Big Sky Industrial Inc. Common Stock Micro-Cap Virtual Conference

Yeah. Thanks, Daniel. Thanks for having me. Thanks Sidoti 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. I will skip some slides that are important, but can get a little repetitive in the 20-minute presentation. I'm Ryan Smith. I'm the CEO of Big Sky Industrial. We're traded 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. I'll start running through these now. Forward-looking statements, if anybody wants to read these, they are on our website and very thorough.

The company really from a high level, from a glance, is kind of summarized in this slide, which I'll start on the left and just move over to the right. As I mentioned, 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 PV 10 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 adds to 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 from 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 display 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 cubic feet, which is absolutely massive. Below that dome, an extremely large, one of the largest in the world, CO2 deposits. That is close to half a trillion cubic feet of gas. For those not intimately familiar with volumes of gases, these are really big numbers. A PV of those two things right now on phase 1 of what we are doing, which we plan on expanding, which I will 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 are going to be capturing and 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 is about 25,000-30,000 car vehicle emissions taken off the road every year. In valuation framing, where I think this is an extremely compelling point in the company's equity is, we are trading at a significant discount to what our phase 1 net asset value is below half of that amount today for a project that has been highly de-risked and is coming online now in a matter of months. The column in the middle is an overview of the project and our assets in Montana. The column on the right is really a high level summary of the industrial gas assets. One takeaway I would say is, in reality, everything is finite, but this reserve and this asset is so large, it is going to be producing long after most of us on this call are gone. It is a 50-plus year producing asset.

50 plus is usually where you stop. It is probably closer to 150 than 50. It is 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 is about $130 million just on this first phase that we are completing right now. 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 are months away from having this online and gain commercial. This is one of the ones I will skip. It does describe kind of how we made our pivot from traditional oil and gas to industrial gas development with what we are doing now. On the right side, I will say we have as strong of a competitive moat that exists in this industry, not only from wholly owning the entirety of the asset base, which you cannot replicate, but we own all of the land, we own all the reserves, we own all the pipeline transport. We are 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 and another slide probably the most. This, simplistically is our business. It's simple, but it's simple by design. 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 helium, 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. Our offtake 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 created. 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 again, 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. 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.

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 stream 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, we don't ever have a production problem.

Our resource is so large, it's never a question of how much gas can you produce. It's a question of how much processing you can put in. Because with a project like ours, the production is relatively cheap, but 80% plus of the capital you spend, typical of other infrastructure and midstream projects, 80% of the capital you spend goes towards the processing and towards the infrastructure. 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 are selling more helium, and importantly, you are continuing to generate more and more carbon capture 45Q credits. It really does become a cyclical cash flow generating, self-funding, non-dilutive vehicle. I will 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 is no warrants, there is no converse, there is 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 1x net leverage.

I point out that in the market, infrastructure and midstream companies, I would say, typically run at 5x-8x leverage. We would never do that as a company. I am not comfortable doing that with the company. We are forecasted to be at about a 1x turn when we come online. I would point out, I expect us to increase our debt capacity, to have that availability. There is a lot of room between that 1x and that 5x. Just to have excess debt capacity, in my opinion, is always a thorough thing to have in place. I am going to skip this slide. This is just a little more detail on each of our three revenue streams. Each one is independent, each one is contracted or supported by bipartisan federal policy. Our helium offtake agreement, this was a big one that we signed.