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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241111200586/en/
Investor Contacts: David Tameron BKV Corporation Vice
President, Strategic Finance and Investor Relations
InvestorRelations@bkvcorp.com Caldwell Bailey ICR, Inc.
BKVIR@ircinc.com
BKV (NYSE:BKV)
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