PROP

Prairie Operating Co. (PROP) - 10-K Summary for Fiscal Year Ended December 31, 2024

Business Context and Reporting Period

Prairie Operating Co. is an independent oil and natural gas company focused on the Denver-Julesburg (DJ) Basin in Colorado. The reporting period covers the fiscal year ended December 31, 2024. The Company transitioned from a cryptocurrency mining business to an exploration and production (E&P) business, exiting crypto mining in January 2024. As of year-end, operations consist of the Central Weld Assets (acquired October 2024) and Genesis Assets (including Bolt-on assets). The Company is a smaller reporting company and non-accelerated filer.

Key Financial Metrics

Note: 2023 revenue was entirely from discontinued cryptocurrency operations. 2024 E&P revenue began only after the October 1, 2024, NRO Acquisition.

Material Changes vs. Prior Period

• Business Pivot: Completed the sale of all cryptocurrency mining assets in January 2024, classifying prior crypto operations as discontinued. The Company is now solely an E&P operator.
• Acquisitions: Closed the NRO Acquisition on October 1, 2024, acquiring 26 producing wells and 5,640 net leasehold acres for a final price of $55.5 million. This acquisition drove all 2024 E&P revenue and reserves.
• Production: Commenced drilling on Genesis Bolt-on Assets in Q3 2024; 8 wells began producing in February 2025. Total 2024 production was 170 MBoe (96 MBbls oil, 245 MMcf gas, 33 MBbls NGLs).
• Financing: Established a $1.0 billion reserve-based Credit Facility (borrowing base $44.0 million at year-end, increased to $60.0 million in Feb 2025). Issued Senior Convertible Notes and Subordinated Notes in Q3 2024.
• Loss Reduction: Net loss from continuing operations decreased by $22.1 million compared to 2023, primarily due to the absence of the $17.1 million crypto impairment charge recorded in 2023.

Guidance, Outlook, and Risks

Outlook and Transactions:

• Bayswater Acquisition: On February 6, 2025, the Company entered an agreement to acquire Bayswater Assets for $602.8 million. Closing is expected by March 15, 2025, subject to financing and conditions. This transaction is critical to the Company's growth strategy but carries execution risk.
• Development Plan: Plans to drill 14 gross wells on the Rusch pad and 7 on the Noble pad in 2025. Total 2025 drilling target is up to 57 gross wells.
• Liquidity: Management believes cash, revenues from new wells, and liquidity from the SEPA ($40 million capacity) and Credit Facility are sufficient for the next 12 months.

• Financing for Bayswater: The Company does not currently have sufficient funds or committed financing to consummate the $602.8 million Bayswater Acquisition.
• Operational Risk: Limited history of drilling producing wells; Genesis Assets (excluding Bolt-on) are pre-production with no assurance of commercial success.
• Commodity Prices: Highly volatile oil and gas prices impact cash flow and reserve values.
• Regulatory: Operations are subject to stringent Colorado regulations (SB 19-181) regarding environmental protection, setbacks, and cumulative impacts.

Investor Verification Checklist

• Bayswater Financing: Verify the status of the New Credit Agreement and capital markets transactions required to fund the $602.8 million Bayswater Acquisition.
• Reserve Accuracy: Confirm the independent reserve report (CG&A) regarding the 26.1 MMBoe proved reserves, noting that 19.7 MMBoe are undeveloped (PUDs) requiring $290 million in future investment.
• Debt Covenants: Review the Credit Facility covenants, specifically the Net Leverage Ratio (max 2.50:1) and Current Ratio (min 1.00:1) requirements starting Q1 2025.
• Derivative Exposure: Assess the impact of outstanding commodity swaps (hedging ~938k Bbls oil and ~1.3B MMBtu gas) on future cash flows if market prices deviate from hedge prices.
• Lease Expirations: Monitor the 15,810 net acres (66% of total) that may expire in the next three years if production is not established.