Investing.com -- KeyBanc Capital Markets initiated coverage of BKV Corp. (NYSE:BKV) with an "overweight" rating and set a price target of $23 per share.
The analysts see BKV as a unique player in the energy and carbon capture sectors, particularly for its focus on natural gas production and carbon sequestration.
BKV's operations center on its assets in the Barnett and Marcellus Shale, alongside a 50% stake in a power generation joint venture in Texas.
BKV stands out due to its dual business model, which integrates traditional energy production with its expanding carbon capture and sequestration (CCUS) segment.
This CCUS capability is already operational, with the company actively sequestering CO2 and aiming for an increase in its sequestration capacity by 2031.
KeyBanc's analysts note that BKV's plans align with broader trends such as rising demand for liquefied natural gas and increased interest in carbon-neutral energy solutions, especially as industrial consumers and power facilities look for ways to meet net-zero goals.
The analysts believe that BKV's diverse portfolio of natural gas production, power generation, and CCUS presents a compelling growth story. While the company is still early in its CCUS efforts, having captured around 0.2 million metric tons per annum of CO2, it aims to scale this to over 16 mmtpa by 2031.
To fund this growth, which is projected to cost $1.55 billion, BKV is actively seeking a joint venture partner, with potential announcements expected by the end of 2024.
The analysts flag that such a partnership could provide a strong valuation marker for the CCUS business, a key growth driver that the market currently underestimates.
Additionally, BKV's power segment, consisting of two gas-fired plants in Texas, is expected to deliver robust earnings from 2025 onward, benefiting from potential data center expansions in the region.
These facilities could be crucial in driving higher utilization rates for BKV's power plants, which currently operate at a sub-60% capacity factor.
Battery storage projects, currently under consideration, could further enhance these assets' earnings potential during periods of extreme energy demand.
Despite BKV's strong positioning, the analysts flag some risks, particularly in its CCUS segment, which depends heavily on future project development and regulatory approvals.
Nonetheless, they remain optimistic about BKV's ability to capitalize on growing market demand for cleaner energy solutions and see upside potential in the stock, supported by the company's initiatives in carbon capture and power generation.