Jonathan Mardini

Jonathan Mardini asked if the spotlighting of Crescent Royalties, given minerals companies' capacity for higher leverage, would change Crescent's overall leverage strategy or if they would target a 1.5x ratio at the minerals level, and how consolidated leverage would trend in 2026. He also inquired about the drivers behind the expected 2,000-foot increase in Eagle Ford lateral lengths in 2026 compared to 2025, and its potential impact on D&C cost per foot.

Answer

CFO Brandi Kendall stated there's no fundamental change to the broader business leverage, with a long-term target of 1x. She noted conservative financing for minerals acquisitions, expecting to be below 1.5x by year-end, with significant asset coverage. EVP of Investments Clay Rynd explained that building scale in the Eagle Ford drives capital efficiency through extended laterals, asset swaps, and joint ventures. COO Joey Hall added that drilling longer laterals and increasing pad sizes (up to 70% simulfrac in South Texas) are key drivers for higher capital efficiency.

Jonathan Mardini inquired about the expected 2,000-foot increase in lateral lengths in the Eagle Ford's central and southern regions compared to 2025, asking about the drivers and the anticipated impact on D&C cost per foot in 2026.

Answer

EVP of Investments Clay Rynd attributed the increase to Crescent's scale in the Eagle Ford, which enables greater capital efficiency through extended laterals, asset swaps, and joint ventures. COO Joey Hall added that longer laterals, combined with increased pad sizes allowing for 70% simulfrac in South Texas, significantly boost capital efficiency.

Jonathan Mardini questioned whether the potential PPA execution on 4.5 TWh of unutilized capacity implies covering only a portion of the Temple plant's capacity, with the remainder sold into merchant markets, and how the PPA structure is evolving. He also asked about the scaling of CCUS volumes through 2030, following the updated 1.5 million ton annual run rate target by 2028.

Answer

Chris Kalnin, CEO, explained that BKV typically hedges about half of the Temple complex's capacity for maintenance and resiliency, and a PPA would likely follow a similar structure, with the balance sold into the grid. He described PPAs as substantive, 10-20 year agreements with a structured price. Eric Jacobsen, President of Upstream, reiterated the 1.5 million tons by 2028 target due to commercial interest and new projects. He noted that volumes would ramp significantly post-2028, driven by larger projects, existing Class VI permits (six in Louisiana), and extensive pore space lease acreage.

Jonathan Mardini asked for clarification on the potential PPA execution for 4.5 terawatt hours of unutilized capacity, specifically whether it implies covering only a portion of the Temple plant's capacity, and how the PPA structure is evolving. He also questioned the scaling of CCUS volumes beyond the 1.5 million tons annual run rate by 2028, looking towards 2030.

Answer

CEO Chris Kalnin explained that PPAs typically cover about half the complex's capacity (one power plant equivalent) to manage maintenance and ensure resiliency, with the balance sold into the grid. He described PPAs as long-term hedges, similar to LNG contracts, with structured capacity and energy payments, usually above strip. President of Upstream Eric Jacobsen elaborated that post-2028, CCUS volumes will ramp significantly due to larger projects, leveraging 7 Class VI permits (6 in Louisiana), 50,000 acres under pore space lease, and substantial CO2 emissions within a 30-mile radius of the High West project.

Jonathan Mardini from KeyBanc Capital Markets asked about the potential structure of Power Purchase Agreements (PPAs) with hyperscalers and how BKV's Temple power plants are expected to perform for the remainder of the year.

Answer

CEO Chris Kalnin explained that BKV has significant headroom to increase its power plant capacity factor and can offer flexible contract structures, from fixed-price to tolling arrangements, due to its integrated gas and power model. CFO David Tameron added that while Q3 started slow, the company is confident in its full-year Power JV EBITDA guidance of $130-170 million, noting Q4 2025 will not have the major maintenance downtime that impacted Q4 2024.

Jonathan Mardini of KeyBanc Capital Markets inquired about the strategic role of the Oklahoma JV within the portfolio, its potential for expansion, and the current deal flow momentum for the new partnership with Carlyle.

Answer

CEO Rusty Hutson characterized the Oklahoma JV as a 'steady as you go' program with significant development runway, and mentioned that similar opportunities could be explored in other basins like the Permian. Regarding the Carlyle partnership, both Hutson and CFO Brad Gray highlighted a disciplined acquisition approach, strong engagement from Carlyle, and confidence in executing deals in the near term, particularly given the favorable M&A environment from recent commodity price shifts.

Jonathan Mardini of KeyBanc Capital Markets inquired about the strategic fit of the Oklahoma joint venture within the portfolio and the progress of the acquisition partnership with Carlyle, particularly regarding PDP-focused deals.

Answer

CEO Rusty Hutson described the Oklahoma JV as a 'steady as you go' program with significant development runway and noted that similar opportunities are being evaluated in other basins like the Permian. Regarding the Carlyle partnership, both Hutson and CFO Brad Gray confirmed active evaluation of transactions, emphasizing a disciplined approach to valuation, especially in the current commodity price environment. Gray added that Carlyle has been a very engaged partner.

Jonathan Mardini of KeyBanc Capital Markets asked about the net debt and leverage trend for 2026, given strip prices are below the company's 2025 hedges. He also questioned the opportunity to continue allocating capital to larger-scale developments in 2026.

Answer

EVP & CFO Bryan Lemmerman confirmed the company expects to continue paying down debt in 2026. President & CEO Jason Pigott noted the 2026 corporate breakeven is below $55/barrel and will likely decrease as more hedges are added. SVP & COO Katie Hill added that the inventory depth in early 2026 supports continuing the efficient, large-scale development strategy.

Jonathan Mardini questioned how net debt and leverage would trend in 2026, given that projected strip prices are below the company's 2025 hedges. He also asked about the opportunity to continue allocating capital to larger-scale developments into 2026.

Answer

EVP & CFO Bryan Lemmerman stated that the company expects to continue paying down debt in 2026. President & CEO Jason Pigott added that the 2026 corporate breakeven is below $55/barrel and that they will likely add more hedges to lower it further. SVP & COO Katie Hill confirmed that the inventory depth for early 2026 supports continuing the efficient, large-scale pad developments seen in the second half of 2025.

Jonathan Mardini questioned how net debt and leverage would trend in 2026 given a lower commodity price strip compared to 2025 hedges, and asked about the opportunity to focus on larger-scale developments next year.

Answer

EVP & CFO Bryan Lemmerman confirmed that the company expects to continue paying down debt in 2026. President & CEO Jason Pigott added that the 2026 corporate breakeven is already below $55/bbl and will likely move lower as they add more hedges. SVP & COO Katie Hill explained that the shift to larger, more efficient 8-13 well pads in late 2025 is a strategy they expect to continue into 2026, as the inventory depth supports it.

Jonathan Mardini asked about improving WAHA natural gas price realizations and whether management was seeing activity reductions from smaller operators. He also questioned how Vital would adjust its own activity in a lower price environment, specifically whether they would build DUCs or drop rigs.

Answer

Executive Benjamin Klein confirmed they are seeing an improvement in the WAHA basis, likely driven by reduced activity, and that they constantly evaluate takeaway options. CEO Mikell Pigott responded that while the goal is to remain free cash flow positive in 2026, it is too early to decide on specific actions like building DUCs versus dropping rigs. He emphasized that contract expirations in March 2026 provide full flexibility to adapt as needed.

Jonathan Mardini, on for Tim Rezvan, asked for the rationale behind the 2025 production guidance being below the Q4 pro forma run rate, sought commentary on the quality of recently acquired assets, and requested an update on plans to redeem preferred shares.

Answer

President and CFO Davis Ravnaas explained that the 2025 guidance midpoint reflects a conservative, flat-growth outlook consistent with peers. He characterized the newly acquired assets as 'outstanding' and a key future contributor. He also confirmed the plan to redeem approximately half of the Apollo preferreds in May remains on track and would not hinder the pursuit of new, accretive acquisitions.

Jonathan Mardini asked if the front-loaded 2025 CapEx program is conducive to driving further capital efficiencies and if this will be the standard approach. He also questioned future capital allocation plans, particularly regarding medium-sized asset packages versus continuing with substantial share repurchases.

Answer

President and CEO John Reinhart affirmed that a front-loaded capital program enhances capital efficiency and is a consistent strategy the company expects to maintain. EVP and CFO Michael Hodges reiterated that their capital allocation framework, which prioritizes share repurchases and organic inventory additions, has been highly effective and sets a high bar for M&A, though they continue to evaluate all opportunities.