BKV Corporation 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and good morning, everyone.

Thank you for joining BKV Corporation's second quarter 2026 earnings conference call. With me today are Chris Kalnin, Chief Executive Officer, Eric Jacobsen, President of Upstream, and David Tameron, Chief Financial Officer. Before we provide our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements, which are subject to certain risks, uncertainties, and assumptions. Actual results could differ materially from those in any forward-looking statements. In addition, we may refer to non-GAAP measures. For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, as well as reconciliations of non-GAAP financial measures, please see the company's public filings, including the Form 8-K filed today. I would also point listeners to the updated investor presentation posted this morning on our investor relations website.

We encourage everyone listening to review those slides and our forthcoming quarterly report to be filed with the SEC for further information on our business, operations, results from the quarter, and details on our updated 2026 guidance. I'd now like to turn the call over to our CEO, Chris Kalnin.

Thank you, Michael, and good morning, everyone. The second quarter was BKV's strongest financial quarter since going public. Record adjusted EBITDAX. Record adjusted net income. Upstream production at the high end of guidance, with capital at the low end. Two carbon capture projects commissioned as we committed, and continued progress in our power growth strategy. Across every business line, the quarter came in at or above plan. That consistency reflects a deliberate, systematic approach to running the company in line with our said-did culture, and it's one of the most important things we will demonstrate to you as investors. What makes these results particularly meaningful is the strategic platform that generates them. BKV is a differentiated company, combining high-quality Barnett upstream production, existing power generation assets in ERCOT, and revenue-generating carbon capture facilities into a single integrated platform.

The closed-loop strategy of gas, power, and carbon capture creates competitive advantages that are difficult to replicate and increasingly valuable in today's energy markets. The results this quarter are evidence that the strategy is working, and as you will hear this morning, the momentum behind each of those businesses continues to build. With that, let me walk you through where we stand. I will begin with our power business. ERCOT's power needs are accelerating, and we are seeing it clearly in the market today. AI infrastructure, data centers, and broad industrial load growth are all converging on the grid at the same time. ERCOT recently reached a record load level in July of more than 91 gigawatts. The scale of this market signal is striking.

ERCOT currently has over 470 gigawatts of load in its interconnection queue, and several analyst reports project ERCOT to be one of the fastest-growing power demand markets in the country. BKV is actively engaged with ERCOT, the PUCT, legislators, and local communities as the frameworks evolve, and we believe we are well-positioned within them. We have submitted both load and generation interconnect applications across our development projects, and a number of our prospective customers are participating in the batch process as well. We believe our integrated platform, development readiness, and track record as a responsible operator and committed community partner position us well to help meet Texas' growing power needs as ERCOT establishes the path forward. The macro backdrop has continued to strengthen, and BKV is operating at the center of it, with our existing power generation fleet demonstrating strong operational performance.

Our Temple facilities posted high availability and increased capacity factors both year-over-year and quarter-over-quarter. Our structured commercial process has matured meaningfully since our last earnings call. At Temple, we have narrowed our focus to a select set of counterparties with whom our discussions have advanced significantly. This progress reinforces our confidence in our original expectation of signing a PPA within 2026 to early 2027. As part of these customer engagements, we are implementing a three-phase development program at our Temple Energy Complex. Phase 1 is our modular generation units of approximately 200 megawatts, which can be implemented with date-certain energization time frames as no load interconnection is required to commence commercial operations. Phase 2 involves activating our grid-connected private use network, or PUN, unlocking the full use of our existing spinning reserves and capacity at Temple 1 and 2 through supplying behind-the-meter power to potential customers.

Phase 3 involves developing an additional CCGT facility, called Temple 3, to support additional potential customer load ramps and supply incremental dispatchable generation through the ERCOT grid. We have made substantive progress in all our phases and, in particular, in Phase 1, we received our air permits for modular generation in the second quarter for up to 400 megawatts, reinforcing our confidence in our near-term energization timelines. We are now extending our power strategy to Jack County, where we are expanding our North Central Texas footprint for the potential development of a second energy complex. This development targets replicating the same integrated platform that has made Temple compelling. In Jack, we aim to develop natural gas-fired generation backed by commercial arrangements with the option for carbon capture. We also intend to supply BKV's own natural gas to the site using BKV-owned midstream infrastructure.

In Jack County, we have 6,200 acres of site control, line of sight to 345 kV grid access, and submitted generation and interconnect applications. We are pleased by the progress on commercial discussions we are having related to the project and excited to mature the project toward commercialization. The integrated BKV platform is designed to rinse and repeat across Texas and potentially beyond. BKV's one-stop shop offering is a differentiated end-to-end solution that has the potential to add significant value to the bottom line. The combination of our Temple and Jack County developments have the potential to organically add an incremental 1.4 gigawatts of dispatchable generation, approximately doubling our total generation capacity to nearly three gigawatts within the next few years. Turning to our upstream business, the second quarter once again demonstrated the strength and consistency of our operating model.

Production at the high end of our guidance range, capital expenditures at the low end, continuing a track record of execution that demonstrates our excellence in upstream. Upstream remains a powerful financial engine for BKV. It generates the cash flow and operational excellence that helps drive everything else we do. The contributions of the upstream business are a key driver of our strong financial performance this quarter. BKV continues to innovate in unlocking the full potential of the Barnett. Our teams have developed leading approaches to manage market-leading base decline while adding significant potential inventory to our reserve base, resulting in substantive production capacity for years to come. I'm incredibly excited about the continued potential of the Barnett. We are also realizing the benefits of bringing our natural gas marketing fully in-house.

BKV now controls 100% of its natural gas marketing with a significant number of customers engaged and creating exposure to premium Gulf Coast markets. Our second quarter results reflect early evidence of the incremental margins this marketing capability has the potential to generate. BKV is now positioned to continue to capture incremental margin through the value chain and from end customers. Turning to our carbon capture business, the first half of 2026 was defined by delivery. We commissioned Cotton Cove and Eagle Ford, as we promised to do in the first half of the year. Our portfolio now stands at three operating projects, Barnett Zero, Cotton Cove, and Eagle Ford, actively sequestering CO2 and generating 45Q tax credits. Combined, these facilities have injected approximately 400,000 tons of CO2 through the end of the second quarter.

Going forward, we expect Cotton Cove and Eagle Ford to demonstrate financial characteristics consistent with what we've established at Barnett Zero. Our development pipeline beyond those operating projects is equally active. East Texas, our projects with Comstock, IWest, and additional opportunities we are evaluating all continue to advance, providing multiple pathways towards our targeted 1.5 million tons per annum injection run rate in 2028. A significant near-term commercial milestone is the progress in our carbon sequestered gas, or CSG, initiative. We have received validation from our independent auditor on the certification for our carbon offsets, a critical step in the broader certification process that positions us to advance commercialization in the second half of the year. CSG gives customers a differentiated low-carbon natural gas solution and gives BKV an incremental monetization layer on top of our existing 45Q economics.

It is a direct expression of what our closed-loop strategy is designed to produce. With that, I will turn it over to our President of Upstream, Eric Jacobsen, to walk through our operating results in more detail.