Prairie Operating Co. 10-Q Summary: Q2 2025
Business Context and Reporting Period
Prairie Operating Co. (PROP) is an independent oil and gas company focused on the Denver-Julesburg (DJ) Basin in Weld County, Colorado. The company transitioned from cryptocurrency mining to oil and gas operations, exiting the crypto business in January 2024. This report covers the quarterly period ended June 30, 2025. The company is classified as a non-accelerated filer and a smaller reporting company.
Key Financial Metrics
| Metric | Q2 2025 (3 Months) | YTD 2025 (6 Months) | YTD 2024 (6 Months) |
|---|---|---|---|
| Total Revenue | $68.1 million | $80.9 million | $0 |
| Net Income (Continuing Ops) | $35.7 million | $33.1 million | ($16.5 million) |
| Net Income (Common Stockholders) | $48.5 million | ($45.0 million) | ($17.6 million) |
| Adjusted EBITDA | $38.6 million | $43.0 million | ($13.9 million) |
| Cash and Equivalents | $10.7 million | $10.7 million | $2.2 million |
| Working Capital | ($64.2 million) Deficit | ($64.2 million) Deficit | ($44.7 million) Deficit |
| Total Debt (Credit Facility) | $387.0 million | $387.0 million | $28.0 million |
| Production (Boe/d) | 21,052 | 12,213 (Avg YTD) | 0 |
Material Changes vs. Prior Period
- Revenue Transformation: The company generated $80.9 million in revenue for the six months ended June 30, 2025, compared to zero in the prior year. This is primarily due to the Bayswater Acquisition (closed March 26, 2025) and the NRO Acquisition (closed October 2024).
- Profitability: The company reported a net income from continuing operations of $33.1 million for the six months ended June 30, 2025, reversing a net loss of $16.5 million in the same period in 2024. However, net income attributable to common stockholders was a loss of $45.0 million YTD 2025 due to significant non-cash accretion and remeasurement charges related to Series F Preferred Stock.
- Balance Sheet Expansion: Total assets increased from $156.6 million (Dec 31, 2024) to $858.5 million (June 30, 2025), driven by the acquisition of oil and gas properties valued at approximately $526 million.
- Debt and Liquidity: Borrowings under the Credit Facility increased to $387.0 million to fund acquisitions and operations. The company maintains $88.0 million in availability under its $475.0 million borrowing base.
Guidance, Outlook, and Risks
- Acquisition Integration: Management expects to recognize benefits from the Bayswater and NRO acquisitions, including increased production volumes and accretive valuation. The Bayswater assets contributed significantly to Q2 revenue.
- Development Program: The company is actively drilling and completing wells at the Rusch and Noble pads, with initial production expected in Q3 2025. An additional acquisition (Edge Acquisition) is expected to close in Q3 2025.
- Liquidity Outlook: Management believes cash balances, operating revenues, and credit facility availability ($88.0 million) are sufficient to meet obligations for the next 12 months. An At-The-Market (ATM) offering of up to $75.0 million is available but unused as of June 30, 2025.
- Risks:
- Commodity Price Volatility: While the company hedges a portion of production (80% required by credit agreement), price fluctuations remain a risk.
- Series F Preferred Stock: The company has significant mezzanine equity ($164.6 million) with complex conversion and dividend terms (12% annual dividend, increasing to 25% later). Remeasurement of this instrument caused significant non-cash charges to net income.
- Capital Requirements: Continued profitability is not guaranteed, and the company relies on its credit facility and potential equity issuances to fund growth.
Investor Verification Checklist
- Series F Preferred Stock Impact: Verify the dilution risk and cash flow impact of the 12% cumulative dividend and potential conversion of the $164.6 million Series F Preferred Stock.
- Acquisition Final Settlement: Confirm the final purchase price adjustments for the Bayswater Acquisition, as the preliminary allocation is subject to change based on reserve estimates and commodity prices.
- Derivative Hedging: Review the specific volumes and prices of outstanding commodity swaps (Oil, Gas, NGLs) to understand the floor on future revenue.
- Debt Covenants: Monitor compliance with the Net Leverage Ratio (max 3.00:1) and Current Ratio (min 1.00:1) covenants under the Amended & Restated Credit Agreement.
- Production Growth: Validate the timeline for the Rusch and Noble pad completions and the Edge Acquisition closing to ensure projected production growth materializes.