All right. Good morning, everyone. I hope you all enjoyed your evening last night. We are ready to begin with our first presentation for the day. Let's please give a warm and generous welcome to the President and CEO of U.S. Energy Corp, Ryan Smith.
Thank you. Good morning. Thanks for joining me this morning. Those of you who I know, good to see you, and those of you who are new to the story, I'm happy to run through U.S. Energy Corp and what we're doing right now. I'm Ryan Smith. I am the President and CEO of U.S. Energy. I'm gonna take 15, 20 minutes this morning to kinda talk about what we're doing, where we've come from, the accomplishments we've made on pivoting our business into a new platform, and why I believe this is as compelling from a return profile perspective as anything that you'll find in the market today for a company our size. Disclaimer page, this is on our website.
If anybody wants to go read it, I would direct you there. Really from a high level, and I'll go into all of this much, much more as we move along, is U.S. Energy at a glance. Historically, we've been a traditional oil and gas company for something like 40 years, listed on the Nasdaq under USEG. Where we sit today is we control an extremely large industrial gas resource in the state of Montana. A lot of helium, a lot of CO2 generated from that project. We also own a large oil field that is right next door and kind of related to the industrial gas resource.
As you can see by this very detailed map in the middle, we're located operationally in Montana. On the column on the right is really the high points of the details of our asset base. We have a massive industrial gas asset base in Montana. It's a 50-year-plus producing asset. Fifty years is kind of the high level that people leave it at. I think this 50 years could be 150 if we were really doing the math. We control a massive amount of helium and a massive amount of CO2 up on this resource. It's one of the largest in the U.S. Therefore, it becomes very quickly one of the largest in the entire world of its kind.
We control about 1.3 billion cubic feet of helium, which is an extremely meaningful supply. As part of that processing, which I'll get into in a little bit, a very large CO2 resource as well, all kind of underpinned by the value that our legacy oil assets provide. They're all fully owned. They're all fully operated by U.S. Energy with minimal or no third-party dependencies. The second table on the right really reflects our carbon management business, which I'll get into in a little bit. We have a large-scale emerging CO2 sequestration business alongside this asset. It's supported by bipartisan legislation.
We're forecasted to receive $130 million on our first phase of Section 45Q federal tax credits for sequestering and utilizing the CO2 that we capture as part of this process. Again, just simple math. That number alone is a few turns of where our current market cap and enterprise value are today. Finally, on the bottom right, when does all this come online? We've been working on this for the last two years. We've made a lot of progress, which I'll go over the last couple of months. Q1 2027, we're selling helium. We are initiating the beginning of our carbon management program. We've began the last stages of spending on our infrastructure. We've signed offtake agreements.
A lot of this timeline, which has been going on for a couple of years now, has been derisked and sequenced leading up to first revenue here in the coming months. I'll hit on this pretty quickly just because it's important to talk about, you know, how we got here. We weren't chasing certain themes or what's hot. This was a very deliberate pivot. As I mentioned, we're traditionally a oil and gas company with kind of scattered assets across the United States in six or seven places. About two years ago, we started strategically monetizing our non-core assets and redeploying that capital into the project that we're here talking about today.
I think the thesis behind this pivot was, 1, the economics of the project we're working on are extremely compelling and drove it kind of on its own. Again, we wanted to get out of the oil and gas valuation game. For those that follow the traditional E&P world, it's been under a lot of pressure for a very long time now, probably over a decade. You know, small cap oil and gas companies trade at 3 times cash flow. Industrial gas companies, especially ones that are infrastructure heavy, the peer group is 8-12 times, and some much higher than that. That really caught our attention.
Combined with the CCUS carbon capture utilization and sequestration business, we saw a pathway with assets that we owned and we control to build a very large business supplying the future U.S. economy with critical domestic supplies that are structurally short in today's world. That's helium, that's CO2, and even that's still oil with everything that's going on in the macro. Moving on to the right, I think this business was lucky, but it was also designed to really have some extremely strong moats that can't be penetrated in this part of the world. As I mentioned, we control one of the largest industrial gas assets in the U.S. We fully own and operate all the associated infrastructure, so there's no margin pressure or leakage.
This last phase of infrastructure that we're building right now it's the only gas processing facility in the Northwest Rockies region. Then again, all of this is not our main focus on the oil side, but we still control a very large oil asset, which I view as really setting the valuation floor of the whole business. This is my favorite slide on the deck, no doubt about it. This kind of explains, you know, where we're making our money and why it's pretty compelling. You know, I named this slide The Flywheel in Action. You know, simplistically, our business plan by design, but also because it's not overly complicated, is very simple. We produce low-cost industrial gas on one of our assets.
We drill the well, we produce the well. That gas goes to a processing plant, a helium processing plant, which is what we're building now. It strips out and it purifies the helium, the helium goes over to the left. Then as part of that production, it creates a very large amount of CO2 producing that helium. We capture all that CO2, we purify it, we liquefy it, then we send that CO2 to the right. You sell the helium via a long-term offtake agreement, which I'll get into in a minute. They come, they pick up the helium from your plant. You take the CO2, you take half of it, you permanently sequester it on one of the assets that we control. Permanent sequestration means goes away forever, never comes back.
That's a major positive U.S. legislation aspect, we get paid $85 a metric ton to permanently sequester that CO2. The rest of the CO2, we send it over to a truck that we own. Trucks cost like $80,000, not a huge capital expense. We inject that CO2 into the oil field. Oil field builds pressure, more oil comes out of the ground. We also get paid $85 a ton for the CO2 that we're sequestering into the oil field. We make money again when oil production increases and we sell that. I think the takeaway from this slide is this isn't 3 businesses that are just bolted together to bolt them together. They all highly benefit each other, and they all make the other one more and more valuable.
We drill one well, produce that one well, and ultimately get three bites at the revenue apple from that. Because if you're getting paid three times on one process, the economics get very robust, we're able to reinvest that capital to scale this project. I'll get into it in a minute, but this is a highly scalable project, and growing into scale with that cash flow profile from the very beginning, it makes it highly capital efficient to scale this project. On the right, you see our initial revenue mix. Because of legacy oil production, we're still about half oil, with the other half being carbon management and helium. As we grow and as we produce more, that percentage of oil will go down, the percentage of the industrial gas revenues will go up.
How does this company look going forward? The majority of our revenue, the majority of our EBITDA, the majority of our profit will be underpinned by long-term offtake agreements or federal policy backed by the U.S. government revenue streams. I think that demands a multiple re-rating away from traditional oil and gas. Questions I get the most, no doubt, is all this sounds good, how are you going to pay for it, and are you gonna dilute me down the road, right? As I mentioned, with the monetization of our legacy oil and gas assets, we put a lot of our own money into this project so far. These numbers are always a little fluid because infrastructure spending isn't a one-time check. It's just kinda tiered over the life of the project. They're ballpark enough.
We've deployed about $30 million of our own money getting this project to this point. This slide says we have another $28 to spend. That number's lower than that at this point in time. It's probably in the low $20s. We look at each 1 of these phases as almost a unit, and you run economics on each individual unit. You know, we're forecasting on a project level. There will be some G&A on top of that. From a project level, our initial phase 1, a 40% unlevered return on capital employed. Again, from a project level, that is an extremely strong number, even layering on corporate costs on top of that, which would, you know, drop that into the low $30s probably.
Still a project that you'd wanna put in as much of your, of your fresh capital as possible. We raised money successfully in early March. Traditional equity offerings, common only, no warrants, etcetera, on top of that. Concurrently with that, we also amended our existing debt facility to make it more of a project finance debt facility to fill the cap structure on the remaining needs for phase 1. We're fully funded for phase 1 from now until revenue's online. The forecast going forward is once we're running, we run this at about 1x leverage. I think you see infrastructure assets in the U.S., much, much larger companies run infrastructure assets at 6, 7, 8, 8x leverage. We would never do that.
I would never do that. I think the takeaway on this is we're running extremely underlevered right out of the gate, and there's financing opportunities as we scale this to lower our cost to capital, reduce equity dilution, going forward. I'll go past this pretty quickly because I've already talked about some of the revenue streams. Again, it's one platform, three streams. There's no redundancy, no margin leakage in any of these revenue streams. We sell helium via contracted offtake. As you've probably seen in the news, the global macro events has put an extreme strain on helium supply in the U.S., in the world. A third of the helium produced comes from Russia, a third comes from Qatar, a third comes from the United States, right?
One of those is probably not like the other two, and I don't think it's a long putt to say that domestic helium supplies, real domestic helium supplies that are underpinned by long-term offtake agreements going forward are the most valuable helium molecules in the world. Our carbon management business has huge scaling potential. It makes money right out of the gate. Then again, I glossed over the oil production aspect. We still control a very large oil field that helps us with financings, it helps us with cash flow, and it's something we'll continue to optimize going forward. One thing I think that I do wanna spend a little bit of time on that we announced a couple of weeks ago or so, a month ago, an extremely important milestone for our company that I think the market overlooked a little bit.
We signed a long-term offtake agreement with the largest industrial gas company literally in the world, to buy, to haul, and to take away, all of the helium that our first phase produces. We got a price we like, we got a term that we like. That 14.5 MMcf per year is the projected volume that our first phase is going to produce, which means they're buying everything that we can produce. The most important thing on here is the 100% take or pay. For those not familiar with that means they have to take it. They have to buy it. What does that mean for us? It gives us revenue certainty. It gives us day 1 cash flow.
Then the kind of the qualitative part of this is when a company our size, you know, gets in bed and signs a mid 8-figure contract with one of the largest companies in the world, it's a very strong confidence boost and a proof of concept. They don't just sign documents. They do diligence on your asset. They do diligence on your business plan. They do diligence on your growth. We checked all those boxes. As we scale this project as well, we are already partnered with the biggest and the best of the industrial gas distribution companies in the world, and that relationship being in place makes sense.
You know, going forward to future financing opportunities, again, no big secret, but on infrastructure assets, they're very easy to underwrite with low cost of capital debt. How do you get that? You get that with offtake revenue, with investment grade counterparties. I think just from an economic standpoint, this is hugely important. From a credibility standpoint, it's hugely important. It even flows through our cap structure to lower our cost of capital going forward. And absolutely tremendous milestone that we accomplished here in the recent weeks. Big Sky Carbon Hub, throwing a lot of names out here for everybody. Really, this is the umbrella of everything that we control that's not oil. Oil's on the left, everything else is on the right.
Massive helium deposit, massive CO2 potential, and also the geology alongside all of the helium and all the CO2 a little bit deeper is ideal for carbon sequestration. We will initially be capturing, utilizing, and sequestering about 125,000 metric tons on our phase 1. That's just a number. I think to relate to that's about 25,000 passenger vehicles removed from the roads per year. And I think a very important point is the infrastructure is already in place to sequester those amounts and a whole lot more. Right now, our field can take about 300,000 metric tons with the dollars that we've spent.
As you can see, the revenue associated with our CCUS business is robust out of the gate. There's a built-in already in place two and a half times scale to that number. Transportation and infrastructure, not sexy, very important. Most energy projects like this die from logistics challenges, much more so than geology challenges. We're right in the middle of a big north-south, east-west railroad. There's two major interstates that run right by us. All this was designed for where we put our plant and our infrastructure, so we have access to take our products to market extremely efficiently in any kind of weather. Exposure to long-term oil. Again, I think most people understand oil economics. It's out there. It's simple. I would say this is very different from how people look at oil traditionally.
Why is that? This field has been around for a very long time, owned by very large companies, all the way from Chevron, Texaco, to Blackstone. The thesis was always take the CO2, source it, pay for it, enhance oil recovery on the oil field. There was a cost associated with that. Now we take that same CO2 from the process that I mentioned, capturing it as part of the helium purification. We send that to our oil field, we inject it, we get paid for that injection. Usually, it was a hard molecule to source and an expensive molecule to pay for. We get paid a lot to take that CO2 and enhance our oil recovery.
Again, it's 1 molecule that we're getting paid twice on, both from the CO2 sequestration and the increase in oil production that comes off of that process. Something to look at here. Again, everybody knows what our 3 revenue streams are. If you look on the right, I think this is more illustrative than anything, but it's here to show the scalability of our platform both from a revenue and an EBITDA basis. The EBITDA is the black line. This shows, as I mentioned earlier, we look at each phase as a unit, and what does that unit get us? This chart on the right shows us adding a 2nd phase at the same size as phase 1 in a year and a half from now.
I think that's probably that 2 years on the map. I think that's conservative. I think that's something we could probably pull forward. You start going to the right of that chart, and you see a really strong compounding effect of keeping this operation up and running, scaling it, and what it looks like into the future. You're looking 4, 5, 6 years into the future, scaling up to a $45 million, $50 million, $60 million EBITDA type of number, majority of which you are selling 8x-12x type of commodities into the market.
I believe that there are some very capital efficient ways for us to build into this revenue and EBITDA projection that we have in front of us now, where the common equity holders, of which the board and myself, own 27% of, don't get wild dilution. Infrastructure and market, I already mentioned. We're in a very ideal situation relative to this part of the world. I'll go through this very quickly as well. You know, I think ultimately we wanna be judged on what we say and then what we accomplish based on what we say we're going to do. We've done a very good job of that.
Over the last two years, we've laid out numerous hurdles that we said we were going to do and we accomplished, starting with land acquisition, starting with drilling, starting with permits. As we made more progress, kind of more dignified hurdles of project financing, of helium offtake agreements, et cetera. We've hit all these milestones. We still have some coming up between now and first revenue, but a lot of the big de-risking events at this company have already taken place. Ultimately, on a development project like this, I think it's only as valuable as the credibility of management. We've done projects like this separately.
On this project specifically, we've hit our timelines and our accomplishments out of the park with a very good technical team, and I expect to continue following that going forward. Then finally, like why U.S. Energy today? What's the investment case? I think it all starts with an asset. You can't fake geology. We have a highly differentiated asset that you cannot find in the market right now, I would say overall or especially in the capital markets, and get exposure to these critical supply items that are going on right now. We're the only integrated helium and CCUS hub in the Northwest U.S. Again, something you cannot replicate. We have a massive resource of helium, a massive resource of CO2. It's a 100% owned and operated.
This is a forever type of asset in terms of production with the size it is. Number 2, economics. Economics have to work. As I mentioned, we have 3 independent revenue streams, a very large amount of 45Q credits coming over 12 years. I think this next valuation number is probably a little low, we trade at 3-ish times cash flow right now based on a peer group that we'll grow into, but is multiples higher than where we're at. Again, all that underpinned by a very large oil asset in the ground that we control. Number 3, execution. We've invested a lot of money. We've raised a lot of money. We've diligently spent that money into the ground without missing timelines, without missing hurdles.
We're You know, everybody wants revenue now, but we are months away at this point from having this online and having a run rate revenue that completely repositions this company. Then again, why now? I think we trade at a massive discount for what we've accomplished to where we're going, to what our projections look like going forward and to the industries that we're selling our product into. A lot of the de-risking hurdles that we had to accomplish up until this point, we have accomplished. There's really a minimal amount going forward outside of plant construction, which is about as simple as it gets in terms of industrial gas business before we're online. I went a little longer than I expected. Thank you for listening.
Happy to answer any questions that anybody may have. Go ahead.
If there's a reason you cannot get the facilities for helium and carbon up in time, is there any penalties you get or will you be liable for any penalties?
There's no penalties. There is a lag built into the helium offtake contract, I believe through July, that you would revisit that contract if you weren't up and running by that time. Go ahead.
You mentioned a singular payment forthcoming at the beginning of your. How much was it?
Are you talking about the tax credits?
Yeah.
I think that one opportunity that you'll see us pursue, and you've seen it in the market, is people that have big numbers of long life forecasted tax credits do a tax equity financing to a buyer that wants to buy those credits. You're pulling forward a big number of that 12-year, $130 million.
Okay
upfront for financing. I think that's something that we'll.
From the government?
It comes from tax equity buyers ranging from tech companies to insurance companies to funds.
Oh, who are buying the credit?
Correct.
There's an actual transaction there.
Oh, yeah.
Have you estimated that into EPS going further?
I mean, we haven't run, like, EPS numbers.
Yeah.
I would say traditionally, what you see in the market, and again, every deal is a negotiated deal, and every deal is a structured deal, is you take that full life cycle of credits, and you sell 50% to 70% of those volumes at a discount rate anywhere between 6% and 10%. I mean, those numbers back of the envelope come out to between $50 million and $70 million of that stream that you could pull forward, recycle that capital, deploy it into phase expansion going forward in a non-dilutive manner. We have about 15 seconds left. Okay. Probably no more time for questions. Okay. If you have any additional questions, they can be-