Good morning, everyone and welcome to BKV’s Full Year and Fourth Quarter 2024 Earnings Conference Call. As a reminder, today’s call is being recorded. [Operator Instructions] I would now like to turn the call over to Mr. David Tameron, Vice President of Strategic Finance and Investor Relations.

Good morning, everyone, and thank you for joining BKV Corporation’s fourth quarter and full year 2024 earnings conference call. With me today are Chris Kalnin, Chief Executive Officer; Eric Jacobsen, President of Upstream; and John Jimenez, 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. Additionally, 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 any reconciliations of non-GAAP financial measures, please see the company’s public filings, including the Form 8-K filed earlier today. We have also posted an updated investor presentation on our website. I’d now like to turn the call over to our CEO, Chris Kalnin.

Thank you, David and thank you everyone for joining us to discuss our fourth quarter and full year 2024 results. I want to take a moment to reflect on the truly transformational year BKV had in 2024. Throughout the year, BKV delivered solid business performance, driven largely by impressive results from our upstream operations. We also gained momentum in our Power business, actively engaging with prospective customers in the data center sector. Our CCUS initiatives progressed with an additional FID on a new carbon capture project as well as significant steps towards securing a financial joint venture partner. At the same time, we maintained a strong balance sheet, providing us with the flexibility to advance our businesses across all our vectors. And of course, we marked the year with a major milestone by making our debut on the New York Stock Exchange at the end of September. BKV is redefining the concept of an energy company by combining traditional and new energy approaches to offer integrated energy solutions that deliver value to customers. With 4 business lines, including power, carbon capture, upstream and midstream, BKV’s businesses generate value stand-alone and in combination create a win formula of decarbonized around-the-clock energy that is scalable, sustainable and profitable. The power markets, in particular, are evolving rapidly, and I’d like to highlight some key trends shaping our power strategy. Our Power JV is anchored on 2 modern and highly efficient combined cycle natural gas power plants that have a capacity of 1,500 megawatts and are located in Temple, Texas. Power generation is a key growth driver for the company given the recent power demand forecast across the U.S. and in the Texas ERCOT market. The power generation business in ERCOT represents a compelling growth opportunity for BKV. Rapid demand growth in ERCOT is…

Thanks, Chris. Building on the upstream theme that Chris teed up, we are very pleased with our fourth quarter upstream performance and are excited about our 2025 program. Fourth quarter production was 774 million cubic feet equivalent per day, outperforming and exceeding the midpoint of the guidance range by 5%. And it was delivered by investing approximately $43 million of development CapEx, which was lower than the amount of investment forecasted. Across the fourth quarter, our new well development performance was at or better than forecasted type curve. We continued our trademark of highly effective base decline management. And we accelerated development timing through strong drilling and completion performance. Simply put, in the fourth quarter, we delivered more upstream activity at a faster pace and at lower cost than we had forecasted. We brought several wells online at the end of the fourth quarter to boost 4Q production, which resulted in a total average annual daily production of 788 million cubic feet equivalent per day or 774 pro forma for the NEPA non-ops divestiture. This strong overall performance continues to showcase our advantaged asset base, featuring low base decline rates coupled with competitive and robust inventory, enabling us to continue our systematic approach to capital investment according to price environment. Given this systematic CapEx approach, we are flexing up our spend in the current environment through developing our long inventory runway of both refracs and new drills. The continuation of this CapEx program is reflected in the guidance we provide for the full year 2025. Our development CapEx investment into refracs and new drills is expected to continue through most of 2025. And on the back of that, our 2025 full year production guidance reflects a range of 755 million to 790 million cubic feet equivalent per day. Our 1Q…

Thanks, Eric. Before I share the power results, I’d be remiss to not acknowledge my recent retirement announcement. It’s been an absolute honor to serve BKV as CFO for the last 4 years. I’m incredibly proud of all that we’ve accomplished in my tenure, most notably, the company’s successful IPO process this last year. BKV is well positioned for the future. And I’m confident that the experienced leadership team, soon to include David as CFO, and its talented employees will take the company to even greater heights as they move forward. I look forward to continuing to support the team in an advisory capacity and I’m ready to enjoy my retirement with my family later this year. And now for an update on our power operations, as expected, during shoulder season, the fourth quarter was characterized by moderate power demand. Taking advantage of this shoulder season, we used the period to conduct scheduled major maintenance, which resulted in downtime for the plants. The average capacity factor for the Temple plants during the quarter was 38% and total generation was 1,200 gigawatt hours. For the full year, the average capacity factor was 57% and the total generation was 7,400 gigawatt hours. During 4Q, power prices averaged $36.90 per megawatt hour with average natural gas costs of $2.50 per MMBtu, resulting in an average spark spread of $19.37 per megawatt hour. For the full year, the average spark spread was $21.96 per megawatt hour. BKV’s implied proportionate share of the Power JV’s net loss during Q4 was about $17 million, including major maintenance expense and adjusted EBITDA was $0.5 million. For the full year, BKV’s implied share of the JV’s net income was $10 million and $34 million for adjusted EBITDA. As a reminder, our Power JV is non-consolidated. Beginning with 1Q…

Thank you, John, and congratulations to you on your forthcoming retirement, and we look forward to hearing about your travel adventures during this next chapter of your life, only 34 countries to go on your path to 100. It has been a joy and a pleasure working alongside you. And I wish you many more successes as you pursue life to its fullest in your retirement. Before we open the call for questions, I want to emphasize a few key messages. First, BKV offers the winning formula through a combination of natural gas production, carbon capture and power, which we believe will attract a premium in the marketplace. Second, BKV has multiple paths for disciplined growth across all our business lines. We have the ability to grow both organically and inorganically with the balance sheet and the organizational readiness to support that growth. Finally, our strong performance in the fourth quarter and throughout 2024 reinforces our ability to deliver shareholder value in line with our aspirations. With that, operator, we are ready to take any questions.

Thank you. [Operator Instructions] Our first question comes from Scott Gruber with Citigroup. Please proceed with your question.

Yes, good morning. Hey, a lot of good color on the Texas power market, Chris. You have excess capacity at your Temple facilities. Data centers are getting bigger. So I’m curious, as you think about the PPA opportunity, how much of your capacity would you be comfortable dedicating to a PPA? You could power a large data center with your two plants, but that would obviously reduce the spare capacity you provide to the ERCOT system. I’m not sure how the interaction with regulators kind of comes into play given that ERCOT is a competitive market. So can you just shed some color on kind of your comfort level around how much capacity at the plants you’d be comfortable dedicating under PPA?

Yes, Scott, good question. So appreciate it. Yes, if you look at ERCOT, it’s obviously a hot topic right now as it is across the grid around how much our people are able to take off to kind of do these private use networks or what we call PUNs. For us, we have two modern combined cycle power plants, each about 750 megawatts. So if you think about sort of a PPA structure, you’re probably not going to want to go more than 750 on those. You are going to be able to take one down for maintenance, keep the other one running as that redundancy is really important to a lot of these data center companies. So when you think about us, I would say, sort of that 750 is about the right kind of upper limit of what we would be comfortable with as we think about these options around sort of private use network and sort of behind-the-meter deals.

And what’s the latest color on your progress with discussions on that front? Do you think an agreement is possible here in ‘25? And then you mentioned you’re starting to look at building additional plants down the road. So are you focused on getting that agreement on the existing plants? Are you starting to look at agreements for new plants? Are those separate opportunities you are pursuing both?

Yes. Good for you to pick that up. I mean I think on the existing power plants, we have, as you can imagine, Scott, an incredibly unique position in the ERCOT market where we have 1,500 megawatts that are undedicated. We are right in the heart of the state. So, those discussions, as I have said, are active and we look forward to the announcements. You can imagine in the next 12 months to 24 months, there is going to be a lot of deals struck in the ERCOT and then broader U.S. market. I think for us, it’s certainly right there. We are active. We can decarbonize it. We have those assets today. And so we feel very excited about the momentum we see in the market, and you are hearing that not just from us, but other producers of gas and power. So, we see that very, very much. And we see that activity actually picking up pretty substantially in the last, I would say, 90 days, 100 days sort of timeframe. With regards to the new power plant study that I mentioned, that’s all about what customers want. And there are some specific customers out there that want new generation assets as part of kind of doing deals. They don’t want to be seen as taking power off the grid. And so our ability to kind of offer both is actually super compelling to them. And I think that that’s where we see BKV being flexible, having the balance sheet, having the strategy to kind of go after both types of customers is being exciting, and I think puts us in a really great position when we talk about kind of near-term agreements and/or ability to kind of strike some longer term deals as well.

Very interesting. Thanks Chris for the color. I will turn it back.

Thanks Scott.

Our next question comes from Nitin Kumar with Mizuho Securities. Please proceed with your question.

Hi guys. Thanks for taking my question. I want to start on the CCUS side. You mentioned the potential for a JV, but you had one FID here. Congratulations on that. As I look at the capital guidance, you are guiding for about $130 million of CCUS and other. Your other CapEx has run around $15 million a quarter. So, should we expect more? I guess what’s baked into this guidance for CCUS capital spending?

Hi. Good morning Nithin and thank you for the question. This is Eric. Yes, within that CCUS and other category of the $130 million, about $90 million of that is expected CCUS spend. So, we will look to further develop the FIDs that we have announced. We hope and anticipate there will be more FIDs coming. And we will be quite active in starting to develop these projects for start-up in early 2026.

Got it. And you are not assuming a JV, just as clarification, right? This would be 100% CapEx on CCUS as of today?

Yes, correct. That would be our reported CapEx 100% at the $90 million range.

Got it. And then my follow-up, I just want to quickly ask on production taxes. It looks like production taxes are a lot lower than expected. Is that just a timing impact and should we see that reverse out here in the first quarter?

Thanks Nitin for picking that up. Actually, taxes other than income have two components, one of which is called the severance tax, which is essentially a production tax. It’s a percentage of revenue. And although pricing and production volume vary, that percentage typically sits around 3% and that didn’t create any of the variance you are seeing in the quarter or in the year-to-date. What was creating the change in the quarter had to do with ad valorem. That’s the other part of taxes that comes through that line. This is the real estate and personal property taxes that are assessed based on the assessed value of the assets. And a couple of the counties were a little bit delayed in terms of their processes and finalizing those assessed values. Those happened in the fourth quarter, and hence, we had a true-up once those were finalized in the range of $4 million to $7 million. So, that’s what’s depressing the quarter. But the year-to-year, the assessed values will fluctuate on ad valorem, but severance stays pretty constant.

Yes. So, it’s Dave. So, just for going forward for modeling purposes, just assume it’s back to historical levels, that was kind of a one-time hit in the fourth quarter.

Sure. And if I can sneak one more in, just on the upstream side, gas prices have obviously been much stronger as I look at your upstream guidance here. There should be some growth through the year, but you are not leaning into the upstream just yet, could you talk a little bit about what you are seeing there and sort of why the current level of activity?

Yes, sure. Thanks again for the follow-up there, Nitin. As we have shared before and as is included in the slide in the finance section of our investor deck, we will remain committed to that systematic disciplined CapEx investment approach and we remain focused on free cash flow. Within that framework, as – if we see prices remaining very strong in the second half of ‘25 and through 2026, I would expect in the coming months, we will have a hard look at upping our CapEx investment in the second half of ‘25. We certainly have the available and quality inventory, both new drills and refracs in NEPA and Barnett to invest additional CapEx, so that’s there. So, over the coming months, we will have a hard look about investing additional in the second half of ‘25. And should we do so, I think what we would expect to see is a nice ramp at the very back end of ‘25, setting us up for a really strong ‘26.

And then just – sorry, Dave again, just coming – just to make sure you and everybody else are clear, our current CapEx guidance is consistent with what we told the analysts on the road show, which was we are using a 3.50 deck to get that capital spend. So, as prices stay strong, as Eric indicated, we would revise as appropriate if need be.

Great. Thanks guys.

Our next question comes from Betty Jiang with Barclays. Please proceed with your question.

Hi. Good morning everyone. John, congrats again on your retirement. I want to start asking about the natural gas processing CCUS contract. It’s really great to see that momentum with additional contract. How is the margin and economics of this contract compared to your Barnett Zero? And then once you start rolling in the additional CCUS volume, how much more low carbon power can you offer to the market once you bake that in?

Eric, why don’t you take the margin question and I will follow-up with the power question.

Sure. Yes. Good morning Betty and thank you for the question on the CCUS business. As we mentioned, we are very excited about to announce this third FID continuing on with our forte in the natural gas processing space with a very large and reputable midstream operator. You can think about the margin that we are realizing from this deal, this latest NGP FID announcement, very comparable, right in line with Barnett Zero and what we have shared before there at the $50 per ton sort of EBITDA margin range, yes.

Yes. So, Betty, on the power, so as you know, you are going to decarbonize around the clock with carbon capture. Our Barnett Zero project at sort of that 150,000 [Technical Difficulty].

I think I got some, Chris, I think you were cutting off in and out a bit there for me, but we can follow-up. And then my follow-up is on the power EBITDA guidance for 2025, it came in a bit light versus what we were expecting before. So, could we just get a bit more color on what’s the underlying assumption? What’s your power price assumption and maybe spark spread?

Yes. I think just to give the context with regards to the market in ‘25, we saw three weeks summer and that carried over into [Technical Difficulty] did layer on about 700 megawatts of hedges into ‘25. I think that’s going to moderate the overall outlook to some degree. And then again, we are seeing a lot of builds that are happening in the market, which are kind of legacy from 2 years or 3 years ago, those projects coming online. That’s depressing [ph] prices in the peak hours in the near-term. Positives there, Betty, is if you look out to ‘26, ‘27, ‘28 in particular, there is a huge amount of contracted base load demand coming on the market. That’s where we see big, big risk to scarcity pricing in ERCOT in particular. And so we are very excited about our assets as we look into the next 2 years to 3 years being positioned ideally for the market. In the near-term, there is a little bit of headwind, as I have said, with regards to kind of weather [Technical Difficulty].

Got it. That’s helpful. Thanks.

[Technical Difficulty]

Yes. Please hold. The conference will resume shortly. Okay. It seems that we have our speakers back and we are about to begin our Q&A. Our next question comes from Bert Donnes with Truist Securities.

Hey. Good morning guys. Thanks for picking mine. First of all, I just want to say congrats to John. I might be 30 years behind you, but I am happy for you. And then on the first question, maybe you could share your thoughts on how the rest of the Barnett operators might be looking at this improved gas strip. Do you think they are willing consolidators as they see higher prices, maybe they think maybe we can get a higher price now or does this widen the bid-ask spread? I think sometimes the conventional thinking is that some of those locations that weren’t previously economic have now kind of slipped into a profitable category, and so maybe that bid-ask spread widens.

Yes, that’s a good question, Bert. I think what you – what we expect is if we stabilize in the price, and I think I have shared this in our last earnings, we should see more transactions. I think it’s about bringing together expectations on the strip. I think the last couple of years has had some pretty significant bid-ask spreads due to kind of varying views on what that strip looks like. I think if we can kind of really keep the strip in and around where it is even today for the next, call it, three months to six months, I think that triggers a lot of transaction because I think then you can all agree on sort of what that reserve base looks like. Of course, if we start to see expectations that prices go even higher, I think that plays to your point where then that bid-ask spread widen again. But if we kind of hang around where we are today and stabilize, I would expect that the second half of the year we will see quite a bit of transactions, particularly on the gas side.

Got it. And I imagine you mean in the Barnett, right, not outside?

Yes. I mean I think in Barnett, and then as of course you know that we are always looking to expand our portfolio to low decline kind of Gulf Coast access basins as well.

Perfect. And then the second question, same thing on the upstream business. It outperformed our expectations, but I believe you pointed towards newer well performance as well as base decline. Could you maybe talk about which one maybe pushed that lever harder and maybe if you are making any changes as a result of the success? Thanks.

Yes. Hi. Good morning Bert and thanks for the question on the upstream side. Yes, we are very pleased as well with the fourth quarter performance on an outperformance on production. It was driven by a few factors as we shared. One is at or mostly above type curve performance on our new wells. It’s driven by our execution excellence and ability to drive turn-in lines earlier in the quarter than we expected. And then we did continue that trademark of ours, which is arresting already industry-leading low base decline even further. And I would say our performance in the fourth quarter was driven largely by the new drills and new wells, which we are very pleased with that performance on type curves and accelerated TILs. I think we expect to continue that performance into 2025 and beyond, Bert. We have applied a lot of lessons and learnings and we continue to get better and more efficient with our new drills and refracs alike. And then we will carry that into that decision I mentioned per the question earlier about whether to deploy additional CapEx in the second half of ‘25 as we potentially grow even further coincident with strip pricing depending on how that lands in our decision-making in the next few months. But certainly, on the back of how we performed and executed our new drills, it lends itself to high confidence going forward.

Understood. Thank you.

Operator, before you take the next question, just if anybody had any – we understand there was some issue and we were breaking up. If anybody has any questions, feel free to get back in the queue and clarify anything you missed. We are happy to cover that again. Operator, back to you.

Okay. Great. Our next question comes from Tim Rezvan with KeyBanc Capital Markets. Please proceed with your question.

Hey. Good morning folks and thank you for taking my question. Some of them might have been answered. So, I just had one for you, Chris. I appreciated the specificity you provided on the potential JV on the carbon capture as well as the timing. So, I know it’s been a sort of frenetic new presidential administration, but this 90-day to 120-day kind of window you provided us is consistent with comments now about the middle of the year. Can you talk about your confidence on getting something over the finish line and maybe what the risks are along that path? Thank you.

Yes. I appreciate it, Tim. Look, with regards to getting a deal over the line, I feel optimistic, as I mentioned in our earlier discussion. With regards to the partner, they are very committed to it. As you know, the big question that a lot of folks have needed to navigate is sort of the scenarios with regards to how this looks in terms of policy. And that’s really what we are hammering out in the next sort of 90 days to 120 days. I think when you look at where folks are at on the carbon capture side, I think it’s incredibly optimistic. This is a bipartisan supported agenda. It’s incredibly embedded into the tax code. It’s in red states. It’s supported by big oil, big ag. And so there is a lot of momentum around that and BKV is really taking a leadership position. So, I would say, all those factors give me a lot of confidence and with sharing that number with you all. At the same time, you know that nothing is a done deal until it’s a done deal. So, we are able and excited about delivering our business standalone and that’s the way we have guided you guys in the market. But we are confident enough to come out and give you a date, timeline and when we think that’s going to happen. So, I think that speaks to our overall perspective on the matter.

Okay. I appreciate that. And just a quick follow-up, the general terms you have provided about kind of a 49% participation with potentially some sort of CapEx carry, those general parameters are still, I guess safe to think about?

Yes. I think it’s consistent with what we have talked about before.

Great. Thank you.

Thanks Tim.

Our next question comes from Jacob Roberts with Tudor, Pickering, Holt & Co. Please proceed with your question.

Good morning.

Hey. Good morning.

Good morning. I wanted to take a look at Slide 21. And just given the FID down in South Texas, I am wondering if there is any regulatory or geologic aspects we need to think about looking at this map and perhaps where you guys are focusing and expanding this business? And then maybe if I could add on a quick follow-up to Tim’s question. Should we be thinking about the JV potential partnership on a project-by-project basis or kind of a blanket agreement on multiple projects?

Sure. You bet, Jake, good morning. I will take the first half of that question and then hand to Chris on the second half on the JV. So, yes, referencing Slide 21 and the natural gas processing plants that we have highlighted across the United States, there are – the nice thing is, most of those are in very favorable regulatory states from an oil and gas and CCUS perspective. If you look at many of the states where there are concentrated plants, those are states which have already received permitting primacy from the EPA, even though Class II doesn’t – NGPs doesn’t require primacy, I think it’s indicative of the regulatory environment. States like Louisiana, Wyoming, North Dakota, all of which have received primacy. West Virginia, we are pleased, just recently did. And then a large concentration in Texas, where we have had already very nice success with the Texas Railroad Commission. We have received three approved Class II permits. A fourth has been filed, and that’s the heart and soul of our NGP business. So, when we look at the regulatory framework in those states where the plants are concentrated is very favorable overall with some already nice success we have had in some of those states. And then as far as geology, to the point of your question, yes, geology matters. You will remember our point source high concentration philosophy, which we think is unique to BKV. Part of that is, we don’t build a lot of infrastructure – new infrastructure, but what we do build is new and robust, meaning we would like to have the pour space very close or ideally right underneath the source of emissions. And that is the case on many, many of these plants in Texas, Oklahoma, Wyoming, North Dakota, there is a lot of favorable geology in many of those states, so not for all, but largely there is. So, we think, again, this map lends itself to our natural gas processing forte and one of the foundations of our CCUS business as we grow to that 1 million tons of injection on the back of natural gas processing and some ethanol in the next few years. Chris, over to you on the JV.

Yes, Jake, on the JV, the deal would be a platform deal. So, there would be a certain amount of capital that they would commit and that would then give us kind of the platform to deploy that capital alongside of them, the JV partner. And so once we are through that then you are obviously either re-upping or you are kind of going on your own. So, that’s how you should think about it. So, it does cover all our kind of deals in the future as you think about that amount of capital that’s being committed.

Thanks. That’s helpful. And then my second one on the power side of things, just thinking about an inorganic opportunity or the potential to build out a new facility. And I apologize if I missed this. Are you willing to look outside ERCOT for those types of things? And yes, I guess that’s about it.

Yes. It’s a good question, Jake. We absolutely are willing and currently are looking outside of ERCOT as well, right. As you think about our model, which is gas, carbon capture and power, that scales and that scales across the U.S. So, a lot of the discussions that we are active in are involving customers that have positions, obviously, in Texas, but also outside of Texas. And we believe that their interest in BKV is around our ability to offer that around the clock decarbonized power. So, clearly, getting assets in addition to kind of the ERCOT market would make a lot of sense to match their portfolios. And that’s exactly how we are thinking about it because we think Texas is a great starting point. But when you think about the issue of data center growth, you have multiple places, certainly in PJM and other markets that are going to be prospective and BKV is very active in looking at that as well.

Thank you. Your answer actually reminded me of the second part of that question. Would these investments be predicated on the ability to offset the carbon?

It depends. There are certain customers. You can imagine the certain customers that have made strong commitments on their net zero goals by sort of end of the decade. Those customers are going to be highly sensitive to your ability to decarbonize. And actually, that is critical for them as part of this because they can’t just take sort of brown – what they call brown power and not decarbonize it. There are other customers in the market that are very just focused on time to power, how quickly can you get me the megawatts. Those customers are less sensitive to it. So, it really is sort of a tale of who is the customer you are talking about and what they are looking for. And we price accordingly. If you are looking for non-decarbonized power and you just want time to market, there is a price point for that. If you are looking for decarbonized around-the-clock power, there is a different price point for that, a bigger premium. So, it really depends on who you are talking about. And as you can imagine, these customers all have different agendas that they are pushing for and BKV can offer either customer what they want.

Great. John, enjoy the retirement and appreciate the time as always.

Alright. Thanks. Appreciate it.

There are no further questions at this time. I would now like to turn the floor back over to Chris Kalnin for closing comments.

Great. Well, listen everyone, we are excited about the quarter we have had and the year we have had. Really appreciate everyone’s interest. John, congratulations on your retirement. David, I know you are going to do a great job. We look forward to continuing the discussion and to deliver on our goals and our promises as BKV does have the winning formula today and is excited about the future of the energy market. Thank you for your time.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.