BKV CorpBKV
BKV Corp Fair Value Disclosure
Note 6 - Fair Value Measurements
As the Company uses the market approach to determine the fair value of its derivative instruments, these fair values are also compared to the values given by counterparties for reasonableness. Since natural gas and NGL swaps do not include optionality and therefore generally have no unobservable inputs, they are classified as Level 2. The Company factors its own non-performance risk into the valuation of derivatives using current published credit default swap rates. As of December 31, 2025 and 2024, the impact of the non-performance risk adjustment to the Company's fair value of commodity derivative liabilities was $1.6 million and $6.6 million, respectively.
The following tables set forth by level within the fair value hierarchy, the financial assets and liabilities that were accounted for at fair value on a recurring basis:
| December 31, 2025 | ||||||||||||||||||||
| Fair Value Measurements Using: | ||||||||||||||||||||
| (in thousands) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||
| Financial assets | ||||||||||||||||||||
| Derivative instruments | $ | 88,214 | $ | — | $ | 88,214 | ||||||||||||||
| Financial liabilities | ||||||||||||||||||||
| Derivative instruments | 5,767 | — | 5,767 | |||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Fair Value Measurements Using: | ||||||||||||||||||||
| (in thousands) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||
| Financial liabilities | ||||||||||||||||||||
| Derivative instruments | $ | 67,634 | $ | — | $ | 67,634 | ||||||||||||||
The contingent consideration was generated from the Devon Barnett Acquisition and on January 8, 2025, the Company paid the final 2024 contingent consideration of $20.0 million, which is reflected as contingent consideration payable within current liabilities on the consolidated balance sheets. The Devon Barnett Acquisition and the Exxon Barnett Acquisition contingencies are described further in Note 16 - Commitments and Contingencies. The Devon Barnett Acquisition was accounted for as an asset acquisition with the contingent consideration meeting the criteria of a derivative in accordance with ASC 815 - Derivatives and Hedging. See Note 7 - Derivative Instruments for further discussion.
The minority ownership puttable shares from the 2021 Plan (as defined in Note 13 - Stockholders' Equity and Mezzanine Equity) were recorded at fair value upon initial recognition in mezzanine equity, and its common stock was valued using both observable (Level 2) and unobservable (Level 3) inputs. Subsequent to the Company's IPO, the minority ownership puttable shares were converted to common stock. The minority ownership puttable shares are further described in Note 13 - Stockholders' Equity and Mezzanine Equity.
Equity-based compensation from the 2021 Plan was recorded at fair market value on the grant date. The underlying market condition was valued using the application of Monte Carlo simulations using both observable (Level 2) and unobservable (Level 3) inputs. Prior to the Company's IPO, the remaining components of the awards were valued based on the fair market value of the common stock of the Company, determined using the same valuation methodologies applied to the minority ownership puttable shares. Equity-based compensation is further described in Note 13 - Stockholders' Equity and Mezzanine Equity.
There was no Level 3 activity for the year ended December 31, 2025. The tables below sets forth the changes in the Company's Level 3 fair value measurements:
| Year Ended December 31, 2024 | ||||||||||||||||||||||||||
| (in thousands) | Contingent Consideration | Minority Ownership | Equity-Based Compensation | Total | ||||||||||||||||||||||
| Balance, beginning of period | $ | 29,676 | $ | 59,988 | $ | 126,966 | $ | 216,630 | ||||||||||||||||||
| Contingent consideration - settled | (20,000) | — | — | (20,000) | ||||||||||||||||||||||
| Mezzanine equity conversion | — | (42,995) | (74,993) | (117,988) | ||||||||||||||||||||||
| Grant date fair value of equity-based compensation, pre-IPO | — | (4) | (42,663) | (42,667) | ||||||||||||||||||||||
| Change in fair market value (all instruments) | (9,676) | (16,989) | (9,310) | (35,975) | ||||||||||||||||||||||
| Balance, end of period | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Year Ended December 31, 2023 | ||||||||||||||||||||||||||
| (in thousands) | Contingent Consideration | Minority Ownership | Equity-Based Compensation | Total | ||||||||||||||||||||||
| Balance, beginning of period | $ | 88,051 | $ | 62,712 | $ | 89,171 | $ | 239,934 | ||||||||||||||||||
| Contingent consideration - settled | (20,000) | — | — | (20,000) | ||||||||||||||||||||||
| Grant date fair value of equity-based compensation, pre-IPO | — | (2) | 22,193 | 22,191 | ||||||||||||||||||||||
| Change in fair market value (all instruments) | (38,375) | (2,722) | 15,602 | (25,495) | ||||||||||||||||||||||
| Balance, end of period | $ | 29,676 | $ | 59,988 | $ | 126,966 | $ | 216,630 | ||||||||||||||||||
Other Fair Value Measurements
The carrying value of cash and cash equivalents, accounts receivable, net, and accounts payable and accrued liabilities approximate their fair values due to the short-term maturities of these instruments. Long-term debt obligations under the RBL Credit Agreement also approximate fair value because the variable rates of interest are market-based. The fair value of the 2030 Senior Notes as of December 31, 2025 was approximately $507.5 million based on quoted market prices from banks and are classified Level 2 in the fair value hierarchy. The 2030 Senior Notes are carried on the consolidated balance sheets at its original issuance value, as adjusted over time to accrete that value to par.Free Sentinel
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 6, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.