BKV Q3 Production Tops Guidance as Power Earnings Fall Short

BKV Corporation reported stronger third-quarter upstream production and higher adjusted earnings, but its power business fell short of guidance as the company continued committing capital to a potential multi-gigawatt generation platform in Texas.

For the three months ended September 30, 2026, net income attributable to BKV was $29.4 million, down from $83.5 million a year earlier. Excluding items including unrealized derivative gains and losses and other nonrecurring transactions, adjusted net income attributable to BKV rose to $39.9 million from $23.1 million. Adjusted diluted earnings were $0.36 per share, compared with $0.27 a year earlier.

Adjusted EBITDAX attributable to BKV increased to $132.7 million from $101.3 million. Adjusted free cash flow before power growth attributable to BKV was $31.2 million, more than double the $15.0 million reported for the prior-year quarter.

Upstream production exceeds guidance

Average net production reached 981 MMcfe per day, above BKV’s guidance range of 935 MMcfe to 965 MMcfe per day. Average realized prices excluding derivatives were $2.31 per Mcf for natural gas and $23.05 per barrel for natural gas liquids, while average cash operating costs were $1.42 per Mcfe.

Accrued development capital expenditure was approximately $51.5 million, below the company’s guided range of $55 million to $75 million. The upstream and midstream segment generated $122.1 million of adjusted EBITDAX during the quarter.

BKV completed a Barnett acquisition on September 15 that added about 65 MMcfe per day of net production, 0.35 Tcfe of proved developed producing reserves and approximately 117,000 net acres. The acquired assets also include around 1,000 gross operated wells, a 180 MMcf-per-day cryogenic gas plant, gathering infrastructure and an operating carbon-capture facility with a trailing 12-month injection rate exceeding 100,000 metric tons per year.

The company said the transaction expanded its liquids-rich production and strengthened its contiguous position in the Barnett Shale. BKV is assessing the acquired drilling inventory and potential operating efficiencies.

Power results miss the company’s range

BKV’s power operations generated 2,317 GWh during the quarter. The Temple I and Temple II plants recorded average capacity factors of approximately 76% and 67%, respectively, with an average spark spread of $21.18 per MWh.

Power Adjusted EBITDAX was $29.5 million, including allocated general, administrative and marketing expenses, below the company’s $45 million to $65 million guidance range. After noncontrolling interests, adjusted EBITDAX attributable to BKV from the power segment was approximately $21.0 million.

BKV owns a 75% interest in the joint venture holding the approximately 1.5-GW Temple generation assets. It has ordered roughly 600 MW of modular generation equipment for delivery in 2027 and 2028 and reserved about 1.2 GW of combined-cycle gas turbine capacity for delivery beginning in 2028. Together with the existing plants, those additions could bring potential capacity to about 3.3 GW, although development depends on financing, regulatory approvals, commercial negotiations and long-term power purchase agreements.

The company disclosed a backstop arrangement with an investment-grade hyperscaler covering up to roughly 90% of payments and deposits under an approximately $200 million turbine equipment agreement through the first quarter of 2027. It also entered into a cost-recovery agreement of up to approximately $179 million with an AI company related to modular expansion before a power purchase agreement is signed. BKV cautioned that these arrangements do not guarantee that PPAs will be completed.

Fourth-quarter capital spending to focus on power growth

For the fourth quarter, BKV expects net production of 1,010 MMcfe to 1,030 MMcfe per day, reflecting a full quarter of production from the September acquisition and an assumption of ethane rejection. Development capital expenditure is projected at $55 million to $75 million.

Gross accrued capital expenditure is expected to total $315 million to $385 million, including $240 million to $270 million for strategic power investment and maintenance. BKV attributed the higher strategic power spending to additional modular equipment, partially supported by the cost-recovery agreement. The company forecasts $80 million to $100 million of fourth-quarter contributions from its power and CCUS joint-venture partners, subject to actual spending and required approvals.

Fourth-quarter Power Adjusted EBITDAX is expected to be $10 million to $30 million. BKV also guided to lease operating and workover costs of $0.52 to $0.56 per Mcfe and gathering, compression, processing and transportation costs of $0.75 to $0.79 per Mcfe.

At September 30, BKV had approximately $1.16 billion of liquidity. Its net leverage ratio was 2.41 times, based on $2.01 billion of total debt, $635.8 million of cash, cash equivalents and restricted cash, and annualized adjusted EBITDAX of $568.5 million.

CCUS platform expands

BKV injected approximately 55,200 metric tons of carbon dioxide during the third quarter. The company now has four operating carbon capture, utilization and sequestration projects with a forecast annual injection rate of about 350,000 metric tons.

BKV is targeting an injection rate of 1.5 million metric tons per year in 2028 from operating and in-development projects. It also received Verra carbon-credit verification during the quarter, which the company said enables delivery of carbon-sequestered gas under an agreement covering up to approximately 10 MMcf per day. Deliveries have not yet begun and remain subject to token transfers.

The company’s growth plans remain exposed to natural-gas and power-price volatility, acquisition integration, financing availability and regulatory approvals. Its proposed power expansion also depends on securing satisfactory long-term contracts, while planned CCUS projects may require final investment decisions, external funding and sufficient carbon dioxide volumes before reaching the targeted scale.