate form, capital structure, or one-time events. We exclude the items listed above from net income (loss) in arriving at Adjusted Net Income (Loss) and Adjusted EPS because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, and the method by which the assets were acquired. Our presentation of Adjusted Net Income (Loss) and Adjusted EPS should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Other companies, including other companies in our industry, may not use Adjusted Net Income (Loss) and Adjusted EPS or may calculate this measure differently than as presented in this release, limiting its usefulness as a comparative measure.

The table below presents a reconciliation of Adjusted Net Income (Loss) to net income, our most directly comparable GAAP financial measure for the periods indicated.

 

Three Months Ended September 30,

 

Nine months ended September 30,

(in thousands, except EPS)

2024

 

2023

 

2024

 

2023

Net income (loss)

$

12,869

 

 

$

18,564

 

 

$

(85,413

)

 

$

79,378

 

Adjustment to net income:

 

 

 

 

 

 

 

Unrealized (gain) loss on derivatives

 

3,042

 

 

 

(9,035

)

 

 

82,142

 

 

 

(55,280

)

(Earnings) losses from equity affiliate

 

(50,562

)

 

 

(49,067

)

 

 

(27,602

)

 

 

(34,792

)

Change in contingent consideration liabilities

 

(3,903

)

 

 

(1,203

)

 

 

(9,973

)

 

 

(24,113

)

Acceleration of equity-based compensation due to IPO

 

10,508

 

 

 

 

 

 

10,508

 

 

 

 

Gain on sales of non-operated interest in proved reserves

 

 

 

 

 

 

 

(5,451

)

 

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

13,877

 

 

 

 

Early settlement of derivative contracts

 

 

 

 

 

 

 

(13,250

)

 

 

(39,124

)

Early settlements of derivative contracts related to the current period

 

 

 

 

20,535

 

 

 

8,350

 

 

 

29,042

 

Total adjustments before taxes

 

(40,915

)

 

 

(38,770

)

 

 

58,601

 

 

 

(124,267

)

Tax effect of adjustments

 

9,410

 

 

 

8,917

 

 

 

(13,478

)

 

 

28,581

 

Total adjustments after taxes

 

(31,505

)

 

 

(29,853

)

 

 

45,123

 

 

 

(95,686

)

 

 

 

 

 

 

 

 

Adjusted net loss

$

(18,636

)

 

$

(11,289

)

 

$

(40,290

)

 

$

(16,308

)

 

 

 

 

 

 

 

 

Adjusted net loss per basic share

$

(0.27

)

 

$

(0.19

)

 

$

(0.60

)

 

$

(0.28

)

Adjusted net loss per diluted share

$

(0.27

)

 

$

(0.19

)

 

$

(0.60

)

 

$

(0.28

)

 

 

 

 

 

 

 

 

Basic weighted-average shares of common stock outstanding

 

68,023

 

 

 

59,021

 

 

 

66,891

 

 

 

58,861

 

Add dilutive effects of TRSUs (1)

 

 

 

 

 

 

 

 

 

 

 

Add dilutive effects of PRSUs (1)

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted-average common shares outstanding

 

68,023

 

 

 

59,021

 

 

 

66,891

 

 

 

58,861

 

_________________________________________________

(1) Net losses are prohibited from including potential common shares in the computation of diluted per share amounts. Therefore, we have utilized the basic shares outstanding to calculate both basic and diluted Adjusted Net Loss per common share.

Adjusted EBITDAX

The Company defines Adjusted EBITDAX as net income (loss) attributable to BKV before (i) non-cash derivative gains (losses), (ii) depreciation, depletion, amortization and accretion, (iii) exploration and impairment expense, (iv) gains (losses) on contingent consideration liabilities, (v) interest expense, (vi) interest expense, related party, (vii) income tax benefit (expense), (viii) equity-based compensation expense, (ix) bargain purchase gains, (x) earnings or losses from equity affiliate, (xi) the portion of settlements paid (received) for early-terminated derivative contracts that relate to future periods and (xii) other nonrecurring transactions.

The Company excludes the items listed above from net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income (loss) determined in accordance with GAAP. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax burden, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDAX. Our presentation of Adjusted EBITDAX should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Other companies, including other companies in our industry, may not use Adjusted EBITDAX or may calculate this measure differently than as presented in this release, limiting its usefulness as a comparative measure.

Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by our management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, rating agencies and others to more effectively evaluate our operating performance and results of operations from period to period and against our peers. We believe Adjusted EBITDAX is a useful performance measure because it allows us to effectively evaluate our operating performance and results of operations from period to period and against our peers, without regard to our financing methods, corporate form or capital structure.

The table below presents a reconciliation of Adjusted EBITDAX to net income, our most directly comparable GAAP financial measure for the periods indicated.

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands)

2024

 

2023

 

2024

 

2023

Net income (loss)

$

12,869

 

 

$

18,564

 

 

$

(85,413

)

 

$

79,378

 

Add back (subtract):

 

 

 

 

 

 

 

Unrealized derivative (gains) losses

 

3,042

 

 

 

(9,035

)

 

 

82,142

 

 

 

(55,280

)

Forward month gas settlement

 

(398

)

 

 

225

 

 

 

(315

)

 

 

(2,713

)

Depreciation, depletion, amortization, and accretion

 

57,461

 

 

 

52,363

 

 

 

169,111

 

 

 

131,389

 

Exploration and impairment expense

 

 

 

 

 

 

 

 

 

 

 

Change in contingent consideration liabilities (earnout adjustment)

 

(3,903

)

 

 

(1,203

)

 

 

(9,973

)

 

 

(24,113

)

Interest expense

 

9,197

 

 

 

20,069

 

 

 

40,443

 

 

 

54,446

 

Interest expense, related party

 

1,329

 

 

 

2,000

 

 

 

5,181

 

 

 

5,083

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

13,877

 

 

 

 

Income tax (benefit) expense

 

11,303

 

 

 

5,156

 

 

 

(30,070

)

 

 

23,041

 

Equity-based compensation expense

 

10,674

 

 

 

7,097

 

 

 

12,819

 

 

 

17,392

 

Gain on sales of non-operated interest in proved reserves

 

 

 

 

 

 

 

(5,451

)

 

 

 

(Earnings) losses from equity affiliate

 

(50,562

)

 

 

(49,067

)

 

 

(27,602

)

 

 

(34,792

)

Early settlement of derivative contracts

 

 

 

 

 

 

 

(13,250

)

 

 

(39,124

)

Early settlements of derivative contracts related to the current period

 

 

 

 

20,535

 

 

 

8,350

 

 

 

29,042

 

Adjusted EBITDAX

$

51,012

 

 

$

66,704

 

 

$

159,849

 

 

$

183,749

 

Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin

We define Adjusted Free Cash Flow as net cash provided by (used in) operating activities, excluding cash paid for contingent consideration and changes in operating assets and liabilities, less total cash paid for capital expenditures (excluding leasehold costs and acquisitions).

Adjusted Free Cash Flow is not a measure of net cash flow provided by or used in operating activities as determined by GAAP. Adjusted Free Cash Flow is a supplemental non-GAAP financial measure that is used by our management and other external users of our financial statements, such as industry analysts, investors, lenders, rating agencies and others to assess our ability to internally fund our capital program, service or incur additional debt and to pay dividends. We believe Adjusted Free Cash Flow is a useful liquidity measure because it allows us and others to compare cash flow provided by operating activities across periods and to assess our ability to internally fund our capital program (including acquisitions), to reduce leverage, fund acquisitions and pay dividends to our stockholders. We define Adjusted Free Cash Flow Margin as the ratio of Adjusted Free Cash Flow for any period to total revenues, excluding derivative gains and losses, for such period. We use this metric to assess our liquidity relative to our revenues. Adjusted Free Cash Flow Margin illustrates the efficiency with which the Company generates Adjusted Free Cash Flow. Adjusted Free Cash Flow should not be considered as an alternative to, or more meaningful than, net income (loss) or net cash provided by (used in) operating activities determined in accordance with GAAP. Other companies, including other companies in our industry, may not use Adjusted Free Cash Flow or may calculate this measure differently than as presented in this release, limiting its usefulness as a comparative measure.

The table below presents our reconciliation of Adjusted Free Cash Flow to net cash provided by operating activities, our most directly comparable GAAP financial measure for the periods indicated.

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands)

2024

 

2023

 

2024

 

2023

Net cash provided by operating activities

$

64,994

 

 

$

34,507

 

 

$

74,776

 

 

$

115,431

 

Cash paid for contingent consideration

 

 

 

 

 

 

 

20,000

 

 

 

65,000

 

Change in operating assets and liabilities

 

(24,209

)

 

 

(10,020

)

 

 

44,186

 

 

 

(42,028

)

Cash paid for capital expenditures (excl. leasehold costs, acquisitions)

 

(21,166

)

 

 

(35,721

)

 

 

(52,774

)

 

 

(161,068

)

Adjusted Free Cash Flow

$

19,619

 

 

$

(11,234

)

 

$

86,188

 

 

$

(22,665

)

Power JV Adjusted EBITDA

We define Power JV Adjusted EBITDA as net income (loss) of BKV-BPP Power LLC (the "Power JV") before (i) unrealized derivative gains/losses, (ii) depreciation and amortization, and (iii) interest expense.

The items listed above are excluded from the Power JV’s net income (loss) in arriving at Power JV Adjusted EBITDA because these amounts can vary substantially from company to company within the power industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Power JV Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) determined in accordance with GAAP. Other companies, including other companies in the power industry, may not use Adjusted EBITDA or may calculate this measure differently than as presented in this release, limiting its usefulness as a comparative measure.

Power JV Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by our management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, rating agencies and others to more effectively evaluate our and the Power JV’s operating performance and results of operations from period to period and against our peers. We believe our investment in the Power JV is a strategic differentiator for BKV’s integrated energy solutions model. Investors in BKV may be interested in the results of the Power JV and the respective impact to BKV’s financial results. We believe Power JV Adjusted EBITDA is a useful performance measure because it allows us to effectively evaluate the Power JV’s operating performance and results of operations from period to period and against peers, without regard to financing methods, corporate form or capital structure.

The table below presents our reconciliation of Power JV Adjusted EBITDA to its net income (loss), the most directly comparable GAAP financial measure for the periods indicated.

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands)

2024

 

2023

 

2024

 

2023

Net income

$

101,124

 

 

$

98,135

 

$

55,204

 

 

$

69,584

Add back:

 

 

 

 

 

 

 

Unrealized derivative (gains) losses

 

(108,858

)

 

 

46,904

 

 

(72,053

)

 

 

66,992

Depreciation and amortization

 

9,487

 

 

 

10,155

 

 

28,439

 

 

 

20,980

Interest expense

 

18,437

 

 

 

18,471

 

 

55,386

 

 

 

31,841

Adjusted EBITDA

$

20,190

 

 

$

173,665

 

$

66,976

 

 

$

189,397

 

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