BKV Corp

NYSE:BKV

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, everyone, and welcome to BKV's Third Quarter 2024 Earnings Conference Call. As a reminder, today's call is being recorded. [Operator Instructions]. A brief question-and-answer session will follow the formal presentation. I would now like to turn the call over to Mr. David Tameron, Vice President of Strategic Finance and Investor Relations for BKV. Please go ahead.

[David Tameron, executive]

Good morning, everyone, and thank you for joining BKV Corporation's Inaugural Earnings Conference Call. With me today are Chris Kalnin, Chief Executive Officer; Eric Jacobsen, Chief Operating Officer; and John Jimenez, 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. Additionally, we may refer to some 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 and for the reconciliation of any non-GAAP financial metrics, please see the company's public filings, including the 8-K form filed today.

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

[Christopher Kalnin, executive]

Thank you, David. Good morning, everyone. I am Chris Kalnin, CEO and Founder of BKV Corporation. I hope you all had a good Veterans Day yesterday. I do want to take a moment to thank our veterans out there. Thank you for your service and for protecting our freedoms.

I also want to thank each of you on this call for taking the time to join us today. This is the first BKV earnings call as a publicly traded company. BKV's IPO in late September was one of only a limited number of IPOs that occurred this year, and we believe it's quite an achievement given the volatile market backdrop.

Thank you to our exceptional BKV team. The journey of becoming a public company required extraordinary effort, dedication and resilience. Our teams went above and beyond to help us achieve this goal.

I would also like to thank Banpu, our Board of Directors and our shareholders and investors for their continued strong support of BKV. This is an exciting moment in our company's history, and I'm incredibly honored to be with you today to share our progress.

BKV is building a new kind of energy company that focuses on delivering energy solutions across our four business lines. We enjoy the best of both the traditional energy industry through our low decline and cash flowing upstream natural gas business, while also actively participating in the energy transition as we build one of the most exciting and rapidly growing carbon capture businesses in the industry, decarbonizing our energy products.

We deliver our energy solutions across the value chain to end customers through our pipeline systems and our power plants. We believe that stand-alone each of these businesses make attractive returns and in combination, they create premium value.

In the third quarter, throughout a challenging commodity price backdrop, we delivered solid performance. We outperformed our forecasted production on lower capital spending. We continue to lower our operating costs through core efficiency initiatives and technology deployments. We continue to fund the expansion of our carbon capture business, while generating positive free cash flow. We strengthened our balance sheet by utilizing our IPO proceeds to further delever, enabling BKV to have top quartile leverage metrics among our peer set. We closed the quarter with a healthy balance sheet that is poised for additional growth, both organically and inorganically.

I will now provide brief third quarter highlights from each of our business lines. For our upstream and midstream businesses, the macro environment for natural gas has continued to be challenging. While longer term, natural gas prices remain bullish, near-term prices have continued to be constrained by the combination of mild weather and oversupply.

BKV has systematically navigated this landscape through a disciplined reinvestment approach in our upstream assets. We have prioritized free cash flow generation while seeking to optimize production declines as efficiently as possible. You can expect us to maintain this systematic approach as we look forward to 2025 and evaluate the pricing environment.

Earlier this year, we sold 2 nonoperated upstream assets in the Marcellus Shale in Northeast Pennsylvania, which helped to further delever our balance sheet. We have replaced a portion of this divested production with our own operated production from the recent fracking of our Marcellus DUC wells, peaking at approximately 50 million cubic feet equivalent per day gross in late third quarter and contributing an incremental 14 million cubic feet equivalent per day of production on average over the third quarter.

Our Barnett assets in and around the Dallas Fort Worth area remain the foundation of our upstream and midstream business and are comprised of majority PDP reserves with low decline rates with close proximity to growing energy markets and strong access to Gulf Coast LNG markets.

We also have a deep inventory of over 15 years of refrac and new drill locations within our core acreage that gives us the flexibility to adjust production levels depending on the commodity price environment. Also, our upstream portfolio produces just over 20% liquids which diversifies our energy product mix through exposure to NGL pricing.

For our carbon capture business, we have now achieved a full year of successful operations at the Barnett Zero facility. Since the commissioning of the Barnett Zero facility, we have permanently sequestered approximately 140,000 tons of CO2.

This is CO2 that would have otherwise been released into the atmosphere and we have drone footage that shows the impact that our Barnett Zero project has on decarbonizing the environment in and around the Bridgeport natural gas processing plant. The Barnett Zero project has also been critical in proving BKV's operational and project development capabilities to other potential emitters and partners in the industry.

Carbon capture is a crucial piece of BKV's closed-loop strategy. The carbon capture projects that we are pursuing make money stand-alone based on 45Q tax credits, which we believe have strong bipartisan support. In addition to the 45Q, we take the environmental attributes of sequestering CO2 and combine these with our natural gas products to create an innovative new natural gas product called Carbon Sequestered Gas or CSG.

This new gas product is a carbon-neutral product when combusted and we have shown through precedent transactions that BKV can charge a premium for CSG. When it comes to competition for CO2 emission sources, we believe BKV operates in a unique white space that has limited competition from large integrated oil and gas companies. BKV focuses on bespoke, high concentration and point source projects, which are typically profitable, but are too small for major energy companies to pursue. The momentum we have with potential projects underscores the strength of this strategy.

Going forward, we will continue to evaluate potential third-party investments in our carbon capture business, which may include joint ventures, project-based equity partnerships, financing arrangements and federal grants, any of which can provide additional capital to help us fund our carbon capture business. We look forward to additional announcements and progress on this front during future earnings calls.

For our Power business, our 50-50 joint venture is with Banpu Power, a publicly traded power subsidiary of Banpu. Our joint venture is anchored in 2 modern and highly efficient combined cycle natural gas power plants that have a capacity of 1,500 megawatts and are located in Temple, Texas. The Power joint venture continued to provide positive operational results through the third quarter despite depressed power prices in the months of July and August, in particular.

The ERCOT market remains one of the fastest-growing power markets in the U.S., and we remain bullish over the long-term outlook of the market. But we do recognize that given the market structure, we will see periods of moderated pricing. Within ERCOT, we are focused on the rapidly growing data center segment as Texas is the second fastest-growing data center market in the country.

We believe that BKV offers a unique value proposition to these potential data center customers through our ability to provide baseload around-the-clock gas-fired generation while decarbonizing that generation through our carbon capture business. We believe that the combination of natural gas and carbon capture provides a winning formula that will help fuel the continued growth in AI data center build-outs in a sustainable and scalable manner. Overall, I am very pleased with our team's performance and our ability to navigate a dynamic market environment. We remain focused on executing our strategy and delivering value to our shareholders.

Now I'd like to hand the call over to BKV's Chief Operating Officer, Eric Jacobsen, to discuss operational specifics for the quarter.

[Eric Jacobsen, executive]

Thank you, Chris, and good morning, everybody. For our upstream and midstream businesses, upstream production during the third quarter was $762.6 million cubic feet equivalent per day, a reduction of 9.7% from the third quarter of 2023. And if you adjust for our non-operated asset sale, the decline is reduced to approximately 6.6%.

As Chris mentioned, the asset sale consisted of non-operated assets in Northeast Pennsylvania, which impacted volumes by 28 million cubic feet equivalent per day. The remaining production decline was as a result of prudent capital spending reduction in response to a weak pricing environment. In fact, for 2024 year-to-date, we have invested just $39.2 million of total development CapEx. Such overall low decline of our upstream assets across almost any commodity pricing and investment scenario is enabled by the nature of our asset base, strong base management and robust capital efficiency.

Looking at our year-to-date results, production for 2024 so far has averaged 792.5 million cubic feet a day equivalent. Some notable highlights from the third quarter included completing a handful of Upper Marcellus DUCs in NEPA, which we were able to bring online at 50% of expected AFE completion costs. These wells have exceeded type curve expectations and are able to generate attractive returns despite the lower commodity prices. We're quite pleased so far, and these results could further prove up and unlock our Upper Marcellus inventory.

As we entered the fourth quarter of 2024, we began to ramp up our development capital investments focused in the Barnett to take advantage of service costs and availability against a stronger forward strip. We currently have one drilling rig and one frac crew operating in the Barnett, delivering a combination of new wells and fracking existing DUCs.

Moving on to our carbon capture operations. During the third quarter of 2024, our Barnett Zero CCUS operations were strong, with injected volumes of CO2 totaling about 50,000 tons. As Chris mentioned earlier, since operational start-up in November 2023, the Barnett Zero facility has sequestered approximately 140,000 tons of CO2. Our project pipeline remains strong, and we continue to gather momentum in our CCUS business. Importantly, as the industry has seen some permitting delays at the federal level, I wanted to mention that BKV has pursued both Class II and Class VI well permits for CO2 injection. This allows us flexibility in a few different ways.

First, Class II wells are specific to sequestration of CO2 from natural gas processing facilities, which complements our core upstream business, and these are typically much faster to permit. Additionally, Class II well applications are made to state regulators and are handled at the state level where we have had great success in working with the Texas Railroad Commission as evidenced by our second approval for a Class II permit for our Cotton Cove project.

With the approved Class 2 permit from the Railroad Commission, our target for first injection on our Cotton Cove project in the first half of 2026 remains on track. Further, we have filed 2 Class VI well permit applications within the last year, which have been deemed administratively complete by regulators, one with EPA jurisdiction in Texas and the other with the state of Louisiana, which has primacy for Class 6 well permitting in Louisiana.

I'll now turn the call over to our CFO, John Jimenez, to provide more details on our Power business as well as our financial results.

[John Jimenez, executive]

Thank you, Eric, and good morning, everyone. Before I move into our third quarter financials, I want to start by highlighting our power business. For the third quarter, the Temple I and Temple II power generation facilities produced 2,400 gigawatt hours of power, serving customers in the southern region of ERCOT. The plant's combined capacity factors increased to 73% for the third quarter, reflecting the continued demand growth in the market and our low relative heat rates, making these plants some of the most desirable baseload plants in the Texas grid.

We also commissioned our 2.5 megawatt solar farm in Ponder, Texas and are serving load through CoServ to a residential community, helping to offset our Scope 2 emissions. For the quarter, BKV's implied proportionate share of the Power joint ventures net income and adjusted EBITDA was $50.6 million and $10.1 million, respectively, inclusive of our power generation and retail electricity businesses.

Results in the quarter were impacted by both adverse weather and mild temperatures, resulting in a lower power joint venture adjusted EBITDA than anticipated. As a reminder, Power is nonconsolidated, and therefore, it is not currently reflected within our non-GAAP measures such as adjusted EBITDAX.

Moving now to our financial performance. As Chris mentioned, we had strong financial performance in the third quarter despite weak natural gas prices. Before I get into the numbers, I did want to highlight our continued deleveraging of the balance sheet. IPO proceeds were used to pay down debt. And at quarter end, our net debt was at $158.7 million for a net leverage ratio of approximately 0.8x. This comes on the heels of successfully syndicating a new RBL in June, which simplified our capital structure as the RBL balance is now the only debt outstanding for the company. Our balance sheet is poised for growth, and we are confidently moving forward to the next phase of BKV's journey.

With that, let's dive into the numbers. BKV generated a profit for the third quarter. Net income for the third quarter was $12.9 million or $0.18 per fully diluted share. This was down from a net income in the third quarter of 2023 of $18.6 million or $0.30 per fully diluted share. The decrease was primarily due to a lower production following the divestment of certain nonoperated upstream assets in the Marcellus.

Unrealized losses on derivatives as well as our decision to remain disciplined and reduced capital spending for the past 9 months. Please note that net income in the third quarter included $3 million of unrealized commodity derivative losses. Excluding these and other nonrecurring items, adjusted net loss for the third quarter 2024 was $18.6 million or $0.27 per fully diluted share.

Adjusted free cash flow for Q3 of 2024 was $19.6 million, which was an increase compared to the negative adjusted free cash flow in the third quarter of 2023 of $11.2 million. The increase is due to higher net cash provided by operating activities and a decrease in capital expenditures during the third quarter of 2024 when compared to the same period of 2023. Through the first 9 months of 2024, adjusted free cash flow is now $86.2 million compared to the same period in the prior year of negative $22.7 million.

Bottom line, the company-wide adjusted free cash flow margin, including our investment in CCUS in the third quarter was 14.2%. And through 9 months, our adjusted free cash flow margin stood at 19.7%.

Accrued capital expenditures in the third quarter of 2024 were $24.4 million, which included $14.6 million for development and $3 million for CCUS. Year-to-date, our accrued capital expenditures are now at $57.3 million, including $39.2 million for development capital and another $7.7 million for CCUS.

More broadly, as mentioned earlier, BKV continues to demonstrate the discipline of regulating capital spend within the corresponding pricing environment. Since the beginning of 2023 as the market saw overall reductions in natural gas pricing, BKV has averaged an industry-leading $0.28 of development CapEx per Mcfe. As referenced earlier, we ended the third quarter with a healthy balance sheet and significant liquidity.

At quarter end, we had cash and cash equivalents of $31.3 million. Combined with the availability on our RBL, our total liquidity as of September 30 was $426.7 million. Again, our net debt to adjusted EBITDAX ratio as of September 30, 2024, was approximately 0.8x, and our long-term net leverage target remains at 1 to 1.5x.

On hedging, to support the generation of future adjusted free cash flow, our general corporate practice is that we hedge approximately 50% of PDP production for 24 months. Based on our current position for 2025, the average price of our gas hedge position is $3.49 and an average NGL price of $21.82 for a BKV weighted barrel. For further detail on our hedging structure, please review footnote 5 in our 10-Q.

Before closing out my section, I did want to make sure you saw the 4Q guidance we provided in the press release, and I wanted to comment briefly on a couple of key metrics. You'll see that we're guiding to a slight uptick in CapEx. As Eric referenced, we increased our development activity as we entered the fourth quarter. For production, you'll see a slight decline from our 3Q levels, which largely reflects built-in downtime related to an anticipated winter storms.

With that, I'd like to turn it back over to Chris to wrap things up.

[Christopher Kalnin, executive]

Thanks, John. In closing, I want to reinforce a few messages. First, as a company, we're excited about the opportunities we see across all our business lines. As our carbon capture and power businesses in particular, scale up, so do our opportunities to further integrate our business and provide low carbon solutions across the energy value chain, an exciting prospect for both BKV and our customers. It also allows us to continue our actionable path towards achieving our ambitious net zero goals for our upstream and midstream operations, delivering on our mission of leading the industry towards the safe and profitable production of carbon sequestered natural gas.

Second, we remain focused on executing our strategy and delivering value to our shareholders. With our strong management team, deep bench of high-quality talent, willingness to innovate and think outside the box and commitment to a sustainable energy future, we're poised to drive growth across all our business lines, positioning us as a leader in energy.

And finally, I would like to thank you all one final time for participating in BKV's first earnings call as a publicly traded company, an exciting milestone in our company's history, and this is only the beginning. As you heard today, we are on quarter 1 in our journey as a public company, and our third quarter results reflect our ability to navigate volatile market conditions, underscores our commitment to operational excellence and reinforces our focus on driving value for our shareholders.

With that, I'd like to open up the call to any questions. Operator?

[Operator]

[Operator Instructions]. Our first question comes from Scott Gruber with Citigroup.

[Scott Gruber, analyst]

Chris, you have a number of growth opportunities in front of you from growing your carbon capture business, expanding your footprint in power to consolidating the Barnett further. How do you think about prioritizing the various growth initiatives? And how do you think about what the portfolio could look like in 5 years' time?

[Christopher Kalnin, executive]

Yes, Scott, good question. Thanks for that, and thanks for being on the call. When you look at kind of what we're doing in terms of prioritizing capital, we're going to start with the base business. As you can see, through the past couple of years, we've been really disciplined on our CapEx. I think it's time, as we look at the forward curve to be spending some money in our upstream business and really getting kind of our production in line with where we see the curve going. And so that's always going to be the key focus for us. That feeds the rest of the machine in terms of just the ability to generate cash. So that's going to be where we -- you'll see us and Eric can talk more to this. But you can see us deploying capital in our upstream business.

In terms of the power and the carbon capture, I mean, clearly, carbon capture is central to us because it decarbonizes the portfolio, and it allows us to sell more power. So we see the carbon capture business growing. We've targeted quite a rapid growth of that. And then on the power side, it's really just the transformation of our energy to end customers.

So you can imagine, we've said hypothetically in the past that we've looked at sort of up to half of our business being from power and carbon capture and the other half being from upstream. I think that's not a bad rule of thumb. Again, these things are hard to predict. And as you look forward, that's going to be something dependent on the environment. But in the near term, prioritizing sort of upstream and making sure our cash engine is humming. And then we're going to be actively building our carbon capture and power portfolio to get to that mark that I just mentioned.

[Scott Gruber, analyst]

Got it. And then on the subject of redeploying capital back into the base gas production business, how do you think about the cadence of recapturing some of the lost volumes in '25 and '26? It's obviously going to be related to the gas pricing environment, but maybe a little bit of flavor for how you think about the kind of cadence of investment relative to the gas price environment?

[Christopher Kalnin, executive]

Yes. I'll have Eric take a shot at that one.

[Eric Jacobsen, executive]

Scott, thanks for joining. So as you recall from the past 2-plus years since our Exxon acquisition of the Barnett, we have shown the ability to grow production nicely on the back of our fantastic inventory, both long laterals, new drills as well as refracs. And then when prices are down, we've really throttled that CapEx back and shown the ability to manage our already industry-leading low decline, flatten the base and manage costs.

As we look forward into '25 and '26, I think you'll continue to see that systematic CapEx investment approach with the ability -- with the agility and the ability to toggle and flex. As Chris said, when we look into the forward curve and anticipating a higher price environment, the extent to which we deploy capital and grow depends on what those -- what the pricing is.

You can think about the fulcrum being in that $3 to $3.25 price range and the fulcrum meaning kind of a maintenance CapEx level of $160-ish or so dev CapEx. Above the $3.25 range, especially as we get into $3.50 and $4, we've said previously and we'll stick to it that that's when we really start to grow. Long laterals in the Barnett refrac program, really grow production like we did in the back half of '25.

And if pricing falls below that $3 mark, I think you'll start to see us invest a little less than maintenance CapEx level, how much less depends on how far the price is below $3. So systematic approach, agility, flexibility, great capital efficient projects to grow when pricing is favorable, maintain when it's in that kind of fulcrum point and then manage the base effectively below that.

[Operator]

Our next question comes from Betty Jiang with Barclays.

[Wei Jiang, analyst]

Congrats on the successful IPO. I look forward to following the companies in the year ahead -- in the years ahead. So I want to start with the Power business. Chris, you mentioned earlier that the CCS helps you to sell more power. In your conversations with counterparty who are interested in that power at companies or what not, is there a general understanding acceptance of carbon capture as an enabler of low-carbon power?

[Christopher Kalnin, executive]

Yes, Betty. Thanks and good to hear from you again. Absolutely. So with regards to the discussions of the data centers, the carbon capture business is particularly important for the power business because we can offer what they call hour-by-hour offsetting. So when you think about a data center, it runs through the night. It has a substantive load that flexes up and down and is, in some ways, divorced of whatever is happening in the weather.

So where these folks that we're talking to are particularly interested in BKV is that we can staple the carbon offsets on an hour-by-hour basis to our power plants or the gas that we combust in our power plants and then offer them baseload power through the night. That's what's really compelling for them. And I think depending on the party you're talking about, each group has different internal kind of carbon offset evaluators and I think in general, the receptivity of carbon capture has been very strong.

I think people see it as a -- increasingly as a winning solution when they can kind of combine it with natural gas and combine cycle and then on the balance by renewables in the market so -- renewables and battery power.

So I think we are seeing very strong traction, I would say. It's going to take a little bit of time to work out all the details, especially as you think about the complexity of offering that product, certifying it and then ensuring that it has all the transparency that you need. But I would say I remain very optimistic, and I think we are at the forefront of shaping some of these discussions with some of the largest companies in this space.

[Wei Jiang, analyst]

Yes. No, that makes sense. And then -- so in order for more power tied to CCS, we also need more carbon to be captured. So with the Barnett Zero up and running for better part of the year now, are you seeing any increased interest from other midstream operator around carbon capture of their gas processing plants? Are you seeing that backlog interest ramp up for more carbon capture projects?

[Christopher Kalnin, executive]

Yes, Eric, why don't you take this one?

[Eric Jacobsen, executive]

Sure. Yes, good question on the carbon capture interest, specifically around midstream providers. We are seeing that ramp up. I think on the back of us delivering a successful and safe and now 1 year in operation Barnett Zero project. Other midstream operators have taken note. We're in conversation with a large number of public and private midstream operators.

To date, we have 3 emitter agreements in total and 5 more under exclusivity across our entire portfolio. So I think -- and many of those are natural gas processing or midstream operator agreements. So yes, the interest is ramping up. I think people are seeing that we can deliver the full chain of these carbon capture projects and starting again on the back of our Barnett Zero project.

[Christopher Kalnin, executive]

And where I might add, we're on track with Cotton Cove, as you heard in the release as well, another natural gas processing project for first half of '26 start-up.

[Operator]

[Operator Instructions] Our next question comes from Bert Donnes with Truist Securities.

[Bertrand Donnes, analyst]

Congrats on your first public earnings call. I just wanted to start off. I think you've got the reputation of the natural consolidator in the Barnett. Are the other operators willing sellers and is there room for synergies in scaling up these positions? Or is it more just about growing your cash flows and gas volumes to maybe flow through to the power in CCUS side?

[Christopher Kalnin, executive]

Bert, it's Chris. Thanks for the question. So there is absolutely a market to sell and consolidate Barnett assets. I think the issue we've had in the last, I would say, 18 months is the volatility around prices. And I think what both buyers and sellers are looking for is more stability in the strip so that we can agree on what that strip is to transact. And I think once you see sort of some normalizing of the strip, is it $3? Is it $3.50? What are we seeing in terms of the more steady state outlook for that strip, I think that's when you're going to see the transactions.

To your question about what are the opportunities certainly, aggregating cash flow is nice and attractive, but I think there's a lot of synergies to bringing in smaller players to our portfolio. We are able to develop full year round. That's a big advantage over someone who's smaller, we're able to assess refrac.

We have more information on the Barnett than any player previous to us because we have the biggest footprint. We have better marketing takeaway. We can drop costs because we have the economies of scale. And when you think about just opportunities to kind of merge the assets and kind of plan that overall your capital program, you're able to do that. So I think there's tremendous synergy on top of just aggregating cash flow and I think most of the players in the Barnett are looking to exit.

They're subscale and it's really hard when you're not the big player in the basin to kind of take advantage of these benefits. So I think it's a matter of just kind of getting some stability in the curve and then I think we'll be poised to kind of transact at the right time.

[Bertrand Donnes, analyst]

Well said. And then maybe the second one is just your -- what's the appetite for adding additional power plants in the JV? Is now the right time? Or do you wait for some of the data center demand to kind of actualize? I imagine other players in the space are well aware of the demand. So maybe are you able to create more value because of your closed-loop system or just your thoughts there?

[Christopher Kalnin, executive]

Yes. Listen, we're bullish on power, right? I think when you look at the demand for data centers that are coming in the U.S., it's unprecedented. We have not seen this kind of load come on to the grid for years and years. And I think as you look at the data and if you really kind of do the forecasting both in ERCOT and broader across the U.S. you see a huge wave of demand that I don't know we're prepared to handle. And AI is real, and it's growing.

And so with that said, I think BKV's posture is leaning forward in a 45-degree angle on power. And I think there is an opportunity right now where people are kind of looking at what this means on the private side, particularly, and I think that creates a space for BKV to still transact at reasonable prices.

And so we're going to be leaning forward on the acquisition side on the power, I think now is the moment. If you look forward in the next few years, I think the opportunity to acquire existing power plants at reasonable prices will be hard. And I think we're going to go into new build sort of territory. And I think that's a whole another can of worms. So we're going to be leaning forward. Obviously, the M&A markets are unpredictable. We got to kind of see the right opportunities. We bought smart in all our deals so far, but we're in a lean forward posture on that.

[Operator]

Our next question comes from Jake Roberts with TP Holt.

[Jacob Roberts, analyst]

Maybe for Eric, I just wanted to -- I know it might be a bit early for 2025, but I believe restimulations are imagined to play a bigger part of the program next year. I just wanted to maybe try to understand how capital allocation between those and the more traditional horizontal wells changes as strip moves?

[Eric Jacobsen, executive]

Yes. Great question, Jake. Yes, the refracs, as you mentioned, they have been a pivotal part of our success in the Barnett. And I think you're aware that we feel like the Barnett is uniquely positioned because of the vintage and the early development of the Barnett, where our predecessors left 300, 400, 500 feet between perf clusters as opposed to modern-day fracs in the 40 to 50 feet between perf cluster range.

So that's why we're differentiated and the backbone of why over the last 3 years, we've been a leading refrac operator in the United States shale. We've done 360 refracs in the last 3 years. So you're right. The 2,100 refracs that we have remaining in our inventory will continue to play a big part of our development program going forward. We're really pleased with the economics, the low-cost investment and then the results and the return of those refracs that we've done to date and anticipate that will absolutely continue going forward.

As we get into '25 and '26, you're right, it does depend on kind of the pricing environments and what level of CapEx we have. You can typically think of our refraction that kind of 20% to 25% of our total dev CapEx spend range and the rest new drills largely Barnett and some NEPA. So that's the way I'd think about it under most pricing scenarios, Jake.

[Jacob Roberts, analyst]

Great. Appreciate that. Maybe staying on the same topic, is there a meaningful shift to either declines or LOE as you see more refracting to the program?

[Eric Jacobsen, executive]

Meaningful shift towards declines or LOE. I mean, yes, I think what we've seen is -- in 2021, we were able to keep production flat on the Devon asset on the back of refracs alone. So it shows the strength of our refrac program being able to keep production flat. On the refracs themselves, they're sort of a little higher decline than the new wells, but not much. So on new wells, I think we say we're at like 45% first year decline.

Refracs are in that kind of mid-50 range. That's because they're not fully virgin, but there's a lot of meat left on that bone. So they do contribute to sort of our low decline asset base, low decline new drills, low-decline refracs and certainly industry-leading low decline base production.

And then on the LOE side, the more we -- the more we work on that flat denominator, the more it helps LOE. You've seen us lower LOE just through structural moves and flattening our organization owning versus renting, prioritizing by profitability and big data, everything we do. And then refracs have certainly helped on the denominator side, along with our ability to maintain base production and flatten it with technology and moving towards machine learning and artificial lift.

[Operator]

There are no further questions at this time. I would now like to turn the floor back over to Chris Kalnin for closing comments.

[Christopher Kalnin, executive]

Thank you, operator, and thank you, everyone, for joining our inaugural earnings call. We're really pleased about our results this quarter. We look forward to continuing to grow BKV as a new kind of energy company, and we're really pleased that you've spent the time with us today. So thank you. Have a great day.

[Operator]

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