BKV 2026年第3四半期決算説明会：生産拡大と400MWテンプル拡張

BKVコーポレーションの2026年第3四半期決算説明会は、上流部門の増産、テンプルでの発電開発の拡大、同社の成長計画に向けた流動性の増強が中心的なテーマとなった。経営陣はまた、テキサス州における規制の不確実性や、ERCOTの電力価格に対する短期的な下押し圧力についても強調した。

主な要点

• 調整後EBITDAXは増加して1億3,300万ドルとなった（前年同期は1億100万ドル、2025年第3四半期）。BKVに帰属する調整後純利益は4,000万ドル、すなわち希薄化後1株当たり0.36ドル。
• 上流部門の平均生産量は981 MMcfe/dとなり、BKVのベースラインガイダンス範囲の上限を上回った。最近取得したバーネット資産は、当四半期中に約2週間分の生産に寄与した。
• BKVは、テンプル・エナジー・コンプレックスにおけるモジュール型発電の計画第1フェーズを、従来の200 MWから400 MWへと引き上げた。これには想定される引取先との費用償還契約による裏付けがある。
• 第3四半期の戦略的電力成長投資額は合計で1億1,600万ドルとなった。経営陣はこの支出について、2026年第4四半期に2億4,000万ドル〜2億7,000万ドルに増加すると見込んでおり、その主な要因はテンプル第1フェーズ開発の規模拡大である。
• 四半期末時点の現金および現金同等物は約6億2,000万ドルであり、総流動性は12億ドルに達し、増加額は3億2,700万ドル（前四半期比）となった。純負債は14億ドル、純レバレッジ比率は2.4倍。
• BKVは現在、4件の炭素回収プロジェクトを運営しており、合計の年間CO2圧入ランレートは約35万トンに達している。経営陣は引き続き、2028年に年間150万トンの達成を目標としている。

主要財務データ

事業および操業実績

上流事業およびバーネット資産の買収

平均生産量は981 MMcfe/d（第3四半期）となった。現金ベースの原単位コストは直前2四半期を9%下回り、開発設備投資の5,100万ドルはガイダンス下限を下回った。

BKVによると、基本的な掘削・仕上げおよび設備コストはおよそ水平長1フィートあたり525ドルにとどまり、バーネットにおける低コストな地位を維持している。Yarborough 8H坑井は引き続き経営陣の予想を上回る実績を上げており、推定インベントリとして約114カ所のアッパー・バーネット掘削候補地を裏付けている。アッパー・バーネットに関する追加成果は2027年半ばに見込まれている。

バーネットの買収は9月15日に完了し、追加となった生産量は65 MMcfe/dを超え、その半分以上を液体分が占めた。また、買収したポートフォリオには約350 Bcfeの確認開発済生産埋蔵量、11万7,000ネットエーカー、約1,000本の操業坑井（グロス）、ならびに年率9%の減退率が含まれている。

付帯インフラにはガス処理プラント（180 MMcf/dの処理能力）が含まれ、約340マイルの天然ガス集約パイプライン、およびさらに225マイルの水集約システム。現在、液体炭化水素はBKVの総生産量の20%を占め、売上寄与としては天然ガス、NGL、原油売上高の約30%に達しました（第3四半期）。

電力開発

BKVの稼働中発電複合施設が記録した実績は、72%の設備利用率（前年同期比2%増）、および等価稼働可能率約96%。電力事業の調整後粗EBITDAは、3,400万ドル（全社費用配賦前）でした。

経営陣は、記録的な需要にもかかわらず、太陽光発電と蓄電池の設備追加がERCOTのピーク時価格を圧迫したため、業績は予想を下回ったと述べました。

テンプルにおいて、BKVは大手フロンティアAI研究所と独占的な商業交渉を進めています。費用弁済契約により支援されるモジュール式フェーズ1の拡張規模は、400MWとなります。経営陣は、本契約が以前発表された1億7,700万ドルのバックストップ契約（投資適格ハイパースケーラーとの契約）とは別件であると述べました。

この400MWの開発計画は、2027年後半に通電を開始する見通しで、その規模は約100MWのトランシェごととなり、2028年中に全面稼働する予定です。さらに追加となる200MW相当の設備は、2029〜2030年の拡張余力を維持することを目的としています。BKVは、初期の400MWについて大気排出許可をすでに取得済みであると述べました。

テンプルにおける全体計画には、以下の3つのフェーズが含まれています：

1. 400MW規模のモジュール式ビハインド・ザ・メーター（自家消費型）発電。
2. 既存の1.5GWのうち半分を自家用送電ネットワーク内で契約すること。
3. 既存プラントと同等規模の新たなコンバインドサイクルガスタービン（CCGT）プロジェクト「テンプル3」の開発。

BKVはまた、1.2GW規模のコンバインドサイクル計画をジャック郡で検討しています。経営陣は、テンプルとジャック郡の双方が当初は独立型（アイランド型）プロジェクトとして設計されており、初期段階における系統連系への依存度を低減できると述べました。

炭素回収

バーネット・ゼロ、コットン・コーブ、イーグル・フォードでは、約12万2,000トンのCO2が第3四半期末までに圧入されました。バーネットの買収により4件目の自社操業プロジェクトが加わり、BKVの現在の年間圧入ランレートは約35万トン。

東テキサス・プロジェクトは引き続き2027年半ばに操業を開始する予定です。BKVはまた、東テキサスでコムストックと、ルイジアナ州でハイ・ウェストとそれぞれプロジェクトを進めており、これらについてはクラスVI許可申請が規制当局による審査中となっています。

経営陣は、BKVが天然ガス生産に伴う炭素隔離に連動したカーボンクレジットにおいて、ベラ（Verra）の認証を取得した最初の企業になったと述べました。同社は、この認証が炭素隔離済みガスの将来的な販売を後押しし、45Q税額控除を上回る追加マージンを生み出すと期待しています。

経営陣のガイダンス

BKVはバーネット買収を反映して2026年の見通しを更新し、現在、生産量が1 Bcf/dを上回ると見込んでいます。経営陣は、戦略的電力投資の増加を除き、当初の設備投資ガイダンスに変更はないと述べました。

戦略的電力成長に向けた設備投資は、総額で2026年第4四半期に2億4,000万〜2億7,000万ドル。これは主に、400MWに拡張されたテンプル第1フェーズ・プロジェクトが牽引する見通しです。

同社は引き続き、テンプルの電力購入契約（PPA）の締結目標時期を2026年から2027年初頭としていますが、経営陣はテキサス州の政治・規制環境の変化がスケジュールに影響を与える可能性があると注意を促しました。

ヘッジ状況：

• およそ2026年の残存天然ガス生産量の63%がヘッジされており、平均価格は3.89ドル/MMBtuです。
• 2027年について、BKVは約472 MMcf/dをヘッジしており、その内訳は価格4ドル/MMBtuのスワップおよび平均フロア価格が約3.30ドル/MMBtuのカラー取引となっています。
• およそ日量2万バレルの2027年NGL生産量がヘッジされており、加重平均価格は約1バレルあたり28ドルとなっています。
• 電力事業では、約700MWがヘッジされており、これは2026年の残存期間向けです。また2027年向けにも約700MWがヘッジされています。2027年のポジションはすべてスパークスプレッド・ヘッジで構成されています。

リスクと注視すべきポイント

経営陣は、テキサス州における政治および規制環境の変化が、データセンターや電力開発のスケジュールに関する潜在的なリスク要因であると指摘しました。BKVは、初期段階でアイランド型（系統独立型）設計を採用することにより、初期のプロジェクト遂行を電力網関連の規制判断から切り離すことができると説明しました。

足元のERCOT電力価格は、太陽光発電や蓄電池の新規導入拡大による下押し圧力にも直面しています。経営陣はこれを一時的なものとみているものの、当四半期のピーク時における実現価格を押し下げた要因であると認めました。

上流（アップストリーム）事業において、BKVはインフレならびに軽油や鋼材価格の上昇に伴うコスト圧力に直面しています。同社は、長期契約、デュアルフューエル（二元燃料）による完工、水平坑井の延伸（ロングラテラル化）、および操業シナジーを通じてこれらの圧力を相殺する方針です。

経営陣は、足元の天然ガス市場は供給が潤沢であると説明し、2027年のフォワードカーブ（先物曲線）もその環境を反映していると述べました。価格が一段と軟化した場合、BKVは商業生産開始（TIL）の時期や完工、再破砕（リフラクチャリング）活動を調整する可能性があります。

電力事業の拡大プログラムには多額の資金が必要です。BKVは営業キャッシュフロー、パートナーからの出資、設備ファイナンス、プロジェクトレベルのファイナンスを活用する計画で、建設期間中は電力関連の負債をリングフェンス（隔離）することを目指しています。

アナリストQ&Aのハイライト

経営陣は、電力プロジェクトに関する商業交渉について、詳細な技術設計、商業条件、そして規制を巡るさまざまな結果に対応できる契約構造という3つの分野に焦点を当てていると述べました。

BKVは、プロジェクトが電力網からの限定的な受電、そして最終的な完全系統連系へと移行するまでの橋渡しとして、アイランド型発電が機能すると見込んでいます。経営陣は、このアプローチにより将来的に送電網へ電力を供給する可能性を維持しつつ、初期段階における電力需要家への負担を回避できると説明しました。

プロジェクトファイナンスについて、BKVは引き続き、負債と自己資本（デット・エクイティ）の比率がおよそ70対30、または80対20となる構成を市場環境に応じて検討しています。PPAが締結され、プロジェクトファイナンスが確保された後、経営陣は最終的な自己資本要件を超えて拠出された初期エクイティについて同社に払い戻されることを見込んでいます。

経営陣は、PPAの価格交渉は現在のERCOT先物価格ではなく、新設発電設備のコストおよび必要とされる期待利回りに基づいていると述べました。また、カーボンオフセットは一部の潜在顧客にとっては重要であるものの、それほど重視しない顧客もいると指摘しました。

BKVは、上流資産の現金化（売却）の可能性や、リスクが低減された電力プロジェクトへのパートナー資本の追加導入を通じて、ポートフォリオの最適化を検討しています。経営陣は、これらの選択肢が同社の成長プログラムに対するさらなる資金調達手段になり得ると述べました。

決算説明会 文字起こし全文

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決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, everyone, and welcome to BKV's Third Quarter 2026 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. Michael Hall, Vice President of Investor Relations. Please go ahead.

Michael Hall

Thank you, operator, and good morning, everyone. Thank you for joining BKV Corporation's Third 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, including those associated with the integration of our recently acquired Barnett Shale assets, our financing activities, and the timing and terms of any power purchase agreements.

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, which is available on our website.

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 on Form 10-Q to be filed with the SEC for further information on our results for the quarter and the details of our updated 2026 guidance.

I'd now like to turn the call over to our CEO, Chris Kalnin.

Christopher Kalnin

Thank you, Michael, and good morning, everyone. I want to start by putting our results and outlook in the context of the tremendous opportunity we see ahead for the energy industry.

Energy has always been fundamental to driving economic growth, and I believe we are entering one of the most exciting periods in our industry.

From the rapid advancement of AI, the growth in LNG, and the continued expansion of our economy, the need for reliable around-the-clock energy has never been more important.

We have strong conviction in the durability of AI-driven power demand and believe we are at the beginning of a sustained power growth supercycle. In fact, we believe electricity demand in ERCOT could more than double over the next decade, creating significant opportunities for companies like BKV.

Of course, this opportunity comes with real challenges, including commodity price volatility, inflation, regulatory uncertainty, and significant capital needs. We've been deliberate in building BKV to navigate these dynamics.

Our strong hedge book, low decline production base, and disciplined approach to financing provide the cash flow and financial flexibility to pursue our growth opportunities with confidence.

And that brings me to our third quarter, where we continue to deliver solid operational results, advance our strategic growth initiatives, and take meaningful steps to position BKV for the next phase of growth across our closed-loop business model.

Turning to our power business. Demand for reliable electricity continues to accelerate. Texas remains an attractive market for investment, and we believe the need for additional dispatchable generation creates an excellent opportunity for BKV to deliver the power that Texas needs.

Following this week's elections, we recognize that Texas' political and regulatory environment will continue to evolve, particularly as the state considers frameworks to accommodate large load growth from data centers with input from newly elected officials and local communities.

Ultimately, we are confident that Texas remains pro-business. BKV will continue to proactively engage with community, legislative, and regulatory stakeholders.

We are committed to responsible power development that strengthens grid reliability, supports economic growth, and reflects the priorities of the communities where we operate.

Our integrated offering is why customers are engaging with us. We offer advanced time-to-power from an existing operating site with equipment secured, EPC agreements, and air permits in hand.

We bring fuel and infrastructure certainty through our own gas, midstream, water, and decarbonization options, so customers aren't depending on a chain of third parties for their most critical inputs.

As their load ramps, our existing combined cycle plants provide a path to highly reliable, efficient grid-connected supply.

These advantages have enabled us to share development capital risk with potential customers as we pursue contracts with the duration and credit quality required to support project financing and attractive risk-adjusted returns.

Today, we are announcing substantial progress in our Tempel Energy complex. We are in exclusive commercial negotiations with a leading frontier AI lab for the delivery of power and associated infrastructure.

Alongside that exclusivity, our power JV has entered into a cost reimbursement agreement, or CRA, with the intended offtaker, supporting an increase in planned modular generation in Temple to 400 megawatts from 200 megawatts.

The CRA allows us to maintain our development schedule and speed to power while advancing commercial discussions towards a long-term PPA. Details of the CRA are provided in our quarterly press release.

The CRA is separate from and in addition to the previously announced backstop agreement for $177 million with an investment-grade hyperscaler. Based on our current commercial momentum, we continue to target our original time frame for executing a PPA within 2026 to early 2027.

At the same time, we recognize that the new political and regulatory backdrop following this week's election could shift our targeted timelines. We will continue to monitor the situation and work closely with our potential customers towards the optimal outcome.

To remind you, at Temple, we have a 3-phase development plan designed to leverage and expand our existing infrastructure.

The first phase is modular behind-the-meter generation, now targeting 400 megawatts at the counterparty's request, with the potential to begin delivering power as early as late 2027 and into 2028.

Phase 2 includes contracting half of our existing 1.5 gigawatts within a private use network or PON to support data center campus expansion. This is a capital-efficient way to contract additional generation on the back of commercial and regulatory agreements.

Phase 3 is building Tempel 3, which would add a third CCGT of similar size and scale to our existing plants. These 3 phases represent a significant opportunity to expand the scale and earnings potential of the Tempel Energy complex.

Beyond Tempel, we continue to evaluate development opportunities at our prospective Jack County site. Our recently announced backstop agreement with an investment-grade hyperscaler represents tangible commercial progress toward a potential 1.2 gigawatt combined cycle project.

We believe the site offers an opportunity to leverage BKV's natural gas, midstream water, and carbon capture capabilities as commercial discussions and development planning advance.

Together, we believe Tempel and Jack County give us a controllable path to grow our power business, supported by our existing equipment supply agreements and commercial momentum.

Ultimately, these projects are about capturing higher margins across the natural gas value chain, backed by long-term power contracts with high-quality counterparties that have the potential to materially enhance BKV's EBITDA.

In Upstream, we delivered another quarter of production above the top end of guidance with operating cost and development capital at or below the low end of our guidance ranges.

Our results in the Barnett continue to demonstrate the strength of our approach in mid-tenured basins, and our recent acquisition is the latest proof point.

We recently expanded our position through the addition of approximately 65 million cubic feet per day equivalent of liquids-rich production. This transaction takes production to over 1 Bcfe per day, along with adding reserves, midstream infrastructure, and an operated carbon capture project.

We believe this model can scale attractively, and we are actively exploring additional expansion and portfolio optimization opportunities.

In carbon capture, we now have 4 operating projects, including the Buy project added through the acquisition, and a clear line of sight to ramping our current CO2 injection run rate of approximately 350,000 tons to our target of 1.5 million tons per year of injection in 2028.

As the platform scales, we believe CCUS can become a self-funding business that makes a meaningful contribution to BKV's financial performance, positioning the company as a low-carbon provider of around-the-clock dispatchable energy.

Finally, I'm extremely pleased to share that BKV has become the first company to receive certification of carbon credits for carbon sequestration associated with natural gas production. This certification came from Verra, an established and renowned carbon credit certification organization.

The certification, combined with our recent MSCI AA rating, positions BKV as a leader in low-carbon around-the-clock energy solutions and enables us to create additional margin, for example, through the sale of carbon-sequestered gas or CSG.

As we scale, we're building on a strong cash-generating foundation and investing in opportunities that expand margins, reduce earnings volatility, and extend the duration and credit quality of our cash flows.

With that, I'll turn it over to our President of Upstream, Eric Jacobsen.

Eric Jacobsen

Thanks, Chris. The third quarter was another incredibly strong quarter for our upstream and midstream business. We delivered production of 981 million cubic feet equivalent per day, above the top end of our baseline guidance range.

Our existing assets performed above the high end of guidance, and the acquisition contributed approximately 2 weeks of production during the quarter.

Cost performance was equally strong, with cash unit costs now 9% below the prior 2 quarters and development capital of $51 million coming in below the low end of guidance. We continue to deliver more with less capital.

Across our existing asset base, we remain on track to meet or exceed our already raised full-year production target, driven by our continued production optimization efforts, exceptional development delivery, and AI-driven analytics.

On the development capital front, our base drilling completions and facilities cost of approximately $525 per lateral foot continues to position BKV's Barnett operations as the lowest cost in major U.S. shale gas plays.

And while we're starting to see some cost pressure on D&C from macro inflation and higher diesel and steel prices, we expect to offset these increases through proactive cost management, including locking in longer-term contracts, rolling out dual fuel completions, even longer laterals, and further operational synergies.

We also continue to see sustained results from our Upper Barnett program. The Yarborough 8H continues to perform well above expectations and supports an inventory of approximately 114 Upper Barnett locations and further reinforces our confidence in the quality and scale of this opportunity.

We expect to have additional Upper Barnett results in mid-2027, which will further delineate this attractive development runway within our existing operating footprint.

Our strong production base, tremendous runway of development inventory, and the newly acquired assets provide a stable foundation for continued cash flow generation into 2027.

Before turning to the acquisition, a word on how we're thinking about 2027. Near term, the gas market looks well supplied. Record demand is being met by new supply, and the 2027 strip reflects that.

We see a larger step-up in demand from LNG and power arriving late in 2027 and into 2028.

Our business is built to perform in exactly this kind of year. With our peer-leading low base decline, we can sustain our production with a low reinvestment rate, and our 2027 hedge position protects the cash flow that funds it.

That same low decline, coupled with exceptional and cost-efficient inventory, gives us the flexibility to respond to changing market conditions with limited impact on production.

We also have levers if prices weaken further, including the timing of turn-in lines, completions timing, and refrac pacing. We'll pull these levers when they create value rather than push volume into a weak market. We'll provide our full 2027 outlook with fourth quarter results.

On the Barnett acquisition, we closed on September 15 and added more than 65 million cubic feet equivalent per day of production, more than half of which is liquids, along with approximately 350 billion cubic feet equivalent of PDP reserves, further strengthening our low decline production profile.

The assets include approximately 117,000 net acres, primarily in Montegue County, approximately 1,000 gross operated wells with a 9% annual decline, and significant operated midstream infrastructure, including a gas plant with 180 million cubic feet per day of capacity, approximately 340 miles of gas gathering lines, and an additional 225 miles of water gathering systems.

Importantly, the liquids-rich nature of these assets further diversifies our production mix and enhances our margin opportunity.

Liquids now represent 20% of our total production and contributed approximately 30% of our natural gas NGL and oil revenue in the third quarter.

We're excited about what these assets bring to BKV: more low-decline production, additional reserves, greater liquids exposure, and an expanded midstream footprint. They also create meaningful opportunities to apply BKV's operating playbook, grow margins, and unlock value from the Barnett.

We look forward to further assessing the inventory development opportunities within this acreage as well.

We have a strong acquisition track record. With the scale, capabilities, and technology we built in the Barnett, we expect to realize significant torque or incremental value above our underwriting assumptions, as we have done with our previous Barnett acquisitions.

On acquisition operating costs, we expect LOE to increase modestly in the near term as we integrate the assets with a goal of bringing LOE towards the low 50s per Mcfe range over time.

We also expect the acquisition to have a slightly favorable impact on GCPT with the addition of Owned Midstream.

We will apply the same disciplined operating approach that has driven meaningful cost improvements across our existing Barnett operations while leveraging the acquired midstream infrastructure to capture more margin per unit of production.

Turning to carbon capture. Barnett Zero, Cott on Cove, and Eagle Ford are all injecting CO2 and generating 45Q tax credits. Combined, these projects have injected approximately 122,000 tons of CO2 through the end of the third quarter.

The Barnett acquisition also adds a fourth operated carbon capture project to our growing portfolio. The [Buy] project captured more than 100,000 metric tons of CO2 over the preceding 12 months through the first quarter of 2026, and we are now integrating it into our operating model.

With these 4 operating projects, we now have a portfolio injecting approximately 350,000 tons of CO2 per year, providing a meaningful and growing foundation of CO2 sequestration and 45Q tax credit generation. And we're continuing to build on that foundation.

Our East Texas project remains on track to begin operations in mid-2027, adding a fifth injecting project to the scaling portfolio.

We're also advancing our development projects with Comstock in East Texas and High West in Louisiana, where Class VI permit applications continue through regulatory review.

Together, our operating assets and advancing development pipeline keep us firmly on track towards our target of 1.5 million tons per year of CO2 injection in 2028.

Stepping back, the common thread across our upstream, midstream, marketing, and carbon capture businesses is capturing more value from every molecule we produce, not simply producing more molecules.

The third quarter was our first full quarter marketing all our own natural gas.

That gives us direct control over where and how our production is sold and lets us retain economics we previously paid to third parties.

Our owned gathering and processing, now including the plant we just acquired, captures midstream margin on our own volumes.

Our power projects are designed to run on BKV-produced gas, creating a long-term in-house customer.

And with Verra verification, we can now deliver carbon-sequestering gas, a first-of-its-kind carbon-neutral natural gas product to customers with the carbon value-adding margin beyond our 45Q tax credits. Each of these adds margin on top of the base commodity price.

Together, they're how our closed-loop strategy shows up in realized economics, and we look forward to sharing more of that progress as we move into 2027.

With that, I will turn the call over to our CFO, David Tameron.

David Tameron

Thank you, Eric. Before turning to consolidated financials, let me begin with power. Pemol delivered another strong quarter of reliable operational performance.

Capacity factor reached 72%, up 2% year-over-year, with an equivalent availability factor of approximately 96%, reflecting continued disciplined execution at the complex.

Gross power-adjusted EBITDA was $34 million before corporate expense allocations. Financial results fell short of expectations as continued solar and battery storage additions weighed on peak pricing realizations despite record ERCOT demand.

Near-term pricing doesn't change our long-term view. If anything, it reinforces the value of the long-term contracts we're pursuing. Power's strategic growth program continues to advance in response to strong potential customer demand, with capital deployment accelerating.

During the quarter, we invested approximately $116 million of strategic growth capital. This was below our expected range as certain planned expenditures shifted into the fourth quarter.

We now expect fourth-quarter spending of approximately $240 million to $270 million. The increase is largely driven by our new 400-megawatt Phase 1 development at Temple and is directly tied to counterparty demand.

This spending supports 2 independent commercial processes at Temple and Jack County, and in both cases, commercial agreements with our counterparties limit our capital at risk.

Turning to consolidated financial results. We reported adjusted EBITDAX of $133 million compared with $101 million in the third quarter last year. Adjusted net income attributable to BKV was $40 million or $0.36 per diluted share.

Total capital expenditures were approximately $187 million versus the midpoint of guidance of $245 million.

Power-related capital was $116 million, while upstream, midstream, CCUS, and corporate capital totaled $71 million. Both of these were below our expected midpoint.

Adjusted free cash flow was approximately $31 million, excluding strategic power growth capital. This brings year-to-date free cash flow before strategic power capital expenditures to over $91 million.

Turning to our balance sheet. It remains strong and well positioned to support our strategic growth initiatives. We have built substantial liquidity to support our targeted 2027 power build-out and to execute against the timelines that matter to prospective customers.

At quarter-end, we had approximately $620 million of cash and cash equivalents and total liquidity of approximately $1.2 billion, which is $327 million higher than last quarter-end.

Net debt was $1.4 billion and net leverage was 2.4x. During the quarter, we further strengthened our liquidity through several actions.

First, we completed an upsized offering of 1.625% convertible notes, raising $575 million. The associated capped call transaction is designed to mitigate dilution until our stock reaches approximately $48 per share.

The proceeds funded the Bard acquisition, enhanced liquidity, and positioned us to retire the Power JV shareholder loan as planned.

Second, we entered into an equipment financing arrangement for the initial 200 megawatts of modular engines, providing up to $160 million of financing and further supporting near-term liquidity.

Third, BPP U.S. contributed approximately $65 million during the quarter. For the remainder of the year, we expect an additional $80 million to $100 million of partner contributions, with the large majority expected to help fund the phase development at Temple.

I also want to be clear about how we're approaching capital allocation through our anticipated power build. Our first priority is funding the upstream program that sustains production and cash flow, supported by our hedge book.

Second is protecting the balance sheet. We intend to keep net leverage at levels appropriate for each of our business units, with power-related project finance ring-fenced through construction.

Third is investing in growth only where commercial protection is in place, as with the cost reimbursement agreement Chris described in our previously announced hyperscaler backstop on our CCGT equipment through March 31, 2027.

We evaluate every growth dollar, including power, through a lens of returns, not just EBITDA.

We'll fund that growth with a mix of operating cash flow, partner capital, equipment financing, and project-level structures designed to limit dilution. Turning to hedging. In our upstream business, we have approximately 63% of our remaining 2026 natural gas production hedged at an average price of $3.89 per MMBtu.

For 2027, we have hedged approximately 472 million a day through swaps at $4 per MMBtu and collars with average floors of approximately $3.30 per MMBtu. We have also hedged roughly 20,000 barrels a day of 2027 NGL volumes at a blended price of approximately $28 per barrel.

In power, we have 700 megawatts hedged for the remainder of 2026 and approximately 700 megawatts for 2027. Our 2027 hedges consist entirely of spark spread hedges.

Finally, we have updated our guidance to reflect the acquisition and our latest outlook.

We now expect production to exceed 1 Bcf a day, a meaningful milestone for BKV, while maintaining our original capital guidance other than the increase in the anticipated strategic power capital investment discussed earlier.

For full details, please see the guidance table in today's earnings release and investor presentation.

With that, I will turn the call back over to Chris.

Christopher Kalnin

Thank you, David. Before we turn to questions, I want to put the progress of the last 24 months into perspective.

Since becoming a public company just over 2 years ago, we have grown our upstream production from approximately 760 million cubic feet equivalent per day to over 1 Bcfe per day.

In carbon capture, we have grown from a single project, Barnet Zero, injecting approximately 140,000 tons of CO2 annually to a portfolio of 4 projects injecting CO2 at an injection rate of approximately 350,000 tons annually and scaling rapidly.

And in power, we have moved from owning 750 megawatts of equity generation capacity to over 1.1 gigawatts while making tangible commercial progress that positions us for meaningful organic growth in the years ahead.

That's significant, measurable progress across each of our business lines in just 2 years and a clear demonstration of our ability to execute and scale our closed-loop strategy.

What continues to excite me is the opportunity still ahead. We've built a differentiated energy platform with multiple avenues for growth, a disciplined approach to capital allocation, backed by strong demand fundamentals.

And we're confident in our ability to execute and build on this momentum, creating long-term value for our shareholders.

Operator, we are now ready to take questions.

Operator

[Operator Instructions]

Our first question comes from Gabe Daoud with Truist.

質疑応答

Gabe Daoud

I was hoping we could maybe just start with the events this week and a Blue Wave and the change in leadership there in Texas.

I was curious if maybe there's anything you could point to on the regulatory front, maybe ease some of the concerns out there from a timeline standpoint. It seems like everything is on track, but I'd love to maybe just discuss that or unpack that a little bit more.

Christopher Kalnin

Gabe, it's Chris here. Thanks. Great question. Obviously, we've been watching the situation in Texas very closely. I think, first of all, congratulations to the returning and the new folks that got elected this cycle.

I think if you look at what the dialogue has been around Texas, I think it's about balancing the need for growth and ensuring that Texas continues to be pro-business friendly while ensuring that the communities and the stakeholders involved are not disadvantaged.

And so I think with the governor-elect, Ms. Hinahulosa, I think you see this theme around ensuring that there is responsibility in how you develop these data center projects in particular.

And the good news is, I think the BKV strategy around engaging the community, dealing with water, local concerns, ensuring sound mitigation, ensuring bringing your own generation to the grid- all those things fit exactly what the governor-elect is looking for in these types of projects.

And the vast majority of the tax income stream actually goes to the school systems, which is near and dear to the heart of the governor-elect as well.

So, we think what's going to happen is there's going to be a high grading of projects; projects that addressed and have been holistic in their thinking around community impact and have balanced those considerations are going to be high graded, and those are the projects that are going to get blessed, and projects that are not considering those things are going to get slowed down.

So, I think it is a reckoning. I think Texas remains incredibly pro-business. So we're very excited about being there. But I think it's an exciting time for BKV because of our environmental credentials, our community credentials, and the projects that we're architecting exactly fit what the governor-elect is looking for.

Gabe Daoud

Maybe as a follow-up, maybe you can just articulate some of the outstanding items as you continue to progress commercial discussions with, I guess, a couple of different counterparties now.

And I guess, it seems like there's a race between 2. Just any color again around what could maybe materialize first between the 2?

Christopher Kalnin

So there's, I would say, Gabe, it's a good question. There are 3 dimensions that we are in the final stretch on. I think the first is the technical designs.

I think people take for granted how complicated these technical solutions are for developing power for data centers.

Everything from what is the heat rates that you're guaranteeing to what are the load ramps you're serving and how much backup power that you need to do in an island to design, for example, all have to be spelled out in excruciating detail.

And so there are just 1,000 technical design decisions that go into these projects that have to get documented and outlined.

The second is, of course, the commercial terms: everything from credit to who pays what damages if things go wrong, events that are not expected, who's at fault for what.

So think of, like, a large LNG deal: there are 1,000 gotchas you have to work through, and you have to think through various scenarios.

And then the third thing is just getting the commercial arrangements to accommodate a variety of regulatory scenarios. As we've talked about, we're in a situation where the regulatory environment continues to be dynamic.

And so as you contemplate that, you have to build into your agreements a decision tree of things that allow you to meet your time-to-power deadlines in a number of scenarios that could play out on the regulatory front.

So with those 3 things, I think again, these are things that we've been working on for the last several months. They're not new. But as I said, they just take time, effort, and compromise to get to the finish line.

Gabe Daoud

Certainly not going the timeline early 1Q '27, right, Chris?

Christopher Kalnin

As I said, we continue to target that timeline '26 to early '27. But we've also said at the same time, you've got to recognize that we've had a pretty significant political shift. We'll watch that.

But I think we're optimistic, and we're working with our customers to continue that execution timeline.

Operator

Our next question comes from Betty Jiang with Barclays.

Wei Jiang

First of all, congratulations on all the commercial progress that you've been making in a fairly short period. But following up on its question earlier about the political shift.

Chris, you mentioned islanded design earlier. Do you think this shift could move customer demand more towards behind-the-meter islanded design, as you mentioned?

And do you think that affects the progress for Temple and Jack County projects differently?

Christopher Kalnin

Yes. Betty, good to hear from you. It's a great question. Look, I think we've always been saying, and you'll be familiar with this, that long-term, you want to be grid-connected.

And so I think the islanded projects, the behind-the-meter setup, is a stepping stone to allow regulation and grids to catch up to where the demand and the power growth is coming from.

So think of it like a bridging solution. And our projects in both Jack and in Temple contemplate that. And particularly, what we have in our design, Betty, we start with an islanded solution, which then is completely agnostic of what's happening on the grid.

And that doesn't put any burden on ratepayers, and we've designed these projects not only to be not grid-connected initially, but to be investing immediately into the communities that we're involved in and incredibly responsible with the standards that BKV adheres to in all our businesses.

The second phase then is you get some level of grid connection, and you create an asymmetric relationship with the grid where you're able to dispatch more power into the grid than you're actually drawing. That's called a withdrawal-limiting point.

And so that structure in our minds is ultimately how you add additional dispatchable generation to the grid, protect the ratepayers from bearing the cost of the infrastructure while still enabling this additional generation that's been deployed to benefit broader society.

So that's the second stage. The third stage then is the grid ultimately upgrades to the levels we need over time, which it has to. The grid has not really been upgraded for 20 years.

So we're playing a degree of catch-up similar to our infrastructure and roads and rail and airports, et cetera. So the grid is just behind.

And so once the grid is fully upgraded- 765 kV lines, et cetera- then you fully connect everything. And you have a much more distributed and much more resilient energy system.

So we think it happens in 3 phases. BKV is leading the edge in all 3. And as you correctly pointed out, we're starting with what we think is the right answer, which is initially islanded in both projects and then rolling into withdrawal and then ultimately grid-connected.

Wei Jiang

So if I can follow that, though, given the regulatory change, is it fair to say that Phase 1 will still move forward no matter what's changing on the regulatory front, and you might just end up staying in that island Phase 1 phase for longer on both projects?

Christopher Kalnin

Yes. I think that's a fair assumption, Betty, because the islanded solution doesn't touch the grid. So the impact to ratepayers is not at all initially, at least.

So, to your point, having islanded solutions in our minds is a way to decouple what's going on regulatory-wise with the need for power for these leading AI frontier labs and hyperscalers. So, this is our solution that we're developing.

Again, we're working jointly with these potential customers in designing this, and this is where their headspace is at as well. So I think you're spot on that initially for the next few years, this is going to be the way that we see power built out here in the U.S. in the majority.

Wei Jiang

For my follow-up, if I can ask about just about the equity funding and how you think about as these projects progress, maybe walking through financing the equity component of this build-out.

I know there are intricacies with the interplay of when the equity capital needs to go out, when you can get financing for equipment and project financing, as well as the reimbursement from JV partners. So maybe just walk us through that process.

David Tameron

Yes. Betty, it's David. I'm going to answer your question a little more. So let me just cover the whole snapshot as I see it today.

And remember, you know this, but we've consistently financed growth with discipline. That we've done that not only since we've been public, but pre-public. That's going to continue going forward.

We're going to align that capital deployment with the commercial opportunities and obviously do that while keeping in mind shareholder returns and the balance sheet.

But just think about '27; let's talk about that first, and then I can answer a little more about the equity piece as far as it relates to project finance. So right now, if you look at what we've done, just take the annualized number for 2026.

If you annualize that on a leverage operating cash flow number, that's about $450 million. I mentioned liquidity in my script: $1.2 billion of liquidity within that is $630 million, $35 million, actually, of cash.

So you think about going into '27, you have $450 million of projected operating cash flow on an annualized basis, what we've done this year, another $600 million plus, you're at $1.1 billion, right, just as you move into '27.

Equipment financing, we talked about that. We had $160 million of equipment financing to finance that first 200 modular, and we have more opportunity to expand that.

We talked about partner capital. We mentioned in the release, $80 million to $100 million of partner capital expected in the fourth quarter.

Obviously, 25% of that is related to the power JV; that's 25% DP U.S., a partner there, and then we have the partner, as you know, on the CIP side.

And then finally, let me just talk about the capital stack. And this was alluded to, but where we are at today versus at least what we've announced today versus where we were at 3 months ago, you think about what's happened and strengthening that material, that commercial stack: the commercial support over $500 million of backstop, $200 million related to the CCGT that we talked about, the hyperscaler, another $374 million that we announced this morning.

So, significant commercial support there. So finally, to get to your question, with that as a backdrop, when we enter into the project financing, and again, we still expect to do that 70-30, 80-20, depending on the market, depending on what we choose to do there.

But think about that in those terms. When we announce them and get the project finance, once- for instance, let me talk about the Temple complex, and I'll just use that as an example. We have put in the equity upfront, as you know.

Once we go out to project finance, once we finalize a PPA, then we will be reimbursed for the amount of equity above that 30%. So there will be additional equity coming in from that once we announce that project financing. Does that make sense?

Operator

Our next question comes from Chris Baker with Evercore ISI.

Christopher Baker

I would love to hear a little bit more about just how the modular timeline is laid out from here.

Obviously, with the release, the step-up from 200 to 400, and then it looks like you have 600 on order. Can you just square that up with their permits and sort of what the rough timeline looks like from here?

Christopher Kalnin

Chris, good to hear from you. Listen, when it comes to the modular Phase 1 at Temple, remember, this is under the JV.

So, 75% us, 25% Bun Power. The way we're thinking about it, as we shared, is late '27, you get energization. You can think of the 400 megawatts in equal tranches.

So you can imagine an initial quarter of that coming online, and then you've got a series of quarters of that. So it comes on in quarters. It's like 100 megawatts per tranche. And you can imagine that rolling into '28. So within '28, you're fully ramped.

And then the extra 200, as you can imagine, these modular units are matched to the load profiles of these potential customers, the data centers. So as they build out their campuses, there's a lot of rationale to continue to add additional buildings.

And so you've got to preserve that ability to bring on additional power. And so the additional 200 gives you the ability to bring on additional power '29- '30 time frame.

So that load ramp fits very nicely with how the customers like to ramp their data centers if you think about, like, a data hall or 2 bringing on 100, 200 megawatts at a piece, that fits very nicely.

And so that's why we've gone ahead and preemptively procured that to make sure that as the customers grow, we can grow into their power needs alongside them and maintain that platform that we're building here.

And on the air permits, Chris, just on the air permits, we already have the 400-megawatt air permits approved. So that's already in hand.

Christopher Baker

And then just love to get an update as to how you're thinking about the economics with the subsequent orders.

Are these all the same resets that we've talked about in the past, and just how to frame that up for folks as we look at the next steps here?

Christopher Kalnin

Exactly. Everything we're doing is modular in design. So it's rinse and repeat, scalable, same exact equipment at every level, so we can build redundant spares. We can swap things out. We can create resiliency.

Remember, initially, this is an islanded mode. So you want to create as much economies of scale, economies of scope as possible.

So everything is going to be identical design, flat, all in proximity to the Temple Energy complex, leveraging the mechanics, the water, the platform we already have operating the 1.5 gigawatts already operating at Temple with incredible staff that operates there around the clock.

So all that infrastructure just is additive, and these designs are identical in how we scale so that there's a huge amount of fungibility.

Operator

Our next question comes from Jonathan Mardini with KeyBanc Capital Markets.

Jonathan Mardini

So you mentioned in your remarks that the batteries and renewables are moderating peak power pricing. Do you see that as a lasting structural shift in the ERCOT power pricing market?

And how may that be influencing the pricing or structure of the PPAs under your discussion?

Christopher Kalnin

Jonathan, good question. So the renewables and batteries are a legacy of the IRA bill. A lot of that was stuff that was planned in the 2020- '21 time frame.

It came on to ERCOT. So you're just seeing an overhang of that build coming online and hitting the market. At the same time, as you know, we've been going through this batch process in ERCOT, where the new demand has been essentially prevented from coming on the grid.

And so you have sort of hundreds of gigawatts of new demand that's been sitting on the sidelines waiting to be connected while you've had this residual IRA-backed solar and battery come on the grid.

So it's really, I would call it, an anomaly, if you will. The reality is the demand is growing, and there's no more dispatchable generation. And really, you don't see the same number of solar and renewable projects coming online anymore because of the change in the regulation.

So what we foresee happening in the next few years, and your point about strip is a good one, and I'll come back to it, is that you don't have any more supply coming online.

And with prices where they are, you certainly aren't going to stimulate any more supply coming online, especially dispatchable. Meanwhile, every year, just organically, Texas power demand has been growing. We had another peak this year. So that sets up for an incredibly exciting merchant market over the next 5 years.

And we're actually very bullish on the curve. I always tell people, if you're willing to sell me several gigawatts of power at today's strip, I'll buy it. But of course, people can't do that.

So the reality is everyone who's looking at additional or incremental large megawatts understands that they have to price that replacement or new generation economics, which is materially above where the curve is.

And so what you're seeing right now is that demand is being held back because of the batch process, and then you've got a hangover, if you will, using a little bit of a crew term of solar supply that's come online.

But that works its way through the system pretty quickly, and then you've got this growth in demand that's coming. And if you don't get dispatchable, that's going to create incredible scarcity of pricing as you get towards the end of this decade, I should say.

Jonathan Mardini

I appreciate that insight could be transitory as demand ramps. As part of that. So you wouldn't see that dynamic impacting the structure and economics of the PPAs that are under discussion?

Christopher Kalnin

Absolutely not. So the PPA discussions are purely based on the cost and the returns around new generation, and the potential customers understand that.

So you're going to price off new generation economics and then the cost of capital on top of that.

Operator

Our next question comes from Scott Gruber with Citigroup.

Scott Gruber

I want to come back to the Island power project. Chris, you mentioned that you have the air permits required to run the modular capacity.

Does the offtaker have the permits they require to construct and operate the associated data center facilities to keep the project moving forward?

Christopher Kalnin

Scott, good to hear from you. I will not be able to comment on where that potential offtaker is or what they have.

I can tell you that we are absolutely advancing the projects alongside them in a way that puts us in a pole position to have time to power. The permits depend on what you're talking about.

And what I can say is our location, where we've sited these projects, and our relationship with the county, with the local stakeholders, is incredibly strong.

The progress we've made on designs, everything that you can contemplate that is needed for these projects is being pursued or thought through very quickly and carefully.

And so, I can't comment for the potential customer, but the feedback we've received is that this project is one of the highlights of where they want to deploy their next potential batch of chips in 2027.

So I'm trying to answer your question indirectly, but you can imagine that their project has a lot of what they need to be able to advance with us at this pace.

Scott Gruber

And I know it's tough to speak on their behalf, but I just wanted to get the color around the timing risk here. So I appreciate your comments.

And then my follow-up is: you're progressing conversations with multiple counterparties on the power side.

Has your ability to sell offset credits impacted those discussions? Has that been a factor? Or are we really still focused on time to first power and just securing the generation capacity over the long run?

Christopher Kalnin

Scott. Look, when it comes to credit, obviously, we're hyper-focused on that, no pun intended.

In terms of the credit quality, I can say that the way we're structuring this- and David, you should comment here- it's going to be very financeable.

I think both sides understand that for these projects to really be executed, you have to have the project financing capability. That's the whole point of the PPA structure to some degree. And so it is a central point of our discussions. But David, maybe you can comment on that.

David Tameron

Scott, it's a good question. Look, there's a model out there for doing this. You've seen that from some of the projects that have been announced, and I would expect us to follow the same model as well.

So obviously, credit is important. As we see the scenario today, we have complete confidence that we can get this project financed, and I'll just leave it at that.

Scott Gruber

I may not have been clear. I was actually referring to your ability to sell the carbon offset credits and whether that's impacting the commercial discussions and attracting customers to your projects.

Christopher Kalnin

Sorry, Scott, we misunderstood you there. In terms of the carbon offsets, I would say it depends on the customer.

One of the potential customers is very focused on that. It is a central part of the thesis. The other customer is pretty agnostic to it; another potential customer, again.

So it really depends on the customer. But I would say for certain customers, it is absolutely critical. And the fact that we have Verra certification on these carbon offsets is a huge milestone, and it really brings substantial credibility.

So we're optimistic that for a subset of our core targeted customers, they're going to absolutely value this, and we're going to create a premium offer.

Operator

[Operator Instructions]

Our next question comes from Jacob Roberts with TPH Research.

Jacob Roberts

I wanted to ask about the power side of things. I think you responded earlier to a question about kind of the pipeline of solar and battery and the impact of you guys seeing that rolling off.

But I'm just curious: is the function of your hedge book to protect against that in the near term? And then how should we think about the hedge book longer dated beyond kind of what we see through 2027 at this point?

Christopher Kalnin

Jake. So the hedge book typically is a rolling 1-year sort of hedge book on the power side.

Generally, what we try to do is cover our fixed costs, so when you think about just basic operating costs, G&A, financing, et cetera, the strategy is very much about just ensuring the coverage of that cost and then maintaining optionality to participate in the scarcity pricing of ERCOT.

So it's less about trying to be very acute with picking the curve and more about just getting predictability in the base cash flows that are needed to cover the fixed cost of the operating business.

As you look out in time, as I mentioned, the curve in our minds gets very bullish, not the current strip, but where the fundamentals point, and I think there are a lot of analyst reports that support that.

And so we're going to be looking to more optimistically evaluate the potential to hedge into those markets in the future.

As it is right now, I think it's very much just about protecting fixed costs and doing that on a rolling annual basis. And so that's how we've done it. Yes.

David Tameron

And Jake, the only thing I would add is it's David. Obviously, as we contemplate a PPA, right, that's effectively a natural hedge, right? So we'll have to adjust our hedging position appropriately.

But as we talked about, the model is moving from a commodity-based model to more stable long-duration cash flows. So as we do that, we'll reevaluate. But yes. To Chris' point, we'll protect the capital program in the meantime.

Jacob Roberts

And I joined late, so I apologize if you covered this, Chris, but I think you mentioned in the prepared remarks some portfolio optimization opportunities. I was wondering if you could just expand on that a bit.

Christopher Kalnin

So if you look at our portfolio, and we've talked about this, there are definitely areas that we can continue to optimize.

We're looking at, certainly on the upstream side, I think there are opportunities for us to monetize, and we've seen some of the private market transactions out there that seem to have pretty attractive metrics.

And so that would be a very nice source of potential funding if we decided to go that route; we'll be inquisitive, and we'll be open to inbound as well as opportunities there. So I think that's one dimension that will remain inquisitive.

I think David hinted at the partner capital that we have; obviously, as we scale the power business and derisk these projects, the ability to bring in partner capital at a premium is going to be another area that's going to optimize our portfolio and give us the ability to capture some value along the way and continue to fund the business accretively.

So I would say those are probably the 2 primary. And then on the carbon capture business, we've got a great partnership with CIP, Copenhagen Infrastructure Partners.

They continue to be a 49% partner in all those projects and are very excited about our future there. We have reached the end of our question-and-answer session.

Operator

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Chris Kalnin for closing comments.

Christopher Kalnin

Thank you, operator, and thank you, everyone, for your interest in BKV. I remain very excited about our future.

I think there are many exciting developments, and we appreciate your interest and your faith in our company, and we look forward to future announcements. Thank you.

Operator

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