BKV Corp

Comparison of the Three Months Ended March 31, 2025 and 2024

Operating Revenues and Operating Income

Our operating revenues and other income from operations include the activity from the sale of natural gas, NGLs, and oil, midstream revenues, gains and losses on our derivative contracts, marketing revenues, Section 45Q tax credits, related party revenues, and other income from operations. The following table provides information on our revenues and other operating income for the periods presented:

Natural Gas Revenues

Our natural gas revenues increased by approximately$71.6 million, or 74%, to$168.0 million for the three months ended March 31, 2025, from$96.3 million for the three months ended March 31, 2024. The impact of commodity price increases, excluding the effect of derivative settlements, provided an$80.6 million increase in period-over-period revenues(calculated as the change in the period-to-period average price times current period production volumes). Theincrease was offset by lower production volumes during the three months ended March 31, 2025, primarily from the assets in the Barnett and from the sale of Chaffee and certain non-operated assets held by Chelsea in June 2024, which collectively accounted for an$8.9 million decreasein period-over-period revenues(calculated as the change in period-to-period volumes times the prior period average price).

NGL Revenues

Our NGL revenues increased by approximately$1.3 million, or 3%, to$44.7 million for the three months ended March 31, 2025, from$43.4 million for the three months ended March 31, 2024. The impact of commodity price increases, excluding the effect of derivative settlements, accounted for a$3.7 million increase in period-over-period revenues(calculated as the change in the period-to-period average price times current period production volumes). Theincrease was offset by lower production volumes during the three months ended March 31, 2025, which accounted for a$2.5 million decreasein period-over-period revenues(calculated as the change in period-to-period volumes times the prior period average price).

Oil Revenues

Our oil revenues increased by approximately$1.5 million, or 79%, to$3.5 million for the three months ended March 31, 2025, from$1.9 million for the three months ended March 31, 2024. Theincrease was primarily due tohigher production volumes during thethree months ended March 31, 2025, which accounted for a $1.7 million increase in period-over-period revenues(calculated as the change in period-to-period volumes times the prior period average price). Theincrease was offset bythe impactof commodity price decreases, excluding the effect of derivative settlements, which accounted for a $0.2 million decrease in period-over-period revenues(calculated as the change in the period-to-period average price times current period production volumes).

Midstream Revenues

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Our midstream revenues decreased by approximately $1.4 million, or 33%, to $2.8 million for thethree months ended March 31, 2025, from $4.1 million for thethree months ended March 31, 2024. This decrease was primarily due to the divestiture of Chaffee of $1.2 million as we sold our Repsol Midstream Interest in connection with this sale. The remainder of the decrease was due to changes in deal structures that reduced midstream transportation revenue while increasing third party gas sales.

Derivative Losses, Net

For the three months ended March 31, 2025, we had net realized and unrealized losses on derivative contracts of$152.2 million compared to net realized and unrealized losses on derivative contracts of$3.7 million for the three months ended March 31, 2024. Theincreased losses for thethree months ended March 31, 2025 were from our open derivative positions, which were in more of an unrealized loss position of $134.0 million compared to thethree months ended March 31, 2024 of$40.1 million. The increased losses on our derivative contracts were also due to realized losses of $18.2 million compared to realized gains of$36.5 million due to higher natural gas prices during this period compared to the same period in the prior year.

Marketing Revenues

Our marketing revenues increased by approximately $1.6 million, or 32% to $6.5 million for thethree months ended March 31, 2025 from $4.9 million for thethree months ended March 31, 2024. Our marketing revenues are derived under our marketing agreement with a third party pursuant to which we receive a fixed percentage of all net income realized in the resale of our and other producers’ hydrocarbons. Theincrease in marketing revenues during thethree months ended March 31, 2025 was primarily due to a higher pricing environment compared to the same period in 2024.

Section 45Q Tax Credits

We generated $3.3 million in Section 45Q tax credits during the three months ended March 31, 2025 related to CO 2 waste sequestration activities under our Barnett Zero Project compared to $2.3 million during the three months ended March 31, 2024. The increase period over period was due to more CO 2 waste sequestered in 2025 compared to the prior period.

Related Party Revenues

Our related party revenues were $0.4 million for the three months ended March 31, 2025, compared to $1.1 million for the three months ended March 31, 2024. The decrease in related party revenues was due to a $0.7 million decrease in operating fee income with BKV-BPP Power, attributable to lower contracted rates.

Other Revenues

Other revenues includes the gain (loss) on the sale of assets and the sale of third-party natural gas. Other revenues were $1.9 million for the three months ended March 31, 2025 compared to $1.4 million for the three months ended March 31, 2024. The period-over-period increase was primarily due to an increase in third party gas sales of $2.5 million and an increase in the gain on sale of assets of $0.4 million, offset by the impairment on our asset held for sale of $2.4 million.

Operating Expenses

Our operating expenses reflect costs incurred in the development, production, and sale of natural gas, NGLs, and oil. The following table provides information on our operating expenses:

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Lease Operating and Workover

The following table summarizes our components of lease operating expenses for the periods presented:

Lease operating and workover expenses were $35.1 million, or $0.51 per Mcfe, for thethree months ended March 31, 2025, which was an increase of approximately $0.6 million from $34.5 million, or $0.46 per Mcfe, for thethree months ended March 31, 2024. Theincrease in lease operating expenses during thethree months ended March 31, 2025 compared to the same period in 2024 was primarily driven by a credit received of $1.5 million for a water sharing agreement during the three months ended March 31, 2024. The increase was also due to increases in repairs and maintenance and timing of fees of $1.0 million and vehicle expense of $0.4 million during the three months ended March 31, 2025. This was offset by $1.4 million of less workover and operating activity due to winter storms and $1.0 million decreases in compression and water expenses due to well shut-ins during the three months ended March 31, 2025.

Taxes Other Than Income

Taxes other than income were $10.2 million, or $0.15 per Mcfe, for the three months ended March 31, 2025, which was a decrease of approximately $1.1 million, or 10%, from $11.4 million, or $0.15 per Mcfe, for the three months ended March 31, 2024. The decrease in taxes other than income during the three months ended March 31, 2025 compared to 2024 was due to decreases in ad valorem and property taxes associated with our operations in the Barnett and NEPA of $4.9 million and $0.2 million, respectively. This was offset by production taxes of $4.0 million in the Barnett. Certain ad valorem and production taxes are not applicable to our NEPA properties.

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Gathering and Transportation

Gathering and transportation expenses were$55.8 million, or$0.81 per Mcfe, for thethree months ended March 31, 2025, which wasa decrease of approximately$3.3 million, or 6%, from$59.1 million, or$0.79 per Mcfe, for thethree months ended March 31, 2024. This decrease was driven by decreased production in the Barnett of $3.2 million and NGL rate decreases of $0.4 million. This was offset by new contracts we entered into during 2024 where we started outsourcing gathering costs with our midstream business of $0.3 million.

Depreciation, Depletion, Amortization, and Accretion

Depreciation, depletion, amortization, and accretion was $40.0 million, or $0.58 per Mcfe, for thethree months ended March 31, 2025, which was a decrease of approximately $12.2 million, or 23%, from $52.2 million, or $0.70 per Mcfe, for thethree months ended March 31, 2024. The decrease in depreciation, depletion, amortization, and accretion during thethree months ended March 31, 2025 compared to thethree months ended March 31, 2024 was primarily due to a depletion rate adjustment in 2025.

General and Administrative

General and administrative expenses were $25.3 million, or $0.37 per Mcfe, for the three months ended March 31, 2025, which was an increase of approximately $4.6 million, or 22%, from $20.6 million, or $0.28 per Mcfe, for the three months ended March 31, 2024. The increase in general and administrative expenses during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was due to increases from Company-wide growth initiatives of $2.6 million in employee bonuses, contract labor, employee-based compensation, and employee expenses, and $2.0 million in consulting and information technology-related expenses.

Other Operating Expenses

Other operating expenses were $6.2 million, or $0.09 per Mcfe, for thethree months ended March 31, 2025, which was a decrease of approximately $2.3 million, or 27%, from $8.6 million, or $0.11 per Mcfe, for thethree months ended March 31, 2024. The decrease in other operating expenses during thethree months ended March 31, 2025 compared to the same period in 2024 was primarily due to $5.0 million of accrued waste emissions costs established by the Inflation Reduction Act recognized during the three months ended March 31, 2024. This was offset by an increase of $1.6 million in third-party natural gas purchases due to increased volumes and increased natural gas prices during the three months ended March 31, 2025 compared to the same period in 2024.

Other Income (Expense)

Gains on contingent consideration liabilities. For the three months ended March 31, 2024, we recognized a gain on contingent consideration liabilities accruing as an earnout obligation under the purchase agreements executed in connection with the Devon Barnett Acquisition and the Exxon Barnett Acquisition. The gain on contingent consideration liabilities was$6.6 million for the three months ended March 31, 2024, and consisted of gains of$4.6 million and$2.0 million from the Devon Barnett Acquisition and the Exxon Barnett Acquisition, respectively. The contingent considerations under these purchase agreements expired in 2024.

Losses from equity affiliate. Losses from our equity affiliate were $9.6 million for thethree months ended March 31, 2025, which was a change of $1.9 million, from $7.7 million compared to thesame period in 2024. Losses from our equity affiliate are related to our investment in, and our proportionate share in the income or losses of the BKV-BPP Power Joint Venture.

Interest expense. Interest expense was$5.1 million for thethree months ended March 31, 2025, which was a decrease of$11.0 million, from$16.1 million for the three months ended March 31, 2024. The decrease in interest expense during thethree months ended March 31, 2025 was primarily due to lower interest rates incurred during thethree months ended March 31, 2025 on our RBL Credit Facility, which we entered into on June 11, 2024, compared to the interest rates on our Term Loan Credit Agreement and Revolving Credit Facilities during thethree months ended March 31, 2024.

Interest expense, related party. Interest expense from our related party borrowings with BNAC was$2.0 million for thethree months ended March 31, 2024, whichwas paid down in June 2024.

Interest income. Interest income was$0.1 million for the three months ended March 31, 2025, which was a decrease of $1.5 million, compared to $1.6 million for the same period in 2024. The decrease was primarily due to the cessation of interest earned on restricted cash following the repayment of the Term Loan Agreement in June 2024, which had previously funded the debt service reserve account.

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Income tax benefit. For the three months ended March 31, 2025, we had an income tax benefit of $29.2 million, which was an increase of $16.2 million, from a $13.0 million in income tax benefit for the three months ended March 31, 2024. During the three months ended March 31, 2025, the increase in income tax benefit was due to higher net losses and excess tax benefits relating to the vesting of restricted shares.

Liquidity and Capital Resources

Capital Commitments

Our primary needs for cash are to fund our upstream development, midstream, power, and CCUS activities, fund operations and capital expenditures, acquisitions, and asset retirement obligations, cover any debt interest or minimum volume commitment obligations, pay down debt, and return capital to stockholders. Our primary use of cash during the three months ended March 31, 2025 and 2024 was to fund the development of our natural gas properties.

During thethree months ended March 31, 2025 and 2024, cash paid for capital expenditures was $57.4 million and $19.9 million, respectively. Our current estimated budget for accrued capital expenditures in 2025 is approximately $320 million to $380 million. Capital expenditures for our operated properties are largely discretionary and within our control. We could choose to defer a portion of these planned capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated prices for natural gas and NGLs, the availability of equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs, and the level of participation by other interest owners. We will continue to monitor commodity prices and overall market conditions and can adjust our rig cadence up or down in response to changes in commodity prices and overall market conditions.

Capital Resources

Historically, our primary sources of capital and liquidity have consisted of internally generated cash flows from operations, together with loans and capital contributions from our majority stockholder, BNAC. We also enter into financial instruments to reduce the impact of commodity price volatility and provide a level of certainty and stability around cash flows. We currently believe that our cash flows from operations, cash on hand, borrowings under our RBL Credit Agreement, and our commodity hedges in place will provide sufficient liquidity to fund our operations and our capital expenditures into 2025, excluding our CCUS business. We expect to fund up to 50% of our CCUS business from a variety of external sources, which may include joint ventures, project-based equity partnerships, debt financing, and federal grants with the remaining capital needs being funded with cash flows from operations.

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

Cash flows provided by operating activities. Net cash provided by operating activities was $22.6 million for the three months ended March 31, 2025, compared to $19.3 million for thethree months ended March 31, 2024. Net cash provided by operating activities increased during the three months ended March 31, 2025 compared to thethree months ended March 31, 2024 due to a $24.7 million increase in income from operations (excluding net unrealized gains (losses), depreciation, depletion, amortization, and accretion, equity-based compensation, and impairment of asset held for sale), resulting from higher natural gas prices compared to 2024, and a $20.4 million increase in working capital. These increases were offset by cash received in January 2024 for the sale of call options of $23.5 million, cash paid in February 2025 for the purchase of put options of $16.2 million, a decrease in interest income of $1.5 million, and a $0.5 million increase in cash paid for interest.

Operating cash flow fluctuations are substantially driven by realized commodity prices, production volumes, and operating expenses. Prices for natural gas and NGLs have historically been volatile, primarily as a result of supply and demand, pipeline infrastructure constraints, basis differentials, inventory storage levels, and seasonal influences. We are unable to predict future commodity prices and therefore cannot provide assurance about future levels of cash provided by operating activities.

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Cash flows used in investing activities. Net cash used in investing activities was $56.0 million for the three months ended March 31, 2025, compared to net cash used in investing activities of $19.9 million for the three months ended March 31, 2024. The change was due to the increase of $39.7 million of capital expenditures (excluding CCUS activities) for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This was offset by the decrease of $2.2 million of expenditures on CCUS activities over the same period and additional cash proceeds on the sale of assets of $1.3 million.

The following table presents our capital expenditures (excluding leasehold costs and acquisitions) on an accrual basis for thethree months ended March 31, 2025 and 2024 and reconciles to cash flows used for capital expenditures in the condensed consolidated statements of cash flows.

Cash flows provided by (used in) financing activities. Net cash provided by financing activities was$33.8 million for thethree months ended March 31, 2025, which consisted of net borrowings on debt of $35.0 million, and was offset by payments of $1.2 million for taxes related to net share settlement of restricted stock units. For thethree months ended March 31, 2024, net cash used infinancing activities was$1.6 million, which was due to net payments on debt of $1.0 million and payments of deferred offering costs of $0.6 million.

Working Capital

As of March 31, 2025, we had cash and cash equivalents of$15.3 million, compared to $14.9 million of cash and cash equivalents as of December 31, 2024. Our net working capital deficit was $148.5 million as of March 31, 2025, compared to adeficit of $71.6 million as of December 31, 2024.

Our working capital fluctuates based on the timing of cash collections on accounts receivable and payments on accounts payable. Our collection of receivables has historically been timely, and losses associated with uncollectible receivables have historically not been significant. Furthermore, we expect that our pace of development, production volumes, commodity prices, and differentials to NYMEX pricing for our natural gas and oil production will be the largest variables impacting our working capital.

RBL Credit Agreement

On June 11, 2024, BKV Corporation, as guarantor, and BKV Upstream Midstream, as borrower, entered into the RBL Credit Agreement with Citibank, N.A., as the administrative agent, and the financial institutions party thereto. The RBL Credit Agreement includes a maximum credit commitment of $1.5 billion. As of March 31, 2025, the RBL Credit Agreement had a borrowing base of $750.0 million, an elected commitment of $600.0 million, and the ability to issue up to $40.0 million in letters of credit. The loans may be borrowed, repaid, and reborrowed during the term of the RBL Credit Agreement. The RBL Credit Agreement will mature on June 12, 2028. The obligations under the RBL Credit Agreement are secured and guaranteed on a secured basis by BKV Corporation, BKV Upstream Midstream, and all of BKV Upstream Midstream’s current and future material restricted subsidiaries. Loans under the RBL Credit Agreement bear interest at one, three, or six-month term SOFR or ABR, 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. We are 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. On May 6, 2025, with the unanimous consent of our credit facility lenders, we amended the RBL Credit Agreement to, among other things, increase the borrowing base by $100.0 million and the elected commitment by $65.0 million. This amendment constituted the semiannual borrowing base redetermination. As of May 9, 2025, $230.0 million of revolving borrowings and $14.1 million of letters of credit were outstanding under the RBL Credit Agreement, leaving $420.9 million of available capacity thereunder for future borrowings and letters of credit.

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 their subsidiaries; (v) make investments; (vi) pay dividends or make other restricted payments; (vii) change their lines of business; (viii) enter into certain hedge

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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 their proved oil and gas properties.

Beginning with the fiscal quarter ending September 30, 2024, the RBL Credit Agreement requires BKV Upstream Midstream and its restricted subsidiaries to always hedge not less than 50% of projected production from their 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 us to cure certain breaches of the minimum current ratio covenant or the maximum net leverage ratio covenant.

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 the assets of BKV Corporation, BKV Upstream Midstream and its restricted subsidiaries that are guarantors, and upon an event of default the agent under the RBL Credit Agreement could commence foreclosure proceedings.

BKV-BPP Power and BKV-BPP Cotton Cove Joint Ventures

Under the terms of the BKV-BPP Power LLC Agreement and BKV-BPP Cotton Cove LLC Agreement, we do not have the ability to unilaterally cause BKV-BPP Power or BKV-BPP Cotton Cove to make distributions. During the three months ended March 31, 2025 and 2024, no distributions were made by BKV-BPP Power or BKV-BPP Cotton Cove. In addition, we may be required to make additional capital contributions to one or both joint ventures to fund items approved in their respective annual budgets or other matters approved by their respective boards. Such additional capital contributions, which are not subject to any limit on the potential amount required, would reduce the amount of cash otherwise available to us. However, any additional capital contributionsto BKV-BPP Power must be approved by a majority of BKV-BPP Power's ten member board of managers, five of whom are appointed by us and five of whom are appointed by BPPUS. Similarly, any additional capital contributions to BKV-BPP Cotton Cove must receive the unanimous approval of BKV-BPP Cotton Cove, LLC's six member board of managers, four of whom are appointed by us and two of whom are appointed by BPPUS.

Off-Balance Sheet Arrangements

We may enter into off-balance sheet arrangements and transactions that could give rise to material off-balance sheet arrangements. As of March 31, 2025, our material off-balance sheet arrangements and transactions included volume commitments of $304.7 million and letters of credit of $14.1 million against the RBL Credit Agreement. For further information regarding these arrangements, see “Note 10 - Commitments and Contingencies” to our condensed consolidated financial statements and under “—Loan Agreements and Credit Facilities — RBL Credit Agreement.”

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our historical consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, and related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For more information, see Note 1 - Business and Basis of Presentation to our condensed consolidated financial statements. As of March 31, 2025, there have been no material changes to our critical accounting policies and estimates as described in our 2024 Annual Report on Form 10-K for the year ended December 31, 2024.

Tariffs and Trading Relationships

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In April 2025, the U.S. government announced a baseline tariff of 10% on products imported from all countries and an additional individualized reciprocal tariff on the countries with which the United States has the largest trade deficits, including China. Increased tariffs by the United States have led and may continue to lead to the imposition of retaliatory tariffs by foreign jurisdictions. Additionally, the U.S. government has announced and rescinded multiple tariffs on several foreign jurisdictions, which has increased uncertainty regarding the ultimate effect of the tariffs on economic conditions. Current uncertainties about tariffs and their effects on trading relationships may impact the demand for, and price of natural gas, NGLs, and oil, increase the costs of goods and services or the availability of raw materials that we rely on to operate our business or impact interest rates. Although we are continuing to monitor the economic effects of such announcements, as well as opportunities to mitigate their related impacts, costs and other effects associated with the tariffs remain uncertain and could adversely impact our financial position, results of operations, and liquidity.

Emerging Growth Company Status

We are an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, including as modified by the Jumpstart Our Business Startups of 2012 (the “JOBS Act”). As a result, for so long as we qualify as an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies. We have elected to take advantage of certain of the reduced disclosure obligations in this Quarterly Report on Form 10-Q and may elect to take advantage of other reduced reporting requirements in our future filings with the SEC. As a result, the information that we provide to our stockholders may be different from other public reporting companies.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. However, we have irrevocably elected not to avail ourselves of this exemption. Rather, we will adopt new or revised accounting standards on the relevant dates in which adoption of such standards is required for other public companies.

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of our IPO. Such fifth anniversary will occur in 2029. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our gross revenues for any fiscal year equal or exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.