BIG SKY INDUSTRIAL INC.

Reserve estimates are based on average prices per barrel of oil and per Mmbtu of natural gas at the first day of each month of the 12-month period prior to the end of the reporting period. Reserve estimates as of December 31, 2025, 2024, and 2023 are based on the following average prices, in each case as adjusted for transportation, quality, and basis differentials applicable to our properties on a weighted average basis:

Average Price During

Oil (per Bbl) · 65.34 · 75.48 · 78.22

Gas (per Mmbtu) · 3.39 · 2.13 · 2.64

Presented below is a summary of our proved oil and natural gas reserve quantities, all of which are located in the United States, as of the December 31, 2025, 2024, and 2023:

As of December 31,

Oil · Natural Gas · Total · Oil · Natural Gas · Total · Oil · Natural Gas · Total

(MBbl) · (MMcf) · (MBOE) · (MBbl) · (MMcf) · (MBOE) · (MBbl) · (MMcf) · (MBOE)

Proved developed · 1,087 · 2,188 · 1,452 · 1,592 · 2,307 · 1,977 · 3,155 · 10,054 · 4,831

Proved non-producing · - · - · - · - · - · - · 28 · 28 · 33

Proved undeveloped · - · - · - · - · - · - · - · - · -

Total proved reserves · 1,087 · 2,188 · 1,452 · 1,592 · 2,307 · 1,977 · 3,183 · 10,082 · 4,864

Internal Controls Over Proved Reserve Estimates

Our internal controls over the recording of proved reserves are structured to objectively and accurately estimate our reserve quantities and values in compliance with the SEC’s regulations. Our process for managing and monitoring our proved reserves is delegated to On Point Resources, a third-party independent petroleum engineering company. Oversight is provided by management and the Audit Committee of our Board of Directors, as discussed below.

On Point Resources, Inc.'s President, Don Jacks has worked in the energy industry since 1981 and has been contracted by the Company to perform our proved reserve estimates since 2019. He holds a Bachelor of Science Degree and a Master of Science Degree in Petroleum Engineering from The University of Texas at Austin and has been a Registered Professional Petroleum Engineer in the state of Texas since 1992. He is also a member of the Society of Petroleum Evaluation Engineers (SPEE) and has been a chapter officer since 2005. Technical and engineering reviews of our assets are performed quarterly by Mr. Jacks and reported to our management. Data obtained from these reviews, in conjunction with economic data and our ownership information, is used in making a determination of estimated proved reserve quantities.

Our reserves are reviewed by our management quarterly and by the Audit Committee of our Board of Directors at least annually. Our management, which includes our Chief Executive Officer and Chief Financial Officer, is responsible for reviewing and verifying that the estimate of proved reserves is reasonable, complete, and accurate. The Audit Committee reviews a summary of the final reserves estimate and meets independently with Mr. Jacks separate from our management to discuss processes and findings in the reserve report. The Audit Committee can and does request reports and information from Mr. Jacks to independently verify values reported by the management team.

Oil and Natural Gas Production, Production Prices, and Production Costs. The following table sets forth certain information regarding our net production volumes, average sales prices realized and certain expenses associated with sales of oil and natural gas for the years ended December 31, 2025, 2024, and 2023.

Production Volume

Oil (Bbls) · 112,797 · 256,166 · 391,645

Natural gas (Mcfe) · 311,729 · 958,325 · 1,396,650

BOE · 164,752 · 415,887 · 624,420

Daily Average Production Volume

Oil (Bbls per day) · 309 · 700 · 1,073

Natural gas (Mcfe per day) · 854 · 2,618 · 3,826

BOE per day · 451 · 1,136 · 1,711

Net prices realized(1)

Oil per Bbl · 56.54 · 70.91 · 72.39

Natural gas per Mcfe · 3.13 · 2.56 · 2.84

Oil and natural gas per BOE · 44.63 · 49.58 · 51.75

Operating Expenses per BOE

Lease operating expenses, gathering, transportation, and treating, and production taxes · 35.03 · 30.24 · 28.70

Depreciation, depletion, accretion, and amortization · 21.89 · 19.85 · 17.99

(1) Net prices realized represent actual prices realized without regard to the effects of commodity derivatives.

We encourage you to read this information in conjunction with the information contained in our financial statements and related notes included in this annual report on Form 10-K, at the end of Part III hereof.

The following table provides a regional summary of our production for the years ended December 31, 2025, 2024, and 2023:

Oil · Natural Gas · Total · Oil · Natural Gas · Total · Oil · Natural Gas · Total

(Bbl) · (Mcfe) · (BOE) · (Bbl) · (Mcfe) · (BOE) · (Bbl) · (Mcfe) · (BOE)

Rockies · 92,343 · 33,555 · 97,936 · 112,191 · 37,829 · 118,496 · 146,199 · 84,431 · 160,271

South Texas, West Texas, and Gulf Coast · 12,125 · 19,539 · 15,381 · 69,367 · 39,677 · 75,980 · 143,825 · 168,884 · 171,972

Mid-continent · 8,328 · 258,635 · 51,434 · 74,608 · 880,819 · 221,411 · 101,621 · 1,143,335 · 292,177

Total · 112,797 · 311,729 · 164,752 · 256,166 · 958,325 · 415,887 · 391,645 · 1,396,650 · 624,420

Drilling and Other Exploratory and Development Activities - Oil and Natural Gas. The Company had no oil and natural gas development or exploratory drilling activity for the year ending December 31, 2025. For the years ending December 31, 2024 and 2023, the Company participated in 1 gross, productive well, 0.8 and 0.01 net to the Company.

• The Company faces industrial gas drilling risks.
• The Company may be unable or unwilling to develop commercially viable industrial gas operations.
• There are numerous risks associated with estimating industrial gas resources.
• The Company faces risks associated with its current lack of distribution agreements.
• The Company’s industrial gas production and margins thereon, if any, will be subject to changing prices.
• The Company’s industrial gas operations will be subject to gas processing and transportation costs and risks.
• The Company’s industrial gas exploration and production activities will be subject to technological risks.
• Our business and operations were previously adversely affected by the COVID-19 pandemic and may be adversely affected by other similar outbreaks.
• Declining general economic, business or industry conditions have, and will continue to have, a material adverse effect on our results of operations, liquidity, and financial condition, and are expected to continue having a material adverse effect for the foreseeable future.
• The Company’s operations could be disrupted by natural or human causes beyond its control.
• Economic uncertainty may affect our access to capital and/or increase the costs of such capital.
• The development of industrial gas, oil and natural gas properties involves substantial risks that may result in a total loss of investment.
• Oil price differential and oil price differentials in other properties in Wyoming and Montana could have adverse impacts on our revenue.
• Unanticipated costs could require new capital that may not be available.
• Competition may limit our opportunities in the industrial gas, oil and natural gas business.
• Successful exploitation of shale formations is subject to risks related to horizontal drilling and completion techniques.
• If our access to oil and natural gas markets is restricted, it could negatively impact our production and revenues. Securing access to takeaway capacity may be particularly difficult in less developed areas of Montana and Wyoming.
• If we are unable to replace reserves, we will not be able to sustain production.
• Many of our joint operating agreements contain provisions that may be subject to legal interpretation, including allocation of non-consent interests, complex payout calculations that impact the timing of reversionary interests, and the impact of joint interest audits.
• Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or the relevant underlying assumptions will materially affect the quantity and present value of our reserves.
• Our hedging activities have in the past and may in the future prevent us from benefiting fully from increases in oil and gas prices and may expose us to other risks, including counterparty risk.
• Our acreage must be drilled before lease expiration, generally within three to five years, in order to hold the acreage by production. In the highly competitive market for acreage, failure to drill sufficient wells in order to hold acreage will result in a substantial lease renewal cost, or if renewal is not feasible, the loss of our lease and prospective drilling opportunities.
• Our producing properties are primarily located in Montana, Wyoming, Texas, and Oklahoma, making us vulnerable to risks associated with having operations concentrated in these geographic areas.
• Insurance may be insufficient to cover future liabilities.
• We are dependent upon information technology systems, which are subject to disruption, damage, failure and risks associated with implementation and integration.
• Improvements in, or new discoveries of alternative energy technologies could have a material adverse effect on our financial condition and results of operations.
• Competition due to advances in renewable fuels may lessen the demand for our products and negatively impact our profitability.
• Permitting requirements could delay our ability to start or continue our operations.
• Negative public perception regarding us and/or our industry could have an adverse effect on our operations.
• Seasonal weather conditions adversely affect our ability to conduct drilling activities in some of the areas where we operate.
• Shortages of equipment, services and qualified personnel could reduce our cash flow and adversely affect results of operations.
• Our oil and natural gas reserves are estimated and may not reflect the actual volumes of oil and natural gas we will receive, and significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.
• We may purchase industrial gas, oil and natural gas properties with liabilities or risks that we did not know about or that we did not assess correctly, and, as a result, we could be subject to liabilities that could adversely affect our results of operations.
• Risks Related to Our Financial Statements
• We have written down, and may in the future be forced to further write-down, material portions of our assets due to low oil and natural gas prices.
• There are inherent limitations in all control systems and misstatements due to error or fraud that may occur and not be detected.
• Our ability to use net operating loss carryforwards and realize built in losses to offset future taxable income for U.S. federal income tax purposes is subject to limitation.
• Risks Related to Governmental Regulations
• Industrial gas, oil and natural gas operations are subject to environmental, legislative and regulatory initiatives that can materially adversely affect the timing and cost of operations and the demand for industrial gas, oil, natural gas, and NGLs.
• Proposed changes to U.S. tax laws, if adopted, could have an adverse effect on our business, financial condition, results of operations, and cash flows.
• Our ability to produce crude oil, natural gas, and associated liquids economically and in commercial quantities could be impaired if we are unable to acquire adequate supplies of water for our drilling operations and/or completions or are unable to dispose of or recycle the water we use at a reasonable cost and in accordance with applicable environmental rules.
• Our industries and the broader US economy experienced higher than expected inflationary pressures in 2022 and beyond, related to continued supply chain disruptions, tariffs, labor shortages and geopolitical instability. Should these conditions reappear, our business, results of operations and cash flows could be materially and adversely affected.
• The conflicts in Ukraine and Israel and related price volatility and geopolitical instability could negatively impact our business.
• Risks Related to U.S. Government Operations A U.S. federal government shutdown could adversely affect our business, results of operations, and financial condition.
• Risks Related to Management, Employees and Directors
• Potential conflicts of interest could arise for certain members of our Board of Directors that hold management positions with other entities and also represent our majority stockholders.
• We depend significantly upon the continued involvement of our present management.
• Risks Related to Our Credit Agreement
• Our obligations under our credit agreement with FirstBank Southwest (the "Credit Agreement") are secured by a first priority security interest in substantially all of our assets.
• Our failure to comply with the covenants in the documents governing our existing and future indebtedness could materially adversely affect our financial condition and liquidity.
• The covenants in our credit and loan agreements restrict our ability to operate our business and might lead to a default under our Credit Agreement.
• Risks Related to Our Common Stock
• We currently have 245,000,000 shares of common stock authorized and there may be future issuances of sales of our common stock, which could adversely affect the market price of our common stock and dilute a stockholder’s ownership of common stock.
• We have established preferred stock which can be designated by the Board of Directors without stockholder approval.
• Our stock price has historically been and is likely to continue to be volatile.
• Our Common Stock may be delisted from The Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements.
• If our common stock is delisted from The Nasdaq Capital Market, your ability to sell your shares of our common stock could also be limited by the penny stock restrictions, which could further limit the marketability of your shares.
• Our Board of Directors has determined to suspend our quarterly cash dividend.
• Our stock repurchases are discretionary and even if effected, they may not achieve the desired objectives.
• A sale of a substantial number of registered shares of common could cause the price of our common stock to decline and make it harder for us to sell equity in the future.
• Risks Relating to our Purchase Agreement with Roth Principal Investments
• The issuance and sale of our Common Stock to Roth Principal Investments may cause dilution to our other stockholders and the sale of the shares of Common Stock acquired by Roth Principal Investments, or the perception that such sales may occur, could cause the price of our Common Stock to fall.
• It is not possible to predict the actual number of shares we will sell under the Purchase Agreement to Roth Principal Investments, or the actual gross proceeds resulting from those sales.
• The Roth Principal Investments will pay less than the then-prevailing market price for our shares of Common Stock, which could cause the price of our Common Stock to decline.
• We will owe the Roth Principal Investments additional consideration in the event it does not generate at least $450,000 in proceeds from the Roth Principal Investments’ resale of the Commitment Shares.
• Risks Relating to Our Governing Documents and Delaware Law
• Our Certificate of Incorporation provides for indemnification of officers and directors at our expense and limits their liability, which may result in a major cost to us and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers or directors.
• Our Certificate of Incorporation contains a specific provision that limits the liability of our directors for monetary damages to the Company and the Company’s stockholders and requires us, under certain circumstances, to indemnify officers, directors and employees.