Thank you for joining Noble Capital Markets Emerging Growth Virtual Equity Conference. I'm Mark Reichman, one of Noble's Senior Research Analysts. Today, we are joined by Mr. Ryan Smith, President, Chief Executive Officer, and Director of Big Sky Industrial Inc., which trades on the Nasdaq Capital Market under the symbol BSIN. Ryan, the floor is yours.
Thanks, Mark, and thank you to everybody at Noble for having me this morning. I appreciate everybody getting up early and listening to what we're doing at Big Sky. We have a lot going on. We're very excited about what we're building here at the company, and I'm looking forward to running through this with everybody this morning. I'll try to go pretty quick so I can leave the floor open for some questions. Forward-looking statements, if anybody wants to double-check these, I'd direct you to our website. An important slide, as really the key overview of what we're doing here, so I'll spend a little more time on this than I will some of the other ones. I think I would direct you to the middle of the page first because that gives you a good mental view of where our assets are in Montana.
If you look at that map, I know it's not a very detailed map, but it should be familiar. That's the state of Montana. The blue dot on the left is our legacy oil field, the Cut Bank oil field. It's a very large [audio distortion] oil field. They're about 15 mi to the east, and the green dot is what we refer to as the Big Sky Carbon Hub, which is where all of our attention and all of our capital have gone over the last couple of years, developing a very large-scale helium and carbon management project. Moving over to the left, what Big Sky is right now, historically, we've been a legacy oil and gas company. A couple of years, we really pivoted our business to focus on our asset base, in Montana, around healing production, around carbon management, around energy infrastructure.
Just for a reference, the board, the insiders, a couple of board members, and myself own a very large percentage of this company, about 27%. So we have a high alignment with our common shareholders, with no tricky structure in the capital stack, no options, no warrants, no pref, et cetera. A lot of underlying value in our business from our legacy oil field, our legacy oil assets. Oil's come up a little bit, so this number is a little bit bigger than what we have it at quarter end, which is how it's reported. But our legacy oil reserves are still worth about $25 million-$30 million on a present value basis. Going down to the industrial gas resource of what we're calling Phase 1, which Phase 1 is the development that we're doing and we're starting right now.
I'm not sure how familiar everybody is with gas volumes, but I think the takeaway from 1.3 billion cubic feet of helium, close to 500 billion cubic feet of CO2, and $115 million NPV value on Phase 1, these are absolutely massive volumes. These aren't small exploratory projects. This is a large-scale geologic structure that holds some of the largest volumes of these industrial gases in the United States. And when you take the deliverability and availability to the U.S. markets, one of the largest in the world. We have a very large carbon management business once we're up and running and commercial, where we're capturing and sequestering about 125,000 metric tons of CO2 per year. For reference, that's roughly about 25,000 cars off of the road annually.
Going down to the valuation for any, I think this is as compelling of a situation that currently exists in micro and small-cap markets. We trade at a very significant discount both to our NAV and on a public valuation basis based on both public comps and where industrial gas-heavy, infrastructure-heavy M&A takes place. Moving over to the right, I think just to summarize this page, we have a very large asset that's going to be producing for a very long time, or we say 50 years plus. That's really kind of the ceiling that people say when you do have a large-scale asset like this. That 50 is probably closer to 150. This asset's going to be producing much longer than any of us are going to be around going forward.
As part of our carbon management business, which is the capture and sequestration of the CO2, we create very large Section 45Q credit carbon capture tax credit pools. Our first phase alone is about $130 million. From a timeline basis, we're scheduled to be up and running late Q1 of 2027. We've begun construction. We've signed our offtake agreements. We've filed our permits. The timeline has been very substantially de-risked and sequenced, and everything is moving in the direction to where it's not a matter of years like most projects, it's a matter of months when we have this up and running. This is something I'll go through pretty quickly. It's very important, but it's kind of just a snapshot of everything I've already talked about our pivot.
We have monetized our oil and gas assets, and we've recycled that capital up in Montana to really develop this long-life helium carbon capture business that we've been developing. On the right, we talked about moats. This is something that is not repeatable. There's not an asset out there in the markets today with a company our size that controls 100% of something like this. It's one of the largest structures in North America. We control and we own all of the land, all of the processing, all of the infrastructure, et cetera. I'll get into a minute why that's highly advantageous, because each one of our revenue streams, it's independent, but it also benefits each revenue stream. It's a sum of the parts where 1 + 1 + 1 isn't really 3. You put all those revenue streams together and it really equals something much more.
Excuse me. Very simple slide. In my opinion, the most important slide in the entire deck. I call it the Flywheel in Action, which I like that name very much, even though sometimes it sounds silly. This is really what our business looks like when we're commercial next year. Number one, we produce low-cost industrial gases off of our industrial gas structure. We've drilled four wells during 2025. That really provides us a long life, steady, low -decline production rates. The next step is we have a very simple, small gathering system that takes the gas from those producing wells to our processing facility. Number two, where that processing facility does two things.
The first thing it does is it separates the helium out, it purifies it, and we sell that via long-term offtake agreement with one of the largest industrial gas companies in the world, where they come in, they pick up our helium from our plant site, pay us, transfer of title, transfer of cost, and they drive off. The first step in making money here is the helium. As part of that helium production and processing process, there's a very large amount of CO2 that's created at this helium plant. We capture 100% of that CO2, and we do two things with it. The vast majority of it, we put it into the last leg of our pipeline, very short piece, and we permanently sequester that CO2 underground, never to come out again.
We take the lesser part of it into a truck that we own, drive it 15 mi down a straight road and inject that into our oil field reservoir. Reservoir pressure builds, incremental barrels come out of the ground. We make money on that incremental oil. So we're making money on the helium. We're making money on the oil. Where it gets very interesting, in my opinion, is the United States government incentivizes industrial producers like us, that as part of their process, large amounts of CO2 are created to capture that CO2 and to either utilize it or sequester it. The acronym is CCUS, Carbon Capture, Utilization, and Sequestration, and they will pay us $85 per metric ton, escalating every year 3% for 12 years to handle and to sequester our CO2 that we're capturing off of this industrial plant. Ends up being fairly large numbers.
What we do with that tax credit stream is we monetize that tax credit stream, and then we reinvest that money into more processing phases, more development going forward. Stepping back a little bit onto the flywheel, every single number benefits, grows the business, and once you get to number four, you reinvest that money, and then you just start it again, and you become a self-funding business with minimal equity dilution going forward. After Phase 1, Phase 2, Phase 3 of reinvesting your proceeds and building more and more processing capabilities out, you end up with a very large and lucrative business. I'll go very quick through this phase. This slide, this is really our sources of capital and how we paid for and how we're paying for our Phase 1. We're fully funded on Phase 1.
We raised straight common equity this past March, as well as put in a project finance debt facility. We are forecast to come out of our Phase 1 build at extremely low levels of leverage, especially considering most infrastructure type of projects, most infrastructure-heavy, midstream-heavy public companies run leverage ratios that are in the mid to high single digits. We are forecasted to be about 1x net leverage coming out in the first quarter of next year. That graph on the right shows really where our cash balance is, the availability we have left and where we are in the process. I will say, as I mentioned before, we put a late first quarter and late first quarter is really like a March 31st date of having this project completed and online. We have followed that timeline successfully, and continue to follow it today.
Something I will gloss over very quickly because I have kind of already talked about it. This is just some more detail about how our platform really creates three revenue streams that not only are not redundant, but benefit each of the other revenue streams through helium, through carbon management, and through oil production. Very important slide here. I know helium is very topical in the markets right now. Like any topical business, you get a lot of promotion out there. I think that if you look at what we are doing and every aspect that we have accomplished so far, this is probably the biggest credibility jolt that we have had from a third- party basis. In March, might be early April of this year, we signed a long-term offtake agreement for all of our helium that we are producing with the largest industrial gas company in the world.
A company like that doesn't partner with a small company like ours without an incredible amount of due diligence, and belief that you have a project that can scale many years going forward. We have a base price of $285 per MCF for five years. That escalates every year with CPI. I would say a very important point here is that this is an all-in price. We don't pay for transportation. We don't pay for tolling. We don't pay for securing firm capacity at large liquefaction facilities. This is a number that is very attractive once you bake in all costs that are part of the entire supply chain of helium. Annual commitment of about 14.5 million cubic feet a year, 100% take or pay. That basically means they will take every molecule of helium that we produce off of this first phase.
So a AAA-rated credit counterparty, very large entity, a very big positive for us that we accomplished this year. This is really an overview slide. Again, just a little more granular of what the project looks like and where it's laid out. I would say one very important note here is the third part about the infrastructure, which I have another slide on later in this deck. Although we are in a very rural part of Montana, our infrastructure couldn't be any better than it is. A major interstate runs north-south right through our property, makes it very easy for us to be able to get our product to market. There's a major rail line, there's major interstates, there's great roads. This is as good as it gets in this part of the country. Something that you just can't repeat, and it's not there.
This is really the last slide that I'll go through, and it's really the slide on the right, the graph on the right that shows the immense economic upside that we have in this project. When we're online on an annualized basis, just because it's not coming on on January 1st, this is about a $15 million a year EBITDA lift. As we move forward, I've talked about it, we've already discussed it publicly, we're already starting planning for our Phase 2 processing time. As you can see, big CapEx number that's covered by the monetization of our credits almost dollar for dollar, if not more.
You really see how the financial profile begins to compound going forward to a very significant EBITDA number phasing into an industry, an industrial gas industry that trades at 8x - 12x , both on M&A comps and public company multiples. With our carbon capture credits and monetization, it really removes the equity overhang of how we pay for stuff. As you see this black line continue to grow and grow and grow, it's really building on a share count that doesn't move a whole lot from where it's at today. Infrastructure slide, just more of the same of what I already talked about in a little more detail. Again, the takeaway here is infrastructure here is as good as it could possibly be for a project like ours. Milestones and catalysts, we've achieved a lot here.
We've achieved a lot that I don't believe the market is fully recognizing that. This isn't a speculative project anymore. We spent a lot of our own money over the last two years getting it to this point, have hit major milestones, still have significant catalysts going forward both this year and next. We've laid out a very clear plan over the last 18 months of what we are going to do. Credit to our team here, we've done a very good job of hitting every one of these milestones when we said we were going to hit it. The last slide, again, the investment case on Big Sky Industrial is we have a very differentiated asset. I think it's the only asset of its kind and of its scale in the U.S. Economics are very strong.
We trade at a discount to where any reasonable forecasted trading metric trades in the market today. We've executed extremely well. We've invested a lot of our own capital. This $27 million number is dated. It's probably significantly more than that at this point. We've drilled our wells. We've filed our permits. We've started construction on our plan. We're six months away from this being online and us going commercial. Again, why now?
Just to reiterate what I already said. We've had fairly good equity performance over the last two to three months when the market has started to realize a little bit that we have something extremely unique here, and have really checked the boxes on a lot of the milestones, and moved this so far to the right up the de-risking scale, that the risk-reward on where this is going, where it stands now, and the things we've accomplished is as compelling as anything that I see in the micro/small- cap universe today. Management team, a lot of experience here. A lot of senior guys that have worked at really, really big companies. You can go through this as you would like on our website. The appendix is really just some slides on the macro helium markets.
I believe that it's as attractive as it could possibly be, both from the supply and the demand side, and we are in great position to take advantage of this in the years coming forward. So with that, Mark, I'll turn it back over to you. I appreciate everybody listening to me run through this very quickly early on a Thursday morning.
Thank you, Ryan. With Phase 1 construction underway and the first gas helium sales and revenue targeted for the first quarter of 2027, what are the most important remaining milestones between now, we're here at October 1st, and commercial operations?
Yeah. Great question, [right?] I think really, it's two things. It's one, the very unsexy but extremely important kind of staying focused, keeping your eye on the ball, continuing to execute every day. Making sure that our construction timeline is followed, making sure our budget is followed, making sure that we are online very close to where we've said we are going to be online, and getting this commercial and starting to make money. Then secondly, I think around our carbon management business, which is such a big driver for us. You've seen a lot of really big companies out there, ExxonMobil, Occidental Petroleum, [Denbury], and et cetera, really put a lot of capital into that business that they're running. Ours is the same type of business. Ours is growing. We have one permit from the EPA that we're still waiting on, which is normal.
I've said multiple times, we highly expect it by the end of the year. I've also said that we expect it sooner than the end of the year. That really unlocks a lot of stuff for us on the tax credit monetization side, where we can go out and take our $130 million Section 45Q tax credit pool and forward sell those to some of the biggest companies in the world. The biggest buyers are Google, Apple, Microsoft, Goldman, Morgan Stanley, Nasdaq, et cetera, and pull forward a very large amount of cash on that $130 million, I think I'll give you some ranges here, $70 million-$95 million that we could pull forward in cash, in a completely non-dilutive manner late this year, very early next year, and use that money to continue to lay down more processing and more development on this asset.
That's really the playbook on rinsing and repeating going into that slide.
Now you have the five-year, 100% take or pay helium offtake agreement. How should investors think about the revenue and margin profile once Phase 1 reaches steady state production? I think you addressed that a little bit on slide 10.
Yeah.
Although I think you have a second plant coming on stream in 2028.
Yeah. I think that initially, we probably have a 60/40 mix. Again, these are ballpark numbers on our first phase of what I will call the industrial gas, which is the helium recovery management versus oil. That is really because of our legacy oil business. As we go forward, for those of you familiar with the project already know this. For those that you are not, I think if you spend any amount of time on this whatsoever, we have such a large resource, it is not a question of how much gas can you produce, because the gas is easy to produce and it is cheap to produce. The processing and the infrastructure is expensive, right? It is not a question of how much gas you can produce, it is how much infrastructure and processing you can lay down.
As I mentioned, we have already started planning on our Phase 2 with the capital for that coming from our credit monetization. As we continue to ramp phases, I think we have a very good line of sight. If Phase 1 is one unit, a high single digit number of units of processing that we can lay down, it continues to grow and to scale more and more into that industrial gas revenue stream while oil continues to shrink as we move out. That is really the plan. The industrial gas business is trade at three to five turns higher than oil businesses do, right? We are really building this to where as we move forward, the majority of our economics are coming from that more lucrative pool of industrial gas dollars than [liquid dollars].
Yeah. Now, Ryan, helium pricing can be difficult for public market investors to understand. Your contracts begins at $285 per MCF at the plant gate with the CPI- linked escalation beginning in 2028, and then a year three pricing redetermination. So how do those provisions protect the economics while allowing Big Sky to participate in changes in the helium market?
Yeah. I would say first, that price is very attractive. That price works. I mean, in any commodity business, you are going to have spikes, right? Spikes up and down. But that price very much works for us. Why does it work for us? Because we are not paying tolling and we are not paying transport costs, and we are not paying for capacity with some of these really big liquefaction facilities. We are guaranteed all of that by our large offtake partner, and they take all the costs to that. So that bucket of costs that a lot of people, when they announce their pricing, do not deduct, that can range from $150- $300 an MCF. So if you are trying to do an apples-to-apples comparison, you would have to add that cost on top of the all-in price that we are receiving.
On the price redetermination, that was something that we asked and fought very hard. I don't believe any commodity business is ever going to go straight up into the right. There's always going to be ups and downs. I feel very strongly on both the lack of supply and the immense demand growth of helium, to where it was very important for us to get a price redetermination put in after year three. Of course, with any price redetermination, there's always some risk with that. That was something that the counterparty didn't want and we wanted, and the economics of the market right now gave us leverage to have that inserted if the market keeps going where it's going.
We have a question here that is-- Well, first they say, "Excellent presentation. Thank you. Is there an update with regards to the status and/or timing of the sequestration applications with the EPA?
Yeah. I mean, it's a very good question and that's, I'd say, a million-dollar question, but probably much more than that. I think that process is going very well. It's a very collaborative process. At the beginning of that process, the normal timeline, whether you're ExxonMobil, whether you're Big Sky, to get these approved are usually 12- 15 months. It's highly collaborative. It's not a black box approach. We've gone through it. Our technical team, our consultants that are the leaders in the United States on this process have led this for us, and it's gone very well. I think we have a very good line of sight on a near-term approval of these permits. From my seat, I feel very good about where that stands, and it's not causing any delays.
I will say, in anything, when you deal with the United States government, right, there is a little bit of a black box there to where you don't tell them what you want. You're always in kind of wait and see for them to run their processes. I've said from the very beginning, it's a 2026 event, and we still feel very confident that's a more than achievable timeline.
I think we are nearing the end of time. Looking over the next 12-18 months, what two or three milestones should investors watch most closely? Why is now a good time for investors to consider Big Sky Industrial?
Yeah. I think we have three big ones. I think we have our final permit for the EPA. What that leads to is the monetization of our credit stream, which is going to pull forward a large cash number that's non-dilutive to our balance sheet that is more than what our market cap is today. Then thirdly, I think it's getting commercial. It's getting our Phase 1 online, when we say we're going to do it, start making money. Then four, it's announcing a final investment decision on our Phase 2 processing, along with the capital raise through our credit monetization to be able to pay for that large CapEx number. We continue to build this, and I believe the same as I think you said at slide 10, that is our base case model.
Like any other base case, it could be more, it could be a little less, like every other business. But no matter what range of goalposts that you put on that forecast, any market recognition that's put on those forecasts of economics is a company and a valuation that's much, much larger than where we trade today.
Ryan, thank you so much for joining us today.
Yeah, for sure. Mark, thank you for having me. Noble, thank you for having me, and I appreciate everybody listening in this morning.
As a reminder, a replay will be available on channelchek.com. On behalf of Noble Capital Markets, thank you to everyone who joined us, and we hope you enjoy the remainder of the Emerging Growth Virtual Equity Conference.
Awesome. Thanks, guys.