Big Sky Industrial Inc.

Daniel Harriman, Big Sky Industrial, Ryan Smith As most of you know, we're going to give Ryan about 20 minutes to go through the presentation, after which time I'm going to open it up for Q&A. If you do have any questions at any time during the presentation, feel free to type those into the Q&A box. And time permitting, we will get to as many as we can. But please join me in welcoming Ryan Smith. And with that, Ryan, I'll hand it over to you. Thank you so much for being here.

Yeah, thanks. Thanks, Daniel. Thanks for having me. Thanks to Dodie for having me. I appreciate the turnout for those listening in and submitting their questions already. I'll try to go through this pretty quickly and hit the high points so I can get to everybody's questions. So I will skip some slides that are important, but can get a little repetitive in 20 minutes. I'm Ryan Smith. I'm the CEO of Big Sky Industrial. We're trading on the NASDAQ. We've really pivoted our business over the last couple of years from a traditional oil and gas company to an industrial gas company that's focused on helium, on carbon management, and managing our legacy oil assets. So I'll start running through this now. Ryan Lewis Smith, Mark Zajac and this oil reserve number should probably be lower than the industrial gas number on the layout of the slide. But we still have a significant oil business here, almost exclusively focused in Montana. Do about 200, 250 barrels a day still with a PV10 of roughly 20 million. It's probably a little higher than that now because oil prices have come up. But a very good base to which we still make money on and as the net present value stack of the company. Moving down, our industrial gas resource, which is really what we are focused on and see the most upside in. These are just numbers, but what I will say is if you take away something for this, they're very big numbers. You look at the assets on our map, it's very simple. I know it's a very simple are displayed in the middle. But we have two very large assets in Montana that are very distinct, but very geographically close to each other. On the left, the blue dot, we have our cut bank oil field. It's a very large conventional oil field. And about 10 miles east of that, the green dot is what we call the Big Sky Carbon Hub, which is an extremely large underground industrial gas structure. I would say visually think of it as a sports dome stadium where on the top of the dome sits an extremely large helium reserve. Right now, we estimate that along with Ryder Scott. Ryder Scott is our third-party reserve engineer. I would say the preeminent reserve engineering firm in the world. A helium resource of $1.3 billion were all involved in this project. a PV of those two things. Right now, on phase one of what we're doing, which we plan on expanding, which I'll get into in a minute, of about 90 million, our carbon management business, which is basically capturing CO2 from our processing plant and permanently sequestering it, we're going to be capturing, sequestering about 125,000 metric tons per year when our operations are online in the first quarter of next year, just for A mental comparison, that's about 25,000 to 30,000 car vehicle emissions taken off the road every year. The valuation framing where I think this is an extremely compelling point in the company's equity is we're trading a significant discount to what our phase one net asset value is, below half of that amount. Ryan Lewis Smith, Mark Zajac, Ryan Lewis Smith, Mark Zajac long after most of us on this call are gone. It's a 50 plus year producing asset. 50 plus is usually where you stop. It's probably closer to 150 than 50. It's fully owned by Big Sky, fully operated by Big Sky. Extremely minimal third-party dependencies for us to develop and operate this asset. As part of our carbon management activities, We make a lot of money capturing the CO2 as part of our helium process and permanently sequestering it through the carbon sequestration 45Q tax credit program. Our first phase alone over a 12-year period, that's about $130 million just on this first phase that we are completing right now. And then when does all this come from a business plan to making money In the first quarter of next year, a lot of our big hurdles have been cleared. A lot of our long lead time items have been ordered. Helium offtake agreements, MRVs filed. The timeline has been very de-risked up to this point and sequenced. And we're months away from having this online and getting commercials. Ryan Lewis Smith, Mark Zajac The entirety of the asset base, which you can't replicate, but we own all of the land. We own all the reserves. We own all the pipeline transport. We're the only game in town in this part of the world and have accomplished almost everything that we need from a permitting standpoint to realize all these different buckets of value. I will spend a little time on this, but this and another slide probably the most. And this simplistically is our business. And it's simple, but it's simple by design. So what our business is when it's up and running is we have our wells that produce our gas, which has heavy helium contents in it. That gas flows through a gathering system, which we're literally installing today, that gas runs to our processing plant. The processing plant splits out the helium, purifies it, injects it in high-pressure injection into a large tube, like you would see a tube on an 18-wheeler driving down the highway. And our off-take partner, which is the largest industrial gas company in the world, drives to our plant every 10 days, picks up the tube, pays us on the spot for the helium they pick up, and drives off. That's way number one. As part of that helium processing, production and processing, a very large amount of CO2 is green. We capture 100% of that CO2 at our plant and send it into the last leg of our gathering system and inject it underground to permanently sequester that CO2, which basically means put it underground, never to come out with a large portion of it. The remainder of that CO2, we truck it 10 miles straight shot paved road to our oil field, inject it into the ground, increase reservoir pressure, incremental barrels come out of the ground because of the increased pressure underground, and we sell those increased barrels of oil and make money there. So we make money on the helium. We make money on the increased oil. And where I really think the story becomes compelling is we make a lot on the carbon management. So every molecule of CO2 that we capture and sequester or utilize, we get paid $85 per metric ton, escalating roughly 3% per year on a 12-year period for all of those volumes. We're capturing a lot of CO2 as part of this process, about 125,000 metric tons per year. If you do that math on the $85 plus escalation plus the amount of CO2 that we're capturing, it comes out to a big number, about $130 million. which I'll get to in a minute of what we plan on doing with that money. But simplistically for this slide, we can monetize those 45Q long-life 12-year cash flow streams and pull that cash flow forward today to reinvest and continue building out phases of our development going forward. For those of you familiar with the story, Ryan Lewis Smith, Mark Zajac but 80 plus percent of the capital you spend, typical to other infrastructure and midstream projects, it is 80% of the capital you spend goes towards the processing and towards the infrastructure. So the big question is how much can you put down and how are you going to pay for that? This flywheel here kind of explains that. You're making money on a day-to-day basis on helium and CO2. You have an extremely large nine-figure number of 45Q tax credits that are sitting out there. We've already started working on the process to monetize those and bring that capital in, put in more processing. At that point in time, every increased processing unit you put in, you are processing more gas, you're selling more helium, and importantly, you're continuing to generate more and more carbon capture 45Q credits. And it really does become a cyclical cashflow generating, self-funding, non-diluted vehicle. I'll spend a very short amount of time on this. Earlier this year, we raised capital for our phase one, raised about 17 million in straight common equity. I will say we have no structure on our balance sheet. There's no warrants. There's no converse. There's no ugly stuff. We have as clean of a balance sheet as anybody that exists out there. We also entered into a $20 million project finance debt facility that funds our phase one project going forward with a very low leverage, especially for an infrastructure asset forecast of about one times net leverage. I point out that in the markets, I would say typically run at five to eight times the original. We would never do that as a company. I'm not comfortable doing that with a company. We're forecast to be at about a one times turn when we come online. And I would point out, I expect us to increase our debt capacity to have that availability and, you know, There's a lot of room between that one times and that five times. But just to have excess debt capacity, in my opinion, is always a thorough thing to have employment system. I'm going to skip this slide. This is just a little more detail on each of our three revenue streams. Each one's independent. Each one's contracted or supported by, you know, bipartisan federal policy. Our helium offtake agreement, this was a big one that we signed. We signed it in late March, early April of this year. Largest industrial gas company in the world, bar none, is our offtake plan, which was extremely important for us. One, to have the credit quality of a counterparty, but also a party that is one of the largest companies in the world that diligence to our project, went through everything and ended up entering into an eight-figure long-term agreement with us, which I view as a massive shot of credibility to our project. Quick numbers, a base price, $285 for MCF on our helium that escalates with CPI over a five-year contracted period. So on a model basis, it's really low, probably low 300s. I would point out that For those of you more familiar with the helium markets, there's a lot of promotion in the helium markets right now, just like any other, I would say, new topical industry where you'll see higher numbers than that. The supply chain on helium goes from gaseous helium that has to be liquefied. Liquefying helium at scale is a very, very big boy's game. Exxon, Messer, Lindy, Airwiki, these are the companies that control the liquefiers at scale. for a gaseous producer to have access to those. You have to transport your own helium. You have to get firm capacity on those liquefiers. That usually adds between $2 and $250 per decimeter. So if you see somebody announcing egregiously high prices and press releases, I would say the vast majority of the time, those are headline numbers that are not taking into consideration all the transport costs, risks, polling fees. that they're going to have to do to monetize their product. It was very important for me to not take on those risks. So this 285 number you see is a net number to us with our counterparty holding all of the cost and the risk for transportation and capacity to their liquefaction facilities. Our healing commitment is a 100% taker pay, which basically means everything that we produce out of our phase one facility our counterparty is contractually obligated to take. I'm going to skip this slide because this is just a more granular overview of where our assets sit and how they look on a kind of zoomed in basis. I would say that although this is a pretty rural part of the country, a major interstate runs right through our asset base. That's very important for transportation purposes. The worst thing you can do on a project like ours is have to go down 10 to 15 different country roads to get to your asset. We're right off the interstate with one road leading to our processing facility, which takes a large amount of execution risk, weather risk off the pavement. I will spend some time on this slide because it's very important. The table on the right shows where this company can go in my opinion, in the extremely near term. Our first phase that we're doing now on a standalone basis is a roughly, I'll call it, again, these numbers, they move around a little bit with pricing, but for simplistic purposes, is a $15 million a year EBITDA business. That's about 50% oil and 50% industrial gas. Going back to my comment that I made earlier, It's never a question for us how much gas you can produce. It's how much processing, how much we call it plant on this slide, how much processing you can put down, and how are you going to pay for that. So what we show here, and what we're already planning on, and I've talked publicly, is we're already working on a phase two design. This shows it being two times the size of phase one. Right now we're looking at between two and three times the size of phase one. But really, just the ramp ability on what we're doing today, which is fairly close to coming online and highly due list at this point in time, along with putting in a second processing facility right after our first one. You get to some really significant numbers Going forward, as you can see on this chart on the right, with the question of how do you pay for it? Going back to my comment on tax credit 45Q monetization, it's an initiative that I've talked about a lot. It's an initiative that we've already started working on and made very good progress on. If you go back to our $130 million phase one 45Q tax credit generation. There's a very large market in the United States, 50 to 60 billion with a B dollars per year. We're the biggest companies in the world, big tech, Google's the biggest buyer, big insurance, big financial services, ultra, ultra high net worth, Goldman Sachs, Morgan Stanley client bases that partner with companies like ours that generate these credits and buy those credits from us. A typical transaction, looks like $0.90 to $0.95 on the dollar and about a 6% to 7% discount rate on that gross 12-year number. And if you do that math to our interest, that comes out to us monetizing our 12-year string for, again, ballpark $70 to $80 million of a cash injection that is non-diluted. So that kind of answers the dumb question on how do you pay for expansion going forward in a Mark Zajac As we continue to phase this going forward with more and more processing capacity, these numbers only get bigger on the share count that stays relatively constant to where it's at. This is another slide that I'm going to skip that just shows that the infrastructure up here, although being a rural area, is as ideal as it could possibly be for a project like ours. I won't go through this in every detail. This is a catalyst list. I think there's a very big discrepancy in the market right now on all of the risk boxes that we've checked and all the catalysts that we've checked up to this point. And I'll say the much fewer remaining execution and catalyst items that we have going forward with where our NAV sits and where we where we currently train. Our team here has done a very good job over the last 18 months laying out a schedule, following that schedule, successfully checking all of these boxes and really continuing to reduce the necessary de-risking items that we have coming up before we have first commercial production. And this is the last slide I'll go through. Again, we have a highly differentiated asset. Any company on the NASDAQ and the New York Stock Exchange, I think we're sitting by ourselves in terms of what we're doing and being a unique process. Large reserves, 100% operated by us. The economics, the trading multiples, return on capital employed, any financial metric that you want to lay out, we set in a very attractive point at this point of our process. Our execution, we've invested a lot of our own money. We've drilled wells. We've filed our permits. We're getting very close to this coming online. And then, you know, why Big Sky now? I think just to reiterate what I already said, I think there is a significant multiple term gap in the stuff that we've accomplished and where we sit today with all the hurdles that we've met so far. and where the near-term upside is on stock from what we trade. So there's some more slides in the back that are kind of helium macro slides that I won't get into now. I think they're very good if you want to get more up to speed with the industrial gas market. But, Dan, with that, I'll wrap it up and answer any questions anybody may have.

Perfect. Thank you so much, Ryan. As a reminder, if you do have any questions, please feel free to type those into the box. We do have a little bit of time left to kind of go through some. Ryan, just kind of wanted to start in a bigger picture, and I know you touched on this a little bit in one of the last slides, but with your targeting early 2027, can you just kind of give us a picture of what main things need to happen between now and then, and maybe what the biggest item is on that critical path to generating revenue.

Yeah, I mean, it's really, it's kind of two ways to answer that question, operationally and then catalyst-based. I think operationally, you know, the very unsexy topic of remaining focused on execution, remaining focused on budget, remaining focused on time, right? Like we drilled our wells, we laid our gallon system down, We're two-thirds through the processing plant build out now. All of our long lead time items have already been ordered and paid for. So from an operational standpoint, it's really staying just laser focused on execution and making sure that we're on top of it. From a catalyst perspective, we have one more permit, our MRV monitoring, reporting, verification report. that we need approval on. I've said publicly we expect that by the end of the year. I've also said publicly that I expect it much sooner than that. And that approval is what unlocks all of our carbon management activities. I don't think it's a stretch to say once we get that approval, I believe it unlocks hundreds of millions of dollars for us over the next six to 24 months and starts the carbon management pipeline.

Do you think that over the next six to 24 months, Do you feel like the market, as it continues to understand your story now, is kind of an industrial gas and carbon business and not a small oil and gas company? Do you expect that progress over the next couple of years to reach milestones that may drive a re-rating and how the market views what you guys do now?

I absolutely do. Great question, and I do. I think that you always have your Your risk spectrum on when people invest in companies and business plans from a great thesis, getting stuff done, finally flipping the switch and turning it online and making money, and then how are you going to scale it? My personal view on this is there's nobody on a U.S. exchange that is doing what we do and has the scale of what we have. And the critical supply topics everywhere in the United States right now, whether it's helium, whether it's CO2, whether it's calcium chloride, propane, brine, et cetera, for everything that the U.S. says that they're going to be doing going forward, AI build-outs, aerospace, missile defense, increased health care. The United States is short on all of these things, and it's not a question of are you going to be short? It's how short are we going to be? And Right now, if you want exposure to these critical supply items, you have to go buy Exxon or you have to go buy Ox or Kinder Morgan. And nobody buys Exxon for helium production and carbon management, right? Even though they produce 70% of the helium in the United States. So on the re-rating topic, I think that there's going to be One winner that drives institutional dollars where a portfolio manager says, I have to check the box on getting an allocation to a critical supply, domestic, depolitical risk entity. And my goal is for Big Sky to be that company. And as you continue to move forward under the business plan, the execution, the flipping the switch to understanding how do you scale it and how do you pay for it, I do. I think all those lead to an ultimate rewriting that matches M&A and public comps of a 10X multiple business.

That's really helpful. And you touched on this a little bit, but I want to give you some more time to kind of talk it up. The offtake agreement that you guys signed in the spring, I think you said eight figures or something within that range. Can you just talk about what a big deal that was in terms of a proof point that somebody else out there is valuing what you guys are trying to accomplish?

Yeah, for sure. It was extremely important for us to go with the biggest and the best. In the helium buying world, there's two kinds. There's The biggest companies in the world. And then there's a lot of guys who I'll just politely say are not the biggest and not credit worthy counterparties. So when you go out and you bid for your helium, you go out to the world and you receive quotes back. We went out and I think we received 11 quotes back from different buyers. So our goal was to always go with the biggest and the best, which we were fortunate enough to accomplish. But just like any fortune... 100 company in the world, right? Like they do their diligence much more than a small strip center helium buying company would do. So they, you know, in a good way tore our project apart, tore our resource apart, tore our engineering apart to get comfortable that, you know, if we're going to get in bed with you for the next multiple years, you better have what you think you have and it better work how you say it's going to work. So not only from a credit risk and a counterparty risk, the unquantifiable but very real confidence injection and credibility injection that we get from entering into a long-term binding deal with somebody like that, I think it's immense, and I think it's as much of a positive box check of do you have a real project as anything else.

For sure. We've come up on time. We weren't able to get to all the questions, but I will just remind those in the audience that the company on their website does have the presentation available. And because of time, Ryan wasn't able to go through everything, but there is a significant amount of information on some of those slides related to maybe some of the questions that we did have. But Ryan, on behalf of everybody at Sedoti, thank you so much for your time this morning and willingness to go through the presentation. For those of you in the audience, we appreciate your participation, and I'm sorry that we weren't able to get to everything, but Ryan, again, thank you so much for sharing the story, and we wish you the best of luck moving forward.

Yeah, awesome. Thanks for having me, and I appreciate everybody for listening.

Goodbye, everybody. Thanks. Take care.