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v3.25.1

Debt | 3 Months Ended
--- | ---
Mar. 31, 2025
Debt Disclosure [Abstract] |
Debt | Note 10 – Debt The Company’s debt balances consisted of the following for the periods indicated: Schedule of Debt Balances
|  | March 31, 2025 |  |  | December 31, 2024 |
|  | (In thousands) |
Credit facility |  | $ | 377,000 |  |  | $ | 28,000 |
SEPA |  | $ | — |  |  | $ | — |
Fair value adjustment |  |  | — |  |  |  | 790 |
SEPA, at fair value |  | $ | — |  |  | $ | 790 |
Senior convertible note |  | $ | — |  |  | $ | 11,252 |
Fair value adjustment |  |  | — |  |  |  | 1,303 |
Senior convertible note, at fair value |  | $ | — |  |  | $ | 12,555 |
Subordinated note – related party |  | $ | 1,458 |  |  | $ | 3,214 |
Fair value adjustment |  |  | — |  |  |  | 1,395 |
Subordinated note – related party |  | $ | 1,458 |  |  | $ | 4,609 |
Credit Facility On December 16, 2024, the Company, as borrower, entered into a reserve-based credit agreement with Citi, as administrative agent and the financial institution party thereto (the “Credit Facility Agreement”). The Credit Facility is guaranteed by all of the Company’s restricted subsidiaries and is secured by a first-priority security interest on substantially all of its oil and natural gas properties and substantially all of its personal property assets, subject to customary exceptions. On February 3, 2025, the Company entered into the First Amendment to the Credit Facility Agreement (the “First Amendment”), which among other things, increased the borrowing base and the aggregate elected commitments to $60.0 million. On March 26, 2025, the Company, as borrower, entered into the Amended & Restated Credit Agreement with Citi, as administrative agent, and the financial institutions party thereto. 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. As of March 31, 2025, the Amended & Restated Credit Agreement provided for a borrowing base of $475.0 million and an aggregate elected commitment of $475.0 million. The Amended & Restated Credit Agreement includes a $47.5 million sublimit for the issuance of letters of credit. The borrowing base is subject to semi-annual redeterminations based upon the value of the Company’s oil and gas properties as determined in a reserve report dated as of January and July of each year, subject to certain interim redeterminations. As of March 31, 2025 and December 31, 2024, the Company had $377.0 million and $28.0 million, respectively, of revolving borrowings and no letters of credit outstanding under the Credit Facility, resulting in $98.0 million and $7.2 million, respectively, of availability for future borrowings and letters of credit. Borrowing under the Amended & Restated Credit Agreement bear interest, at the Company’s election, based upon the Term SOFR or Alternate Base Rate (each as defined in the Amended & Restated Credit Agreement), as applicable, plus an additional margin which is based on the percentage of the borrowing base being utilized, ranging from 2.75% to 3.75% per annum for Term SOFR loans (plus a 0.10% per annum adjustment) and 1.75% to 2.75% for Alternate Base Rate loans. There is also a commitment fee on the undrawn commitments, ranging from 0.375% to 0.50% based on the percentage of the borrowing base being utilized. During the three months ended March 31, 2025, the Company recognized $1.2 million of interest expense related to the Credit Facility. The Company is subject to certain financial covenants under the Credit Facility, which require the Company to maintain, for each fiscal quarter commencing with the fiscal quarter ending March 31, 2025, a Net Leverage Ratio (as defined in the Amended & Restated Credit Agreement) of no greater than 3.00 to 1.00 and a Current Ratio (as defined in the Amended & Restated Credit Agreement) of at least 1.00 to 1.00. The Amended & Restated Credit Agreement also includes conditional equity cure rights that will enable the Company to cure certain breaches of these financial maintenance covenants. Further, beginning April 1, 2025, the Amended & Restated Credit Agreement requires the Company and its restricted subsidiaries to always hedge not less than 80% of projected production from their proved developed producing reserves and certain wells through March 31, 2028. As of March 31, 2025, the Company is in compliance with all covenants under the Amended & Restated Credit Agreement. Additionally, the Amended & Restated Credit Agreement contains various restrictive covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to, subject to certain exceptions: (i) incur indebtedness; (ii) incur liens; (iii) declare or pay dividends, make distributions or make other restricted payments; (iv) repay or redeem other indebtedness; (v) make investments; (vi) change their respective lines of business or acquire or make any expenditures in oil and gas properties outside the United States; (vii) sell or discount receivables; (viii) acquire or merge with any other company; (ix) sell assets or equity interests of the Company’s subsidiaries; (x) enter into or terminate certain hedge agreements; (xi) enter into transactions with affiliates; (xii) own any subsidiary that is not organized in the United States; (xiii) enter into certain contracts or agreements that prohibit or restrict liens on property in favor of the administrative agent or restrict any restricted subsidiary from paying dividends or making distributions; (xiv) allow gas imbalances, take-or-pay or other prepayments with respect to the Company’s proved oil and gas properties; (xv) engage in certain marketing activities; (xvi) enter into sale and leasebacks; and (xvii) make or incur any capital expenditure or leasing or acquisition expenditure in oil and gas properties that are not borrowing base properties. As of March 31, 2025 and December 31, 2024, the Company has $14.1 million and $1.7 million, respectively, of unamortized deferred financing costs associated with its Credit Facility, which is presented as a non-current asset on the consolidated balance sheet. These costs will be amortized to interest expense on the accompanying statements of operations on a straight-line basis over the life of the Credit Facility. Standby Equity Purchase Agreement On September 30, 2024, the Company entered into the SEPA with Yorkville, whereby, subject to certain conditions, the Company has the right, but not the obligation, to sell to Yorkville up to $40.0 million shares of Common Stock, at any time and in an the amount as specified in the applicable Advance Notice, during the commitment period commencing on the SEPA Effective Date and terminating on September 30, 2026. Each issuance and sale by the Company under the SEPA (each, an “Advance”) is subject to a maximum limit equal to 100% of the aggregate volume traded of the Company’s Common Stock on the Nasdaq Stock Market during the five trading days immediately prior to the date of the Advance Notice. The shares will be issued and sold to Yorkville at a per share price equal to 97% of the lowest daily volume weighted average price of Common Stock for three consecutive trading days commencing on the trading day immediately following Yorkville’s receipt of an Advance Notice. On September 30, 2024, pursuant to the SEPA, the Company paid Yorkville a structuring fee of $25,000 and a commitment fee of 100,000 shares of Common Stock (the “Commitment Fee”), Yorkville advanced an initial $15.0 million (the “Pre-Paid Advance”) to the Company, and the Company issued the Senior Convertible Note to Yorkville. In connection with the SEPA, the Company entered into a registration rights agreement with Yorkville pursuant to which the Company agreed to file a registration statement registering the resale of the Common Stock shares underlying the SEPA. The Company’s right to sell shares to Yorkville under the SEPA is contingent upon the Company having an effective registration statement with respect to the shares issuable pursuant to or in connection with the SEPA, which was declared effective by the SEC on December 20, 2024, and upon the conversion of the Senior Convertible Note, which occurred in February 2025. Any purchases under an Advance will be subject to certain limitations, including that Yorkville cannot acquire (i) any shares that would result in Yorkville, including its affiliates, beneficially owning more than 4.99% of the Company’s outstanding Common Stock at the time of an Advance or (ii) more than 19.99% of the Company’s issued and outstanding Common Stock as of the SEPA Effective Date (the “Exchange Cap”), subject to limited exceptions. Pursuant to the SEPA, the Company may issue up to a total of 4,198,343 shares of Common Stock within the Exchange Cap through Advances under the SEPA, upon conversion of the Senior Convertible Note or through any other issuances of Common Stock thereunder. The Company determined that the SEPA represents a derivative instrument pursuant to ASC 815, which should be recorded at fair value at inception and remeasured at fair value each reporting period with changes in the fair value recognized in earnings. As of December 31, 2024, the Company has recorded the SEPA at its fair value of $0.8 million and recorded the corresponding $0.8 million loss on adjustment to fair value – embedded derivatives, debt, and warrants on its consolidated statement of operations and consolidated statement of cash flows for the year ended December 31, 2024. The fair value of the SEPA as of December 31, 2024 was determined by a third-party using a Monte Carlo simulation model. Refer to Note 6 – Fair Value Measurements for a further discussion of the fair value of the SEPA. Pursuant to the Series F Preferred Stock Certificate of Designation, the Company may only request an Advance Notice on the SEPA if the Series F Preferred Stock is fully converted or redeemed. As such, the Company has determined that the fair value of the SEPA as of March 31, 2025 is $0, which resulted in corresponding loss on adjustment to fair value – embedded derivatives, debt, and warrants of $0.8 million on the Company’s consolidated statement of operations and consolidated statement of cash flows for the three months ended March 31, 2025. Senior Convertible Note On September 30, 2024, Yorkville advanced the Pre-Paid Advance to the Company and the Company issued the Senior Convertible Note to Yorkville, with an interest rate of 8.00% and a maturity date of September 30, 2025. The Company’s obligations with respect to the Pre-Paid Advance and under the Senior Convertible Note was guaranteed by Prairie LLC, a subsidiary of the Company, and Prairie Operating Holding Co., LLC (“Prairie Holdco”), a subsidiary of the Company, pursuant to a global guaranty agreement entered into by Prairie LLC and Prairie Holdco in favor of Yorkville on September 30, 2024. Yorkville had the option to convert the Pre-Paid Advance into shares of Common Stock at any time at the Conversion Price (as defined in the SEPA). The Company also had the option to, at any time, redeem all or a portion of the amounts outstanding under the Senior Convertible Note at 105% of the principal amount thereof, plus accrued and unpaid interest. At the time of issuance, the Company determined that certain features of the Senior Convertible Note required bifurcation and separate accounting as embedded derivatives. As such, the Company elected the fair value option to account for the Senior Convertible Note; therefore, in accordance with ASC 815, the Company recorded the Senior Convertible Note at fair value and remeasured the fair value each reporting period with changes in fair value recognized in earnings. In December 2024, and in conjunction with the Credit Facility Agreement, the Company made a $3.7 million payment on the Senior Convertible Note, resulting in a principal balance of $11.3 million as of December 31, 2024. However, due to the election of the fair value option, the Company reported the Senior Convertible Note at its fair value of $12.6 million on its consolidated balance sheet as of December 31, 2024. Refer to Note 6 – Fair Value Measurements for a further discussion of the fair value of the Senior Convertible Note. During the three months ended March 31, 2025, Yorkville converted the remaining $11.3 million of the Senior Convertible Note in exchange for 2.1 million shares of Common Stock, resulting in a principal balance of $0 as of March 31, 2025. As a result, the Company recognized loss on adjustment to fair value – embedded derivatives, debt, and warrants of $5.5 million on the Company’s consolidated statement of operations and consolidated statement of cash flows for the three months ended March 31, 2025. Subordinated Promissory Note On September 30, 2024 (the “Subordinated Note Effective Date”), the Company entered into the Subordinated Note with the Noteholders in a principal amount of $5.0 million, with a maturity of December 31, 2025. Refer to Note 17 – Related Party Transactions for a further discussion of the Subordinated Note and the Noteholders. The Subordinated Note has an interest rate of 10.00% and the Noteholders are entitled to a minimum return on capital of up to 2.0x upon the repayment, prepayment or acceleration of the obligations, or the occurrence of certain other triggering events under the Subordinated Note. The Subordinated Note is guaranteed by Prairie LLC pursuant to a global guaranty agreement entered into by Prairie LLC in favor of the Noteholders on the Subordinated Note Effective Date. The Subordinated Note is subordinated to the prior payment in full in cash to the Senior Convertible Note and any future senior secured revolving credit facility of the Company entered into after the Subordinated Note Effective Date. On December 16, 2024, the Company and the Noteholders agreed to amend and restate the Subordinated Note (the “Amended and Restated Subordinated Note Agreement”), to, among other things, extend the maturity date of the Subordinated Note to March 17, 2027. Additionally, the Amended and Restated Subordinated Note Agreement modified certain provisions to better align with the Credit Facility Agreement. In December 2024, and in conjunction with the Credit Facility Agreement, the Company made a $1.8 million payment on the Subordinated Note, resulting in a principal balance of $3.2 million as of December 31, 2024. Pursuant to the terms of the Subordinated Note, the Company issued the Subordinated Note Warrants to purchase up to 1,141,552 shares of Common Stock to the Noteholders, which vest in tranches based on the date of repayment of the Subordinated Note. As of March 31, 2025 and December 31, 2024, Subordinated Note Warrants providing the right to purchase 570,778 shares of Common Stock had vested and were outstanding. Refer to Note 15 – Common Stock Options and Warrants below for a further discussion of the Subordinated Note Warrants. Pursuant to the Subordinated Note, the Company entered into a registration rights agreement (the “SPA Registration Rights Agreement”) with the Noteholders pursuant to which the Company agreed to file a registration statement registering the resale of the Common Stock underlying the Subordinated Note Warrants. The registration statement was declared effective by the SEC on December 20, 2024. At the time of issuance, the Company determined that certain features of the Subordinated Note and the Subordinated Note Warrants required bifurcation and separate accounting as embedded derivatives. As such, the Company elected the fair value option to account for the Subordinated Note and the Subordinated Note Warrants; therefore, in accordance with ASC 815, the Company recorded the Subordinated Note and the Subordinated Note Warrants at fair value and remeasured the fair values each reporting period with changes in fair value recognized in earnings. As of December 31, 2024, the fair value of the Subordinated Note was $4.6 million. Refer to Note 6 – Fair Value Measurements for a further discussion of the fair value of the Subordinated Note and the Subordinated Note Warrants. On March 26, 2025, in connection with the closing and financing of the Bayswater Acquisition, the Company paid $3.2 million of the outstanding balance under the Subordinated Note. Pursuant to the terms of the payoff letter, the Company and the Noteholders agreed that the remaining $1.5 million outstanding Subordinated Note balance would be converted to principal, will accrue interest at a rate of 15% of per annum, and all principal and other amounts owed (other than interest) pursuant to the Subordinated Note will not be redeemable for any reason so long as the any Series F Preferred Stock of the Company remains outstanding. Therefore, the Company determined that changes to the Subordinated Note included in the payoff letter qualify as an extinguishment of debt and elected to forgo the previous fair value option election. As such, the Company now presents the Subordinated Note at its face value of $1.5 million as of March 31, 2025.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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