Big Sky Industrial Q3 2026 Earnings Call Transcript

Big Sky Industrial (NASDAQ:BSIN) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Big Sky Industrial Inc. reported a 12% increase in revenue to $2 million for Q3 2026, driven by a 30% increase in average realized prices.

The company completed the field side of Phase One, with all necessary equipment procured and construction of the processing facility underway, targeting first production in spring 2027. The MRV application for CO2 sequestration is in the final stage of EPA approval, and the delay does not impact the project’s economics.

Big Sky has secured a five-year, 100% take-or-pay helium contract with a fixed price of $285 per MCF, starting production from day one. The company is progressing with plans for a larger Senior Secured Credit Facility and monetization of Phase One Section 45Q credits.

Management is optimistic about future growth, with Phase Two planning underway and highlighting the company’s transition to an industrial gas producer.

Full Transcript

OPERATOR

Welcome to the Big Sky Industrial Inc. 23rd Quarter 2026 Earnings Call. I will now turn the conference over to Mason McGuire, VP of Finance and Strategy.

Mason McGuire (Vice President of Finance and Strategy)

Good morning and welcome to Big Sky Industrial Inc. Third Quarter 2026 earnings conference call. All participants are in listen-only mode. Following management’s prepared remarks, there will be a question-and-answer session for analysts. Today’s call is being recorded and a replay will be available on the Investor Relations section of the company’s website at bigskyindustrialinc.com. Before we begin, I would like to remind everyone that today’s discussion will include forward-looking statements within the meaning of the federal securities laws. These statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to materially differ. Please refer to the company’s most recent SEC filings, including the Form 10-Q filed yesterday and the Form 10-K, for a discussion of these risks.

Statements made on this call speak only as of today and the company undertakes no obligation to update them. Joining us this morning are Ryan Smith, President and Chief Executive Officer, and Mark Zajak, Chief Financial Officer. I’ll now turn the call over to Mr. Smith.

Ryan Smith (President and Chief Executive Officer)

Thanks, Mason, and good morning everyone. The third quarter was about execution. When we spoke in August I said every structural piece of Phase One was in place: engineering, permitting, EPC, funding, and offtake; and that what was left between here and first revenue is execution. That is where this team has spent the last 90 days in Houston and in Montana, and we’re pleased with where the project stands. The field side of Phase One is now built.

Our infill gathering and injection lines are complete. Our long-lead equipment has been procured, including the power generation that will power the plant. Fabrication of the processing facility is underway and construction remains on schedule. We are targeting first production in spring 2027, and our helium is sold from day one. Here’s how I’ll walk through the call this morning: construction and operations first, then a direct update on our MRV application, then our commercial position and the market we’re selling into. Mark will take you through the quarter and the capital structure, and I’ll come back at the end with what’s ahead. I’m going to start in the field because that’s where the progress this quarter is most visible. Our infill gathering and injection lines are complete.

Those are the lines that bring gas from our production wells to the processing facility and carry CO2 from the plant to the Big Rose sequestration asset. The production wells are drilled, completed, and ready to tie in, and our Class II injection wells are operational. In other words, the field side of Phase One—gas in, helium purified and sold, and CO2 captured—is in place and ready for the plant. On the plant, our long-lead equipment has been procured, including company-owned power generation. In August we identified the generators as the longest lead-time item on the project. They are purchased, on site, and owning our generation puts plant uptime in our own hands from day one while significantly improving our operational costs going forward. Fabrication of the modular processing facility is underway with our EPC partner. The modular design is a big reason we remain comfortable and on schedule.

Most of the build happens in a controlled fabrication environment rather than in the field, and far less can go sideways on site. On-site civil work begins in the coming weeks, and equipment installation runs from late in the fourth quarter into the first quarter of next year. We’re targeting first production in spring 2027, and I want to be clear why we framed it as a window. It leaves sensible room for commissioning and for a Montana winter, and I’d rather give a window than a specific date at initial operations. The plant is designed to produce greater than 14 million cubic feet of high-purity helium and to capture approximately 125,000 metric tons of CO2 a year.

Now the MRV, as I know it’s on the front of the mind of many of you who’ve dialed in today. Our Big Rose MRV is in the final stage of the EPA’s approval process. Big Rose is where we will sequester the CO2 captured in Phase One and in future phases. We submitted the plan on October 9, 2025, and because of the federal government shutdown, the agency accepted it on November 12, 2025. We have addressed the EPA’s comments and are awaiting final agency action, and nothing in the agency’s feedback has changed our expectation of approval.

While the process has taken longer than we optimistically hoped, historically EPA approvals of comparable plans have generally taken 12 months or longer, so our timing is in line with precedent, even if we had hoped for a quicker outcome. The review is detailed by design. It covers how CO2 will be monitored, measured and accounted for, including leak detection and verification of long-term sequestration, and the timing of the final decision rests with the agency.

Our responsibility to this point has been to respond promptly and keep the project moving forward. And that’s exactly what we have done. The MRV approval is not a condition to starting Phase One plant or to selling helium. Our injection wells are permitted and operational so we can sequester CO2 from the first day the plant runs. The approval timing does not change our resource base, our plant sequestration capacity, or our helium offtake terms. Its impact is when we start generating and monetizing 45Q credits, not on the underlying economics of the project. We’re advancing our credit monetization work in parallel with the EPA review so that we’re positioned to move forward once approval is received.

Our second plan for Cutbank was submitted on December 17, 2025. It supports CO2 enhanced oil recovery at our Cutbank oil field over the longer term as we move through future phases, and it continues to move positively through the EPA process. Now to the commercial side of the platform. Our helium is sold from day one. The offtake we signed in April is a five-year, 100% take-or-pay contract with an investment-grade global industrial gas company: 1.2 million cubic feet a month at a fixed plant-gate price of $285 per MCF with CPI escalation beginning 3-1-20 and a pricing redetermination in year three. The buyer handles all transportation logistics and delivery, so we realize the full 285 with no deductions.

Volume risk and demand risk sit with an investment-grade counterparty, not with us. The market we’re selling into continues to make our case for us. On October 23, the Department of Energy designated helium a critical material under the Energy Act of 2020, citing its essential role in semiconductor manufacturing and growing supply chain risk. We have said for some time that an American producer of a strategically important industrial gas matters a great deal right now, and that designation puts it in writing.

There is no substitute for helium in semiconductors, medical imaging, fiber optics, or aerospace. Domestic supply remains thin, and our year-three redetermination gives us a way to participate in a stronger market. Cutbank oil field keeps doing its job by providing low-decline oil production that supports the platform while we build, and the captive CO2 outlet for enhanced oil recovery in future phases. With that, let me hand it to Mark to walk through the third quarter results and the capital structure.

Mark Zajak (Chief Financial Officer)

Thanks, Ryan, and good morning everyone. I’ll cover three things this morning: the quarter’s results including the remediation item in lease operating expense, our liquidity, and the financing work Ryan referenced. The full detail is in yesterday’s press release and in our 10-Q. Starting with the quarter, revenue was $2 million, up 12% from $1.7 million a year ago, as a 30% increase in our average realized price to $63.83 per boe more than offset lower volumes following our 2025 divestiture. Production was 30,628 boe, 76% oil. Lease operating expense was $2.1 million compared to $1 million a year ago. The increase reflects approximately $1.2 million of remediation and related costs from the previously disclosed release of produced fluids from a gathering line in our legacy oil operations, which was identified and remediated during the quarter.

We submitted a claim under our general liability policy, which provides $1 million of coverage for pollution cleanup costs after a $100,000 deductible, and we expect to recover up to $1 million of these costs. Because the claim is pending approval, no receivable has been recorded at the quarter end. Excluding these costs, lease operating expense was $0.9 million or $29.71 per boe, essentially flat with the $29.58 a year ago. Cash general and administrative expense was $1.6 million, down from $1.7 million a year ago and $1.8 million in the second quarter, primarily on lower accounting and tax professional fees.

Adjusted EBITDA, which excludes the $1.2 million of remediation costs, was negative $0.8 million compared to a negative $1.3 million a year ago. Net loss was $3.5 million or $0.07 per share. On liquidity, we ended the quarter with $2.9 million of cash and $14.4 million of total liquidity, including $11.5 million of undrawn capacity under our Senior Secured Credit Facility. That facility carries a $20 million borrowing base, no financial covenant testing through the quarter ending March 31, 2027, and a May 20, 2029 maturity.

On financing, we are running two complementary processes. The first is a new, larger Senior Secured Credit Facility. Our existing facility was sized for the start of the construction. As we approach first production with contracted helium revenue, we believe the asset supports more borrowing capacity, and a larger facility would expand that capacity and our financial flexibility. Those discussions are underway. The second is monetization of the Phase One Section 45Q credits.

Under tax law, 45Q credits are transferable, which makes the Phase One credit stream a financeable asset in its own right and a potential source of non-dilutive capital. Those discussions are progressing and we will update the market as each process advances. With that, back to you, Ryan.

Ryan Smith (President and Chief Executive Officer)

Thanks, Mark. Let me close with what’s ahead because the next several months are full. Over the coming months we have a sequence of milestones, each of which further de-risks the project. On site, civil work starts in the coming weeks. Equipment installation runs from late in the fourth quarter into the first quarter, followed by commissioning. Our Big Rose MRV plan is in the final stage of the EPA’s process, and our credit facility and 45Q monetization processes are advancing in parallel.

First production comes in spring 2027 with our helium sold from day one. Behind Phase One is Phase Two. Engineering and planning are underway for a second, larger plant on the same footprint using the same infrastructure, same permits, and same field operations we’re putting in place for Phase One. Our acreage, our permitted wells, and our geology already support two to three times Phase One capacity with no new land required. We expect to make a final investment decision in the coming months following completion of financing and final plant sizing.

Once Phase One is operating, Big Sky Industrial is no longer a small-cap E&P. We are an industrial gas producer with contracted offtake, a carbon management business with policy-backed revenue, and a low-decline oil business integrated as a captive CO2 outlet. Small-cap E&P companies trade at roughly three times EBITDA, midstream and gas processing at roughly eight times, and blue-chip industrial gas companies at roughly 17 times or higher. Those aren’t our forecasts.

They are public market multiples that anyone can verify. Our job is to keep executing the milestones and let the market award it. To put a fine point on the quarter, the field side of Phase One is complete. The long-lead equipment is in hand, plant fabrication is underway, and construction remains on schedule. Our helium is contracted from day one, and the federal government has now formally recognized it as a critical material. In August I said the countdown to commercial operation was measured in months, not years, and there are fewer of them now. I want to thank our team in both Houston and Montana for their execution this quarter, and thank you to our shareholders for the continued support as we move from the build phase into the cash flow phase.

The path to first production is clear and we’re executing against our plan. Operator, with that, please open the line for questions.

OPERATOR

Thank you. We will now begin the question-and-answer session. To ask a question, please press star one on your touchtone phone. If you wish to remove your question from the queue, press star then two. We ask that analysts limit themselves to one question and one follow-up. Our first question comes from Charles Mead with Johnson Rice. Please proceed with your question.

Charles Mead (Analyst)

Good morning, Ryan and Mark, and to the rest of the Big Sky team there. Ryan, thank you for the detail. Really in the context of that 12-month context for the EPA approval, I think I was aware of that, but I hadn’t really focused on it. But I wondered if you could just add a little bit more color and tell us how many rounds of comments you’ve had from the EPA that you’ve responded to, and when did your last round of comments come? How long ago? Got it. That’s good detail, Ryan. Thank you for that. And then on the construction of your plant, I wonder if you could share a few of the items on the critical path to start-up that you and the board are the most focused on.

Thank you.

Ryan Smith (President and Chief Executive Officer)

Yeah, good question. Good morning. Some of this I probably can’t get too granular on, but from a high level, I think the expectation going into this was very similar—I’ll appeal to the finance crowd a little bit—very similar to an S-1 with the SEC to where you submit your project, your proposal on the front end, you get reviewed, the review starts, and then over the allotted expected time period going forward, you get questions, comments that you respond to.

And in an ideal scenario, those questions and comments get less and less and less as you move forward. Our process has mimicked that 100%, to where the first round we got—I believe it was the very end of last year, maybe early this year—was the most thorough. And then a few back and forth turns in the four to five comment range that got materially less as we move forward is the blueprint that we expected and that occurred with us. So our last round of comments—again, this is a ballpark timeline—was around Labor Day, which, internally, our opinion was those comments were extremely light and we instantly responded to those.

And since then, in the company’s opinion, our review has been complete and nothing in the feedback that we’ve gotten has reflected otherwise. So it’s been—to answer your question—it’s been, you know, call it six plus weeks since that last turn occurred. Yeah, I mean, I think at a high level—right—I’ll give you a layup answer: it’s really everything, right, just because everything ties into it coming online when we want it to come online. A lot of the long lead-time items, and I would say like the riskiest items, were us getting in the queue for generators, membranes, et cetera, pumps, pipe, materials that we’ve gotten ahead of.

So, you know, right now fabrication of the plant is beginning off site, civil work is beginning on site, and that’s complicated, but on the risk spectrum, this is a very, like, old, proven type of processing technology and, you know, clearing a site, etc., is pretty simple. So a lot of the riskiest items are behind us. Just going forward, making sure that all these fabrication—assembling the pieces off site, moving it on. Unfortunately, weather does play a part in moving it on, leads to this spring date.

The gathering system was a very important thing for us obviously so we can move this gas. You want to have that gathering system done by end of November just because you don’t want to be operating up there in the winter for installing a gathering system—that’s been completed. So again, every single part we’re extremely focused on, but right now it’s really just the execution of putting the materials together and making sure that’s being done on a timely basis going forward.

OPERATOR

Our next question is from Tom Kerr with Zacks SCR. Please proceed with your question.

Tom Kerr (Analyst)

Good morning, guys. Any update on the capex numbers for the industrial gas buildout? We’re at $15 million, you know, 2026. I guess we have about three quarters left of buildout cost—what do those numbers look like? Have those changed? And then related to that, is there a maintenance capex number once everything gets built out for the industrial gas properties? Got it. That makes sense. One more quick one on the 45Q monetization. Are you able to provide any updates or further color on, you know, the discussions? You know, are you talking about finance companies or energy companies? Are you talking about a big chunk of the 130 million, a small chunk—just, I know you may not be able to discuss it, but any further color on that?

All right, great, thanks. I’ll jump back in the queue.

Ryan Smith (President and Chief Executive Officer)

So I think we have probably, I’d say, two-fourths left of spend. I would stick to the number we gave on our Q just because intra-quarter numbers are always weird numbers to give. We have spent a little bit this quarter, so I would add a couple million dollars to the 3Q 9/30 number, but that’s all moving along. I think the only increase that we’ve had materially that wasn’t originally in the plan is what we announced earlier on—us acquiring power generation—which net-net is an upfront capital spend but over the life cycle of operational costs you more than make your money and then some and also aren’t exposed to increasing power prices in perpetuity, in my opinion, going forward. And on the maintenance costs, the maintenance costs on the plant are not very significant.

Of course there will be some. It’s built into the numbers that we’ve put out in our investor presentation. So of course, like with any machine, you’ll have some maintenance cost, but that’s built into our forecasts, our operating expenses, and outside of something that’s major and unforeseen, it’s an extremely low maintenance cost on the plant going forward once it’s up and running. Yeah, I mean, again, I’ll reiterate what you said—there’s only so much you can say—but from a high level, and this is reflected in the call and the earnings release, we’re in talks with multiple parties ranging from, I would say, the largest financial institutions and then overall the biggest pool of—I’ll call it credit finance parties—which comes in multiple different avenues, are big insurance, big tech, big financial institutions, large entities that have very significant tax burdens forecasted into perpetuity in the future.

And I would say all of our conversations reflect that group. Every group has a different structure and a different need and a different desire on what they transact on, going from annual all the way to the entire pool. Some entities want to do more of a financing structure than an outright purchase. I think at the end of the day, they all kind of look the same to us, and from a corporate finance perspective, once you break it down and the discount you sell it at and the proceeds you receive, etc. So even though some of them look a little bit different, they all kind of get you to the same place. But again, without saying stuff that I’m probably not in the position to say right now, the demand and the interest from the counterparty side has been very strong. We’re in discussions with multiple entities that fit under that umbrella of potential buyers that I mentioned, and our expectations on getting a deal done haven’t changed at all.

OPERATOR

We have reached the end of the question-and-answer session. I would like to turn the floor back over to Ryan Smith for closing comments.

Ryan Smith (President and Chief Executive Officer)

Yeah, thank you. I appreciate everybody dialing in, listening today. We’ve made a lot of progress this quarter. We’ve made a lot of progress post quarter. Everything is moving forward as we have hoped, to being commercial in the spring of next year while we continue to plan on our Phase Two and our future growth initiatives. So I look forward to updating the market intra quarter as we get more information and giving you updates on our next quarterly earnings call.

OPERATOR

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.