PROP

Prairie Operating Co. 2026 Q1 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026. Prairie Operating Co. is an independent oil and gas company focused on the acquisition and development of crude oil, natural gas, and NGLs in the Denver-Julesburg (DJ) Basin in Weld County, Colorado. As of the reporting date, the Company held approximately 68,700 net leasehold acres. The Company is classified as a non-accelerated filer and a smaller reporting company.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Surge: Total revenue increased by $69.8 million (514%) compared to Q1 2025. This was primarily driven by the Bayswater Acquisition (closed March 2025) and new wells coming online, resulting in production of 2,086 MBoe versus 295 MBoe in the prior year.
• Significant GAAP Loss: The Net Loss attributable to the Company widened to $152.7 million from $2.6 million. This was largely due to a $177.1 million loss on derivatives (primarily $162.9 million in unrealized losses) and a $31.9 million loss on adjustments to fair value for embedded derivatives, debt, and warrants.
• Operating Expenses: Total operating expenses rose to $57.6 million from $11.8 million, driven by higher lease operating expenses, transportation, taxes, and depreciation/depletion/amortization (DD&A) due to increased production volumes.
• Derivative Position: The Company shifted from a net derivative asset position of $53.4 million in Q4 2025 to a net derivative liability of $109.4 million in Q1 2026 due to unfavorable changes in commodity prices relative to hedge contracts.

Guidance, Outlook, and Risks

• Liquidity and Going Concern: Management asserts that cash balances, operating revenues, and the $113.5 million available under the Credit Facility are sufficient to meet obligations for the next 12 months. The Company is in compliance with all financial covenants (Net Leverage Ratio and Current Ratio).
• Capital Resources: The Company has a $75.0 million At-The-Market (ATM) offering program available, though no shares were issued under it as of March 31, 2026. Subsequent to the quarter, the Company sold approximately 773,000 shares under the ATM for $1.8 million.
• Series F Preferred Stock: The Company holds $122.1 million in Series F Preferred Stock (mezzanine equity). Subsequent to the reporting period, the Company repurchased 13,727 shares for $19.0 million and issued "Penny Warrants" to the holder. The issuance date for the Series F Warrants was extended to July 8, 2026.
• Key Risks:
  • Commodity price volatility and the impact of derivative settlements.
  • Ability to fund development plans and maintain credit facility covenants.
  • Significant dilution potential from Series F Preferred Stock warrants and other convertible instruments.
  • Regulatory and environmental liabilities.

Investor Verification Checklist

• Derivative Exposure: Verify the impact of the $177 million derivative loss on future cash flows and the specific hedge volumes/prices relative to current market rates.
• Series F Preferred Stock Terms: Review the specific conversion rates, dividend accruals (12% cumulative), and the potential dilution from the Series F Warrants (valued at $114.4 million liability).
• Working Capital Deficit: Assess the sustainability of the $181 million working capital deficit and reliance on the Credit Facility for operations.
• Subsequent Events: Confirm the details of the April 2026 Series F repurchase and the issuance of Penny Warrants, as these alter the capital structure post-filing.
• Production Growth: Validate the production increase from the Bayswater Acquisition and the timeline for new wells (Elder East/West, Opal Coalbank) coming online.