Big Sky to Drill for Helium, Carbon Credits in Montana

Revenue is expected from three sources: helium sales, incremental oil production from carbon dioxide injection, and federal Section 45Q carbon capture tax credits. Smith said the company expects to receive $85 per metric ton under the program, with the credit escalating by roughly 3% annually over 12 years. He estimated Phase I could generate about $130 million in 45Q credits over that period.

On a standalone basis, Phase I could produce roughly $15 million in annual EBITDA, split about evenly between the oil business and industrial gas operations, Smith said.

The company is also exploring monetization of its anticipated 45Q credits as a source of non-dilutive expansion capital. Smith said a typical transaction could value credits at $0.90 to $0.95 on the dollar, using a discount rate of roughly 6% to 7%. Based on Big Sky's estimated credit stream, he said that could translate into $70 million to $80 million in upfront cash.

Big Sky has already drilled its wells, installed the gathering system and completed roughly two-thirds of the processing plant build-out, Smith said. Long-lead equipment has been ordered and paid for.

The remaining regulatory hurdle is approval of the company's monitoring, reporting and verification plan, or MRV, which is needed to support its carbon-management activities. Smith said the company expects approval by year-end and believes it could come sooner. He said the approval would unlock the carbon-management timeline and potential access to significant capital over the following six to 24 months.

Smith said the company's key constraint is not gas supply but processing capacity. More than 80% of project capital expenditures are directed toward processing facilities and related infrastructure. Big Sky is already working on a Phase II processing design that could be two to three times the size of Phase I, he said.

Smith said he expects continued project execution, initial commercial operations and expansion planning to help investors view Big Sky as an industrial gas and carbon-management business rather than solely as a small oil producer.