BKV Corp

Notes to the Condensed Consolidated Financial Statements

Note 1 - Business and Basis of Presentation

General

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

The majority shareholder of BKV Corp is BNAC. BKV Corp's ultimate parent company is Banpu Public Company Limited, a public company listed in the Stock Exchange of Thailand. As of May 9, 2025, the date these condensed consolidated financial statements were available to be issued, BNAC owned 75.4% of BKV Corp's shares. The remaining 24.6% of shares of common stock of BKV Corp were owned by non-controlling members of management, members of the board of directors, and employee and non-employee shareholders.

Basis of Presentation of the Unaudited Condensed Consolidated Financial Statements

These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts for BKV Corp's wholly-owned subsidiaries. The condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s 2024 Annual Report on Form 10-K, as certain disclosures and information required by GAAP for complete consolidated financial statements have been condensed or omitted. The condensed consolidated financial statements, in the opinion of management, reflect all adjustments, which include normal and recurring adjustments, necessary to fairly state the Company’s financial position, results of operations, and cash flows for the periods presented herein. The interim results are not necessarily indicative of results to be expected for the year ending December 31, 2025 or for any other future annual or interim period. The December 31, 2024 condensed consolidated balance sheet was derived from the Company's 2024 Annual Report on Form 10-K, but does not include all disclosures required by GAAP for annual financial statements.

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

Business Segment Information

In accordance with Accounting Standards Codification (“ASC”) 280 -Segment Reporting, the Company is organized, managed, and identified asone operating segment andone reportable segment as the Company does not distinguish between business lines for the purpose of making decisions about resource allocation and performance management. The Company’s Chief Executive Officer, identified as the Chief Operating Decision Maker (“CODM”), evaluates financial performance on a consolidated basis, primarily using net income from the condensed consolidated statements of operations. Additionally, the CODM reviews reported consolidated revenues, significant segment expenses, and other segment items as presented on the condensed consolidated statements of operations on a monthly basis to allocate resources, manage liquidity, and assess overall Company performance relative to budget. The CODM also monitors total assets and capital expenditures, on a consolidated basis, as presented on the condensed consolidated balance sheets and condensed consolidated statements of cash flows, respectively.

Revision of Previously Issued Financial Statements

In connection with the preparation of the consolidated financial statements for the year ended December 31, 2024, the Company identified an error in its previously issued consolidated financial statements that originated prior to January 1, 2021. Specifically, in connection with the corporate restructuring of BKV Corp in 2020, the tax basis of certain assets was calculated in error resulting in an understatement of deferred tax liabilities, net of $7.4 million, an understatement of tax expense, and an overstatement of retained earnings.

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Management assessed the materiality of this error and concluded it was not material to the Company's previously issued financial statements. Management has revised its previously issued consolidated financial statements to correct the errors as follows (in thousands):

Reclassification

Certain prior period amounts have been reclassified in order to conform to the current period presentation. These reclassifications had no impact on previously reported balance sheets, net loss, net cash flows, or stockholders' equity.

Initial Public Offering

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

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

Liquidity

As of March 31, 2025, the Company held $15.3 million of cash and cash equivalents. The Company’s working capital deficit as of March 31, 2025 was $148.5 million, and for the three months ended March 31, 2025, cash flows provided by operating activities was $22.6 million. The Company intends to make the payments related to its debt and investments in capital expenditures with cash flows from operations. During the three months ended March 31, 2025, the Company purchased put options with several counterparties and paid a premium of $16.2 million. For further discussion on derivative transactions, see Note 5 - Derivative Instruments.

Significant Judgments and Accounting Estimates

The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. There have been no significant changes to the Company's accounting estimates from those disclosed in the Company's 2024 Annual Report on Form 10-K.

Significant Accounting Policies

The Company's significant accounting policies are described in the notes to the consolidated financial statements for the year ended December 31, 2024, which are disclosed in the 2024 Annual Report on Form 10-K. There have been no significant changes in accounting policies during the three months ended March 31, 2025.

Common Shares Issued and Outstanding

As of March 31, 2025 and December 31, 2024, the Company had common shares issued and outstanding of 84,708,373 and 84,600,301, respectively.

Accounting Pronouncements Not Yet Adopted

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In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Disaggregation of Income Statement Expenses. This standard requires that entities (i) disclose amounts of purchases of inventory, employee compensation, and depreciation, depletion, and amortization, including those recognized as part of oil and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption, (ii) include certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements, (iii) disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and (iv) disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. This standard is effective January 1, 2027 with early adoption permitted. Management is currently evaluating the impact this standard will have on the Company's disclosures.

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which requires entities to disclose the title of the chief operating decision maker and, on an interim and annual basis, significant segment expenses and the composition of other segment items for each segment’s reported profit. The standard also permits disclosure of additional measures of segment profit. BKV adopted this guidance effective January 1, 2024 and currently identifiesone operating segment andone reportable segment.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires public entities to disclose more consistent and detailed categories in their statutory to effective income tax rate reconciliations and further disaggregate income taxes paid by jurisdiction. For each annual period presented, the new standard requires disclosure of the year-to-date amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign. It also requires additional disaggregated information on income taxes paid (net of refunds received) to an individual jurisdiction equal to or greater than 5% of total income taxes paid (net of refunds received). This ASU is effective for the Company prospectively to all annual periods beginning after December 15, 2024, and interim reporting periods beginning after December 15, 2025.

Note 2 - Debt

RBL Credit Agreement

On June 11, 2024, the Company and BKV Upstream Midstream entered into the RBL Credit Agreement with BKV Upstream Midstream as the borrower and BKV Corp as the guarantor on the RBL Credit Agreement. The RBL Credit Agreement includes a maximum credit commitment of $1.5 billion. As of 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. As of March 31, 2025 and December 31, 2024, the Company's reserve-based lending agreement had outstanding balances of $200.0 million and $165.0 million, respectively. On May 6, 2025, with the unanimous consent of the credit facility lenders, the Company and BKV Upstream Midstream 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 loans may be borrowed, repaid, and reborrowed during the term of the RBL Credit Agreement. The RBL Credit Agreement matures on June 12, 2028. The obligations under the RBL Credit Agreement are secured and guaranteed on a secured basis by all of BKV Upstream Midstream's current and future material subsidiaries. Loans under the RBL Credit Agreement bear interest at one, three, or six-month term SOFR or an 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. BKV Upstream Midstream is obligated to pay certain fees to the lenders and administrative agent under the RBL Credit Agreement, including commitment fees on the average daily amount of the undrawn portion of the commitments. During the three months ended March 31, 2025, BKV Upstream Midstream recognized $0.5 million of commitment fees, which is included in interest expense on the condensed consolidated statements of operations.

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

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

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

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

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

The RBL Credit Agreement includes customary equity cure rights that will enable BKV Upstream Midstream to cure certain breaches of the minimum current ratio covenant or the maximum net leverage ratio covenant. As of March 31, 2025, BKV Upstream Midstream was in compliance with such covenants in the RBL Credit Agreement.

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

Upon consummation of the RBL Credit Agreement, BKV Upstream Midstream paid financing costs of $8.1 million, which have been deferred and capitalized as debt issuance costs and included within other assets on the condensed consolidated balance sheets. The debt issuance costs are amortized over the life of the RBL Credit Agreement. As of March 31, 2025 and December 31, 2024, $6.4 million and $6.9 million, respectively, of unamortized debt issuance costs remained outstanding. As of March 31, 2025 and December 31, 2024, the effective interest rate on the RBL Credit Agreement was 7.40% and 7.50%, respectively, and the outstanding letters of credit were $14.1 million for both periods.

Note 3 - Natural Gas Properties & Other Property and Equipment

As of March 31, 2025 and December 31, 2024, accumulated depreciation, depletion, and amortization for developed natural gas properties was $728.8 million and $697.0 million, respectively. For the three months ended March 31, 2025 and 2024, depreciation, depletion, and amortization expense for developed natural gas properties was $31.8 million and $45.1 million, respectively.

As of March 31, 2025 and December 31, 2024, accumulated depreciation for midstream assets was $18.9 million and $17.3 million, respectively. For the three months ended March 31, 2025 and 2024, depreciation expense on midstream assets was $1.6 million and $1.9 million, respectively.

Other property and equipment consisted of the following:

For the three months ended March 31, 2025 and 2024, depreciation expense for other property and equipment was $1.7 million and $1.4 million, respectively. During the three months ended March 31, 2025, the Company received proceeds on the sale of other properties of $1.1 million, and recognized a gain on sale of these properties of $1.1 million, which is included in other revenues in the condensed consolidated statements of operations.

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Asset Held for Sale

The Company classifies assets as “held for sale” when, among other factors, management approves and commits to sell the assets with the intent to complete the sale within one year. The net assets held for sale are then recorded at the lower of the current value and the fair market value, less costs to sell, if any.

As of March 31, 2025, the Company approved the plan to sell its field office in Bridgeport, Texas. The Company intends to complete the sale of this field office within twelve months, and has classified this asset as held for sale, which is presented separately on the condensed consolidated balance sheets. The Company recognized an impairment on the field office of $2.4 million using an estimated selling price of $5.5 million. The impairment is netted within other revenues on the condensed consolidated statements of operations. See below for the major class of assets held for the sale for the Bridgeport field office:

Note 4 - Fair Value Measurements

As the Company uses the market approach to determine the fair value of its derivative instruments, these fair values are also compared to the values given by counterparties for reasonableness. Since natural gas and NGL swaps do not include optionality and therefore generally have no unobservable inputs, they are classified as Level 2. The Company factors its own non-performance risk into the valuation of derivatives using current published credit default swap rates. As of March 31, 2025 and December 31, 2024, the impact of the non-performance risk adjustment to the Company's fair value of commodity derivative liabilities was $8.9 million and $6.6 million, respectively.

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

The contingent consideration was generated from the Devon Barnett Acquisition. As of December 31, 2024, the contingent consideration was included in current liabilities in the condensed consolidated balance sheets as a payable as the final payout of$20.0 million was made on January 8, 2025. The Devon Barnett Acquisition and the Exxon Barnett Acquisition contingencies are described further in Note 10 - Commitments and Contingencies. The Devon Barnett Acquisition was accounted for as an asset

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acquisition with the contingent consideration meeting the criteria of a derivative in accordance with ASC 815 -Derivatives and Hedging. See Note 5 - Derivative Instrumentsfor further discussion.

The minority ownership puttable shares from the 2021 Plan (as defined in Note 8 - Stockholders' Equity) were recorded at fair value upon initial recognition in mezzanine equity, and its common stock was valued using both observable (Level 2) and unobservable (Level 3) inputs. Subsequent to the Company's IPO, the minority ownership puttable shares were converted to common stock. The minority ownership puttable shares are further described in Note 8 - Stockholders' Equity.

Equity-based compensation from the 2021 Plan was recorded at fair market value on the grant date. The underlying market condition was valued using the application of Monte Carlo simulations using both observable (Level 2) and unobservable (Level 3) inputs. Prior to the Company's IPO, the remaining components of the awards were valued based on the fair market value of the common stock of the Company, which is valued consistent with valuation methodologies described for the minority ownership puttable shares. Equity-based compensation is further described in Note 8 - Stockholders' Equity.

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

Note 5 - Derivative Instruments

The Company may utilize derivative contracts in connection with its natural gas and NGL operations to provide an economic hedge of the Company’s exposure to commodity price risk associated with anticipated future natural gas and NGL production. The Company also determined that the contingent consideration generated from the Devon Barnett Acquisition met the definition of a derivative in accordance with ASC 815 -Derivative and Hedging, and the fair value of the contingent consideration was $20.0 million as of December 31, 2024, and is included in contingent consideration payable in the condensed consolidated balance sheets. The change in the fair value of this contingent consideration was a gain of $4.6 million for three months ended March 31, 2024, and is included in gains on contingent consideration liabilities on the condensed consolidated statements of operations. See Note 10 - Commitments and Contingencies for further discussion.

The derivative contracts outstanding as of March 31, 2025 consisted of commodity swaps, basis swaps, put and call options, and producer collar agreements, subject to master netting agreements with each individual counterparty. The following table presents gross commodity derivative balances prior to applying netting adjustments recorded in the condensed consolidated balance sheets:

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Collar, Commodity Swap, and Basis Swap Contracts

A commodity collar provides for a price floor and a price ceiling. The floating price for the collar contract is traded for a fixed price when the floating price is not between the floor and ceiling. If the floating price is between these contracted prices, no trade occurs. A commodity swap agreement is an agreement whereby a floating price based on the underlying commodity is traded for a fixed price over a specified period. Basis swaps provide a guaranteed price differential for natural gas from two different specified delivery points over a specified period. The fair value of open collar, commodity swap, and basis swap contracts reported in the condensed consolidated balance sheets may differ from that which would be realized in the event the Company terminated its position in the respective contract.

Derivative Contracts

The following tables set forth the derivative losses, net on the condensed consolidated statements of operations:

Settled derivative gains, net for the three months ended March 31, 2024 includes gains of $13.3 million related to the termination of certain natural gas commodity derivative swap contracts prior to their contractual settlement dates. $8.4 million of such gains is attributable to early-terminated natural gas commodity derivative swap contracts covering production during the three months ended March 31, 2024.

During the first quarter in 2024, the Company entered into an agreement to sell a call option and subsequently received a net premium of $23.5 million for contracts that settle in 2026 and 2027. The call option has an established ceiling price of $5.00 per MMBtu. If at the time of settlement the contracted settlement price exceeds the ceiling price, the Company pays the counterparty an amount equal to the difference between the contracted settlement price and the ceiling price multiplied by the contract volumes. The premium received was recorded as a liability and is subsequently adjusted to the current fair value of the option written.

During the first quarter in 2025, the Company entered into agreements to buy put options and subsequently paid a net premium of $16.2 million for contracts that settle in 2026 and 2027. The put options have an established floor of $3.00 per MMBtu. If at the time of settlement the contracted settlement price falls below the floor, the counterparties pay the Company an amount equal to the difference between the contracted settlement price and the floor multiplied by the contract volumes.

Volume of Derivative Activities

As of March 31, 2025, the Company’s derivative activities based on volume and contract prices, categorized by primary underlying risk and related commodity, by year, were as follows:

The following table represents natural gas commodity derivatives indexed to NYMEX Henry Hub pricing:

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The following table represents natural gas basis derivatives based on the applicable basis reference price listed below:

The following table represents natural gas liquids commodity derivatives for contracts, by contract type, expiring through December 31, 2026 based on the applicable index listed below:

Note 6 - Revenue from Contracts with Customers

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All of the Company's revenues are generated in the states of Pennsylvania and Texas. Revenues consist of the following:

Accounts receivable and revenue from contracts with customers

As of March 31, 2025 and December 31, 2024, the Company’s receivables from contracts with customers were $56.6 million and $49.8 million, respectively. Also, as of March 31, 2025 and December 31, 2024, one purchaser accounted for more than 10% of accounts receivables, and for the three months ended March 31, 2025 and 2024, that purchaser’s revenues were $166.5 million and $92.3 million, respectively. Another purchaser’s revenues, that also accounted for more than 10% of the Company’s revenues during the three months ended March 31, 2025 and 2024 amounted to $40.8 million and $39.1 million, respectively. The Company does not believe that the loss of these customers would have a material adverse effect on the condensed consolidated financial statements because alternative customers are readily available.

Note 7 - Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities included in current liabilities consist of the following:

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Note 8 - Stockholders' Equity

Equity-Based Compensation

2024 Equity and Incentive Compensation Plan

The Company's 2024 Equity and Incentive Compensation Plan (the “2024 Plan”) became effective immediately prior to the consummation of the IPO. The 2024 Plan permits the grant of awards to the non-employee directors, officers, and other employees of BKV Corp and its controlled subsidiaries in order to provide incentives and rewards for service and/or performance. The Company may grant stock options, appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, cash incentive awards, and certain other awards based on or related to shares of the Company's common stock. Under the 2024 Plan, the Company can issue up to 5,000,000 shares of its common stock, which are subject to adjustment to reflect any extraordinary cash dividend, stock dividend, split, or combination of the Company's common stock. The aggregate number of shares of the Company's common stock available for award under the 2024 Plan will be reduced byone share of the Company's common stock for every one share of its common stock subject to an award granted under the 2024 Plan. Each grant of an award under the 2024 Plan will be evidenced by an award agreement that includes terms and provisions, determined by the Company's Compensation Committee (or other committee of the board of directors designated by the board to administer the 2024 Plan), which outlines the number of shares of common stock, earning or vesting terms, and any other terms consistent with the 2024 Plan.

Any shares of common stock awarded under the 2024 Plan that have been canceled, forfeited, expired, settled for cash shares, or is unearned (in whole or part) will be added back to the aggregate number of shares of common stock available under the 2024 Plan, with the exception of the following: (i) shares of common stock withheld by the Company in payment of the exercise price of a stock option; (ii) shares of common stock tendered or otherwise used in payment of the exercise price of a stock option; (iii) shares of common stock withheld by the Company or tendered or otherwise used to satisfy a tax withholding obligation; (iv) shares of common stock subject to share-settled appreciation rights that are not actually issued in connection with the settlement of such appreciation right; and (v) shares of common stock reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of stock options. As of March 31, 2025,2,873,158 shares were available for future grants under the 2024 Plan.

Performance-Based Restricted Stock Units

During the three months ended March 31, 2025, the Company granted 571,471 performance-based restricted stock units (“PRSUs”) under the 2024 Plan. These PRSUs cliff vest on December 31, 2026 and are subject to a performance period beginning January 1, 2024 and ending on December 31, 2026 (the “2024 PRSU Performance Period”). The table below summarizes the

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PRSU activity for the three months ended March 31, 2025:

These PRSUs are eligible to be earned based on three performance conditions: (i) annualized Total Shareholder Return (“aTSR”) of the Company's common stock during the 2024 PRSU Performance Period, weighted at 30%, (ii) relative Total Shareholder Return (“rTSR”) of the common stock of the Company's benchmark group during the 2024 PRSU Performance Period, weighted at 30%, and (iii) Return on Capital Employed (“ROCE”) based on the average annual performance over the 2024 PRSU Performance Period, weighted at 40%.

The aTSR and rTSR components of the awards are market-based conditions valued using the Monte-Carlo Simulation pricing model, which calculates multiple potential outcomes and establishes grant date fair value based on the most likely outcome. For purposes of the grant date fair value during the three months ended March 31, 2025, the aTSR and rTSR components assumed a risk free rate of 3.9%, a dividend yield of animmaterial amount, and volatility of 40% that used a combination of daily historical and implied volatility over a look back period commensurate with the remaining term of the assets. The weighted average grant date fair value of the aTSR and rTSR components of PRSU awards granted during the three months ended March 31, 2025 was $13.62 and $22.44, respectively.

ROCE is considered to be a non-market performance condition. Thus, the likelihood of achievement must be reassessed at every reporting period, and compensation expense is adjusted accordingly. As of March 31, 2025, management estimates ROCE performance for the post IPO grants to be lower than the target performance by approximately 18.1%, and for the grants that were issued during the three months ended March 31, 2025 to be greater than the target performance level by approximately 40.4%. The grant date fair value of the PRSUs presented in the activity for the three months ended March 31, 2025 takes into account the grant date fair value for ROCE, due to the non-market performance conditions being probable of achievement as of the respective modification date or grant date which establishes a grant date fair value. The weighted average grant date fair value of the ROCE component of PRSU awards granted during the three months ended March 31, 2025 was $19.40.

As of March 31, 2025, there was $17.8 million of unrecognized compensation expense related to the PRSU awards, which will be amortized over a weighted average period of 2.2 years.

Equity-based compensation related to PRSUs was $1.2 million for the three months ended March 31, 2025, which is included in general administrative expenses in the condensed consolidated statements of operations.

Time-Based Restricted Stock Units

During the three months ended March 31, 2025, the Company granted 380,887 time-based restricted stock units (“TRSUs”) under the 2024 Plan. Under the applicable provisions of the 2024 Plan, the TRSU incentive award vests annually over three anniversary dates in equal portions with the first tranche vesting on January 1, 2025, subject to continued employment with the Company and board of director approval. The table below summarizes the TRSU activity for the three months ended March 31,

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2025:

As of March 31, 2025, there was $11.9 million of unrecognized compensation expense related to the 2024 TRSU awards, which will be amortized over a weighted average period of 2.4 years.

Equity-based compensation related to TRSUs was $0.9 million for the three months ended March 31, 2025, which is included in general administrative expenses in the condensed consolidated statements of operations.

Employee Stock Purchase Plan

The Company's Employee Stock Purchase Plan (the “ESPP”) became effective immediately prior to the consummation of the IPO. A total of 500,000 shares of the Company's common stock are available for awards under the ESPP and only permits eligible employees to purchase shares of the Company's common stock through payroll deductions, which cannot exceed 10% of the employee's eligible compensation. The ESPP will be implemented through a series of offerings of up to a period of 27 months, which will consist ofone offering period. During the offering period, payroll contributions will accumulate without interest and, on the last trading day of the offering period, accumulated payroll deductions will be used to purchase shares of the Company's common stock. For the three months ended March 31, 2025, the Company did not recognize any equity-based compensation expense related to the ESPP.

2021 Equity and Incentive Compensation Plan

On January 1, 2021, the BKV Corporation Long-Term Incentive Plan (the “2021 Plan”) was established. Upon consummation of the IPO,7,724,499 RSUs were considered to have been granted under ASC 718 -Compensation-Stock Compensation (“ASC 718”), when taking into consideration performance RSUs at the maximum performance level and TRSUs anticipated to be legally granted in thethree years following inception. As of December 31, 2024, the awards considered granted under ASC 718 since inception equaled the number of RSUs legally granted. Prior to the Company's IPO, RSUs under the 2021 Plan were recognized in mezzanine equity on the condensed consolidated statements of stockholders' equity and mezzanine equity and were valued using unobservable inputs. See Note 4 - Fair Value Measurements for further detail.

Performance-Based Restricted Stock Units

PRSUs cliff vest and were subject to a vesting or performance period beginning January 1, 2021 and ending on December 31, 2023 (the “Performance Period”). As of December 31, 2023, or the Performance Period, the Company achieved its goals as follows: TSR met its threshold at 136%, ROCE met its threshold at 131%, and IPO readiness met its threshold at 200%. In February 2024, the Plan’s committee approved the Company’s goals and the PRSUs outstanding as of December 31, 2023 vested with some being forfeited prior to the Plan’s approval.

The following table summarizes the PRSU activity under the 2021 Plan for the three months ended March 31, 2024:

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Time-Based Restricted Stock Units

The following table summarizes the TRSU activity under the 2021 Plan for the three months ended March 31, 2024:

For the three months ended March 31, 2024, equity-based compensation expense related to the TRSUs under the 2021 Plan was $1.1 million, which is included in general and administrative expenses in the condensed consolidated statements of operations. Upon consummation of the IPO, the remaining TRSUs from the 2021 Plan vested.

Note 9 - Equity Method Investment

The Company is a 50% owner of BKV-BPP Power, which is accounted for as an equity method investment. BKV-BPP Power owns and operates the Temple Plants, which are two combined cycle gas turbine and steam turbine power plants located on the same site in the ERCOT North Zone in Temple, Texas. The Temple Plants deliver power to customers on the ERCOT power network in Texas. BKV-BPP Power also has a wholly-owned subsidiary that engages in retail power sales to customers in Texas.

BKV-BPP Power has a term loan from each of its affiliates, BNAC and BPPUS, each in the amount of $141.0 million, both of which mature on November 1, 2026.

The Company has an Administrative Service Agreement ("ASA") with BKV-BPP Power, in which the Company provides certain services as required by the ASA, on an annual basis with options to extend. During the three months ended March 31, 2025 and 2024, the Company recognized revenues of $0.4 million and $1.1 million, respectively, related to the services provided under the ASA, which is included in related party revenues on the condensed consolidated statements of operations.

During the three months ended March 31, 2025 and 2024, the Company recognized, based on its 50% ownership interest in BKV-BPP Power, losses of $9.6 million and $7.7 million, respectively. For the three months ended March 31, 2025, BKV-BPP Power's total revenues, net, included unrealized derivative losses of $16.0 million and operating expenses included unrealized derivative gains of $3.0 million. For the three months ended March 31, 2024, BKV-BPP Power's total revenues, net, included unrealized derivative losses of $5.8 million and operating expenses included unrealized derivative losses of $2.1 million.

The table below sets forth the summarized financial information of BKV-BPP Power:

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Note 10 - Commitments and Contingencies

From time to time, the Company may be subject to various claims, title matters, and legal proceedings arising in the ordinary course of business, including environmental contamination claims, personal injury and property damage claims, claims related to joint interest billings and other matters under natural gas operating agreements, and other contractual disputes. The Company maintains general liability and other insurance to cover some of these potential liabilities. All known liabilities are fully accrued based on the Company's best estimate of the potential loss. While the outcome and impact on the Company cannot be predicted with certainty, results may change in future periods. For the periods presented in the condensed consolidated financial statements, the Company believes that its ultimate liability, with respect to any such matters, will not have a significant impact or material adverse effect on its financial positions, results of operations, or cash flows. Results of operations and cash flows, however, could be significantly impacted in the reporting periods in which such matters are resolved.

As a part of the consideration paid for the Devon Barnett Acquisition, additional cash consideration would be required to be paid by the Company if certain thresholds were met for average Henry Hub natural gas and WTI crude oil prices for each of the calendar years during the period beginning January 2021 through December 31, 2024 (the “Devon Barnett Earnout”). Average Henry Hub payouts and threshold were as follows: $2.75/MMBtu $20.0 million, $3.00/MMBtu $25.0 million, $3.25/MMBtu $35.0 million, and $3.50/MMBtu $45.0 million; average WTI payouts and thresholds are as follows for these periods: $50.00/Bbl $10.0 million, $55.00/Bbl $12.5 million, $60.00/Bbl $15.0 million, and $65.00/Bbl $20.0 million. Payments were due in the month following the end of the respective measurement period for which the hurdle rates were set. As of December 31, 2024, the final portion of the arrangement was considered to be settled resulting in a settlement of $20.0 million, which is reflected as contingent consideration payable within current liabilities on the condensed consolidated balance sheets, and was paid on January 8, 2025. As described in Note 4 - Fair Value Measurements and Note 5 - Derivative Instruments, the contingent consideration was accounted for as a derivative instrument. Management uses NYMEX forward pricing estimates for both Henry Hub and WTI hurdle rates and Monte Carlo simulations to determine the fair value of the contingent consideration. For the three months ended March 31, 2024, the change in the fair value of the contingent consideration was a gain of $4.6 million. This change in the fair value during this period impacted the associated liability on the condensed consolidated balance sheets and recognition of the gain was recognized in the gains on contingent consideration liabilities on the condensed consolidated statements of operations.

In conjunction with the Exxon Barnett Acquisition, additional cash consideration would have been required to be paid by the Company if certain thresholds for future Henry Hub natural gas prices were met for the year ended December 31, 2024. Based on the thresholds for this period, no payout was required. As of December 31, 2024, the fair value of the contingent consideration waszero. The change in the fair value of the contingent consideration for the three months ended March 31, 2024 was a gain of $2.0 million. This change in the fair value during this period reduced the associated liability on the condensed consolidated balance sheets and recognition of the gain was recognized in the gains on contingent consideration liabilities on the condensed consolidated statements of operations. Refer to Note 4 - Fair Value Measurements for the valuation methodology and associated inputs.

The Company has volume commitments in the form of gathering, processing, and transportation agreements with various third parties that require delivery of 1,068,885,447 dekatherms of natural gas. The significant majority of the agreements terminate by 2029, with one agreement extending through 2036. As of March 31, 2025, the aggregate undiscounted future payments required under these contracts total $304.7 million.

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A summary of the Company's commitments, excluding contingent consideration, as of March 31, 2025, is provided in the following table:

Note 11 - Income Taxes

The effective tax rates for the three months ended March 31, 2025 and 2024 were 27.1% and 25.2%, respectively. For the three months ended March 31, 2025, the difference in the effective tax rate from the U.S. statutory federal income tax rate of 21.0% was primarily due to the Company benefiting from the Section 45I tax credits from marginal production and from the monetization of certain Section 45Q tax credits from the injection of CO 2 waste in the Barnett Zero Project well. For the three months ended March 31, 2024, the difference in the effective tax rate from the U.S. statutory federal income tax rate of 21.0% was primarily due to the Company benefiting from the monetization of certain Section 45I tax credits from marginal production.

Note 12 - Earnings Per Share

Basic net income (loss) per common share for each period is calculated by dividing net income (loss) by the basic weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is calculated by dividing net income (loss) of the Company by the diluted weighted average number of common shares outstanding for the respective period. Diluted weighted average number of common shares outstanding and the dilutive effect of potential common shares is calculated using the treasury method. The Company includes potential shares of common stock for PRSUs and TRSUs in the calculation of diluted weighted average shares outstanding based on the number of common shares that would be issuable if the end of the reporting period was also the end of the performance period. During periods in which the Company incurred a net loss, diluted weighted average common shares outstanding were equal to basic weighted average of common shares outstanding because the effects of all potential common shares was anti-dilutive.

The following is a reconciliation of the Company's basic weighted average number of common shares outstanding to the diluted weighted average number of common shares outstanding:

Note 13 - Subsequent Events

On May 6, 2025, the Company and BKV Upstream Midstream entered into the Second Amendment to Credit Agreement, which amended the RBL Credit Agreement. See Note 2 - Debt for further information.

On May 8, 2025, BKV dCarbon Ventures, together with C Squared Solutions, Inc., a Delaware corporation and, for the limited purposes specified therein, BKV Corp, entered into the Limited Liability Company Agreement of BKV dCarbon Project, LLC (the “BKV-CIP JV Agreement”) forming BKV dCarbon Project, LLC (the “BKV-CIP Joint Venture”) for the purpose of

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developing CCUS projects. For more information regarding the terms of the BKV-CIP JV Agreement and the ancillary agreements entered into by BKV dCarbon Ventures and BKV Corp in connection therewith, refer to the Company’s Current Report on Form 8-K filed on May 8, 2025.

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