Q1 2025 BKV Corp Earnings Call
Good morning, everyone and thank you for joining BKB Corporation first quarter 2025 earnings conference call.
Chris Coleman: With me today are Chris Coleman.
Erik Jacobsen: Chief Executive Officer, and Erik Jacobsen President of upstream.
Erik Jacobsen: Before we provide our prepared remarks, I would like to remind all participants that our comments today will include forward looking statements.
Erik Jacobsen: Subject to certain risks uncertainties and assumptions.
Erik Jacobsen: Actual results could differ materially from those in any forward looking statements.
Erik Jacobsen: Surely we may refer to non-GAAP measures or 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 a reconciliation of any non-GAAP financial measures.
Erik Jacobsen: Please see the company's public filings, including the form 8-K filed today.
Erik Jacobsen: We have also posted an updated investor presentation on our website.
Erik Jacobsen: I'd now like to turn the call over to our CEO, Chris Kelvin.
Chris Kelvin: Thank you David and thank you to everyone for joining us to discuss our first quarter results.
Chris Kelvin: <unk> business model is poised to grow rapidly in multiple economic scenarios.
Chris Kelvin: K V sits at the confluence of some of the biggest mega trends in energy.
Chris Kelvin: It's one of the largest natural gas producers in Texas, We expect natural gas demand to continue to grow robustly, both domestically and globally.
Further.
Chris Kelvin: Efforts to Decarbonize, the global economy continued to show demand for low carbon gas.
Chris Kelvin: This trend has helped to accelerate growth in our carbon capture business and the demand for our carbon offsets that are produced by this business.
Chris Kelvin: Further we remain confident in the robustness of the 45 <unk> tax credit.
Chris Kelvin: As this part of the tax code has strong bipartisan backing and the current administration has vocalized its support of the carbon capture business.
Chris Kelvin: Finally, the U S power boom, driven by cloud compute and generative AI is real and happening and continues to drive strong projected growth in the power industry with Texas expected to see some of the strongest demand growth across the country.
Chris Kelvin: Our power joint ventures, modern combined cycle gas fired power plants located in temple, Texas are ideally situated to serve this insatiable power demand growth.
Chris Kelvin: BK vs four business lines of upstream midstream carbon capture and power generation, each standalone make money, but in combination create premium margins and differentiated products like carbon sequestered gas or C. S. G. A completely decarbonize natural gas.
Chris Kelvin: Product that is scalable affordable will lead certified commands a premium to regular natural gas.
Chris Kelvin: The current macroeconomic landscape has headwinds, including persistent inflation the potential impact of tariffs and scenarios of slowing economic growth.
Chris Kelvin: However.
Chris Kelvin: Despite these challenges U K V is a new kind of energy company that is vertically integrating into the value chain and differentiating how energy gets developed and sold.
Chris Kelvin: Our proactive management of our supply chain puts us in a position, where we project minimal supply chain disruptions and expect limited cost impacts to our businesses.
Chris Kelvin: Reinforcing our ability to deliver value in any environment.
Chris Kelvin: The first quarter exemplifies VK vs continued delivery on our promises showcasing our company's sad and did culture, where we say what we are going to do and then do it.
Chris Kelvin: Let's start with our upstream and midstream businesses.
Chris Kelvin: Once again, we delivered on the high end of expectations.
Chris Kelvin: Our upstream and midstream businesses are operating at full throttle delivering strong financial and operational results.
Chris Kelvin: Our assets in the Barnett and northeast Marcellus continue to showroom for optimization as we drive down development costs per lateral foot, while delivering at or above our sanction type curves.
Chris Kelvin: Further Dk V continues to defy gravity with our low base production decline rates.
Chris Kelvin: We are driving cost efficiencies across our asset base and enhancing our operations with strategic initiatives that include the use of data and analytics.
Chris Kelvin: This quarter's results reflect outstanding operational execution.
Chris Kelvin: Disciplined financial management, and our team's ability to deliver consistently.
Chris Kelvin: These outcomes reaffirmed the strength of our ability to execute and our confidence in the Barnett shale as a play with significant continued running room for.
Chris Kelvin: Where we have over 15 years of inventory and ability to serve long term natural gas demand.
Chris Kelvin: The Barnett is geographically advantaged with direct access to unconstrained midstream infrastructure proximity to booming LNG export markets and have front row positioned to supply natural gas to the growing AI data center market.
Chris Kelvin: The Barnett is experiencing a true Renaissance and we believe it can compete with the best basins in the country when comparing the full cycle economics.
Chris Kelvin: In power, we outperformed our guidance in the first quarter and that is the result of the combination of prudent financial planning and strong operational management that allows the temple plants to maintain equivalent availability factors at approximately 90% for the plants inclusive of downtime for maintenance.
Chris Kelvin: While having significant capacity factor running room to capitalize on power demand growth and scarcity pricing in the ERCOT market.
Chris Kelvin: As a result of the comprehensive maintenance programs conducted in the last two quarters. The temple plants are well positioned to run at full capacity through the peak summer seasons in Texas.
Chris Kelvin: The demand growth in ERCOT is real fueled by the expansion of data centers population increases economic development industrial growth and the broader shift towards electrification.
Chris Kelvin: Our momentum in the discussions with Hyperscale is in data center companies underscores the strength of our position in Texas as one of the go to energy companies to serve the upcoming low demand.
Chris Kelvin: We are active in discussions with these potential customers and expect that agreements with these customers will be accretive to our power business we.
Chris Kelvin: We believe our existing power assets combined with the ability to serve Decarbonize natural gas in the form of C. S. G. Ideally positions BK vs. In discussions with data center companies that need power, but also want to Decarbonize power and who are willing to pay a premium for this.
Chris Kelvin: Our seats U S business is consistently hitting milestones that we set out to achieve.
Chris Kelvin: Our team has been operating our flagship Barnett zero facility safely and reliably for over a year and both our cotton Cove and South Texas carbon capture projects remain on track for initial injection of C. O. Two next year.
Chris Kelvin: Our recent announcement of our partnership with Comstock resources, helping them to decarbonize their midstream assets in the Haynesville underscores the momentum we have here.
Chris Kelvin: I want to take a moment to thank Jay Allison and his team for their belief in BK V and I look forward to a strong partnership with Comstock in our carbon capture projects with them.
Chris Kelvin: In previous calls I have referenced working towards a potential joint venture partnership to help scale our C. C U S business.
Chris Kelvin: I am pleased to emphasize that we have signed definitive agreements with Copenhagen infrastructure partners or C. I P for their commitment to invest $500 million in our carbon capture business with the ability to invest up to $1 billion upon mutual agreement.
Chris Kelvin: This creates an exciting new platform for us to accelerate the growth in the carbon capture business, while accretively diversifying the source of capital for that growth.
Chris Kelvin: T I P brings deep expertise proven execution capability and significant capital investment.
Chris Kelvin: All critical for the continued growth of our C. C U S business.
Chris Kelvin: They're global track record in developing complex projects and commitment to decarbonization makes them an ideal partner for us as we work to accelerate our six U S project pipeline and maximize the impact of our projects.
Chris Kelvin: We are incredibly excited about the prospect of serving more customers and growing our geographic footprint across the U S.
Chris Kelvin: D. K V has built a new kind of energy company that focuses on delivering energy solutions across our four business lines.
Chris Kelvin: We enjoy the best of both the traditional energy industry, while accretively participating in the energy transition.
Chris Kelvin: B K V has the ability to offer decarbonize our round the clock energy that is scalable sustainable and profitable and the momentum we have is showing results.
Speaker Change: With that I'd like to turn the call over to Erik Jacobsen, our president of upstream to go through the details of our upstream midstream and carbon capture businesses.
Chris Kelvin: Eric.
Speaker Change: Thank you Chris.
Speaker Change: BK vs upstream business in northeast, Pennsylvania, and the Barnett continues to deliver outstanding results fueled by strong production and top tier operational efficiency.
Speaker Change: I want to take a moment to reiterate that we view our position in the Barnett shale is an important strategic advantage for our upstream business. The Barnett shale is undergoing a true Renaissance and we're leading the charge. The basin is now proving its resilience and value in a big way and are re imagining of it is paying.
Speaker Change: Dividends.
Speaker Change: With more than 15 years of high quality inventory highly desired and sought after low nitrogen content gas limited to no takeaway capacity constraints and a peer leading low base decline. The Barnett offers us significant running room operational flexibility and resilient cash flow generation.
Speaker Change: It's uniquely positioned at the intersection of two transformative forces the LNG export boom and the explosive AI driven growth of data centers literally at our feet. We're unlocking value through disciplined capital efficiencies continued optimization of capex versus development.
Speaker Change: And deep basin knowledge and expertise the Barnett is not only back it's thriving our first quarter production was 761 million cubic feet equivalent per day coming in above the midpoint of guidance. This was accomplished at meaningfully lower capex investment in forecast and yet at or even slightly.
Speaker Change: [noise] ahead of planned activity levels for the first quarter. The development Capex spend was $48 million, 26% below the midpoint of our guided range for the quarter. This lower than forecast Capex number was the result of development efficiencies carried forward from Q4 of 'twenty 'twenty four we were a.
Speaker Change: To further these efficiencies and maintain a strong safety record while drilling even more challenging wells in the first quarter. We recently drilled for example, two horizontals with 110 degree bends mid lateral with our one rig Barnett program.
Speaker Change: We also achieved a BK V record of completing 14, Barnett new well frac stages in 24 hours. This quarter. These efficiencies also enabled the acceleration of turn in lines or tills.
Speaker Change: I would like to note that we anticipate second and third quarter capex to be higher than first quarters. Following the planned cadence of our upstream investment.
Speaker Change: Given our advanced purchase of long lead procurement items for 2025, Capex to get ahead of potential tariff impact at.
Speaker Change: And our continued increase in efficiencies, we do not expect material capital inflation impacts in our 2025 program. In fact are 2025, well costs are coming down considerably. For example, we are approaching a double digit percentage cost reduction in cost per lateral foot for our new drills now when compared to a few.
Speaker Change: Quarters ago in Q1, we put six new wells into production with the aggregate of the six wells producing at or above sanction type curves. This along with accelerating these new well tills and continuing our highly robust re frac program helped us achieve overall production above the midpoint of the range for the quarter.
Speaker Change: We continue to expect a ramp in our production in the second half of 'twenty 'twenty five as natural gas strip pricing remains elevated moving into 2020 six and we forecast a Q4 2025 exit at production slightly above that of Q4 of 'twenty 'twenty four.
Speaker Change: We will deliver on all of this while maintaining our flexible yet disciplined capital investment framework.
Speaker Change: Across the Barnett N NEPA, our upstream business continues to be the backbone of our closed loop operations model and the cash flow generated from this business line. It makes it exceptionally well suited to maintain strong performance now and well into the future with low base decline disciplined cost management.
Speaker Change: New midstream takeaway constraints and a high quality long duration inventory.
Speaker Change: Our upstream assets are built for resilient performance and capital efficient development.
Speaker Change: These combined advantages.
Speaker Change: Your pin our ability to deliver sustainable long term value and consistently meet or beat performance targets.
Speaker Change: In addition to stellar performance in our upstream business I am also excited to share highlights from our growing six U S business.
Speaker Change: The announcement of our joint venture with CIP is needle moving and it not only de risks, but accelerates our six U S development efforts in 2026 and beyond.
Speaker Change: In the near term, we are hyper focused on optimizing our existing Barnett zero six U S operation and moving forward or other F. I D and pre F. I D projects here are several highlights of what we have accomplished in six U S. Since our last call.
Speaker Change: In the first quarter behavior submitted a class six permit application to the Louisiana Department of energy and natural resources for five C. O two injection wells totaling 10 million tons per year of injection capacity as a part of our high West Ccs project. Additionally, we signed an exclusive L O.
Speaker Change: Lie with Comstock resources to develop six U S projects at two of Comstock natural gas processing facilities in their western Haynesville operating area in East, Texas.
Speaker Change: As part of the agreement the company's plan to develop six U S injection wells to permanently sequester C. O two waste produced at Comstock, Bethel and Mark Kaye natural gas processing and protects production facilities in Texas.
Speaker Change: Our cotton Cove project, which previously reached F. I D remains on track for first injection in the first half of 2026 and the six U S project in South, Texas with a leading midstream energy company that we announced in February is similarly on track to have initial injection of C. O. Two in the first quarter of 2026.
Speaker Change: Operations at our flagship six U S projects Barnett zero continued to be highly reliable reliability for Barnett zero in the first quarter was 100% with nearly 39000 metric tons of Sidoti injected.
Speaker Change: Once again, we are delivering on what we promised our six U S strategy is being validated by our actions we.
Speaker Change: We announced an exciting six U S partnership with a global infrastructure leader in CIP, we are developing natural gas processing projects with multiple parties across multiple basins, including a major midstream company in a pure upstream company.
Speaker Change: We have submitted and received approval for four class II injection wells in the state of Texas to date, along with submitting three class six permit applications across Texas and Louisiana.
Speaker Change: And we have a flagship operating six U S facility in Barnett zero that has delivered consistently and safely since initial injection in late 'twenty or 'twenty three.
Speaker Change: With all of these advancements in our Ccs business, we have clear line of sight to our 1 million ton per year injection run rate by the end of 2027, we are building a world class Ccs portfolio and we're just getting started.
David Cameron: With that I will hand, the call over to our CFO, David Cameron to go over some details on our power business and BK vs financial results.
David Cameron: Thanks, Eric first I would like to say that I'm honored to step into my new role as CFO.
John Jimenez: I assumed from John Jimenez as of April 1st.
David Cameron: Over the past several years I have taken on increasing responsibilities within Bkb's finance organization.
David Cameron: And I'm excited to now lead these efforts as the company continues its era of rapid growth.
David Cameron: Before we move into the financials I did want to provide an update on our power operations.
Speaker Change: BK B remains very bullish on power and the fundamental supply and demand outlook in Texas underpins our enthusiasm.
David Cameron: In its latest forecast.
Speaker Change: Caught revises 2031 load forecast higher by 68 Gigawatts.
This is a 45% increase from 2020 for projections.
Speaker Change: What the uptake being primarily driven by data centers.
Speaker Change: Since its last forecast ERCOT projection for datacenter load specifically is up by over 150%. These trends are strong and will continue to accelerate as more projects are added to the queue.
Speaker Change: As it relates to BK V. Capitalizing on these markets one key advantage of our assets is that the tempo of plants are fully operational and capable of serving the market. Immediately. This is unlike new projects that are still at least three to four years away from completion.
Speaker Change: Now onto our power results from the first quarter.
Speaker Change: The typical power plants performed very well in the first quarter significantly beating guidance.
Speaker Change: For the quarter the power JV adjusted EBITDA was $20 million and BK vs implied 50% share was $10 million.
Speaker Change: This outperformance was driven by a cold snap of weather in Texas earlier, this year, which helped drive higher pricing.
Speaker Change: Looking at a few of the operational staff.
Speaker Change: Combined capacity factor during the first quarter was 50%.
Speaker Change: Total generation was nearly 1600 gigawatt hours.
Speaker Change: Power prices averaged 50 452 per megawatt hour and average realized spark spread was 25 39 per megawatt hour.
Speaker Change: As a reminder, our power JV is not consolidated as you likely saw in this morning's release, we are now reporting combined adjusted EBITDAX, which we define as our adjusted EBITDAX plus 50% of power JV adjusted EBITDA.
Speaker Change: As we move into the summer season, we are well positioned to take advantage of what we believe will be a robust power market in ERCOT.
Speaker Change: Conditions have intensified and projections for power pricing have increased.
Speaker Change: Based on our pricing outlook and current hedge position, we continue to target a 2025 gross power adjusted EBITDA range of $130 million to $170 million.
Speaker Change: Moving it off with the operational update I will now discuss PK vs. Overall financial performance during the quarter.
Speaker Change: But actual results for the quarter were led by continued strong performance from our upstream operations and better than anticipated natural gas pricing.
Speaker Change: Our combined adjusted EBITDAX came in at just over $100 million, which included 90 million from upstream and the previously mentioned 10 million from power.
Speaker Change: For the first quarter powered JV adjusted EBITDA represented 10% of our combined adjusted EBITDAX.
Speaker Change: We expect the power Jv's impact the overall 20 twenty-five results to continue to increase and ultimately represent close to 15% to 20% of BK vs full year combined adjusted EBITDAX.
Speaker Change: Overall PK be at a net loss in the first quarter of $79 million or a loss of 93 cents per diluted share.
Speaker Change: After removing unrealized derivative losses and other adjustments we had an adjusted net income up 35 million or a positive 41 cents per diluted share.
Speaker Change: Accrued capital expenditures in the first quarter were $58 million, which included 48 million for upstream development and 10 million for C. C. S. Another.
Speaker Change: This was significantly below the low end of our first quarter guidance range of $75 billion and reflected upstream items, Eric previously discussed.
Speaker Change: As well as lower than expected spending in our Ccs business.
Speaker Change: Looking ahead to the second quarter, we anticipate total capex will be between 75 and $100 million with 70 million go into the upstream and $20 million going towards six U S and other.
Speaker Change: Net production for the quarter is expected to fall between 775, and 805 million cubic feet per day.
Speaker Change: At the midpoint. This is up 4% sequentially from first quarter 2025 levels.
Speaker Change: Moving to the balance sheet at the end of one cube PK be at cash and cash equivalents of approximately $15 million or.
Speaker Change: Our debt leverage stood at less than 0.7 times net debt to adjusted EBITDAX.
Speaker Change: Liquidity at the quarter end, we completed a successful army L redetermination.
Speaker Change: Illustrating the strength of our business, we added an additional peg towards syndicate it.
Speaker Change: Our borrowing base to $850 million from $750 million and increased our elected commitment are out to $665 million from 600 billion.
Speaker Change: The company generated positive adjusted free cash flow in the first quarter of $6 million, which included premiums paid to enable colored for fiscal year 'twenty six and 2027.
Speaker Change: Excluding the premiums paid our adjusted free cash flow would have been $22 million and our overall adjusted free cash flow margin for the company would've been 10%.
Speaker Change: Regarding hedging I'd like to reiterate that our philosophy is to hedge approximately 50% of production 24 months out.
Speaker Change: Based on our current position for the balance of 2025, we have 58% of our natural gas hedged at an average price of $3 44 said per M. B to you and 43% of our Ngls hedged at an average of 21 73 per weighted barrel for 'twenty 'twenty six we have approximately half of our natural gas hedges at $3.
Speaker Change: 45 cents per M b to you.
Speaker Change: A little under 40% of our Ngls hedged at 20 201.
Speaker Change: I've covered a handful of our guidance ranges and you can refer to our second quarter guidance, which is detailed in the earnings release from this morning.
Speaker Change: I would note we are not making any changes to our full year 2025 guidance targets, which we originally released in February and.
Speaker Change: In summary, despite all the macro noise currently going on in the world.
Speaker Change: Our business is performing above expectations and our financial position remains strong.
Speaker Change: We continued to deliver on our promises continued to meet and beat guidance. It continued to achieve solid financial results.
Speaker Change: <unk> offers a unique investment opportunity through our winning combination of a strong up your upstream production in the Barnett.
Speaker Change: A growing power business in the heart of our ERCOT and our Ccs business with tremendous momentum.
Speaker Change: Our balance sheet is strong with net leverage ratio of less than 0.7 times.
Speaker Change: And particularly with our CIP partnership announcement. This morning, we have ample funding to deliver our growth targets at all aspects of our business.
Speaker Change: With that I would like to turn it back over to Chris to wrap things up.
Chris: Thanks, David.
Speaker Change: BK V is leading the way as we continue to grow and reshape the energy industry.
Speaker Change: We are well positioned to leverage future growth opportunities.
Speaker Change: This quarter, we continue to add to our executive leadership team, creating a new chief commercial officer role and welcoming the longer assignment to the BK V team.
Speaker Change: The locker has broad highly relevant experience identifying strategic and commercial opportunities.
Speaker Change: BK V delivered on promises this quarter, we delivered strong results on our key metrics.
Speaker Change: We brought in a new C. C O S JV partner in CIB and engage with Comstock to decarbonize their haynesville assets.
Speaker Change: We maintained our disciplined balance sheet and increased liquidity, while continuing to grow our businesses.
Speaker Change: We advanced our strategy across all our business lines.
Speaker Change: Teekay vs platform produces an unmatched winning offering of decarbonize our round the clock energy that is scalable sustainable and profitable. We believe our business model has multiple ways to win.
Speaker Change: With that operator, we are ready to take any questions.
Speaker Change: Operator, we are ready for questions.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Right.
Speaker Change: Operator are you there.
Speaker Change: Yeah.
Speaker Change: Yeah.
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Speaker Change: It gives us a few minutes, everybody where quite effectively operator.
Speaker Change: Operator.
Speaker Change: Yeah.
Speaker Change: Ladies and gentlemen, we are currently experiencing technical difficulties. Please standby the event where resumed momentarily again, we thank you for your patience. Please standby we will resume momentarily.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Once again, ladies and gentlemen, we do apologize for the technical difficulties, we will resume our Q&A. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Our question is coming from Scott Gruber with Citigroup. Please proceed with your question.
Scott Gruber: Yes, good morning.
Speaker Change: Hey, Scott.
Scott Gruber: Can you guys hear me.
Speaker Change: Good morning, good morning, Congrats on the JV with <unk>, and and and the Comstock projects I'm just curious.
Speaker Change: There's obviously been a debate on.
Speaker Change: The resiliency of the 45 key tax credit, but do you just take the momentum here behind Ccs projects is picking up especially.
Speaker Change: Gas processing projects as is that momentum are part of the motivating factor you have to get through this deal over the line and I'm just curious it's a line of sight.
Speaker Change: Deploy did portion of Cip's cash.
Speaker Change: You know really helped to spur finalization of the agreement.
Speaker Change: Yes, Scott Good question I'll take the first part of that and I'll have Eric to take the second half.
Speaker Change: In regards to 45 Q.
Speaker Change: As I mentioned on the call.
Speaker Change: We believe it's very robust this is a bipartisan.
Speaker Change: Piece of legislation that is in the tax code.
Speaker Change: Texas, Louisiana, and North Dakota, Wyoming, all hugely supportive the Trump administration's come out and said their support carbon capture so we feel very good about the legislation being robust.
Speaker Change: And it ultimately helps energy competitiveness for the U S think about LNG low carbon impact to Europe, and you think about just the infrastructure and the jobs that you're bringing to the U S. So I think that's incredibly powerful at a high level. The momentum we're seeing on the carbon capture side, particularly natural gas processing is incredibly strong and as you rightly point out.
Speaker Change: I think this is a great moment in time, where.
Speaker Change: There may have been some.
Speaker Change: Footfalls and some of the other carbon capture projects and I think BK V is just really blazing the trail with our ability to execute deliver and drive growth on the carbon capture side, which by the way is critical when you think about data center and power because they want to decarbonize that around the clock power and that's why we're so excited about it but Eric maybe just a couple of words on how we think.
Speaker Change: That funnel is looking.
Speaker Change: Yes, good morning, Scott.
Speaker Change: On the on the specifically on the momentum around natural gas processing plants I think that does continue to be strong for us we have the two <unk> announced with cotton Cove in the South Texas Midstream operator, we're very excited to be working with a fantastic Comstock team on those two additional plants and then as we've shared in our in our slide pack. There there are 12 million.
Speaker Change: <unk> tons per year of Sidoti from natural gas processing plants.
Speaker Change: Which were <unk>.
Speaker Change: Going after in that specific niche we have four class II permits for natural gas processing plants approved in Texas. So that funnel remains strong the economics for those projects remain robust and I think we are establishing ourselves as a key leader and a winner in the natural gas processing space.
Speaker Change: And I'm curious why didn't the cutting tools and Comstock projects get dropped into the JV was there.
Speaker Change: When you think about those projects or was it just timing.
Speaker Change: Color there would be great.
Speaker Change: Yes, it's good.
Speaker Change: Good question Scott its really just around timing there are certain kinds of timing criteria involved in that deal. So we will continue to we have the first two projects entered into the JV and then there are many more to come in sort of the <unk> and <unk> phases.
Speaker Change: Okay I appreciate the color Congrats I'll turn it back.
Speaker Change: Thank you thanks Scott.
Speaker Change: Thank you as a reminder, ladies and gentlemen, if you would like to ask a question at this time. Please press star one on your telephone keypad.
Next question is coming from the line of Tim <unk> with Keybanc capital markets. Please proceed with your question.
Speaker Change: Good morning, Thanks for taking my questions I wanted to start on the on the Capex for Cc U S. With this deal announced you still have your kind of internal capex for <unk> and other unchanged at about $130 million can you can you walk me through is that is that projects that you are.
Speaker Change: Waiting to drop into the JV I thought we might see some sort of change with that.
Speaker Change: So I wonder if you could give some context on that.
Speaker Change: Yes sure.
Tim: You bet, Tim and good morning.
Speaker Change: Of course today, and I will just start by reiterating our excitement around it.
Speaker Change: Attracting an investor to have the reputation and scale of CIP I think what this does is it gives us an opportunity to optimize our capital spend in the Ccs space as well as Accretively diversify our capital across the other business sectors. We have as part of that JV, we're going to I'd say reevaluate the pace and scale of <unk>.
<unk> <unk> capital.
Speaker Change: I think youll see an aggregate that amount will remain very robust, but the near term timing may shift around a bit and as we refresh that and optimize it with our JV partner CIP more to come on it what won't change Tim in the near term is our continued commitment to deliver on our projects.
Speaker Change: <unk> and South, Texas, and continuing to work with the exception with Comstock team on those projects will also continue to work a number of our major agreements, which are kind of the.
Speaker Change: <unk>.
Speaker Change: Critical path and backbone of the Ccs projects. We will continue to work goes on a number of fronts that havent been announced yet we're already leveraging CIP and their reach to other emitters and other projects and then lastly, we remain absolutely committed to our 1 million tons per year.
Speaker Change: Two injection rate by the end of 2027 and as we show in our 10-K with a number of other <unk>.
Speaker Change: <unk> in GP in industrial projects heading towards 30 million tons per year by the early 2000, <unk>. So more to come we're going to refresh with our JV JV on that Tim but it's exciting.
Speaker Change: The scope and scale of this of this business is put on accentuated by the partnership with CIP and more to come on a refresh there.
Speaker Change: Okay, I guess 18 hours after the announcements a little early for changing guidance. So we'll stay tuned.
Speaker Change: And then on the follow up Eric on the upstream side I'm trying to kind of.
Speaker Change: Yes.
Speaker Change: I understand the inclination to grow if there is one.
Speaker Change: The expectations in the first quarter again, you left the full year guidance out and it seems like that may have been a corporate wide decision to lead things unchanged after a quarter.
Speaker Change: With the strip firming up and contango into the end of the year.
Speaker Change: Can you kind of talk about your inclination to grow.
Speaker Change: <unk>, maybe to above 800 million a day.
Speaker Change: Yes sure great. Good follow up thank you for that as well, Tim So I think I'd start by reiterating our systematic disciplined structural framework around capital investment, which is largely hinges on price range of commodity price ranges and we've shared before in the $3 50 to $4 price range.
Speaker Change: That's a kind of a growth mode to the tune of 2% to 3% and with add on our production, we remain committed to that 2%, 2% to 3% growth <unk> 25, or <unk> 24.
Speaker Change: As you rightly said the strip price has remained solidly in there I think this morning 26 is $4 35, and 27 is in the $4 range. So thats certainly peaks our attention and caused us to continue to look very closely at strip, which has remained resilient and solid but I think what sort of drives us to continue to watch it as the.
Speaker Change: Macroeconomic trade winds at the moment, So we'll watch those.
Speaker Change: Trade winds so to speak closely as we make a decision about investing additional capital in the back half of the year. We certainly have the opportunity set in the inventory to do so that's very very attractive and if you did see us invest in the back half of 'twenty. Five. Additionally, it would result in growth more in the 2026 regions beyond so.
Speaker Change: Kind of watching the macroeconomic trade winds opportunity set remains strong stay tuned in this space.
Speaker Change: Okay I appreciate the context. Thank you.
Speaker Change: Thank you. Our next question is coming from the line of Jacob Roberts with TBH. Please proceed with your question.
Speaker Change: Good morning.
Speaker Change: Hey, Jacob.
Speaker Change: I just wanted to touch on the recent announcement with Comstock and some of the commentary there looking at the Western Haynesville, the Battle and marketing plan I believe one is operational and one is under construction. So I was wondering if you could speak to the differences of how those projects look in terms of jumping in halfway or three quarters. The way however, far along it is.
Speaker Change: Versus an already existing facility and kind of subsequent to that or should we be thinking about your guidance not starting on this project until that second plant is fully operational.
Speaker Change: Good morning, Jake I'll take that yes, I think.
Speaker Change: Start by saying that we'll be releasing more details about kind of the pace and scale and timing of.
Speaker Change: Of our projects with Comstock here in the coming quarters or so as we work with the exceptional Comstock team.
Speaker Change: We would expect to develop it in sort of a phased approach or a trained approach as they grow production, we would add trains.
Speaker Change: Vessels in operation now as you say are likely starting point I think just just what we've released so far and what Jay Allison and his team spoke about or the principles of the deal which are.
Speaker Change: <unk> excuse me Comstock will.
Speaker Change: Concentrate the cotwo from their natural gas processing plants, both bethell and Mark Kaye.
Speaker Change: More and more as they grow for what you said over time <unk> will capture that concentrated stream compress it treated injected and sequester it for all time.
Speaker Change: <unk> will operate the Ccs projects, we will realize or received a 45 acute credits and pay Comstock ACO to her delivery fee. So thats kind of the structure of the agreement.
Speaker Change: We're very well prepared to kind of grow with Comstock with a trained approach as they grow their production.
Speaker Change: Great. That's very helpful. And then maybe for Chris Chris you touched on macroeconomic conditions in the prepared remarks, and you specifically referenced them relative to the power segment in the slide deck can you comment relative to that power business is that mostly.
Speaker Change: Domestic inflation or are there other broader considerations, we need to be thinking about.
Speaker Change: Yes, Joe Good question. So I think when you think about the power business. There is theres two kind of dimensions on the macro side. One is what does it mean for the cost inflation side of <unk>.
Speaker Change: Building new capacity for example, new steel power plants or heavy steel.
Speaker Change: Turbines are coming from overseas largely so you see there is an inflation factor that we have to factor in and Thats going to ultimately have a cost impact on the price of power rate as the new marginal capacity coming into the market goes up and cost. The overall power prices increase so I think that's one major dimension and then I think the second.
Speaker Change: <unk> dimension is what does it mean for data center and large load investments and I would say on that front, it's actually.
Speaker Change: Relatively bullish as well as you look at where folks are thinking about building additional data center capacity or even industrial capacity I think theyre very much is a view that you've got to be in the U S. If you want to kind of access to U S market and I think thats, leading to I would say.
Speaker Change: Decently more bullish scenario around some of the power Gen, particularly in Texas in the ERCOT market. That's why we referenced the recent kind of uptick in the amount of load Thats forecasted we keep seeing these forecast go up in Texas in particular and again, that's a function of both the idea of that.
Speaker Change: The cost to build new capacity is going up and or the fact that there is a strong incentive to start building more in the U S to access the U S market I think those things bode very well for our power business.
Speaker Change: Great I appreciate the time.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is coming from the line of Betty Jang with Barclays. Please proceed with your question.
Speaker Change: Hi, good morning, everyone.
Speaker Change: Yes also share the congrats on the JV announcement.
Speaker Change: And it's a big deal because they're showing a vote of confidence in the pipeline of projects that you guys have put together.
Speaker Change: I wanted to better understand some of the funding mechanism that.
Speaker Change: That JV is going to evolve.
Speaker Change: Like what's the value of the asset.
Speaker Change: Contributed into the JV.
Speaker Change: Dan.
Speaker Change: How.
Speaker Change: Sure.
Speaker Change: How CIP will be <unk>.
Speaker Change: <unk> dollars into that JV over time, and the pace of that drawdown at that 500 million dollar commitment.
Speaker Change: Yes.
Good morning, and thanks for the question.
Speaker Change: Yes, just to start before I answer those questions I just want to reiterate what you said and Eric had mentioned this as well, but if you think about the vote of confidence right. We've not had from our global infrastructure partner.
Speaker Change: The IP we had from.
Speaker Change: From the large midstream operator, we referenced and then we've had from Comstock one of our peer so to your point, we validated our pipeline right across across the spectrum across many different entities at a lot of I just looked at it. So so thank you for pointing that out second question, we're not disclosing the amount of <unk>.
Speaker Change: Project capital that's associated with this transaction.
Speaker Change: I think CIP as well as ourselves as well as ourselves we're keeping some of those details confidential book.
Speaker Change: One thing is for us it doesn't create our economics, if you think about traditional.
Speaker Change: <unk>.
Speaker Change: The A&P world some of those types of just thinking about it a decrease or increase our value. It gives us obviously significant flexibility.
Speaker Change: The funding mechanism, so as far as that that piece goes.
Speaker Change: There are there is it upfront.
Speaker Change: These are capital associated with it and that capital will be drawn down.
Speaker Change: Over the next call it 12 months to 24 months.
Speaker Change: Additional projects are deployed.
Speaker Change: Total spending on those projects as well as digital.
Speaker Change: Projects like contributed that'll be drawn down at as far as the project. There is on the government side there is the board.
Speaker Change: We're represented on.
Speaker Change: As well as CIP will bring projects to that board and there is certain criteria, but once those projects are signed off that will be contributed into the JV at that point.
Speaker Change: Did I answer your question I missed anything there.
Speaker Change: Oh.
Speaker Change: Got it.
Speaker Change: They're all there.
Speaker Change: Disclosure limitations, but that color is helpful.
Speaker Change: For my follow up.
Speaker Change: Chris you mentioned in the prepared remarks about.
Speaker Change: Data center companies willing to pay a premium for the Cup Decarbonize power and Decarbonize gas.
Speaker Change: Im just curious how that conversation is going and are you seeing the willingness to buy still seeing the willingness to buy decarbonize power or is there also a willingness to pay.
Speaker Change: Pay a premium for the gas that's going into the power plants.
Speaker Change: That theyre currently using basically I'm trying to understand.
Speaker Change: The value of the environmental attributes and how that's going to get monetize going forward.
Speaker Change: Yes, that's a good good question and good morning to you.
Speaker Change: With regards to the premium or the ability for us to sell Decarbonize power I think the momentum is very strong.
Speaker Change: And it depends on the customer it's not every customer that's willing to pay that premium, but there are certain large.
Speaker Change: Technology companies that are utilizing these data centers that are extremely concerned.
Speaker Change: About their ESG goals in their carbon footprint and what <unk> is able to uniquely offer them is an ability to grow their portfolio with gas as the firming power combined with other sources of power and.
Speaker Change: And decarbonize and hit their goals and so for that we are very.
Speaker Change: Active in the discussions around our premium and I think what Youll see again looking at the broader market and just kind of from my perspective, what Youll see is a menu where people can say all right I want to buy X percent of Decarbonize power X percent of kind of a regular what I call regular unleaded gas.
Speaker Change: And then.
Speaker Change: Some sort of renewable mix and I don't think it's going to be one one solution, but the great thing about <unk>, we can offer customers that commercial flexibility in that menu and for the Decarbonize middle of the night when I need to run my generative AI and cloud compute and I don't have renewables out there.
Speaker Change: I can still decarbonize that power and not us.
Speaker Change: My ESG.
Speaker Change: Offsets against that so that is incredibly compelling again not every customer is willing to pay for that are wanting to pay for that but there is a segment of the market that we believe this product with the carbon capture absolutely addresses and I would say the market is moving in this direction.
Speaker Change: That's great to see.
Speaker Change: Thank you as a final reminder, ladies and gentlemen, if you would like to ask a question at this time. Please press star one on your telephone keypad.
Speaker Change: Okay.
Speaker Change: It appears we have no additional questions at this time, so I'd like to pass the floor back over to management for any additional closing remarks.
Speaker Change: Thank you operator, well listen everyone. We're really really pleased with the results in this quarter. I think you can expect <unk> to meet and beat and deliver on results Thats. Our philosophy. We're excited about this winning formula that we've put together in our company stay tuned for more announcements and thank you for your time.
Speaker Change: Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.
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