10-Q: Prairie Operating Co. Reports Strong Q3 Growth Driven by Acquisitions

Prairie Operating Co. announced significant revenue and production increases for Q3 2025, driven by recent strategic acquisitions and active drilling programs in the DJ Basin.

Summary

• Total revenues for the nine months ended September 30, 2025, reached $158.6 million, a substantial increase from $0 in the same period of 2024, primarily due to the Bayswater and NRO acquisitions.
• Net income from continuing operations improved significantly to $34.4 million for the nine months ended September 30, 2025, compared to a net loss of $27.9 million in the prior year.
• However, the net loss attributable to common stockholders increased to $67.5 million for the nine months ended September 30, 2025, from $29.0 million in 2024, largely due to Series F preferred stock dividends and remeasurement.
• Adjusted EBITDA saw a dramatic improvement, reaching $99.5 million for the nine months ended September 30, 2025, compared to a negative $20.0 million in the prior year.
• Oil production for the nine months ended September 30, 2025, was 2,149 MBbls, natural gas production was 7,338 MMcf, and NGL production was 957 MBbls, all up from zero in 2024 due to acquisitions.
• Average sales volumes per day (Boe/d) for the nine months ended September 30, 2025, were 23,029 Boe/d.
• The company closed the Bayswater Acquisition on March 26, 2025, for a purchase price of $602.8 million (cash and stock), with a final settlement payment of $31.7 million received from Bayswater on October 15, 2025.
• The Edge Acquisition closed on July 3, 2025, for $12.5 million cash, adding 47 wells and approximately 11,000 net acres.
• The Third Exok Acquisition closed on August 8, 2025, for $1.6 million, acquiring approximately 5,500 net acres.
• The Credit Facility was amended and restated on March 26, 2025, increasing the maximum commitment to $1.0 billion and the borrowing base to $475.0 million, with $58.0 million available as of September 30, 2025.
• The company issued Series F Preferred Stock on March 26, 2025, raising $148.3 million (net $137.2 million), with a 12% cumulative dividend rate, which can be paid in common stock.
• A hedging program was executed in October and November 2025 to secure crude oil prices at $60.45/bbl (rest of 2025), $60.02/bbl (2026-2027), and $60.62/bbl (Q4 2028), and natural gas at $4.07/MMBtu (through 2027).
• The Rusch pad development (11 wells) came online in late September 2025, and completion activities began on the Simpson pad (6 wells) in September 2025, with first production expected late 2025.

Sentiment

Score: 7

Explanation: The company demonstrated strong operational growth and financial improvement in key metrics like revenue and Adjusted EBITDA, driven by successful acquisitions and development programs. However, the increased net loss attributable to common stockholders due to preferred stock obligations and significant increase in liabilities temper the overall positive sentiment.

Positives

• Significant increase in total revenues to $158.6 million for the nine months ended September 30, 2025, from $0 in the prior year, driven by successful acquisitions.
• Net income from continuing operations improved to $34.4 million for the nine months ended September 30, 2025, reversing a $27.9 million loss in the prior year.
• Adjusted EBITDA showed strong growth, reaching $99.5 million for the nine months ended September 30, 2025, compared to a negative $20.0 million in 2024.
• Substantial increase in oil, natural gas, and NGL production volumes, with average sales volumes per day reaching 23,029 Boe/d.
• Successful completion of multiple accretive acquisitions (Bayswater, Edge, Third Exok) expanding asset base to approximately 65,000 net leasehold acres.
• Active and successful drilling and completion programs, including the Rusch pad (11 wells online) and Opal Coalbank pad (9 wells online with 525 Boe/d initial production).
• Strengthened liquidity through an amended Credit Facility with a $475.0 million borrowing base and $58.0 million available as of September 30, 2025.
• Implementation of a hedging program to mitigate commodity price volatility and meet Credit Facility requirements, securing future prices for oil and natural gas.

Negatives

• Net loss attributable to common stockholders increased to $67.5 million for the nine months ended September 30, 2025, from $29.0 million in 2024, primarily due to Series F preferred stock dividends and remeasurement.
• Total liabilities significantly increased to $679.3 million as of September 30, 2025, from $103.8 million at December 31, 2024, largely due to increased debt from the Credit Facility and Series F Preferred Stock.
• The company reported a working capital deficit of $24.0 million as of September 30, 2025.
• Significant non-cash losses on adjustment to fair value for embedded derivatives, debt, and warrants, totaling $30.5 million for the nine months ended September 30, 2025.
• Interest expense increased substantially to $19.5 million for the nine months ended September 30, 2025, due to higher borrowings on the Credit Facility.

Risks

• Ability to fund the development and drilling plan.
• Ability to grow operations and fund such operations on the anticipated timeline or at all.
• Uncertainties inherent in estimating quantities of oil, natural gas, and NGL reserves and projecting future rates of production and the amount and timing of development expenditures.
• Commodity price and cost volatility and inflation.
• Ability to obtain and maintain necessary permits and approvals to develop assets.
• Safety and environmental requirements that may subject the company to unanticipated liabilities.
• Changes in regulations governing the business and operations, including those pertaining to the environment, drilling program, and pricing of future production.
• Success in retaining or recruiting, or changes required in, officers, key employees, or directors.
• General economic, financial, legal, political, and business conditions and changes in domestic and foreign markets.
• Risks related to the growth of the business.
• Ability to recognize the anticipated benefits of the Bayswater Acquisition, the NRO Acquisition, and other transactions.
• Effects of competition on future business.
• New risk factors emerging from a competitive and rapidly changing environment.

Future Outlook

Management expects that the current cash balance, anticipated revenues from existing producing wells, and available liquidity under the Credit Facility, proceeds from the ATM Offering, and potential offerings under its effective Form S-3 registration statement will be sufficient to fund its development program and operations, meet obligations, and maintain compliance with financial covenants over the next 12 months. The company plans to continue growing through accretive acquisitions and developing its high rate-of-return drilling inventory in the DJ Basin.

Management Comments

• "We believe that the DJ Basin is one of the premier resource plays in the U.S., as Weld County boasts some of the lowest break-even prices in the U.S., and has a long production history which has proven and consistent results."
• "We strive to deliver energy in an environmentally efficient manner by deploying next-generation technology and techniques."
• "In addition to growing production through our drilling operations, we intend to continue growing our business through accretive acquisitions."
• "The Rusch wells came online late in September 2025 and are expected to contribute meaningful production in the fourth quarter of 2025."
• "Completion activities at the Simpson pad are expected to be finalized in the fourth quarter of 2025 and first production is expected towards the end of 2025."

Industry Context

Prairie Operating Co. operates in the Denver-Julesburg (DJ) Basin, a region noted for its low break-even prices and consistent production history, making it a premier resource play in the U.S. The company's strategy of growth through accretive acquisitions and development of liquids-rich assets aligns with broader industry trends focusing on high-return, established basins. The hedging program reflects a common industry practice to manage commodity price volatility, especially given the fluctuating global energy markets.

Related Party Transactions

• Common Stock Options: Gary C. Hanna, Edward Kovalik, Bristol Capital, BOKA, Gracemont Enterprises LP (controlled by Mr. Hanna), Blue Trail Partners, LLC (controlled by Mr. Kovalik), Rose Hill Holdings Limited, Anchorman Holdings Inc., and Blackstem Forest, LLC hold various common stock options.
• Series D PIPE: Bristol Investment (affiliated with Paul L. Kessler, former Director), First Idea Ventures LLC (affiliated with Jonathan H. Gray, Director), First Idea International Ltd. (affiliated with Jonathan H. Gray), and the ONeill Trust (Series E PIPE Investor) are investors in the Series D PIPE.
• Series E PIPE: The ONeill Trust is the sole Series E PIPE Investor.
• Consent and Agreement: An agreement with the ONeill Trust on August 15, 2024, addressed waivers, lien releases, and amendments to beneficial ownership limitations for Series D and E Preferred Stock and Warrants.
• Subordinated Promissory Note and Subordinated Note Warrants: Issued to Noteholders (entities controlled by Jonathan H. Gray, a director of the Company) in a principal amount of $5.0 million, with warrants to purchase up to 1,141,552 shares of Common Stock.
• Discontinued Operations Deferred Purchase Price Note Receivable: The remaining $0.4 million note receivable from the Crypto Sale was paid off in July 2025 by Fifty Shades Limited, an entity controlled by Jonathan H. Gray.

Stakeholder Impact

• Shareholders: Common stockholders experienced an increased net loss due to preferred stock obligations, but the company's growth and improved operational metrics could indicate future value. Potential dilution from ATM offerings and warrant exercises.
• Employees: Stock-based compensation is a significant component of general and administrative expenses, indicating ongoing incentive programs.
• Creditors: The company is in compliance with all covenants under its Credit Facility, and the hedging program aims to stabilize cash flows, which is positive for debt repayment capacity.
• Customers: Increased production volumes from acquisitions and development suggest a more robust supply of crude oil, natural gas, and NGLs.
• Suppliers: Active drilling and development programs imply continued demand for services and equipment from suppliers.

Next Steps

• Finalize purchase accounting for the Bayswater Acquisition in the fourth quarter of 2025.
• Continue development of the Noble pad, with first production expected in the fourth quarter of 2025.
• Finalize completion activities at the Simpson pad in the fourth quarter of 2025, with first production expected towards the end of 2025.
• Maintain hedging requirements under the Amended & Restated Credit Agreement through additional hedging activities.
• Potentially utilize the ATM Offering for general corporate purposes, including advancing the development and drilling program, repaying existing indebtedness, or financing potential acquisition opportunities.

Key Dates

Recommendation

Prairie Operating Co. has demonstrated significant operational growth and financial improvement in revenue and Adjusted EBITDA, driven by strategic acquisitions and active development programs. The strengthened Credit Facility and hedging strategy provide a more stable financial foundation. However, the increased net loss attributable to common stockholders due to substantial preferred stock obligations and the overall increase in liabilities present a cautionary note. While the company is expanding its asset base and production, the impact on common shareholder value is currently diluted by these financial structures. A 'hold' recommendation is appropriate as the company navigates this growth phase, with investors monitoring the long-term accretion of acquisitions and the management of preferred stock liabilities.

Keywords

Oil and Gas, DJ Basin, Weld County Colorado, Energy Exploration, Production, Acquisitions, Crude Oil, Natural Gas, NGLs, SEC Filing, 10-Q, Financial Results, Hedging, Credit Facility, Preferred Stock