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Organization, Description of Business, and Basis of Presentation | 3 Months Ended
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Mar. 31, 2025
Accounting Policies [Abstract] |
Organization, Description of Business, and Basis of Presentation | Note 1 – Organization, Description of Business, and Basis of Presentation Organization and Description of Business Prairie Operating Co. (individually or together with its subsidiaries, the “Company”) is an independent energy company focused on the acquisition and development of crude oil, natural gas, and natural gas liquids (“NGLs”). The Company’s assets and operations are strategically located in the oil region of rural Weld County, Colorado, within the Denver–Julesburg Basin (the “DJ Basin”) of Colorado. As of December 31, 2024, the Company’s exploration and production (“E&P”) assets included approximately 23,740 net leasehold acres in, on and under approximately 37,000 gross acres. In addition to growing production through its drilling operations, the Company also seeks to grow its business through accretive acquisitions, such as the NRO Acquisition (as defined herein), which closed in October 2024, and the Bayswater Acquisition (as defined herein), which closed in March 2025. Refer to Note 3 – Acquisitions for a discussion of the acquisitions. Bayswater Acquisition On February 6, 2025, the Company and certain of its subsidiaries entered into a Purchase and Sale Agreement (the “Bayswater PSA”) with Bayswater Resources, LLC, Bayswater Fund III-A, LLC, Bayswater Fund III-B, LLC, Bayswater Fund IV-A, LP, Bayswater Fund IV-B, LP, Bayswater Fund IV-Annex, LP, and Bayswater Exploration & Production, LLC (collectively, “Bayswater”), pursuant to which it agreed to acquire certain oil and natural gas assets (the “Bayswater Assets”) from Bayswater for a purchase price of $602.75 million, subject to certain closing price adjustments, payable in cash and 3,656,099 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) (the “Equity Consideration” and collectively, the “Bayswater Acquisition”). The Company closed the Bayswater Acquisition on March 26, 2025, at which time the Company paid approximately $482.5 million in cash, $15.0 million of which was deposited in escrow pending the Company’s acquisition of additional working interest (the “Additional Working Interest Acquisition”), which Bayswater acquired and assigned to the Company on April 11, 2025, and issued the Equity Consideration to Bayswater (collectively, the “Bayswater Purchase Price”). The Company funded the cash portion of the Bayswater Purchase Price with cash on hand, the proceeds from the issuance of Common Stock in a public offering, the proceeds from the issuance of the 148,250 shares of Series F Preferred Stock, $0.01 par value per share (“Series F Preferred Stock”), and borrowings under its Credit Facility (defined herein). Refer to Note 14 – Stockholders’ Equity for a discussion of the issuance of Common Stock, Note 13 – Mezzanine Equity for a discussion of the issuance of Series F Preferred Stock, and Note 10 – Debt for a discussion of the Credit Facility. Previously, the Company focused on cryptocurrency mining until the sale of its cryptocurrency miners in January 2024. Upon the closing of the Crypto Sale (as defined herein), the Company exited the cryptocurrency mining business. All results and activities from these assets and operations have been classified as discontinued operations in the Company’s consolidated financial statements. Refer to Note 4 – Discontinued Operations for a discussion of the discontinued operations. Basis of Presentation and Consolidation The accompanying condensed consolidated financial statements included in this Quarterly Report present the Company’s financial position, results of operations, and cash flows for the periods presented in accordance with GAAP and the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company owns 100% of the equity interest of Prairie Operating Co., LLC, a Delaware limited liability company (“Prairie LLC”), which is considered a variable interest entity for which the Company is the primary beneficiary, as the Company is the sole managing member of Prairie LLC and has the power to direct the activities most significant to Prairie LLC’s economic performance, as well as the obligation to absorb losses and receive benefits that are potentially significant. The condensed consolidated financial statements as of March 31, 2025 and for the three months ended March 31, 2025 and 2024 are unaudited. The condensed consolidated financial statements as of December 31, 2024 were derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, 2024. Certain disclosures have been condensed or omitted from these condensed financial statements; however, management believes the disclosures are adequate to make the information not misleading. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related note disclosures included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Liquidity Analysis During the three months ended March 31, 2025, the Company had a net loss of $2.6 million. The Company cannot predict if or when it will be profitable and may continue to incur losses for an indeterminate period of time. Additionally, the Company may be unable to achieve or sustain profitability on a quarterly or annual basis and extended periods of losses and negative cash flow may prevent it from successfully operating and expanding its business. As of March 31, 2025, the Company had cash and cash equivalents of $15.0 million, a working capital deficit of $54.7 million, and an accumulated deficit of $122.4 million. On March 26, 2025, the Company, as borrower, amended and restated its reserve-based credit agreement with Citibank, N.A. (“Citi”), dated as of December 16, 2024 (the “Credit Facility”), with Citi, as administrative agent, and the financial institutions party thereto (the “Amended & Restated Credit Agreement”). The Credit Facility is scheduled to mature on March 26, 2029, and the Amended & Restated Credit Agreement provides for a maximum credit commitment of $1.0 billion under the Credit Facility. Further on March 26, 2025, the Company issued Common Stock in a public offering, resulting in proceeds of $41.4 million, net of $2.4 million of underwriting discounts and commissions and issued the Series F Preferred Stock, resulting in approximately $139.1 million of net proceeds, after deducting the advisor fees and estimated offering expenses. Additionally, on March 26, 2025, the Company closed the Bayswater Acquisition, using cash on hand, the proceeds from the issuance of Common Stock in a public offering, the proceeds from the issuance of the Series F Preferred Stock, and borrowings under its Credit Facility. Refer to Note 14 – Stockholders’ Equity for a discussion of the issuance of Common Stock, Note 13 – Mezzanine Equity for a discussion of the issuance of Series F Preferred Stock, and Note 10 – Debt for a discussion of the Credit Facility. The assessment of liquidity requires management to make estimates of future activity and judgments about whether the Company can meet its obligations, have adequate liquidity to operate, and maintain compliance with the applicable financial covenants of its Amended & Restated Credit Agreement, as discussed in Note 10 – Debt. Significant assumptions used in the Company’s forecasted model of liquidity in the next 12 months include its current cash position and ability to manage spending. Based on an assessment of these factors, management expects that the Company’s cash balance, expected revenues from its existing producing wells, including those acquired in the Bayswater Acquisition, and the liquidity available under its Credit Facility and potential offerings under the effective Form S-3 registration statement will be sufficient to meet its obligations over the next 12 months and fulfil the financial covenant requirements under its Credit Facility Agreement, as discussed in Note 10 – Debt. Since entering into the Amended & Restated Credit Agreement in March 2025 to increase the borrowing base to $475.0 million and with the Company’s Form S-3 registration statement becoming effective in December 2024, the Company has the ability to access funds to meet its working capital needs. The Company’s ability to borrow under its Amended & Restated Credit Agreement does not require action on the part of management, other than requesting the borrowing. Additionally, as of March 31, 2025, the Company has availability of $98.0 million under the Credit Facility, which is less or equal to its liquidity needs; therefore, substantial doubt about the Company’s ability to continue as a going concern does not exist. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. These estimates and assumptions include estimates for reserves of credit losses, accruals for potential liabilities, the valuation of the subordinated promissory note (the “Subordinated Note”) warrants issued in the third quarter of 2024, discussed further in Note 10 – Debt, the valuation of the Series F Preferred Stock, discussed further in Note 13 – Mezzanine Equity, the fair value of its derivative instruments, and the realization of deferred tax assets. Segment Information The Company operates in one business segment: the acquisition, development, and production of crude oil, natural gas, and NGLs (the “Operating Segment”), primarily in the DJ Basin. This is consistent with the internal reporting provided to the Company’s executive team, which is the chief operating decision maker (“CODM”) and includes the Chief Operating Officer, President, Chief Financial Officer, and Executive Vice President of Operations. The Company’s Operating Segment produces and sells crude oil, natural gas, and NGL volumes, which is reported as oil, natural gas, and NGL revenue on its consolidated statements of operations for the three months ended March 31, 2025 and 2024. The Company’s revenue recognition policy and other accounting policies for its Operating Segment are the same as its company-wide accounting policies discussed below in Note 2 – Summary of Significant Accounting Policies. The Operating Segment’s major customers during the three months ended March 31, 2025 are also discussed below in Note 2 – Summary of Significant Accounting Policies. Additionally, the Company did not have any intra-entity sales or transfers during the three months ended March 31, 2025 or 2024, and the Operating Segment significant expenses are the same as those reported on the consolidated statements of operations for the three months ended March 31, 2025 and 2024. The CODM assesses the performance of the Operating Segment and decides how to allocate resources based on the Company’s net income (loss), as reported on the consolidated statements of operations. Additionally, net income (loss) on the consolidated statements of operations is used to monitor budget versus actual results of the Operating Segment and to benchmark against the Company’s competitors. The CODM’s measure of the Operating Segment assets is reported as total assets on the consolidated balance sheets.

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- Definition The entire disclosure for the business description and basis of presentation concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/235/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 275 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/275/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205/tableOfContent + Details
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