8-K: Prairie Operating Co. Announces Pro Forma Financials Following Bayswater and NRO Acquisitions

Prairie Operating Co. releases unaudited pro forma condensed combined financial information to reflect the Bayswater Resources LLC and Nickel Road Operating LLC (NRO) acquisitions.

Summary

• Prairie Operating Co. has released unaudited pro forma condensed combined financial information related to its acquisition of assets from Bayswater Resources, LLC and Nickel Road Operating LLC (NRO).
• The Bayswater acquisition involves a total consideration of $602.8 million, subject to adjustments.
• The NRO acquisition closed on October 1, 2024, with a final purchase price of $94.5 million.
• The pro forma balance sheet combines the historical balance sheet of the Company as of December 31, 2024, on a pro forma basis as if the Bayswater Acquisition, the Subsequent Events, described in Note 3 Subsequent Events below, and the Financing Transactions described in Note 5 Financing below had been consummated on December 31, 2024.
• The pro forma statement of operations combines the historical statement of operations of the Company, the adjusted historical consolidated statement of operations of NRO from January 1, 2024 through September 30, 2024, and the historical statement of revenue and direct operating expenses of Bayswater, as applicable, on a pro forma basis as if the NRO Acquisition, Bayswater Acquisition, the Subsequent Events, described in Note 3 Subsequent Events below, and the Financing Transactions described in Note 5 Financing below had been consummated on January 1, 2024.
• The company expects to acquire an interest in a DrillCo partnership within 45 days of closing the Bayswater Acquisition for $15.0 million.
• As of March 1, 2025, $47.0 million of revolving borrowings were outstanding under the Existing Credit Agreement.
• In January and February 2025, Yorkville converted $11.3 million of the Senior Convertible Note into 2.1 million shares of common stock.
• The company anticipates issuing Series F convertible preferred stock to High Trail Capital LP for $150.0 million.
• The company expects to generate $35.0 million from the sale of its Common Stock.

Sentiment

Score: 6

Explanation: The sentiment is neutral. The announcement provides pro forma financial information related to acquisitions, which is neither inherently positive nor negative. The potential benefits of the acquisitions are balanced by the risks and uncertainties associated with integrating the acquired assets and managing the increased debt load.

Positives

• The acquisitions of Bayswater and NRO are expected to increase the company's asset base and production capacity.
• The company has secured financing to support the Bayswater acquisition, including an increased borrowing base and preferred stock issuance.
• Conversion of the Senior Convertible Note eliminates debt and strengthens the balance sheet.
• Pro forma revenue for the year ended December 31, 2024, is $497.898 million.

Negatives

• The pro forma financial information is for illustrative purposes only and does not guarantee future financial performance.
• The actual financial position and results of operations may differ significantly from the pro forma amounts.
• The company incurred a net loss attributable to Prairie Operating Co. common stockholders of $165.152 million on a pro forma basis.
• The company has significant debt outstanding under its credit facility.

Risks

• The Bayswater Acquisition is subject to closing price adjustments and customary closing conditions.
• The company may not enter into its New Credit Agreement within the anticipated timeframe, or at all.
• The estimated fair value of assets acquired and liabilities assumed in the Bayswater Acquisition is subject to change.
• Future oil and natural gas commodity prices, reserve estimates, and interest rates could impact the company's financial results.
• The company's ability to pay dividends on the Series F Preferred Stock may be subject to certain equity conditions.
• The company's development plan for the Acquired Properties, as of December 31, 2024, assumed that all of the undeveloped acreage set forth in the tables above would be extended by continuous development and thereafter establishment of production, thereby negating the need to exercise the available extension provisions and nullifying the expiration periods.

Future Outlook

The company expects the Bayswater Acquisition to close and to enter into a New Credit Agreement. The company intends to fund a portion of the purchase price of the Bayswater Acquisition using borrowings under its New Credit Agreement, resulting in a total outstanding balance of approximately $377.0 million. The company expects to issue Series F convertible preferred stock and generate gross proceeds from the sale of its Common Stock.

Industry Context

The announcement reflects ongoing consolidation in the oil and gas industry, with companies seeking to expand their asset base through acquisitions. The pro forma financials provide insight into the potential impact of these acquisitions on Prairie Operating Co.'s financial performance.

Comparison to Industry Standards

• It is difficult to compare the results to industry standards without knowing the specific assets acquired and the company's operational strategy.
• However, the pro forma financials can be compared to those of similar-sized oil and gas companies operating in the same region.
• Benchmarking against companies like Ovintiv, PDC Energy (now Chevron), and Civitas Resources, which also have significant operations in the DJ Basin, could provide valuable insights.
• Comparing Prairie's production costs, reserve estimates, and standardized measure of discounted future net cash flows to those of its peers would be beneficial.

Related Party Transactions

• Lease operating expenses, related party on the Combined Statement of Revenues and Direct Operating Expenses.

Stakeholder Impact

• Shareholders: Potential for increased value through acquisitions, but also increased risk due to debt and integration challenges.
• Employees: Potential for new opportunities and challenges related to integrating the acquired assets.
• Customers: No immediate impact expected.
• Suppliers: Potential for increased business due to expanded operations.
• Creditors: Increased debt load, but also increased asset base to support the debt.

Next Steps

• Closing of the Bayswater Acquisition.
• Entering into a New Credit Agreement.
• Acquisition of DrillCo Interest.
• Issuance of Series F convertible preferred stock.
• Sale of Common Stock.
• Continued development of the Acquired Properties.

Key Dates

Keywords

Acquisition, Pro Forma, Financial Information, Bayswater, NRO, DrillCo, Credit Facility, Convertible Note, Preferred Stock, Common Stock, Oil and Gas