Prairie Operating(PROP) - 2025 Q1 - Quarterly Report

PART I Item 1. Condensed Consolidated Financial Statements (unaudited) Q1 2025 unaudited financials show total assets at $775.4 million and liabilities at $553.1 million, driven by the Bayswater acquisition, generating $13.6 million in oil and gas revenues, but resulting in a $93.5 million net loss attributable to common stockholders Condensed Consolidated Balance Sheet Highlights (As of March 31, 2025 vs. Dec 31, 2024) | Account | March 31, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :--- | :--- | :--- | | Total Assets | $775,445 | $156,554 | | Cash and cash equivalents | $14,972 | $5,192 | | Property and equipment, net | $672,660 | $134,620 | | Total Liabilities | $553,121 | $103,786 | | Credit facility | $377,000 | $28,000 | | Mezzanine Equity | $188,281 | $0 | | Total Stockholders' Equity | $34,043 | $52,768 | Condensed Consolidated Statement of Operations (Three Months Ended March 31, 2025 vs. 2024) | Account | Q1 2025 ($ in thousands) | Q1 2024 ($ in thousands) | | :--- | :--- | :--- | | Total Revenues | $13,590 | $0 | | Income (loss) from operations | $1,753 | $(8,045) | | Net loss from continuing operations | $(2,617) | $(7,993) | | Net loss from discontinued operations | $0 | $(1,044) | | Net loss attributable to Prairie Operating Co. | $(2,617) | $(9,037) | | Series F preferred stock deemed dividends | $(90,612) | $0 | | Net loss attributable to common stockholders | $(93,474) | $(9,037) | | Loss per share, basic and diluted | $(3.49) | $(0.90) | Note 1 – Organization, Description of Business, and Basis of Presentation Prairie Operating Co. transformed into a DJ Basin-focused energy company after the Bayswater acquisition and exiting crypto mining, with management asserting sufficient liquidity despite a $54.7 million working capital deficit - The company is now focused on the acquisition and development of crude oil, natural gas, and NGLs in the DJ Basin[32] - The Bayswater Acquisition closed on March 26, 2025, for approximately $482.5 million in cash and 3,656,099 shares of common stock[33][34] - The company exited the cryptocurrency mining business in January 2024, with these activities now classified as discontinued operations[35] - As of March 31, 2025, the company had a working capital deficit of $54.7 million and an accumulated deficit of $122.4 million, but management believes there is no substantial doubt about its ability to continue as a going concern due to available liquidity under its credit facility[40][44] Note 3 – Acquisitions This note details the Bayswater Acquisition (March 2025, $490.6 million) and NRO Acquisition (October 2024, $55.5 million), which fundamentally shifted the company's asset base to oil and gas production Bayswater Acquisition Preliminary Purchase Price Allocation (March 26, 2025) | Component | Amount (in thousands) | | :--- | :--- | | Cash consideration | $467,520 | | Common stock issued to sellers | $16,000 | | Direct transaction costs | $7,061 | | Total consideration | $490,581 | | Allocated to: | | | Oil and natural gas properties | $509,954 | | Other assets & receivables | $54,902 | | Liabilities assumed | $(74,275) | NRO Acquisition Final Purchase Price Allocation (October 1, 2024) | Component | Amount (in thousands) | | :--- | :--- | | Cash consideration & Deposits | $55,270 | | Direct transaction costs | $239 | | Total consideration | $55,509 | | Allocated to: | | | Oil and natural gas properties | $63,591 | | Liabilities assumed | $(8,186) | Note 4 – Discontinued Operations The company exited its cryptocurrency business on January 23, 2024, selling mining equipment for $1.0 million cash and a $1.0 million note, resulting in a $1.044 million loss from discontinued operations in Q1 2024 - On January 23, 2024, the company sold all its cryptocurrency miners for $1.0 million cash and a $1.0 million deferred payment note[83] Loss from Discontinued Operations | Period | Amount (in thousands) | | :--- | :--- | | Three Months Ended March 31, 2024 | $(1,044) | | Three Months Ended March 31, 2025 | $0 | Note 10 – Debt Q1 2025 saw a dramatic shift in debt, with the credit facility borrowing base increasing to $475 million ($377 million drawn), the $11.3 million Senior Convertible Note converting to equity, and the Subordinated Note partially paid down and restructured - The Amended & Restated Credit Agreement provides for a maximum commitment of $1.0 billion with a borrowing base of $475.0 million as of March 31, 2025[120] - As of March 31, 2025, $377.0 million was drawn on the credit facility, leaving $98.0 million in availability[121] - During Q1 2025, the remaining $11.3 million of the Senior Convertible Note was converted into 2.1 million shares of common stock[134] - On March 26, 2025, the company paid down $3.2 million of the Subordinated Note, with the remaining $1.5 million outstanding converted to principal and accruing interest at 15% per annum[139][140] Note 13 – Mezzanine Equity To fund the Bayswater Acquisition, the company issued $148.3 million in Series F Preferred Stock, classified as mezzanine equity, which was adjusted to a $188.3 million redemption value, resulting in a $90.2 million non-cash deemed dividend - Issued 148,250 shares of Series F Preferred Stock on March 26, 2025, for gross proceeds of $148.3 million to partially fund the Bayswater Acquisition[148] - The stock carries a 12% cumulative dividend, payable in cash or, at the company's election, in common stock[149] - The Series F Preferred Stock is classified as mezzanine equity and was adjusted to its maximum redemption amount of $188.3 million, resulting in a deemed dividend of $90.2 million recognized on the statement of operations[155] Note 18 – Subsequent Events Post-quarter, the company implemented a significant hedging program covering 85% of daily production through Q1 2028 and completed the $15.0 million Additional Working Interest Acquisition related to the Bayswater deal - Post-quarter, the company hedged approximately 85% of its daily production, securing prices of $68.27/bbl for the remainder of 2025 and $64.29/bbl for 2026 through Q1 2028[214] - On April 11, 2025, the company completed the Additional Working Interest Acquisition for $15.0 million, which was held in escrow at the close of the Bayswater deal[215] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transformation into a DJ Basin E&P operator, reporting Q1 2025 revenues of $13.6 million, operating income of $1.8 million, and positive Adjusted EBITDA of $5.2 million, with liquidity bolstered by $98.0 million credit facility availability Overview and Recent Developments The company, now a DJ Basin-focused E&P firm, closed the Bayswater Acquisition, secured financing, expanded hedging, and initiated new drilling and completion activities on its properties in early 2025 - Closed the Bayswater Acquisition on March 26, 2025, funded by a combination of cash on hand, a public offering of common stock, issuance of Series F Preferred Stock, and borrowings under its Credit Facility[222] - Post-acquisition, the company hedged approximately 85% of its daily production through Q1 2028[223] - Launched an 11-well development program at the Rusch Pad in April 2025 and began completions on 9 acquired wells at the Opal Coalbank pad in May 2025[224][225] Results of Operations Q1 2025 saw total revenues of $13.6 million from oil, gas, and NGL sales due to acquisitions, resulting in an operating income of $1.8 million compared to a prior-year loss, with a net loss from continuing operations of $2.6 million Q1 2025 Revenue and Production | Metric | Value | | :--- | :--- | | Total Revenues | $13.6 million | | Total Production | 295.0 MBoe | | Average Daily Production | 3,278 Boe/d | | Average Realized Price (pre-hedges) | $46.07 per Boe | Q1 2025 Operating Expenses | Expense Category | Amount (in thousands) | Per Boe | | :--- | :--- | :--- | | Lease operating expenses | $2,012 | $6.82 | | Gathering, transportation, and processing | $907 | $3.07 | | Ad valorem and production taxes | $957 | $3.24 | | Depreciation, depletion, and amortization | $2,117 | $7.18 | | General and administrative expenses | $5,551 | $18.82 | | Total operating expenses | $11,837 | $40.13 | - General and administrative expenses decreased by $2.1 million year-over-year, mainly due to lower stock-based compensation and investor relations costs[242] Non-GAAP Financial Measures The company reported a positive Adjusted EBITDA of $5.2 million for Q1 2025, a significant turnaround from a negative $6.7 million in Q1 2024, reflecting the positive cash flow impact of new production assets Reconciliation of Net Loss to Adjusted EBITDA | Line Item | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net loss from continuing operations | $(2,617) | $(7,993) | | Adjustments (DD&A, Interest, etc.) | $7,817 | $1,272 | | Adjusted EBITDA | $5,200 | $(6,721) | Liquidity and Capital Resources Q1 2025 liquidity was transformed to fund the Bayswater acquisition, raising $521.3 million through debt and equity, resulting in a $54.7 million working capital deficit but $98.0 million credit facility availability, deemed sufficient for future operations - As of March 31, 2025, the company had a working capital deficit of $54.7 million and cash of $15.0 million[257] Cash Flow Summary (Three Months Ended March 31) | Cash Flow | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | From Operating Activities | $16,932 | $(3,324) | | From Investing Activities | $(528,431) | $(10,127) | | From Financing Activities | $521,279 | $4,462 | - Financing activities in Q1 2025 were driven by $349.0 million in credit facility borrowings, $148.3 million from Series F Preferred Stock issuance, and $43.8 million from common stock issuance[260] - As of March 31, 2025, the company had $98.0 million of availability under its credit facility, which management believes is sufficient to meet obligations for the next 12 months[264][283][284] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide this disclosure - Disclosure is not required for the company[287] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025[290] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[293] PART II Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - The Company is not involved in any material legal proceedings[294] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K have occurred - As of the date of this report, there have been no material changes in the risk factors disclosed in the company's 2024 Annual Report on Form 10-K[295] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during Q1 2025 that were not previously disclosed in a Form 8-K - No unregistered sales of equity securities occurred during the quarter that were not otherwise disclosed in a Form 8-K[296] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[300] Item 6. Exhibits This section indexes all exhibits filed with the quarterly report, including key transactional and governance documents like the Bayswater PSA and Amended Credit Agreement - The exhibit index lists key transactional and governance documents, including the Bayswater PSA (Exhibit 2.5), the Amended and Restated Credit Agreement (Exhibit 10.19), and Sarbanes-Oxley certifications (Exhibits 31.1, 31.2, 32.1, 32.2)[302][304]