Prairie Operating Co. (PROP) - Q2 2026 10-Q Summary
Business Context and Reporting Period
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, primarily in Weld County, Colorado. This report covers the quarterly period ended June 30, 2026. The Company operates as a non-accelerated filer and smaller reporting company.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|
| Total Revenue | $98.9 million | $182.3 million | $80.9 million |
| Net Income (Loss) to Common Stockholders | $193.8 million | $19.4 million | ($45.0 million) |
| Adjusted EBITDA | $34.0 million | $71.1 million | $43.0 million |
| Operating Cash Flow | N/A | $94.3 million | $9.7 million |
| Capital Expenditures (Cash) | N/A | ($132.6 million) | ($53.9 million) |
| Cash and Equivalents | $0.02 million | $0.02 million | $10.7 million |
| Working Capital | ($125.5 million) | ($125.5 million) | ($46.1 million) |
| Debt (Credit Facility) | $436.0 million | $436.0 million | $366.0 million |
| Debt Availability | $39.0 million | $39.0 million | $109.0 million |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 45% quarter-over-quarter and 125% year-over-year (YTD), driven by a 40% increase in average realized price per Boe (excluding derivatives) and an 84% increase in production volumes. Production growth is attributed to the Bayswater Acquisition (closed March 2025) and new wells coming online.
- Profitability Volatility: While GAAP Net Income to Common Stockholders surged to $193.8 million in Q2 2026, this is largely non-cash. It is driven by a $87.2 million gain on the remeasurement of Series F Preferred Stock and a $45.1 million unrealized gain on derivatives. Conversely, YTD 2026 GAAP Net Income was only $19.4 million due to a $132.0 million loss on derivatives and significant remeasurement charges earlier in the year.
- Derivative Impact: The Company recognized a $45.1 million gain on derivatives in Q2 2026, reversing a $132.0 million loss for the six-month period. This volatility stems from changes in the fair value of open derivative contracts relative to market prices.
- Liquidity Position: Cash and cash equivalents dropped to $21,000 from $20,000 at year-end 2025. The Company reported a working capital deficit of $125.5 million, up from $46.1 million at December 31, 2025.
Guidance, Outlook, and Risks
- Capital Program: 2026 capital expenditure guidance is $185.0 million to $195.0 million. As of June 30, 2026, cash expenditures totaled $132.6 million, with an additional $12.4 million in accrued liabilities.
- Production Outlook: The Company is operating a one-rig, one-frac crew cadence. Recent pads (Blehm/Schneider, Elder East/West, Opal Coalbank) have come online with initial production ranging from 450 to 915 Boe/d. The Burnett and Castor pads are in various stages of completion.
- Series F Preferred Stock: The Company has entered into multiple letter agreements to extend the issuance date of Series F Preferred Stock Anniversary Warrants to August 31, 2026. These amendments reduced the number of shares issuable upon exercise and resulted in significant non-cash remeasurement gains/losses. A portion of the Series F stock was repurchased for $19.0 million in April 2026.
- Key Risks:
- Nasdaq Delisting: The Company received a notice on July 2, 2026, that its stock price has been below the $1.00 minimum bid price requirement for 30 consecutive days. It has until December 29, 2026, to regain compliance.
- Liquidity Constraints: With only $39.0 million of availability on its Credit Facility and minimal cash on hand, the Company relies on future production cash flows and potential equity sales under its At-The-Market (ATM) offering to meet obligations.
- Covenant Compliance: The Company recently amended its Credit Facility to lower the Current Ratio covenant requirement to 0.50:1.00 for the second half of 2026 to ensure compliance.
Investor Verification Checklist
- Verify Derivative Valuation: Confirm the magnitude of the $45.1 million Q2 derivative gain versus the $132.0 million YTD loss and its impact on cash flow versus reported earnings.
- Assess Liquidity Runway: Evaluate the sufficiency of the $39.0 million credit facility availability and the $75.0 million ATM offering capacity to fund the remaining $50+ million of 2026 capital expenditures and working capital needs.
- Monitor Nasdaq Compliance: Track the stock price to ensure it meets the $1.00 minimum bid price requirement for 10 consecutive days before the December 29, 2026 deadline.
- Review Series F Terms: Analyze the implications of the extended Anniversary Warrant issuance date (August 31, 2026) and the reduced share issuance formula on future dilution.
- Check Production Volumes: Verify that new wells from the Opal Coalbank, Burnett, and Castor pads are meeting the production targets necessary to maintain the borrowing base and covenant compliance.