Business Context and Reporting Period
This Form 8-K, dated October 24, 2022, reports a material definitive agreement between Creek Road Miners, Inc. ("Creek Road") and Prairie Operating Co., LLC ("Prairie"). The filing details a proposed merger where Creek Road will acquire Prairie, resulting in a corporate name change to "Prairie Operating Co." and a significant restructuring of Creek Road's capital structure. The transaction is contingent upon shareholder approval, a private placement financing, and the acquisition of specific oil and gas assets.
Key Financial Metrics and Transaction Terms
The filing does not provide historical revenue, profit, or cash flow metrics for either entity. Key financial terms of the proposed transaction include:
- Consideration to Prairie Members: The greater of 2,000,000 shares of Creek Road Common Stock or 33.33% of the post-restructuring outstanding shares.
- Option Conversion: Conversion of certain Prairie options into 8,000,000 restricted performance-based options to purchase Common Stock at $0.25 per share, exercisable only if production hurdles are met.
- Exok Asset Acquisition: Prairie agreed to acquire oil and gas leases in Weld County, Colorado, for a total consideration of $28,182,000, consisting of $24,000,000 in cash and $4,182,000 in equity (836,400 shares and 836,400 warrants at $6.00 exercise price).
- Debt Restructuring: Holders of Series B Preferred Stock agreed to a 10% reduction in stated value; Series C Preferred Stock holders agreed to a 20% reduction; and certain Convertible Debenture holders agreed to a 20% reduction in principal balance.
- Financing Requirement: The merger is conditioned on the consummation of a Private Investment in Public Equity (PIPE) transaction raising at least $30.0 million.
Material Changes and Restructuring
The filing outlines a comprehensive restructuring of Creek Road's capital and governance prior to the merger closing:
- Capital Restructuring: All holders of Series A, B, and C Preferred Stock, Convertible Debentures, warrants, and certain promissory notes must convert into Common Stock.
- Reverse Stock Split: Creek Road will effect a reverse stock split of Common Stock at a ratio between 1-for-23 and 1-for-30.
- Authorized Shares: An increase in authorized Common Stock from 100,000,000 to 150,000,000 shares.
- Governance Changes: All current officers and directors of Creek Road, except Paul Kessler, will resign. A new Board of Directors and officer team will be appointed effective at the closing.
Guidance, Risks, and Conditions
The transaction is subject to numerous conditions and risks that could prevent consummation:
- Closing Conditions: Requires 66 2/3% shareholder approval for the charter amendments, successful completion of the $30 million PIPE, and satisfaction of conditions for the Exok asset acquisition.
- Termination Rights: Either party may terminate if the merger is not consummated within 180 days, if regulatory approval is denied, or if there is a material breach. Exok may terminate the asset purchase if cash consideration is not received by January 18, 2023.
- Lock-up Agreements: Certain executives and Prairie members are subject to a 180-day lock-up on share sales post-closing.
- Forward-Looking Risks: Management cautions that actual results may differ due to general economic conditions, failure to raise capital, delays in closing, or failure to realize anticipated benefits.
Investor Verification Checklist
- Verify the status of the $30.0 million PIPE financing, as the merger is contingent upon its completion.
- Confirm the outcome of the shareholder vote required to approve the reverse stock split and charter amendments.
- Review the definitive Information Statement (Schedule 14C) once filed for detailed financial projections and valuation metrics.
- Monitor the closing of the Exok Transaction, specifically the delivery of the $24 million cash payment by the January 18, 2023 deadline.
- Assess the impact of the debt and preferred stock write-downs on the post-merger capital structure and dilution.