DEF 14A: Prairie Operating Co. Announces 2024 Annual Meeting of Stockholders

Prairie Operating Co. will hold its 2024 Annual Meeting of Stockholders on June 5, 2024, to vote on director elections, an incentive plan, auditor ratification, and executive compensation.

Summary

• Prairie Operating Co. is holding its 2024 Annual Meeting of Stockholders on June 5, 2024, in Houston, Texas.
• Stockholders will vote on six proposals, including the election of seven directors, approval of the 2024 Amended & Restated Long-Term Incentive Plan, and ratification of the selection of Ham, Langston & Brezina, L.L.P. as the independent accounting firm.
• The record date for determining stockholders eligible to vote is April 8, 2024.
• The company is soliciting proxies via the internet, with a Notice of Internet Availability of Proxy Materials being mailed around April 26, 2024.
• The Board of Directors recommends voting FOR all director nominees, the incentive plan, auditor ratification, and the advisory vote on executive compensation, and recommends a frequency of THREE years for future advisory votes on executive compensation.
• As of April 8, 2024, there were 11,133,889 shares of common stock outstanding and entitled to vote.

Sentiment

Score: 7

Explanation: The document is a standard proxy statement, which is generally neutral in tone. The recommendations are positive for the proposals, but the overall sentiment is balanced.

Positives

• The Board recommends voting FOR all director nominees.
• The Board recommends voting FOR the approval of the 2024 Amended & Restated Prairie Operating Co. Long-Term Incentive Plan.
• The Board recommends voting FOR the ratification of Ham, Langston & Brezina, L.L.P. as the independent accounting firm.
• The Board recommends voting FOR the advisory vote to approve the compensation of Named Executive Officers.
• The Board recommends a frequency of THREE years for future advisory votes on executive compensation.

Risks

• If the 2024 Amended & Restated Prairie Operating Co. Long-Term Incentive Plan is not approved, the company's ability to attract and retain qualified personnel may be limited.

Future Outlook

The company aims to align executive compensation with stockholder interests and promote long-term value creation.

Industry Context

This is a standard proxy filing for a publicly traded company, covering routine governance matters.

Comparison to Industry Standards

• The proposals outlined in the proxy statement, such as director elections, executive compensation, and auditor ratification, are standard practices for publicly traded companies.
• Companies like ExxonMobil, Chevron, and ConocoPhillips also conduct annual meetings with similar agenda items.
• The structure of the board and its committees (Audit, Compensation, Nominating & Governance) aligns with common corporate governance models.
• The executive compensation discussion follows SEC guidelines for smaller reporting companies, which is less extensive than for larger companies.

Related Party Transactions

• On May 3, 2023, pursuant to the Merger Agreement, the Company, Creek Road Merger Sub, LLC (Merger Sub) and Prairie Operating Co., LLC, Merger Sub merged with and into Prairie LLC, with Prairie LLC surviving and continuing to exist as a Delaware limited liability company and a wholly owned subsidiary of the Company (the Merger).
• At the Effective Time, Edward Kovalik and Gary C. Hanna were each issued 1,148,834 shares of common stock as merger consideration pursuant to the Merger Agreement.
• On August 14, 2023, Prairie LLC exercised its option under the Amended and Restated Purchase and Sale Agreement, dated as of May 3, 2023 (Exok Agreement) to purchase additional oil and gas leases, including all of Exok Incs (Exok) right, title and interest in, to and under certain undeveloped oil and gas leases located in Weld County, Colorado, together with certain other associated assets, data and records, consisting of approximately 20,328 net mineral acres in, on and under approximately 32,695 gross acres from Exok (such assets, the Initial Genesis Assets).
• On May 15, 2022, Exok entered into an agreement with Gary C. Hanna and Edward Kovalik whereby Exok agreed to share and assign certain of its overriding royalty interests under the Initial Genesis Assets to Gary C. Hanna and Edward Kovalik at the closing of the Merger (the Closing).
• Following the Closing, these interests are owned in equal one-third shares by entities controlled by each of Gary Hanna, Edward Kovalik and Paul Kessler.
• To avoid any potential conflict of interest with certain members of the Board and management owning certain overriding royalty interests under the Initial Genesis Assets, all of the Companys drilling programs will be approved by an independent committee of the Board on a quarterly basis.
• Bristol Investment Fund purchased $1,250,000 of the Companys series D preferred stock (Series D Preferred Stock) and series D PIPE warrants (Series D PIPE Warrants) in the series D PIPE (the Series D PIPE).
• First Idea Ventures LLC purchased $750,000 of Series D Preferred Stock and Series D PIPE Warrants in the Series D PIPE.
• Jonathan H. Gray, a director of the Company, holds 50% and his spouse, Chloe Gray, holds 50% of the interests of First Idea Ventures LLC and each share voting and investment power over the securities held by First Idea Ventures LLC.
• John D. Maatta purchased $50,000 of Series D Preferred Stock and Series D PIPE Warrants in the Series D PIPE.
• Prior to the Effective Time, the Company, Bristol Capital Advisors, LLC (Bristol Capital Advisors) Paul L. Kessler, Gary C. Hanna and Edward Kovalik entered into the Stockholders Agreement pursuant to which the parties agreed to use reasonable best efforts, including taking certain necessary actions, to cause the Board to cause certain nominees to be elected to serve as a director on the Board under the following conditions: (i) one nominee designated by Bristol Capital Advisors and Paul L. Kessler, collectively, so long as Bristol Capital Advisors, Paul L. Kessler and their respective affiliates collectively beneficially own at least 50% of the number of shares of common stock collectively beneficially owned by such parties on the Closing Date; (ii) four nominees designated by Gary C. Hanna and Edward Kovalik (the Prairie Members) so long as the Prairie Members and their affiliates collectively beneficially own at least 50% of the number of shares of common stock collectively beneficially owned by such parties on the Closing Date; (iii) three nominees designated by the Prairie Members so long as the Prairie Members and their affiliates collectively beneficially own at least 40% (but less than 50%) of the number of shares of common stock collectively beneficially owned by such parties on the Closing Date; (iv) two nominees designated by the Prairie Members so long as the Prairie Members and their affiliates collectively beneficially own at least 30% (but less than 40%) of the number of shares of common stock collectively beneficially owned by such parties on the Closing Date; and (v) one nominee designated by the Prairie Members so long as the Prairie Members and their affiliates collectively beneficially own at least 20% (but less than 30%) of the number of shares of common stock collectively beneficially owned by such parties on the Closing Date.
• In connection with the Closing, the Company entered into lock-up agreements with the Prairie Members, Paul Kessler, John D. Maatta, Michael Breen (former director), Alan Urban (former Chief Financial Officer) and Scott Sheikh (former Chief Operating Officer and General Counsel), that impose limitations on any sale of shares of common stock until 180 days after the Closing, subject to certain exceptions.
• In addition, the Company entered into a lock-up agreement with Bristol Investment Fund that impose limitations on any sale of an aggregate of 50% of its shares of common stock until 120 days after the Closing, subject to certain exceptions, and Bristol Investment Fund agreed, subject to such lock-up, to effect only open market sales and not to sell an aggregate daily amount of shares of common stock exceeding 1%, for every $100,000 invested in the Series D PIPE, of the average daily volume of the trading day on which the open market sales of the shares of common stock occurs.
• In connection with the Closing, the Company entered into the AR Debentures due December 31, 2023 with each of Bristol Investment Fund and Barlock 2019 Fund, LP, in the principal amount of $1,000,000.
• As a result, the AR Debentures were fully extinguished in October 2023.
• As of the date of the execution of the Merger Agreement, Bristol Investment Fund entered into a support agreement with the Company pursuant to which, subject to the terms and conditions therein, Bristol Investment Fund agreed to exchange its Original Debenture, in full satisfaction of the outstanding principal amount, accrued but unpaid interest and a 30% premium, for (a) the AR Debenture in substantially the same form as their respective Original Debenture, (b) shares of common stock and (c) shares of Series D Preferred Stock.
• At the Effective Time, the Company assumed and converted options to purchase membership interests of Prairie LLC outstanding and unexercised as of immediately prior to the Effective Time into Non-Compensatory Options to acquire an aggregate of 8,000,000 shares of common stock for $7.14 per share, which are only exercisable if specific production hurdles are achieved, and the Company entered into the Option Agreements with each of Gary C. Hanna, Edward Kovalik, Paul Kessler and BOKA Energy LP, a third-party investor.
• Erik Thoresen, a director of the Company, is affiliated with BOKA Energy LP.
• In connection with the closing of the Series D PIPE, the Company entered into the Series D Registration Rights Agreements with each Series D PIPE Investor pursuant to which the Company agreed to submit to or file with the SEC, within 45 calendar days after the Closing Date, a registration statement registering the resale of the shares of common stock underlying the Series D Preferred Stock and Series D PIPE Warrants, and the Company agreed to use its best efforts to have such registration statement declared effective as promptly as possible after the filing thereof but no later than 90 calendar days (or 120 calendar days if the SEC notifies the Company that it will review such registration statement) following the date of the closing.
• As a result of the registration statement having not been declared effective within the timeframe required under the Series D Registration Rights Agreement, liquidated damages of $548,144 were paid under the registration rights agreement associated with the Series D PIPE for the year ended December 31, 2023.
• Of this total, $46,229 was paid to Bristol Investment Fund and $31,767 was paid to First Idea International LTD. And First Idea Ventures LLC.
• The Company entered into a securities purchase agreement with Narrogal Nominees Pty Ltd ATF Gregory K ONeill Family Trust (the Series E PIPE Investor) on August 15, 2023, pursuant to which the Series E PIPE Investor agreed to purchase, and the Company agreed to sell to the Series E PIPE Investor, for an aggregate of $20.0 million, securities consisting of (i) 39,614 shares of common stock, (ii) 20,000 shares of Series E Preferred Stock, and (iii) Series E PIPE Warrants to purchase 8,000,000 shares of common stock, each at a price of $6.00 per share, in a private placement.
• On August 30, 2023, the Company, Gary C. Hanna, Edward Kovalik, Bristol Capital and Georgina Asset Management, LLC (Georgina Asset Management) entered into a non-compensatory option purchase agreement, pursuant to which Georgina Asset Management agreed to purchase, and each of Gary C. Hanna, Edward Kovalik and Bristol Capital (collectively, the Sellers) agreed to sell to Georgina Asset Management, Non-Compensatory Options to acquire an aggregate of 200,000 shares of common stock for an aggregate purchase price of $2,000 (the Option Purchase).
• On May 3, 2023, the ONeill Trust purchased $10,000,000 of Series D Preferred Stock and Series D PIPE Warrants in the Series D PIPE.
• On August 15, 2023, the ONeill Trust purchased $20,000,000 of Series E Preferred Stock and Series E PIPE Warrants in the Series E PIPE.
• On November 13, 2023, the ONeill Trust delivered notice to the Company of the exercise of its Series D B Warrants to purchase 2,000,000 shares of common stock at an exercise price of $6.00 per share for total proceeds to the Company of $12 million (the Warrant Exercise).
• On April 8, 2024, the Company entered into an Amendment and Waiver of Exercise Limitations Letter Agreement (the Letter Agreement) with Bristol Investment Fund to amend certain terms of the A warrants to purchase shares of common stock (the A Warrants) and B warrants to purchase shares of common stock (the B Warrants and together with the A Warrants, the Series D PIPE Warrants) held by Bristol Investment Fund.

Stakeholder Impact

• Approval of the incentive plan is intended to benefit employees and directors by aligning their interests with those of the stockholders.
• The outcome of the advisory vote on executive compensation will provide feedback to the Board and Compensation Committee regarding stockholder sentiment.
• The election of directors will determine the leadership and oversight of the company.
• The ratification of the independent accounting firm ensures the integrity of the company's financial reporting.

Next Steps

• Stockholders are encouraged to review the proxy statement and vote their shares.
• The company will proceed with the Annual Meeting on June 5, 2024.

Key Dates

Keywords

Annual Meeting, Proxy Statement, Stockholders, Board of Directors, Executive Compensation, Incentive Plan, Director Election, Auditor Ratification, Prairie Operating Co.