BKV Corp (BKV)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I, Financial Statements in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes, including “Management's Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2025 included in our 2025 Annual Report on Form 10-K filed on March 6, 2026. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs, and expectations. We disclaim any duty to publicly update any forward-looking statements except as otherwise required by applicable law.

In this section, references to “BKV,” the “Company,” “we,” “us,” and “our” refer to BKV Corporation and its subsidiaries, unless otherwise indicated or the context otherwise requires. For more information on our organizational structure, see Note 1 - Business and Basis of Presentation to our condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Recent Developments

•Initial injection at Cotton Cove and Eagle Ford CCUS Projects. The Cotton Cove project owned by our BKV-BPP Cotton Cove Joint Venture commenced commercial CO2 sequestration operations on April 2, 2026, and the Eagle Ford project owned by our BKV-CIP Joint Venture commenced commercial CO2 sequestration operations on June 10, 2026. The Cotton Cove facility receives CO2 waste from BKV's co-located, owned and operated gas processing plant, while the Eagle Ford facility receives CO2 waste from a nearby gas processing plant owned and operated by a diversified midstream energy company. We estimate that the Cotton Cove project will geologically sequester up to approximately 32,000 metric tons of CO2 per year and that the Eagle Ford project will geologically sequester up to approximately 90,000 metric tons of CO2 per year.

Operational and Financial Highlights

Below are some highlights of our operating and financial results for the three and six months ended June 30, 2026:

•Production of natural gas, NGLs, and oil was 89.0 Bcfe, or 978.3 MMcfe/d and 172.3 Bcfe, or 951.8 MMcfe/d, respectively.

•Average realized product prices, excluding the impact of settled derivatives, were $2.49 per Mcfe and $2.96 per Mcfe, respectively.

•Power generation of 2,222 GWh and 4,203 GWh, respectively, from the Temple Plants and capacity factors of 69.6% and 66.0%, respectively.

•Upstream/Midstream production revenues were $221.9 million and $509.6 million, respectively, and Power revenues were $74.4 million and $143.4 million respectively.

•Net income attributable to BKV was $75.8 million and $119.9 million, respectively.

•Net cash provided by operating activities for the six months ended June 30, 2026 was $181.7 million.

•Accrued capital expenditures for the six months ended June 30, 2026 were $191.0 million.

Factors That Affect Comparability of Our Financial Condition and Results of Operations

Our business depends on many factors, including, but not limited to: (i) commodity prices, (ii) market supply and demand for natural gas, NGLs, and power, and (iii) upstream and power capital and operating costs. We continually monitor domestic and global factors which may cause our actual results of operations to differ from historical results or expected outlook.

Commodity Pricing. The natural gas, NGL, and power industries are each cyclical and seasonal, and commodity prices are highly volatile, and we expect these prices to continue to remain volatile in the near future. In order to manage our market exposure to price volatility, we utilize derivative contracts in connection with our operations to provide an economic hedge of our exposure to commodity price risks associated with anticipated future natural gas and NGL production and power generation. However, there are still market risks beyond our control that may impact our financial condition, results of operations, and cash flows.

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Supply, Demand, Market Risk, and the Impact on Natural Gas, NGLs, and Power Prices. Natural gas, NGL, and power prices are subject to large fluctuations in response to relatively minor changes in the demand for natural gas, NGLs, and power. Natural gas and NGL prices are affected by current and expected supply and demand dynamics, including the level of drilling, completion, and production activities by other natural gas production companies, industry-wide supply chain disruptions, widespread shortages of labor, material, and services. Other factors impacting supply and demand include weather conditions (including severe weather events), pipeline capacity constraints, basis differentials, export capacity, supply chain quality and availability. Power prices in the ERCOT market are subject to large fluctuations in response to relatively minor changes in the weather, time of day and generation mix, along with current and expected supply and demand dynamics in the ERCOT market. The majority of the factors noted above are outside of our control.

Power Business. The consolidated financial statements include the results of our power business for all periods presented, reflecting the retrospective recast of prior periods, as the BKV-BPP Power Joint Venture Transaction was accounted for as a transfer between entities under common control. However, the power business has historically operated separately from our other operations and has a different operating profile. Businesses engaged in power generation are subject to seasonal, daily, and hourly fluctuations in demand, periods of peak load, and changes in supply and demand dynamics, which can result in variability in revenues and operating costs. In addition, the power business is more capital intensive, requiring ongoing investments in land, modular generation equipment, and turbine generators, and its growth is dependent on access to capital and the ability to obtain necessary commercial agreements. As a result, our consolidated results may not be fully comparable across periods and may not be indicative of the results that would have been achieved if the power business had been operated as part of our company during those periods or of our future performance.

Upstream Capital Costs. Businesses engaged in the exploration and production of natural gas and NGLs, such as ours, face the challenge of natural production declines. As initial reservoir pressures are depleted, natural gas and NGL production from a given well naturally decreases. Thus, as does any natural gas exploration and production company, we deplete part of our asset base with each unit of natural gas and NGLs we produce. We attempt to overcome this natural decline by drilling and refracturing to unlock additional reserves and acquiring more reserves than we produce. Our future growth will depend on our ability to enhance production levels from our existing reserves and to continue to add reserves in excess of production in a cost-effective manner, through development of existing assets and acquisitions. Our ability to make capital expenditures to increase production from our existing reserves and to add reserves through drilling is dependent on our capital resources and can be limited by many factors, including our ability to access capital in a cost-effective manner and to timely obtain drilling permits and regulatory approvals.

Other factors significantly affecting our financial condition and results of operations include, among others:

•success in drilling new wells;

•the availability of attractive acquisition opportunities and our ability to execute them;

•the amount of capital we invest in the leasing and development of our properties;

•facility or equipment availability and unexpected downtime; and

•delays imposed by or resulting from compliance with regulatory requirements.

Production Volumes and Power Data

The following table presents our historical production volumes for the periods presented:

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Impact of Acquisition and Joint Venture Transactions. Our financial condition and results of operations for the periods presented were impacted by acquisitions and joint venture transactions completed during 2025, which changed the scale, composition, and ownership structure of our operations.

In May 2025, as part of our CCUS business strategy, we partnered with the Class B Member to form the BKV-CIP Joint Venture, and beginning in the third quarter of 2025, we consolidated the BKV-BPP Cotton Cove Joint Venture. These transactions resulted in changes to the accounting treatment of certain assets and results, including the recognition of noncontrolling interests and fair value adjustments, further affecting comparability across periods.

In September 2025, we completed the Bedrock Acquisition, with an economic effective date of July 1, 2025. The acquisition significantly expanded our asset base in the Barnett with low-decline proved developed producing reserves, resulting in higher production volumes, revenues, operating expenses, depreciation, depletion and amortization, and asset retirement obligations beginning in the third quarter of 2025. Because the acquired assets were not owned for a full period of 2025, results for 2026 are not comparable to prior periods. In addition, the consideration paid, including cash, common stock, and repayment of indebtedness, affected our liquidity, leverage, and weighted average shares outstanding.

As a result of these transactions, our historical operating, financial, and reserve data may not be comparable between periods presented in this Quarterly Report on Form 10-Q.

Sources of Revenues

Our core businesses are the production of natural gas and the generation of natural gas-fired power from our owned and operated assets. Currently, a significant portion of our revenues are derived from the sale of our natural gas production and the NGLs that are extracted from processing our natural gas, as well as from the sale of our power generated out of the Temple Plants and sold to a third party at either market or negotiated contract terms. A smaller portion of our revenues are generated from the sale of crude oil, midstream and surface operations, and certain marketing revenue and other income. Our midstream and surface operations primarily support our own exploration and production operations, with revenues generated primarily from fees charged for midstream and surface services, including transportation, freshwater sourcing and disposal, and other services to us and our affiliates and, to a lesser extent, third parties.

Realized Commodity Prices

NYMEX Henry Hub, for gas prices, and NYMEX WTI, for oil prices, are widely used benchmarks for the pricing of natural gas and oil in the United States. The price we receive for our natural gas and oil production is generally different than the NYMEX price because of

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in Item 8 of Part II, Financial Statements and Supplementary Data in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions, and projections about our industry, business, and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Annual Report on Form 10‑K. See Item 1A of Part I, “Risk Factors” and under “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We are a forward-thinking, growth-driven energy company focused on creating long-term risk-adjusted stockholder value through the development of natural gas producing assets, the ownership and operation of natural gas-fired power generation assets, and selective accretive acquisitions. Our core businesses are the production of natural gas and the generation of natural gas-fired power from our owned and operated assets, supported by a closed-loop strategy enabled by our upstream, midstream, power, and CCUS businesses.

Our operations are supported by four business lines: natural gas production, natural gas midstream, power generation, and CCUS. Our operating approach is designed around a closed-loop model that aligns these business lines to support cost efficiency, commercial optimization, and operational reliability across the value chain. Through this approach, we retain operational control over the production, transportation, and processing of natural gas and provide multiple platforms for disciplined capital deployment, while meeting growing demand for low carbon natural gas and power.

For example, in the Barnett Shale, natural gas produced from our upstream assets is gathered and transported in part through our midstream systems. In November 2023, we commenced sequestration operations at our first CCUS project, and we currently expect our second and third CCUS projects to commence sequestration activities in the first and second quarter of 2026 with additional CCUS growth opportunities beyond 2026. Further, we are pursuing a power growth strategy that aligns with both our natural gas and CCUS businesses.

As part of our ongoing operations, we expect our owned and operated upstream and natural gas midstream businesses to achieve net-zero Scope 1 and Scope 2 greenhouse gas emissions during the early 2030s and net-zero Scope 1, Scope 2, and Scope 3 emissions by the late 2030s.

We believe our business model, experienced management team, and disciplined technology-enabled operations support our ability to create long-term, risk-adjusted stockholder value.

Recent Developments

•Equity Offering. On December 3, 2025, we completed an underwritten public offering of 6,900,000 shares of common stock for net proceeds of $170.1 million (the "2025 Equity Offering"). We used the net proceeds from the 2025 Equity Offering to fund the cash consideration for the BKV-BPP Power Joint Venture Transaction and related expenses. For additional information, see Note 1 - Business and Basis of Presentation and Note 13 - Stockholders' Equity and Mezzanine Equity.

•BKV-BPP Power Joint Venture Transaction. On January 30, 2026, we completed the previously announced BKV-BPP Power Joint Venture Transaction for aggregate consideration consisting of $115.1 million in cash and 5,315,390 shares of our common stock. We funded the cash consideration with a combination of cash on hand and the net proceeds from the 2025 Equity Offering. Following the closing of the transaction, the BKV-BPP Power Joint Venture is owned 75% by BKV and 25% by BPPUS, and the financial results of BKV-BPP Power will be consolidated into our financial statements. For additional information, see Note 14 - Investments and Note 19 - Subsequent Events.

Operational and Financial Highlights

Below are some highlights of our operating and financial results for the year ended December 31, 2025.

•Production of natural gas, NGLs, and oil was 305.0 Bcfe, or 835.5 MMcfe/d.

•Average realized product prices, excluding the impact of settled derivatives, were $2.81 per Mcfe.

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•Production revenues were $857.6 million and midstream revenues were $10.5 million.

•Lease operating expense was $145.6 million, or $0.48 per Mcfe.

•Net income attributable to BKV was $173.1 million.

•Net cash provided by operating activities was $242.7 million.

•Accrued capital expenditures were $318.5 million.

Factors That Affect Comparability of Our Financial Condition and Results of Operations

Our business depends on many factors, primarily commodity prices, market supply and demand for natural gas, NGLs, and oil, upstream capital costs, and production costs. We continually monitor domestic and global factors which may cause our actual results of operations to differ from historical results or expected outlook.

Commodity Pricing. The natural gas and NGL industry is cyclical and commodity prices are highly volatile, and we expect these prices to continue to remain volatile in the near future. In order to manage our market exposure of price volatility, we utilize derivative contracts in connection with our natural gas operations to provide an economic hedge of our exposure to commodity price risks associated with anticipated future natural gas and NGL production. However, there are still market risks beyond our control that may impact our financial condition, results of operations, and cash flows.

Supply, Demand, Market Risk, and the Impact on Natural Gas, NGLs, and Oil Prices. Natural gas and oil prices are subject to large fluctuations in response to relatively minor changes in the demand for natural gas, NGLs, and oil. Prices are affected by current and expected supply and demand dynamics, including the level of drilling, completion, and production activities by other natural gas production companies, global industry-wide supply chain disruptions, widespread shortages of labor, material, and services, the ability to agree and maintain production levels by members of OPEC and other oil producing countries, and political instability of other energy producing countries, resulting in increased supply in the global market. Other factors impacting supply and demand include weather conditions (including severe weather events), pipeline capacity constraints, inventory storage levels, basis differentials, export capacity, supply chain quality and availability, strength of the U.S. dollar as well as other factors, the majority of which are outside of our control.

Upstream Capital Costs. Businesses engaged in the exploration and production of natural gas and NGLs, such as ours, face the challenge of natural production declines. As initial reservoir pressures are depleted, natural gas and NGL production from a given well naturally decreases. Thus, as does any natural gas exploration and production company, we deplete part of our asset base with each unit of natural gas and NGLs we produce. We attempt to overcome this natural decline by drilling and refracturing to unlock additional reserves and acquiring more reserves than we produce. Our future growth will depend on our ability to enhance production levels from our existing reserves and to continue to add reserves in excess of production in a cost-effective manner, through development of existing assets and acquisitions. Our ability to make capital expenditures to increase production from our existing reserves and to add reserves through drilling is dependent on our capital resources and can be limited by many factors, including our ability to access capital in a cost-effective manner and to timely obtain drilling permits and regulatory approvals.

Other factors significantly affecting our financial condition and results of operations include, among others:

•success in drilling new wells;

•the availability of attractive acquisition opportunities and our ability to execute them;

•the amount of capital we invest in the leasing and development of our properties;

•facility or equipment availability and unexpected downtime; and

•delays imposed by or resulting from compliance with regulatory requirements.

Production Volumes.

The following table presents our historical production volumes for the periods presented:

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Impact of Acquisition and Joint Venture Transactions. Our financial condition and results of operations for the periods presented were impacted by acquisitions and joint venture transactions completed during 2025, which changed the scale, composition, and ownership structure of our operations.

In May 2025, as part of our CCUS business strategy, we partnered with the Class B Member to form the BKV-CIP Joint Venture, and beginning in the third quarter of 2025, we consolidated the BKV-BPP Cotton Cove Joint Venture. These transactions resulted in changes to the accounting treatment of certain assets and results, including the recognition of noncontrolling interests and fair value adjustments, further affecting comparability across periods.

In September 2025, we completed the Bedrock Acquisition, with an economic effective date of July 1, 2025. The acquisition significantly expanded our asset base in the Barnett with low-decline proved developed producing reserves, resulting in higher production volumes, revenues, operating expenses, depreciation, depletion and amortization, and asset retirement obligations beginning in the third quarter of 2025. Because the acquired assets were not owned for a full period, results for 2025 are not comparable to prior periods. In addition, the consideration paid, including cash, common stock, and repayment of indebtedness, affected our liquidity, leverage, and weighted-average shares outstanding.

As a result of these transactions, our historical operating, financial, and reserve data may not be comparable between periods presented in this Annual Report on Form 10-K.

Sources of Revenues

Currently, substantially all of our revenues are derived from the sale of our natural gas production and the NGLs that are extracted from processing our natural gas, though we also generate a portion of our revenues from the sale of crude oil, midstream and surface operations, a minority equity interest in a midstream system, and certain marketing revenue and other income. Our midstream and surface operations primarily support our own exploration and production operations, with revenues generated primarily from fees charged for midstream and surface services, including transportation, freshwater sourcing and disposal, and other services to us and our affiliates and, to a lesser extent, third parties.

Realized Commodity Prices

NYMEX Henry Hub, for gas prices, and NYMEX WTI, for oil prices, are widely used benchmarks for the pricing of natural gas and oil in the United St

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