Prairie Operating Co.

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 oil and gas 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”).

As of December 31, 2025, the Company’s assets included approximately 68,000 net leasehold acres in, on and under approximately 98,200 gross acres. In addition to growing production through its drilling operations, the Company intends to continue growing its business through accretive acquisitions, such as the NRO Acquisition (as defined herein), which closed in October 2024, the Bayswater Acquisition (as defined herein), which closed in March 2025, the Edge Acquisition (as defined herein), which closed in July 2025, and the Summit and Crown Acquisitions, which closed in October 2025, focusing on assets with the following criteria: (i) producing reserves, with opportunities to add accretive, undeveloped bolt–on acreage; (ii) ample, high rate–of–return inventory of drilling locations that can be developed with cash flow reinvestment; (iii) strong well–level economics; (iv) liquids–rich assets; and (v) accretive valuation. Refer to Note 3 – Acquisitions for a discussion of the Company’s acquisitions.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements included in this Annual Report present the Company’s financial position, results of operations, and cash flows for the years 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 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.

Segment Information

The Company operates inone business segment: the acquisition, development, and production of crude oil, natural gas, and NGLs (the “Reportable Segment”), primarily in the DJ Basin. This is consistent with the internal reporting provided to the Company’s executive team, made up of the Interim President and Chief Executive Officer and the Executive Vice President – Chief Financial Officer, who are considered the chief operating decision makers (“CODM”).

The Company’s Reportable 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 years ended December 31, 2025 and 2024. The Company’s revenue recognition policy and other accounting policies for its Reportable Segment are the same as its company–wide accounting policies discussed below in Note 2 – Summary of Significant Accounting Policies. The Reportable Segment’s major customers during the years ended December 31, 2025 and 2024 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 years ended December 31, 2025 or 2024, and the Reportable Segment’s significant expenses are the same as those reported on the consolidated statements of operations for the years ended December 31, 2025 and 2024. Additionally, the CODM does not receive additional information regarding expenses other than what is reported on the consolidated statements of operations for the years ended December 31, 2025 and 2024.

The CODM assesses the performance of the Reportable 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 Reportable Segment and to benchmark against the Company’s competitors. The CODM’s measure of the Reportable Segment assets are reported as total assets on the consolidated balance sheets.

Note 2–Summary of Significant Accounting Policies

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 reserve quantities and estimated future cash flows associated with proved reserves, depletion of proved developed oil and natural gas reserves, asset retirement obligations, accruals for the Company’s oil, natural gas, and NGL revenues and any potential liabilities, the valuation of the Series F Convertible Preferred Stock, $0.01 par value per share (“Series F Preferred Stock”), Series F Preferred Stock Warrants (as defined herein), and the Company’s stock–based compensation performance based awards, the fair value of commodity derivative instruments, the realization of deferred tax assets, and any acquisition–related purchase price allocations.

Cash and Cash Equivalents

Cash and cash equivalents are defined by the Company as short–term, highly liquid investments which have an original maturity of three months or less and deposits in money market mutual funds that are readily convertible into cash. The carrying value of cash and cash equivalents approximate the fair value due to the short–term nature of these instruments. The Company may have cash balances which exceed the federal deposit insurance limits of $250,000, creating a potential credit risk. To mitigate this risk, the Company maintains its cash and cash equivalents with high quality financial institutions; therefore, it does not anticipate incurring any losses related to these credit risks. As of December 31, 2025 and 2024, the Company had cash and cash equivalents of less than $0.1 million and $5.2 million, respectively.

Joint Interest and Other Receivables

Joint interest and other receivables consist of uncollateralized joint interest owner obligations due within 30 days of the invoice date and, at times, receivables from the counterparties to the Company’s derivative contracts. In the Company’s capacity as operator, it incurs development, exploration, operating, and plug and abandonment costs which are billed to its partners based on their respective working interests. For receivables from joint interest owners, the Company typically has the ability to withhold revenue distributions to recover any unpaid joint operations billings which are past due.

Oil and Natural Gas Properties

Proved properties. The Company follows the successful efforts method of accounting for its oil and natural gas properties. Under this method, development drilling and completion costs are capitalized when incurred and depleted using the unit–of–production (“UOP”) method based on total estimated proved developed oil and natural gas reserves. The costs of acquiring proved properties are also capitalized and depleted, including leasehold acquisition costs transferred from unproved properties, using the UOP method based on total estimated proved developed and undeveloped reserves.

The Company assesses its proved oil and natural gas properties for impairment whenever circumstances indicate that the carrying value of proved oil and natural gas properties may not be recoverable. In this assessment, the Company compares unamortized capitalized costs to the expected undiscounted pre–tax future cash flows for the associated assets grouped at the lowest level for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre–tax future cash flows, based on the Company’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair value. Fair value is generally estimated using the income approach described in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 820, Fair Value Measurements (“ASC 820”). If applicable, the Company utilizes prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value measurements are typically based on judgmental assessments of commodity prices, pricing adjustments for differentials, operating costs, capital investment plans, future production volumes, and estimated proved reserves, considering all available information at the date of review. These assumptions are applied to develop future cash flow projections that are then discounted to estimated fair value, using a market–based weighted average cost of capital.

Unproved properties. Under the successful efforts method of accounting for oil and natural gas properties, unproved properties, such as the costs to acquire undeveloped leases, are not subject to depletion until they are transferred to proved properties. The Company transfers leasehold costs to proved properties on an ongoing basis as the properties to which they relate are evaluated and proved reserves established. Additionally, development drilling and completion costs for wells in–progress are excluded from depletion until the related project is completed and proved producing reserves are established.

The following table presents the property balances excluded from the Company’s UOP depletion calculation for the years indicated:

The Company evaluates its unproved properties for impairment on a yearly basis by considering, among other things, remaining lease terms, future drilling plans and capital availability to execute such plans, commodity price outlooks, recent operational results, reservoir performance and geology, and estimated acreage value based on prices received for similar, recent acreage transactions by us or other market participants. If circumstances dictate that the carrying value of unproved properties may not be recoverable, the Company performs a recoverability test. If carrying values exceed the undiscounted future net cash flows associated with the unproved reserves, impairment is measured and recorded at fair value, which is generally estimated using the income approach described in ASC 820. If applicable, the Company utilizes prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value measurements are typically based on judgmental assessments of commodity prices, pricing adjustments for differentials, operating costs, capital investment plans, future production volumes, and estimated proved reserves, considering all available information at the date of review. These assumptions are applied to develop future cash flow projections that are then discounted to estimated fair value, using a market–based weighted average cost of capital. Additionally, the Company expenses any costs related to the expiration of unproved leasehold. During the year ended December 31, 2025, the Company recorded $3.4 million related to leases which expired, which is presented as abandonment and impairment of unproved properties expense on its consolidated statement of operations. The Company didnot record any abandonment and impairment of unproved properties expense the year ended December 31, 2024.

Exploratory costs. Exploration costs such as exploratory geological and geophysical costs, delay rentals, and exploration overhead are expensed as incurred. Under the successful efforts method of accounting, exploratory drilling costs are initially capitalized pending the determination of proved reserves. If proved reserves are found, drilling costs remain capitalized and are classified as proved properties. If proved reserves are not found, the costs related to unsuccessful wells are charged to exploration expense. For exploratory wells that find reserves that cannot be classified as proved when drilling is completed, costs continue to be capitalized as suspended exploratory drilling costs if there have been sufficient reserves found to justify completion as a producing well and sufficient progress is being made in assessing the reserves and the economic and operational viability of the project. If the Company determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed. In some instances, this determination may take longer than one year. To date, the Company has not drilled any exploratory wells but may have exploratory drilling in future years.

Other Property and Equipment

As part of the Bayswater Acquisition, the Company acquired several salt–water disposal wells and the associated facilities, equipment, and pipelines (collectively, the “SWD Facilities”). The Company has accounted for the SWD Facilities at its relative fair value allocated to the assets as of March 26, 2025, the closing date of the Bayswater Acquisition, adjusted for the interim settlement statement and final settlement statement, as discussed further below. The Company is depreciating the SWD Facilities using the straight–line method over an estimated 30–year life from May 2023 and 2024, the dates the SWD facilities were constructed. Refer to Note 3 – Acquisitions for a discussion of the Bayswater Acquisition.

Additionally, other property and equipment also includes of vehicles, computer equipment, and office furniture and fixtures which are depreciated using the straight–line method over their estimated useful lives offive years.

Derivative Instruments

The Company utilizes commodity derivative instruments to reduce its exposure to crude oil and natural gas price volatility for a portion of its estimated production from its proved, developed, producing oil and natural gas properties. The fair values of the Company’s derivative instruments are measured on a recurring basis using a third–party industry–standard pricing model. Refer to Note 6 – Fair Value Measurements for a further discussion of the fair value of the Company’s derivative instruments.

The Company has not designated any of its derivative instruments as hedges for accounting purposes; therefore, the aggregate net gains and losses resulting from changes in the fair values of its outstanding derivatives, the settlement of derivative instruments, and any net proceeds or payments related to the early termination of derivative contracts during the period are recognized as net gain or loss on derivatives, as applicable, in the consolidated statements of operations. Refer to Note 4 – Derivative Instruments for a discussion of the Company’s outstanding derivative instruments.

Prepaid Expenses and Other Current Assets

The Company’s prepaid expenses and other current assets primarily consists of premiums paid for its various insurance packages, including commercial packages, general liability, and Director and Officer policies, and performance bonds which are amortized into general and administrative expenses over the life of the policy and prepaid software licenses and subscriptions which are amortized into general and administrative or lease operating expenses, depending on the type of license or subscription, over the term of the license or subscription.

Debt Issuance Costs

Debt issuance costs include origination, legal, and other fees incurred to issue debt or amend existing credit facilities. Deferred financing costs related to the Company’s amended and restated reserve–based credit agreement (the “Credit Facility”) with Citibank, N.A. (“Citi”) are capitalized as debt issuance costs, net on the accompanying balance sheets and amortized to interest expense on the accompanying statements of operations on a straight–line basis over the life of the Credit Facility. Refer to Note 10 – Debt for a discussion of the Company’s Credit Facility.

Leases

The Company capitalizes its operating leases as right–of–use (“ROU”) assets and lease liabilities on the accompanying consolidated balance sheets and recognizes the fixed minimum lease costs for its operating leases on a straight–line basis over the lease term in accordance with ASC Topic 842, Leases (“ASC 842”). The Company does not recognize leases with initial lease terms less than or equal to 12 months on the balance sheet and only includes those short–term leases as part of its lease–related disclosures. Additionally, the Company does not include any of its variable lease costs in the calculation of its ROU assets and lease liabilities, instead variable costs are expensed as incurred.

The Company makes certain assumptions and judgments when determining its ROU assets and lease liabilities. When determining whether a contract contains a lease, the Company considers whether there is an identified asset that is physically distinct, whether the supplier has substantive substitution rights, whether the Company has the right to obtain substantially all of the economic benefits from the use of the asset, and whether it has the right to control the asset. Certain of the Company’s leases include one or more options to renew the lease, with renewal terms that can extend the lease term for additional years. When determining if renewals should be included in the lease term to be recognized, the Company utilizes the reasonably certain threshold, therefore, certain of the leases included in the calculation of its ROU assets and lease liabilities could include optional renewal periods for which it is not contractually obligated. Additionally, the Company must estimate its incremental borrowing rate when the implicit rate is not stated in the lease agreement and cannot be readily determined. As of December 31, 2025, none of the Company’s active leases contain purchase or termination options that are reasonably certain to be exercised.

The Company has certain operating leases for office space, vehicles, and equipment used in its daily operations, for which it records the related lease costs as general and administrative or lease operating expenses, depending on the type of lease, on the accompanying consolidated statements of operations. Refer to Note 11 – Leases for further information related to the Company’s operating leases.

Asset Retirement Obligations

The Company’s oil and natural gas properties include estimates of future expenditures to plug and abandon wells, pipelines, platforms, and other related facilities after the reserves have been depleted. The Company recognizes the present value of the asset retirement obligation costs as a liability when it is incurred or assumed (acquired) and an increase to its capitalized oil and natural gas properties. The capitalized asset retirement obligation costs are depleted over the productive lives of the oil and natural gas properties while the asset retirement obligation liability is accreted to the expected settlement value over the productive lives of the oil and natural gas properties. Upon settlement, the difference between the recorded liability amount and the amount of costs incurred will be recognized as an adjustment to the capitalized cost of oil and natural gas properties.

The determination of future asset retirement obligations requires estimates of the future costs of removal and restoration, productive lives of the oil and natural gas properties based on reserve estimates, and future inflation rates. Estimated costs consider historical experience, third–party estimates, and government regulatory requirements but do not consider salvage values. These costs could be subject to revisions in subsequent years due to changes in regulatory requirements, the estimated plug and abandonment cost, and the estimated timing of the oil and natural gas property retirement. In subsequent periods, if the estimate of the asset retirement obligation liability changes, the Company records an adjustment to both the asset retirement obligation liability and the oil and natural gas property carrying value. Additionally, the Company estimates the credit–risk adjusted discount rate, which is applied to the future inflated plug and abandonment costs to determine the discounted present value which is recognized as the initial liability. The determined credit–risk adjusted discount rate is also subsequently applied to accrete the liability. Refer to Note 8 – Asset Retirement Obligations for further information related to the Company’s asset retirement obligations.

Commitments and Contingencies

The Company recognizes a liability for loss contingencies when it is probable a liability has been incurred, and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount the Company accrues the minimum amount in the range. Additionally, the Company could be subject to legal actions and claims arising in the ordinary course of business, which, if considered probable and reasonably estimable, would require a contingent liability to be recorded as general and administrative expense.

Additionally, following the close of the Bayswater Acquisition in March 2025, the Company is party to an oil transportation agreement which includes a minimum volume commitment, requiring the Company to transport a fixed determinable quantity of crude oil on a monthly basis. Under the terms of this agreement, the Company may be required to make periodic deficiency payments for any shortfalls in delivering the minimum gross volume to be transported by the counterparty. Additionally, one of the Company’s gas gathering contracts requires a monthly guaranteed payment intended to reimburse the counterparty for costs incurred to connect to the gathering facility. Refer to Note 12 – Commitments and Contingencies for further information related to the Company’s commitment contracts.

Liabilities at Fair Value

The Company has several financial instruments which were evaluated for embedded derivatives and bifurcation in accordance with ASC Topic 815, Derivatives and Hedging(“ASC 815”) at the time of issuance. Pursuant to ASC 815, the Company has determined that the Standby Equity Purchase Agreement (the “SEPA”), convertible promissory note (the “Senior Convertible Note”), the subordinated promissory note (the “Subordinated Note”) Warrants, Series F Preferred Stock Warrants (as defined herein), and certain features of the Series F Preferred Stock should be accounted for at fair value. As a result, the Company has reflected these financial instrument liabilities at their fair value on its consolidated balance sheet and reflects the changes in the fair values of the liabilities as loss on adjustment to fair value – embedded derivatives, debt, and warrants on its consolidated statements of operations. The Company has engaged a third–party valuation expert to assist in preparing the fair value valuations of these financial instruments at each reporting period. Refer to Note 6 – Fair Value Measurementsfor a full discussion of the fair values of the SEPA, the Senior Convertible Note, the Subordinated Note Warrants, Series F Preferred Stock, and Series F Preferred Stock Warrants.

Revenue Recognition

The following table presents the Company’s oil, natural gas, and NGL revenues disaggregated by revenue stream:

The Company recognizes revenue from the sales of crude oil, natural gas, and NGLs at the point that control of the produced oil, natural gas, and NGL volumes are transferred to the purchaser, which may differ depending on the applicable contractual terms. The Company considers the transfer of control to have occurred when the production is delivered to the purchaser because at that time, the purchaser has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the oil, natural gas, or NGL production. Transfer of control dictates the presentation of the Company’s transportation and processing expenses within its consolidated statements of operations. Transportation and processing expenses incurred prior to the transfer of control are recorded gross within transportation and processing expenses in the accompanying consolidated statements of operations. Gathering, transportation, and processing expenses incurred subsequent to the transfer of control are recorded net within crude oil, natural gas, and NGL sales revenues.

Oil revenue contracts. The majority of the Company’s oil revenue contracts are structured so that the Company delivers production at the wellhead or other contractually agreed–upon delivery point, at which time the purchaser takes custody, title, and risk of loss of the product, and the Company receives a specified index price from the purchaser with no deduction. As such, the Company recognizes revenue when control transfers to the purchaser at the delivery point based on the price received from the purchaser and records the third–party transportation costs as a component of transportation and processing expenses in the accompanying consolidated statements of operations.

Natural gas and NGLs revenue contracts. Under the Company’s natural gas processing contracts, the Company delivers natural gas to a processing entity at the wellhead or the inlet of the processing entity’s system. Typically, the Company relinquishes control at the inlet of the midstream processing facility and recognizes natural gas and NGL revenues based on the agreed upon contracted amount of proceeds received from the midstream processor. As such, the Company recognizes the revenue associated with these contracts net of gathering and processing costs.

Additionally, the Company has made an accounting election to exclude certain qualifying taxes collected from customers and remitted to governmental authorities from its reported revenues and is presenting those amounts as a component of operating expense in the accompanying consolidated statements of operations. The amounts due from purchasers are reflected in oil, natural gas, and NGL accrued revenue on the accompanying consolidated balance sheets and consists of uncollateralized accrued oil, natural gas, and NGL revenue due under normal trade terms, generally requiring payment within 30 days of production. The Company records the differences between its estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. Additionally, the Company has determined that product returns or refunds are very rare and will account for them as they occur, and it generally provides no warranty other than the implicit promise that goods delivered are free of liens and encumbrances and meet the agreed upon specification.

As discussed above, the Company closed the Bayswater Acquisition in March 2025 and fully took over operations of the assets acquired in the Bayswater Acquisition in the third quarter of 2025. During the integration of the Bayswater Acquisition, the Company renegotiated certain purchaser agreements associated with the assets acquired, and as a result, certain purchasers which were customers at the close of the acquisition are no longer customers. During the second half of 2025, two of the Company’s largest customers accounted for approximately 83% and 10% of its oil, natural gas, and NGL revenues. The Company is exposed to credit risk in the event of nonpayment by the purchasers of its production, all of which are concentrated in energy–related industries and may be similarly affected by changes in economic and financial conditions, commodity prices, or other conditions. While the loss of a single purchaser may result in a temporary interruption in sales of, or a lower price for, the Company’s production, the Company does not believe the loss of any single purchaser would have a material impact its business because it believes it could readily find alternative purchasers in its producing region.

General and Administrative Expenses

General and administrative expenses consist of overhead, including salaries, incentive compensation, benefits for the Company’s corporate staff, costs of maintaining its headquarters, and costs of managing its production and development operations. The Company records a certain portion of its salaries, wages, and benefits as lease operating expenses when they are directly attributable to maintaining the production of its operated oil and natural gas properties. For the oil and natural gas properties for which the Company is the operator, it reduces general and administrative expenses for reimbursements received from other working interest owners for the portion of costs and allowable overhead incurred during the drilling and production phases of the property. general and administrative expenses also include audit, legal, and other professional service fees, investor relations costs, and software expenses.

Stock–based Compensation

The Company’s stock–based compensation awards are classified as either equity or liability awards in accordance with GAAP. The fair value of an equity–classified award is determined at the grant date and is amortized to general and administrative expense on a graded attribution basis over the vesting period of the award. The fair value of a liability–classified award is determined on a quarterly basis beginning at the grant date until final vesting. Changes in the fair value of liability–classified awards are recorded to general and administrative expense over the vesting period of the award.

Additionally, the Company grants performance stock awards (“PSUs”), which vest and become earned upon the achievement of certain performance goals based on the Company’s relative total shareholder return as compared to the performance peer group during the performance period, which represents a market condition per ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). As such, the Company has engaged a third–party valuation expert to assist in preparing the fair value of the PSUs awards using a Monte Carlo simulation model as of the grant date. Per the PSU agreements, these awards can be settled in either stock or cash, as determined by the Compensation Committee of the Board of Directors (the “Committee”); however, unless the Committee determines otherwise, these PSUs will be settled in stock; therefore, the Company classified the PSUs as equity awards.

The Company recognizes compensation expense related to equity–classified and liability–classified awards using the straight–line method over the requisite service period during which the employee, board member, director, or advisor is required to provide services in exchange for the award in accordance with ASC 718. The Company has elected to not estimate the forfeiture rate of its RSUs and PSUs in its initial calculation of compensation expense but instead adjusts compensation expense for forfeitures as they occur. Refer to Note 16 – Long–Term Incentive Compensation for a further discussion of the Company’s RSUs and PSUs.

Income Taxes

The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their respective tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. On this basis, as of December 31, 2025, the Company had a partial valuation allowance of $6.7 million to offset its net deferred tax liabilities.

Supplemental Disclosures of Cash Flow Information

The following table presents non–cash investing and financing activities and supplemental cash flow disclosures relating to the cash paid for interest for the years indicated:

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023–09, Income Taxes (Topic 740) (“ASC 740”): Improvements to Income Tax Disclosures (“ASU 2023–09”) to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023–09 is effective for annual periods beginning January 1, 2025, with early adoption permitted. The Company has adopted ASU 2023–09 for the annual period ended December 31, 2025 and has conformed its income tax disclosures in Note 18 – Income Taxes to reflect the new requirements.

In November 2024, the FASB issued ASU 2024–03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220–40): Disaggregation of Income Statement Expenses (“ASU 2024–03”), which requires the disclosure of specific information about certain costs and expenses. ASU 2024–03 is effective for annual periods beginning January 1, 2027, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

Recently Issued Tax Legislation

On July 4, 2025, Public Law 119–21, commonly referred to as One Big Beautiful Bill Act (“OBBB”) was signed into law, resulting in several changes to the U.S. federal income tax laws. The legislation includes several changes to federal tax regulations and makes permanent, extends, or modifies certain provisions of Public Law No. 115–97, commonly referred to as the Tax Cuts and Jobs Act. These changes include, among others, permanently restoring earnings before interest, taxes, depreciation, and amortization expense–based business interest deduction limitation, 100% bonus depreciation for certain property and immediate expensing for certain domestic research and experimental expenditures. The Company does not expect the OBBB to have a material effect on income tax expense for the year ending December 31, 2025. All effects of changes in tax legislation are recognized in the consolidated financial statements during the period of enactment. As such, the effects of the OBBB are reflected in the Company’s assessment of its valuation allowance as of December 31, 2025.

Note 3 –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 the Company agreed to acquire certain oil and natural gas assets (the “Bayswater Assets”) from Bayswater for a purchase price of $602.8 million, subject to certain closing price adjustments, payable in cash and 3,656,099 shares of Common Stock (the “Equity Consideration” and collectively, the “Bayswater Acquisition”).

The Company closed the Bayswater Acquisition on March 26, 2025 and paid Bayswater cash for the as–adjusted closing purchase price of approximately $482.5 million, $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 Series F Preferred Stock, and borrowings under its Credit Facility. Refer to Note 14 – Stockholders’ Equityfor a discussion of the issuance of Common Stock, Note 13 – Mezzanine Equityfor a discussion of the issuance of Series F Preferred Stock, and Note 10 – Debt for a discussion of the Credit Facility. On June 6, 2025, the Company received an interim settlement payment from Bayswater of $30.7 million, $16.1 million of which related to the time period between the effective date of the Bayswater PSA and the closing of the Bayswater Acquisition, resulting in a decrease to the purchase price. The Company completed the final settlement with Bayswater on October 15, 2025, resulting in a final purchase price allocation of $475.6 million.

The Bayswater Acquisition has been accounted for as an asset acquisition in accordance with ASC Topic 805, Accounting for Business Combinations (“ASC 805”). The estimated fair value of the consideration paid by the Company and the allocation of that amount to the underlying assets acquired and liabilities assumed, on a relative fair value basis, are recorded on the Company’s books as of March 26, 2025, the closing date of the Bayswater Acquisition. Additionally, costs directly related to the Bayswater Acquisition are capitalized as a component of the Bayswater Purchase Price. The allocation of the total Bayswater Purchase Price, on a relative fair value basis, is based upon management’s estimates of and assumptions related to the fair value of assets acquired and liabilities assumed as of the closing date using currently available information.

The following table presents the allocation of the Bayswater Purchase Price, as adjusted for the closing of the Additional Working Interest Acquisition and the final settlement with Bayswater on October 15, 2025 to the net assets acquired on March 26, 2025, the closing date of the Bayswater Acquisition:

The consideration is allocated to the assets acquired and liabilities assumed on a relative fair value basis. The fair value measurements of assets acquired and liabilities assumed, on a relative fair value basis, are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of oil and gas properties and asset retirement obligations were measured using the discounted cash flow technique of valuation. Significant inputs to the valuation of oil and gas properties include estimates of: (i) reserves, (ii) future operating and development costs, (iii) future commodity prices, (iv) future plugging and abandonment costs, (v) estimated future cash flows, and (vi) a market—based weighted average cost of capital rate. These inputs require significant judgments and estimates and are the most sensitive and subject to change.

Other 2025 Acquisitions

In July 2025, the Company entered into an agreement to acquire certain assets from Edge Energy II LLC (“Edge Energy”) for a total purchase price of $12.5 million payable in cash, subject to certain closing adjustments (the “Edge Acquisition”). The Company closed the Edge Acquisition on July 3, 2025, which included the acquisition of 13 operated wells on approximately 11,300 net acres, and funded the transaction by borrowing under its Credit Facility. The Company completed the final settlement with Edge in September 2025.

In August 2025, the Company completed its third acquisition from Exok (as defined herein), acquiring approximately 5,000 net acres for $1.6 million (the “Third Exok Acquisition”). Refer to Note 15 – Common Stock Options and Warrants for a discussion of the First Exok Acquisition and Second Exok Acquisition.

In October 2025, the Company entered into agreements to acquire certain assets from Summit Oil & Gas, LLC. (“Summit”) and Crown Exploration II, Ltd (“Crown”) for a total purchase price of $2.3 million payable in cash, subject to certain closing adjustments (the “Summit and Crown Acquisitions”). The Summit and Crown Acquisitions included the acquisition offive operated wells on approximately 3,400 net acres.

NRO Acquisition

On January 11, 2024, the Company and one of its subsidiaries entered into an asset purchase agreement (the “NRO Agreement”) with Nickel Road Development LLC, Nickel Road Operating, LLC, (“NRO”) to acquire certain assets owned by NRO (the “Central Weld Assets”) for total consideration of $94.5 million (the “Purchase Price”), subject to certain closing price adjustments and other customary closing conditions (the “NRO Acquisition”). The Purchase Price consisted of $83.0 million in cash and $11.5 million in deferred cash payments. The Company deposited $9.0 million of the Purchase Price into an escrow account on January 11, 2024 (the “Deposit”).

On August 15, 2024, the Company and NRO agreed to amend certain terms of the NRO Agreement, pursuant to which the total consideration of the NRO Acquisition was reduced to $84.5 million in cash, subject to certain closing price adjustments and other customary closing conditions, and the parties agreed to remove the deferred cash payments. Additionally on August 15, 2024, $6.0 million of the Deposit was released to NRO and the remaining $3.0 million was returned to the Company.

On October 1, 2024, the Company closed the NRO Acquisition and paid $49.6 million to the sellers in cash, using cash on hand, the proceeds from the issuance of Common Stock, and a portion of the proceeds from the issuance of the Senior Convertible Note. Refer to Note 10 – Debtfor a discussion of the Senior Convertible Note and to Note 14 – Stockholders’ Equity for a discussion of the issuance of Common Stock. The Company completed the final settlement with NRO in December 2024, which resulted in a final consideration of $55.5 million.

The NRO Acquisition was accounted for as an asset acquisition in accordance with ASC 805. The estimated fair value of the consideration paid by the Company and the allocation of that amount to the underlying assets acquired, on a relative fair value basis, were recorded on the Company’s books as of October 1, 2024, the closing date of the NRO Acquisition. Additionally, costs directly related to the NRO Acquisition were capitalized as a component of the Purchase Price.

The following table presents the allocation of the purchase price, adjusted for the final settlement, to the net assets acquired on October 1, 2024, the closing date of the NRO Acquisition:

Note 4 –Discontinued Operations

On January 23, 2024, the Company sold all of its cryptocurrency miners (the “Mining Equipment”) for consideration consisting of (i) $1.0 million in cash and (ii) $1.0 million in deferred cash payments (the “Deferred Purchase Price”), to be paid out of (a)20% of the monthly net revenues received by the buyer associated with or otherwise attributable to the Mining Equipment until the aggregate amount of such payments equals $250,000 and (b) thereafter,50% of the monthly net revenues received by the buyer associated with or otherwise attributable to the Mining Equipment until the aggregate amount of such payments equals the Deferred Purchase Price, plus accrued interest (collectively, the “Crypto Sale”). The Company recognized a loss of $1.0 million related to this disposition on its consolidated statement of operations and statement of cash flows for the year ended December 31, 2024.

As of December 31, 2024, the Company presented the Deferred Purchase Price payment as a note receivable on its consolidated balance sheets, of which $0.5 million was classified as current, $0.2 million of which was classified as non–current, based on when the payments are expected. As of June 30, 2025, the note receivable balance was $0.5 million and in July 2025, the Company received $0.4 million to satisfy the remaining Deferred Purchase Price note receivable. Refer to Note 19– Related Party Transactions for a further discussion of the pay–off of the Deferred Purchase Price note receivable.

The following table presents the major classes of line items constituting the loss from discontinued operations on the Company’s consolidated statement of operations and consolidated statement of cash flows for the years indicated:

Note 5–Derivative Instruments

The Company utilizes commodity derivative instruments to reduce its exposure to crude oil, natural gas, and NGL price volatility for a portion of its estimated production from its proved, developed, producing oil and natural gas properties. As of December 31 2025, the Company only had commodity swap contracts outstanding, which guarantee a fixed price on contracted volumes over specified time periods. However, in the future, the Company may utilize other types of derivative instruments including call and purchased options, put spreads, collars, and three–way collars. All of the Company’s commodity derivative counterparties are large financial institutions with investment–grade credit ratings, and as such, the Company believes it does not have any significant credit risk associated with its counterparties and does not currently anticipate any non–performance from its counterparties.

As of December 31, 2025, the Company had the following outstanding crude oil and natural gas derivative contracts in place, which settle monthly and are indexed to NYMEX West Texas Intermediate, NYMEX Henry Hub, and Mount Belvieu OPIS, respectively:

The Company recognizes all of its derivative instruments at fair value as assets or liabilities on the accompanying consolidated balance sheets. The Company has not designated any of its derivative instruments as hedges for accounting purposes; therefore, it presents aggregate net gains or losses resulting from changes in the fair values of its outstanding derivatives as unrealized gains on derivatives and aggregate net gains or losses resulting from the settlement of derivative instruments during the period are recognized as realized gain on derivatives on the accompanying consolidated statements of operations.

The Company typically has numerous hedge positions that span several time periods and often result in both fair value derivative asset and liability positions held with the applicable counterparty. The Company has elected to net its derivative instrument fair values executed with the same counterparty, pursuant to the International Swaps and Derivatives Association, Inc. master agreements, which provide for the net settlement over the term of the contract and in the event of the default or termination of the contract.

The following tables present the gross and net fair values of the Company’s derivative instruments recognized on the consolidated balance sheets for the years indicated:

The following table presents the components of the gain (loss) on derivatives, net reflected on the accompanying consolidated statements of operations and cash flows for the years indicated:

Note 6–Fair Value Measurements

Certain of the Company’s assets and liabilities are carried at fair value and measured on either a recurring or non–recurring basis. Per ASC 820, fair value is defined as an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market–based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The GAAP fair value valuation hierarchy categorizes assets and liabilities measured at fair value into one of three levels depending on the observability of the inputs used in determining fair value. The three levels of the fair value hierarchy are as follows:

The classification of an asset or liability within the fair value hierarchy is based on the lowest level input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement of an asset or liability requires judgment and may affect the valuation of the fair value asset or liability and its placement within the fair value hierarchy. There have been no transfers between fair value hierarchy levels.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, other current assets, accounts payable, and other current liabilities on the consolidated balance sheets approximate fair value because of their short–term nature. Additionally, the carrying value of the Company’s Credit Facility approximates fair value as it is subject to short–term floating interest rates that reflect market rates available to the Company at the time of borrowing.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the Company’s assets and liabilities which were measured at fair value on a recurring basis as of the years indicated and their classification within the fair value hierarchy:

Commodity derivative contracts. The fair values of the Company’s derivative instruments are measured on a recurring basis using a third–party industry–standard pricing model that considers various inputs such as quoted forward commodity prices, discount rates, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant data. These significant inputs are observable in the current market or can be corroborated by observable active market data and are therefore considered Level 2 inputs within the fair value hierarchy. As of December 31, 2025, the fair value of the Company’s commodity derivative contracts is an asset of $53.4 million, $28.8 million of which is considered acurrent asset. As of December 31, 2024, the fair value of the Company’s commodity derivative contracts is a liability of $4.4 million, $2.4 million of which is considered acurrent liability.

The Company has several financial instruments which were evaluated for embedded derivatives and bifurcation in accordance with ASC 815 at the time of issuance. As a result, the Company reflects these financial instrument liabilities at their fair value on its consolidated balance sheet and reflects the changes in the fair values of the liabilities as loss on adjustment to fair value – embedded derivatives, debt, and warrants on its consolidated statements of operations. The following table presents the changes in the Company’s financial instruments presented at fair value for the years indicated:

The following table presents the face value and fair value of each financial instrument presented at fair value on the Company’s consolidated balance sheet as of the years presented:

Standby Equity Purchase Agreement. On September 30, 2024, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with Yorkville, whereby, subject to certain conditions, the Company has the right, but not the obligation, to sell to Yorkville shares up to $40.0 million shares of Common Stock, at any time and in the amount as specified in the Company’s request (“Advance Notice”), during the commitment period commencing on September 30, 2024 (the “SEPA Effective Date”) and terminating on September 30, 2026. 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. The Company engaged a third–party valuation expert to assist in preparing the fair value of the SEPA as of December 31, 2024. These estimates were derived using a Monte Carlo simulation model and significant inputs which were based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

Pursuant to the Prairie Operating Co. Certificate of Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock (the “Series F 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 December 31, 2025 is $0 million, resulting in a gain of $0.8 million, which is presented as part of loss on adjustment to fair value – embedded derivatives, debt, and warrants on the Company’s consolidated statement of operations for the year ended December 31, 2025. Refer to Note 10 – Debt for a further discussion of the SEPA and Note 13 – Mezzanine Equityfor a discussion of the Series F Preferred Stock.

Senior Convertible Note. On September 30, 2024, 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 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.

The Company engaged a third–party valuation expert to assist in preparing the fair value of the Senior Convertible Note as of December 31, 2024. These estimates were derived using a Monte Carlo simulation model and significant inputs which were based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

The Senior Convertible Note was fully converted throughout the first quarter of 2025. As a result, the Company recognized a loss on adjustment to fair value – embedded derivatives, debt, and warrants of $5.5 million on its consolidated statement of operations for the year ended December 31, 2025. Refer to Note 10 – Debtfor a further discussion of the Senior Convertible Note.

Subordinated Promissory Note. On September 30, 2024, the Company entered into a subordinated promissory note (the “Subordinated Note”) with First Idea Ventures LLC and The Hideaway Entertainment LLC (together, the “Noteholders”), in a principal amount of $5.0 million, which has a maturity of March 17, 2027. The Noteholders were entitled to a minimum return on capital of up to 2.0 x upon the repayment, prepayment or acceleration of the obligations, or the occurrence of certain other triggering events under the Subordinated Note. The Company had determined that certain features of the Subordinated Note required bifurcation and separate accounting as embedded derivatives. As such, the Company had elected the fair value option to account for the Subordinated Note; therefore, in accordance with ASC 815, the Company recorded the Subordinated Note at fair value and remeasured the fair value each reporting period with changes in fair value recognized in earnings.

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 balance on the Subordinated Note 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 while any of the Company’s Series F Preferred Stock remain outstanding. Therefore, the Company determined that changes to the Subordinated Note included in the payoff letter qualify as an extinguishment of debt and therefore 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 December 31, 2025. Refer to Note 10 – Debt for a further discussion of the Subordinated Note.

The Company engaged a third–party valuation expert to assist in preparing the fair value of the Subordinated Note as of December 31, 2024. These estimates were derived using a credit default valuation model using significant inputs which were considered unobservable inputs because they were corroborated by market data and are therefore considered Level 2 inputs within the fair value hierarchy. As discussed above, the Company did not fair value the Subordinated Notes as of December 31, 2025.

Subordinated Note Warrants. As discussed in Note 10 – Debt below, pursuant to the terms of the Subordinated Note, the Company issued to the Noteholders warrants (the “Subordinated Note Warrants”) to purchase up to 1,141,552 shares of Common Stock, vesting in tranches based on the date of repayment of the Subordinated Note. The Company has determined that the Subordinated Note Warrants should be accounted for as a liability pursuant to ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). In accordance with ASC 815, the Company recorded the Subordinated Note Warrants at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings.

The Company engaged a third–party valuation expert to assist in preparing the fair value of the Subordinated Note Warrants as of December 31, 2025 and 2024. These estimates were derived using a Monte Carlo simulation model using the significant inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

As of December 31, 2025, the fair value of the Subordinated Note Warrants was $0.3 million compared to $4.2 million as of December 31, 2024. The Company recognized the changes in fair value of $3.9 million as components of the loss on adjustment to fair value – embedded derivatives, debt, and warrants on its consolidated statements of operations for the year ended December 31, 2025, respectively. Refer to Note 15 – Common Stock Options and Warrantsfor a further discussion of the Subordinated Note Warrants.

Series F Preferred Stock. On March 24, 2025, the Company entered into a securities purchase agreement with an investor (the “Series F Preferred Stockholder”), pursuant to which the Series F Preferred Stockholder agreed to purchase for an aggregate of $148.3 million (i)148,250 shares of Series F Preferred Stock, with a stated value of $1,000 per share (the “Stated Value”), convertible into shares of Common Stock and (ii) warrants to purchase shares of Common Stock, subject to the satisfaction of certain conditions (the “Series F Preferred Stock Warrants”) (collectively, the “Series F Preferred Offering”). On March 26, 2025, the Series F Preferred Offering closed, and the Company issued the Series F Preferred Stock to the Series F Preferred Stockholder. The Company has determined that the Series F Preferred Stock should be classified as mezzanine equity because it is currently redeemable at the Series F Preferred Stockholder’s option. Additionally, the Company determined that certain features of the Series F Preferred Stock require bifurcation and separate accounting as embedded derivatives. Therefore, in accordance with ASC 815, the Company has recorded the embedded derivatives associated with the Series F Preferred Stock at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings.

The Company engaged a third–party valuation expert to assist in preparing the fair value of the Series F Preferred Stock embedded derivatives as of December 31, 2025. These estimates were derived using a Monte Carlo simulation model using the significant inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

As of December 31, 2025, the fair value of the Series F Preferred Stock embedded derivatives was $15.9 million compared to $25.5 million at the time of issuance which is presented on the Company’s consolidated balance sheet as a liability with a corresponding amount recognized as Series F Preferred Stock in mezzanine equity. The Company recognized the change in fair value as a component of the loss on adjustment to fair value – embedded derivatives, debt, and warrants on its consolidated statements of operations for the year ended December 31, 2025. Refer to Note 13 – Mezzanine Equityfor a further discussion of the Series F Preferred Stock.

Series F Preferred Stock Warrants. As discussed above, subject to the satisfaction of certain conditions, the Series F Preferred Stockholder will receive warrants to purchase shares of Common Stock. On March 25, 2026, the Company and the Series F Preferred Stockholder entered into an Amendment to the Securities Purchase Agreement and Form of Anniversary Warrant (the “Series F Preferred Stock Warrant Amendment”), which, among other things, changes the issuance of the Series F Preferred Stock Warrants from the first anniversary of the issuance date of the Series F Preferred Stock to April 7, 2026. The Company has determined that the Series F Preferred Stock Warrants are not considered indexed to the Company’s own stock because the potential number of common shares to be issued upon the exercise of such warrants will vary based on the amount of Series F Preferred Stock outstanding on April 7, 2026. As such, the Company has determined that the Series F Preferred Stock Warrants should be accounted for as liabilities pursuant to ASC 480. In accordance with ASC 815, the Company recorded the Series F Preferred Stock Warrants at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings.

The Company engaged a third–party valuation expert to assist in preparing the fair value of the Series F Preferred Stock Warrants as of December 31, 2025. These estimates were derived using a Monte Carlo simulation model using the significant inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

As of December 31, 2025, the fair value of the Series F Preferred Stock Warrants was $90.1 million compared to $22.1 million at the time of issuance which is presented on the Company’s consolidated balance sheet as a liability with a corresponding amount recognized as Series F Preferred Stock in mezzanine equity. The Company recognized the change in fair value of $68.0 million as a component of loss on adjustment to fair value – embedded derivatives, debt, and warrants on its consolidated statements of operations for year ended December 31, 2025. Refer to Note 15 – Common Stock Options and Warrantsfor a further discussion of the Series F Preferred Stock Warrants.

Assets and Liabilities Measured at Fair Value on a Non–Recurring Basis

Acquisition–related assets and liabilities. The fair values of assets acquired and liabilities assumed in an acquisition are measured on a non–recurring basis on the acquisition date. If the assets acquired and liabilities assumed are current and short–term in nature, the Company uses their approximate carrying values as their fair values, which is considered a Level 1 input in the fair value hierarchy. If the assets acquired are not short–term in nature, then the fair value is determined using the estimated replacement values of the same or similar assets and, as such, are considered Level 3 inputs in the fair value hierarchy. Refer to Note 2 – Acquisitionsfor a further discussion of the Company’s acquisitions.

Note 7–Property and Equipment, net

The Company’s property and equipment, net consisted of the following for the years indicated:

Note 8 –Asset Retirement Obligation

The following table presents the changes in the Company’s asset retirement obligations for the years indicated:

As of December 31, 2025, the asset retirement obligations liabilities assumed in acquisitions primarily relate to the Bayswater Acquisition and the Edge Acquisition, which were completed in the first and third quarters of 2025, respectively. Referto Note 3 – Acquisitions for a discussion of the Bayswater Acquisition and Edge Acquisition. As of December 31, 2025, the asset retirement obligations liabilities incurred through development activities fully relate to the wells which came online during 2025. The Company did not have any producing assets until the NRO Acquisition was closed on October 1, 2024; therefore, there were no asset retirement obligations prior to that date. Refer to Note 3 – Acquisitions for a further discussion of the NRO Acquisition.

Note 9–Accounts Payable and Accrued Expenses

The Company’s accounts payable and accrued expenses consist of the following for the years indicated:

Note 10 –Debt

The Company’s debt balances consisted of the following for the years indicated:

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. On February 3, 2025, the Company entered into the first amendment to the reserve–based credit agreement with Citi, 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 Credit Facility with Citi, as administrative agent, and the financial institutions party thereto, which amended and restated the Company’s existing reserve–based credit agreement with Citi. On June 6, 2025, the Company entered into the first amendment to the Credit Facility, which added Bank of America N.A. and West Texas National Bank as lenders under the Credit Facility. The Credit Facility is scheduled to mature on March 26, 2029, and the Credit Facility provides for a maximum credit commitment of $1.0 billion under the Credit Facility. As of December 31, 2025, the Credit Facility provided for a borrowing base of $475.0 million and an aggregate elected commitment of $475.0 million. The Credit Facility 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 immediately preceding January 1st and July 1 st of each year, subject to certain interim redeterminations. The borrowing base of $475.0 million was reaffirmed with the mid–year 2025 redetermination.

As of December 31, 2025 and 2024, the Company had $366.0 million and $28.0 million, respectively, of revolving borrowings andno letters of credit outstanding under the Credit Facility, resulting in $109.0 million and $7.2 million, respectively, of availability for future borrowings and letters of credit. Borrowing under the Credit Facility bears interest, at the Company’s election, based upon the Term SOFR or Alternate Base Rate (each as defined in the Credit Facility 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 years ended December 31, 2025 and 2024, the Company recognized $25.3 million and $0.1 million, respectively, in interest expense related to borrowings on its 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 Credit Facility Agreement) of no greater than 3.00 to 1.00 and a Current Ratio (as defined in the Credit Facility Agreement) of at least 1.00 to 1.00. The Credit Facility 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 Credit Facility 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 as of December 31, 2025 through March 31, 2028. As of December 31, 2025, the Company is in compliance with all covenants under the Credit Facility.

Additionally, the Credit Facility 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 the Company’s and its subsidiaries’ 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.

Guarantees. Prairie Operating Co. is a holding company which owns no operating assets and has no significant operations independent of its subsidiaries. The Credit Facility is guaranteed by all of Prairie Operating Co.’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. The assets, liabilities, and results of operations of Prairie Operating Co. and its guarantor subsidiaries are not materially different than the Company’s consolidated financial statements.

As of December 31, 2025 and 2024, the Company has $12.6 million and $1.7 million, respectively, of unamortized deferred financing costs associated with its Credit Facility, which are presented as debt issuance costs, net on the consolidated balance sheets. 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. During the years ended December 31, 2025 and 2024, the Company amortized $3.2 million and less than $0.1 million, respectively, of deferred financing costs into interest expense on the accompanying statements of operations.

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, 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 (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 the 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”).

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.

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 has 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. Additionally, the Commitment Fee and any issuance costs associated with the SEPA have been expensed to general and administrative expenses. As such, the Company has recorded the SEPA at its fair value of $0.8 million as of December 31, 2024 and recorded the corresponding $0.8 million loss on adjustment to fair value – 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 was determined by a third–party using a Monte Carlo simulation model, refer to Note 6 – Fair Value Measurementsfor a further discussion of the fair value of the SEPA.

Pursuant to the Series F 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 December 31, 2025 is $0 million, resulting in a gain of $0.8 million which is presented as part of loss on adjustment to fair value – embedded derivatives, debt, and warrants on the Company’s consolidated statement of operations for the year ended December 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 were 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, 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 Measurementsfor a further discussion of the fair value of the Senior Convertible Note.

During the first quarter of 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 December 31, 2025. As a result, the Company recognized a loss on adjustment to fair value – embedded derivatives, debt, and warrants of $5.5 million on the Company’s consolidated statement of operations for the year ended December 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, which has a maturity of March 17, 2027. Refer to Note 19 – Related Party Transactions for a further discussion of the Subordinated Note and the Noteholders. The Noteholders were 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 terms of the Company’s Credit Facility. In December 2024 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 December 31, 2025 and 2024, Subordinated Note Warrants providing the right to purchase 856,165 shares and 570,778 shares, respectively, 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 Measurementsfor a further discussion of the fair value of the Subordinated Note and the Subordinated Note Warrants. At the time of issuance, the total fair value of the Subordinated Note and the Subordinated Note Warrants exceeded the proceeds of $5.0 million; as a result, the Company has recognized a loss on debt issuance of $3.0 million on its consolidated statement of operations for the year ended December 31, 2024.

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 while any of the Company’s Series F Preferred Stock 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 December 31, 2025.

Note 11–Leases

The Company determines if a contract contains a lease at its inception or as a result of an acquisition and makes certain assumptions and judgments when determining its right–of–use assets and lease liabilities. As of December 31, 2025 and 2024, all of the Company’s leases are operating leases. The Company capitalizes its operating right–of–use assets and corresponding lease liabilities separately on its consolidated balance sheets, using the present value of the remaining lease payments over the determined lease term applying the implicit rate of the lease.

The following table presents the components of the Company’s operating leases on its consolidated balance sheets for the years indicated:

The Company’s operating leases expire at various times through 2030. The Company’s weighted–average remaining lease terms and discount rates are as follows for the years indicated:

The Company recognizes lease expense for its operating leases on a straight–line basis. The following table presents the components of the Company’s lease costs during the years presented:

As of December 31, 2025, the Company’s future lease commitments by year consisted of the following:

The Company’s supplemental cash flow disclosures related to operating leases are presented below for the years indicated:

Note 12 –Commitments and Contingencies

Following the closing of the Bayswater Acquisition in March 2025, the Company is party to agreements containing minimum volume commitments, which require the Company to deliver fixed determinable quantities of crude oil, natural gas, and NGL production volumes.

Oil Transportation Agreement

The Company is party to a Crude Oil Purchase and Sale Agreement (the “Oil Transportation Agreement”) with an oil pipeline company, under which all of the oil produced from some of the leases purchased in the Bayswater Acquisition will be gathered and transported by the oil pipeline company. Additionally, the Oil Transportation Agreement, as amended in 2023, requires a minimum volume of 15.85 million barrels of oil from the covered leases to be delivered from September 1, 2022 through December 31, 2026. As of December 31, 2025,1.5 million barrels of oil remained to be delivered and under–delivered volumes will incur a fee ranging from $1.64 per Bbl to $1.81 per Bbl. During the year ended December 31, 2025, the Company incurred under–delivered volume fees totalling $2.0 million, which is included in transportation and processing expenses on the consolidated statements of operations. The Company didnot incur any fees during the year ended December 31, 2024, as this was prior to the Bayswater Acquisition. As of December 31, 2025, the Company estimates its maximum future commitment under the Oil Transportation Agreement to be $1.4 million for January 1, 2026 through December 31, 2026. The Company will recognize these costs in the period in which the amounts are deemed probable and estimable.

Gas Gathering Agreement

One of the Company’s gas gathering and processing agreements acquired in the Bayswater Acquisition requires a monthly minimum payment, which began in October 2019 and continues through September 2029. This monthly minimum payment is intended to reimburse the costs incurred by the counterparty to connect the gathering facility to the covered area. During the year ended December 31, 2025, the Company recognized guaranteed payments of $0.6 million, which is included in lease operating expenses on the consolidated statements of operations. The Company didnot incur any fees during the year ended December 31, 2024, as this was prior to the Bayswater Acquisition.

The Company’s estimated maximum future commitment under the Gas Gathering Agreement as of December 31, 2025 is presented below:

Legal and Litigation

The Company is subject to various litigation, claims and proceedings, which arise in the ordinary course of business. The Company recognizes a liability for such loss contingencies when it believes it is probable that a liability has been incurred, and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount the Company accrues the minimum amount in the range. The outcomes of any such currently pending matters are not expected to have a material adverse effect on the Company’s financial position or results of operations. During the year ended December 31, 2025, the Company incurred $1.5 million of non–recurring litigation expenses, which are reflected as general and administrative expenses on its consolidated statement of operations.

Note 13–Mezzanine Equity

The following table presents the changes in the Company’s mezzanine equity year ended December 31, 2025:

Series F Preferred Stock

On March 24, 2025, the Company entered into a securities purchase agreement with the Series F Preferred Stockholder, pursuant to which the Series F Preferred Stockholder agreed to purchase for an aggregate of $148.3 million (i)148,250 shares of Series F Preferred Stock, with a Stated Value of $1,000 per share, convertible into shares of Common Stock and (ii) upon the one–year anniversary of the issue date of the Series F Preferred Stock, subject to the satisfaction of certain conditions, the Series F Preferred Stock Warrants. On March 25, 2026, the Company and the Series F Preferred Stockholder entered into the Series F Preferred Stock Warrant Amendment, which, among other things, changes the issuance date of the Series F Preferred Stock Warrants from the first anniversary of the issuance date of the Series F Preferred Stock to April 7, 2026. The Series F Preferred Offering closed on March 26, 2025, and the Company received approximately $136.1 million of net proceeds, after deducting advisor fees and offering expenses. The Company used the proceeds from the Series F Preferred Offering to fund a portion of the Bayswater Acquisition, which also closed on March 26, 2025.

The Series F Preferred Stockholder is entitled to receive, on a cumulative basis, whether or not authorized or declared, dividends on each share of Series F Preferred Stock at a rate per annum equal to 12%, on the amount equal to the sum of (a) the Stated Value plus (b) all accrued and unpaid dividends on such share of Series F Preferred Stock (including dividends accrued and unpaid on previously unpaid dividends). Dividends are payable to the Series F Preferred Stockholder in cash on March 1, June 1, September 1, and December 1 of each calendar year, which began on June 1, 2025. Alternatively, pursuant to the Series F Certificate of Designation, the Company may elect to pay the dividends entirely or partially in shares of Common Stock. Additionally, the Series F Certificate of Designation provides that six months after the anniversary date of the maturity of the Company’s Credit Facility the dividend rate will increase to 25%. The Company elected to pay the June 1, 2025, September 1, 2025, and December 1, 2025 dividends by issuing the Series F Preferred Stockholder 1,305,000 shares,1,806,000 shares, and 2,421,000 shares, respectively, of Common Stock.

The Series F Preferred Stockholder may convert all or a portion of its shares of Series F Preferred Stock into shares of Common Stock at any time and from time to time. The initial conversion rate for the Series F Preferred Stock is 202.0202 shares of Common Stock per share of Series F Preferred Stock (the “Standard Conversion”), which is subject to certain adjustments as described in the Series F Certificate of Designation. The Series F Preferred Stockholder may also convert all or a portion of its shares of Series F Preferred Stock using an Alternative Conversion Rate (as defined in the Series F Certificate of Designation) in lieu of the Standard Conversion, subject to an Alternative Conversion Cap (as defined in the Series F Certificate of Designation) for each quarter. During the year ended December 31, 2025,27,200 shares of Series F Preferred Stock were converted into 13,024,200 shares of Common Stock using the Alternative Conversion.

Subject to the terms, conditions and certain exceptions set forth in the Series F Certificate of Designation, the Company will have the right to redeem all of the then–outstanding shares of Series F Preferred Stock for a cash redemption price per share of Series F Preferred Stock equal to the Company Redemption Price (as defined in the Series F Certificate of Designation). If a Fundamental Change (as defined in the Series F Certificate of Designation) occurs, the Series F Preferred Stockholder may require the Company to redeem all or any portion of the shares of the Series F Preferred Stock for a cash purchase price equal to the Fundamental Change Redemption Price (as defined in the Series F Certificate of Designation).

With respect to the Standard Conversion or a redemption of the Series F Preferred Stock, the Series F Preferred Stockholder will be entitled to receive an additional payment (the “Additional Payment”) in an amount equal to $19.9 million multiplied by the Stated Value of each share of converted or redeemed Series F Preferred Stock dividend the aggregate Stated Value of all shares of Series F Preferred Stock issued in the Series F Preferred Offering. The Company expects any Additional Payments to be paid in shares of Common Stock.

Additionally, the Series F Certificate of Designation provides that upon the completion of certain equity issuances resulting in proceeds to the Company, or certain dividends or distributions declared or made, prepayments of indebtedness made, or investments acquired, owned or made pursuant to the Credit Facility, the Company would pay the Series F Preferred Stockholder all or a portion of a cash sweep amount equal to 25% of the net proceeds from such financing or of the amount of such dividend, distribution, prepayment or investment, as applicable, in redemption of a number of shares of Series F Preferred Stock at a price per share equal to the result of (A) (i) an amount equal to 106.25% plus 6.25% on each one year anniversary of the issuance of the Series F Preferred Stock (the “Repayment Multiplier”) multiplied by (ii) the Stated Value of such shares of Series F Preferred Stock, plus (B) accrued and unpaid dividends on such shares.

The Company has determined that the Series F Preferred Stock should be classified as mezzanine equity because it is currently redeemable at the Series F Preferred Stockholder’s option. Additionally, the Company determined that certain features of the Series F Preferred Stock require bifurcation and separate accounting as embedded derivatives. On the date of issuance, in accordance with ASC 815, the Company recorded a liability of $25.5 million for the fair value of the Series F Preferred Stock embedded derivatives and a liability of $22.1 million for the fair value of the Series F Preferred Stock Warrants. Refer to Note 6 – Fair Value Measurementsfor a further discussion of the fair value of the Series F Preferred Stock embedded derivatives and Series F Preferred Stock Warrants. As a result, on March 26, 2025, the Company recognized the Series F Preferred Stock as mezzanine equity based on its relative fair value of $92.6 million, after allocating $47.6 million of the proceeds to the embedded derivative features and the Series F Preferred Stock Warrants. Additionally, the Company recorded the issuance costs of $12.2 million as a reduction to the allocated proceeds.

As of December 31, 2025, in accordance with ASC 480, the Company adjusted the value of the Series F Preferred Stock to reflect its maximum redemption amount of $136.1 million resulting in a remeasurement of Series F Preferred Stock of $80.5 million, which is presented in the remeasurement of Series F Preferred Stock line item on the consolidated statement of operations for the year ended December 31, 2025. Additionally, at each conversion, the Company reduces the balance of the Series F Preferred Stock by the carrying value of the converted shares, which, as of December 31, 2025, has resulted in a decrease of $34.0 million since the issuance date.

Note 14–Stockholders’ Equity

Series D Preferred Stock

The Company has authorized 50,000 shares of Series D preferred stock with a par value of $0.01 and a stated value of $1,000 per share, which are convertible into shares of Common Stock at a price of $5.00 per share (“Series D Preferred Stock”). No dividends are to be paid other than in those in the same form as dividends actually paid on Common Stock other than any adjustments related to stock dividends or stock splits.

Each share of Series D Preferred Stock is convertible at any time at the option of the holder into the number of shares of Common Stock determined by dividing the stated value of such share of $1,000 by $5.00, subject to adjustment by certain events as defined in the Certificate of Designation of Preferences, Rights and Limitations of Series D Preferred Stock (the “Series D Certificate”). If the average price of the Company’s Common Stock, as defined and calculated, for any 22 trading days during a 30 consecutive trading day period exceeds $8.50, subject to adjustment, the Company can require conversion of the Series D Preferred Stock into Common Stock subject to certain conditions including stock trading volumes and existence of an effective registration statement for such converted shares.

The Company received an aggregate of $17.4 million in proceeds from a number of investors (the “Series D PIPE Investors”) who were issued 17,376 shares of Series D Preferred Stock along with Series A warrants (“Series D A Warrants”) to purchase 3,475,250 shares of the Company’s Common Stock and Series B warrants (“Series D B Warrants” and together with the Series D A Warrants, the “Series D PIPE Warrants”) to purchase 3,475,250 shares of Common Stock (collectively, the “Series D PIPE”). Refer to Note 15 – Common Stock Options and Warrants for a further description of the Series D PIPE Warrants.

In January 2025, Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust (the “O’Neill Trust”) converted 8,000 shares of Series D Preferred Stock into 1,600,000 shares of Common Stock. As a result, the O’Neill Trust no longer holds any Series D Preferred Stock. During the years ended December 31, 2025 and 2024, there were conversions of 8,475 and 6,170 shares of Series D Preferred Stock, respectively, into 1,695,000 and 1,234,090 shares of Common Stock, respectively. As of December 31, 2025 and 2024, there were 5,982 and 14,457 shares, respectively, of Series D Preferred Stock outstanding.

Series E Preferred Stock

The Company has authorized 50,000 shares of Series E preferred stock with a par value of $0.01 and a stated value of $1,000 per share, which are convertible into shares of Common Stock at a price of $5.00 per share (“Series E Preferred Stock”). No dividends are to be paid other than in those in the same form as dividends actually paid on Common Stock other than any adjustments related to stock dividends or stock splits.

Each share of Series E Preferred Stock is convertible at any time at the option of the holder into the number of shares of Common Stock determined by dividing the stated value of such share of $1,000 by $5.00, subject to adjustment by certain events as defined in the Certificate of Designation of Preferences, Rights and Limitations of Series E Preferred Stock (the “Series E Certificate”). If the average price of the Company’s Common Stock, as defined and calculated, for any 22 trading days during a 30 consecutive trading day period exceeds $8.50, subject to adjustment, the Company can require conversion of the Series E Preferred Stock into Common Stock subject to certain conditions including stock trading volumes and existence of an effective registration statement for the resale of such converted shares.

The Company received an aggregate of $20.0 million in proceeds from Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust (the “O’Neill Trust” or the “Series E PIPE Investor”). The Series E PIPE Investor was issued 20,000 shares of Series E Preferred Stock along with 39,615 shares of the Company’s Common Stock, and Series A warrants (“Series E A Warrants”) to purchase 4,000,000 shares of the Company’s Common Stock and Series B warrants (“Series E B Warrants” and together with the Series E A Warrants, the “Series E PIPE Warrants”) to purchase 4,000,000 shares of Common Stock (collectively, the “Series E PIPE”). Refer to Note 15 – Common Stock Options and Warrantsfor a further description of the Series E PIPE Warrants.

The Company’s obligations under the Series E Preferred Stock and the Series E PIPE Warrants were secured by a lien on the assets acquired in the Exok Option Purchase as described under the Deed of Trust, Mortgage, Assignment of As–Extracted Collateral, Security Agreement, Fixture Filing and Financing Statement, dated August 15, 2023 (“Deed of Trust”). On August 15, 2024, the lien on the assets acquired in the Exok Option Purchase under the Deed of Trust was released in accordance with the terms and procedures set forth therein pursuant to the Consent and Agreement (as defined herein). Refer to Note 19 – Related Party Transactions for a further discussion of the Consent and Agreement with the O’Neill Trust.

During the year ended December 31, 2024, in connection with the Consent and Agreement, all of the Series E Preferred Stock shares outstanding were converted into 4,000,000 shares of Common Stock. As of December 31, 2025 and 2024, no shares of Series E Preferred Stock were outstanding.

Common Stock

The Company has 500,000,000 authorized shares of Common Stock with a par value of $0.01 per share. The holders of the Company’s Common Stock are entitled toone vote per share and the Company’s Second Amended and Restated Certificate of Incorporation does not provide for cumulative voting. The Company’s common stockholders are entitled to receive ratably such dividends, if any, as may be declared by the Company’s Board of Directors out of legally available funds. However, the current policy of the Board of Directors is to retain earnings, if any, for the Company’s operations and expansion. Upon liquidation, dissolution or winding–up, the holders of the Company’s Common Stock are entitled to share ratably in all of its assets which are legally available for distribution, after payment of or provision for all liabilities. The Company’s common stockholders have no pre–emptive, subscription, redemption, or conversion rights. The rights, preferences and privileges of the Company’s common stockholders are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that the Company may designate and issue.

On September 30, 2024, the Company entered into a securities purchase agreement to sell 1,827,040 shares of Common Stock (the “Acquired Shares”) to an investor for $8.21 per share. Concurrent with the issuance of the Acquired Shares, the Company entered into the SPA Registration Rights Agreement with the investor pursuant to which the Company agreed to file a registration statement registering the resale of the Acquired Shares. The registration statement was declared effective by the SEC on December 20, 2024.

On March 24, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Citigroup Global Markets Inc., as representative of the several underwriters named therein (collectively, the “Underwriters”), providing for the offer and sale (the “Common Stock Offering”) by the Company, and the purchase by the Underwriters, of 8,555,555 shares of Common Stock, at a price to the public of $4.50 per share ($4.2525 per share net of underwriting discounts and commissions). Pursuant to the Underwriting Agreement, the Company also granted the Underwriters a 30–day option to purchase up to an additional 1,283,333 shares of Common Stock on the same terms as above (the “Over–Allotment Option”). The Common Stock Offering was registered under the Securities Act of 1933, as amended, pursuant to a registration statement on Form S–3. On March 25, 2026, the Underwriters exercised the Over–Allotment Option with respect to 1,181,349 shares of Common Stock. On March 26, 2025, the Company issued 9,736,904 shares of Common Stock in connection with the Common Stock Offering, for proceeds of $41.4 million, net of $2.4 million of underwriting discounts and commissions and $3.7 million in issuance fees. The Company used these proceeds to partially fund the Bayswater Acquisition, which also closed on March 26, 2025. Refer to Note 3 – Acquisitions for a further discussion of the Bayswater Acquisition.

At–the–Market Offering

On June 20, 2025, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Citigroup Global Markets Inc. and Truist Securities, Inc., as managers (together, the “Managers”). Pursuant to the agreement, the Company has the option to sell shares of its Common Stock up to an aggregate offering price of $75.0 million through the Managers (the “ATM Offering”). Sales of the shares of Common Stock sold under the ATM Offering, if any, will be made under the Company’s Registration Statement on Form S–3, which was declared effective by the SEC on May 2, 2025, and the prospectus supplement dated June 20, 2025 relating to the ATM Offering filed with the SEC, in each case, as may be amended or supplemented from time to time.

The Company currently anticipates any net proceeds from the ATM Offering will be used for general corporate purposes, which may include, among other things, advancing its development and drilling program, repayment of existing indebtedness or financing potential acquisition opportunities. Additionally, as discussed in Note 13 – Mezzanine Equity, per the Series F Certificate of Designation, the Series F Preferred Stockholder could require the Company to use a portion of the net proceeds from sales of the ATM Offering to redeem a number of shares of its Series F Preferred Stock. As of December 31, 2025, the Company hasnot issued any shares under the ATM Offering.

Treasury Stock

During the year ended December 31, 2025, the Company paid $0.5 million to repurchase 111,357 shares of vested restricted stock units from employees to cover such employees’ portion of the tax withholdings. The Company has presented the shares repurchased at cost as treasury stock on its consolidated balance sheet as of December 31, 2025.

Note 15–Common Stock Options and Warrants

Merger Options

On May 3, 2023, the Company completed its merger with Prairie LLC, pursuant to the terms of the Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2023 (the “Merger Agreement”), by and among the Company, Creek Road Merger Sub, LLC (“Merger Sub”), and Prairie LLC, pursuant to which, among other things, 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”). Upon consummation of the Merger, the Company changed its name from “Creek Road Miners, Inc.” to “Prairie Operating Co.”

On August 31, 2022, Prairie LLC entered into agreements with its members whereby each member was provided non–compensatory options to purchase a 40% membership interest in the Company for an aggregate exercise price of $1,000,000 per member. The non–compensatory options were sold to the members for $80,000 per option holder. The non–compensatory options only become exercisable in 25% increments upon the achievement of the following production milestones in barrels of oil equivalent per day (“Boe/d”):2,500 Boe/d,5,000 Boe/d,7,500 Boe/d, and 10,000 Boe/d.

On May 3, 2023, prior to the closing of the Merger, Prairie LLC entered into a non–compensatory option purchase agreement with its members, Bristol Capital, LLC (“Bristol Capital”), which manages Bristol Investment described above, and BOKA Energy LP (“BOKA”), a third–party investor, pursuant to which Bristol Capital and BOKA purchased non–compensatory options for $24,000 and $8,000, respectively, from Prairie LLC’s members.

Upon the Merger, the Company converted the non–compensatory options to purchase the outstanding and unexercised membership interests of Prairie LLC, as of immediately prior to the Merger, into options to acquire an aggregate of 8,000,000 shares of Common Stock for an exercise price of $0.25 per share (the “Merger Options”), which are only exercisable if the production hurdles noted above are achieved. The Company achieved all of these production milestones upon the closing of the Bayswater Acquisition on March 26, 2025; as such, all of the Merger Options are now exercisable.

Subsequent to the Merger, the Company entered into amended and restated non–compensatory option agreements (the “Option Agreements”) with each of Gary C. Hanna, former President and Director as of March 3, 2026, Edward Kovalik, former Chairman of the Board and Chief Executive Officer as of March 3, 2026, Bristol Capital, and BOKA. An aggregate of 2,000,000 Merger Options are subject to be transferred to the Series D PIPE Investors, based on their then–percentage ownership of the Series D Preferred Stock to the aggregate Series D Preferred Stock outstanding and held by all Series D PIPE Investors as of the May 3, 2023, if the Company does not meet certain performance metrics by May 3, 2026.

On August 30, 2023, the Company, Gary C. Hanna, former President and Director as of March 3, 2026, Edward Kovalik, former Chairman of the Board and Chief Executive Officer as of March 3, 2026, Bristol Capital, and Georgina Asset Management entered into a non–compensatory option purchase agreement, pursuant to which Georgina Asset Management agreed to purchase, and each of the sellers agreed to sell to Georgina Asset Management, the Merger Options to acquire an aggregate of 200,000 shares of Common Stock, for an exercise price of $0.25 per share for an aggregate purchase price of $2,000. In December 2023, Mr. Hanna assigned all of his remaining options to Gracemont Enterprises LP, an entity controlled by Mr. Hanna. In January 2024, Georgina Asset Management transferred its options to Westwood Financial Holdings LLC (“Westwood”) pursuant to an assignment. In September 2024, Mr. Kovalik assigned all of his remaining options to Blue Trail Partners, LLC, an entity controlled by Mr. Kovalik.

On September 30, 2024, the Company, BOKA, Rose Hill Holdings Limited (“Rose Hill”), Anchorman Holdings Inc. (“Anchorman”), and Blackstem Forest, LLC (“Blackstem” and, together with Rose Hill and Anchorman, the “Option Purchasers”) entered into a non–compensatory option purchase agreement, pursuant to which each of the Option Purchasers agreed to purchase, and BOKA agreed to sell to the Option Purchasers, Merger Options to acquire an aggregate of 800,000 shares of Common Stock, for an exercise price of $0.25 per share. The Company didnot receive any proceeds from the transfer of the Merger Options and the terms of the Option Agreements were not amended, modified, or changed in any way in connection with the transfers.

On March 31, 2025, Bristol Capital paid $0.6 million to exercise its option to purchase 2,333,334 shares of Common Stock, which were issued by the Company on the same day. Additionally, during the second quarter of 2025, Westwood paid $0.1 million to exercise its option to purchase 200,000 shares of Common Stock and Rose Hill exercised its cashless option and received 283,870 shares of Common Stock. In September 2025, Anchorman exercised its cashless option and received 176,636 shares of Common Stock. As of December 31, 2025,4,966,666 shares of Common Stock remain issuable upon the exercise of the Merger Options. As of December 31, 2025, the Merger Options have a weighted average remaining contractual life of 0.3 years.

Legacy Warrants

Upon the Merger, the Company assumed warrants to purchase 53,938 shares of the Company’s Common Stock with a weighted average exercise price of $47.61 per share (the “Legacy Warrants”). As of December 31, 2025 and 2024,37,138 Legacy Warrants providing the right to purchase shares of Common Stock were outstanding. As of December 31, 2025, the Legacy Warrants have a weighted average remaining contractual life of 0.6 years.

Series D PIPE Warrants

The Series D PIPE Warrants, upon issuance, provided the warrant holders with the right to purchase an aggregate of 6,950,500 shares of Common Stock at an exercise price of $6.00 per share. The Series D A Warrants expire on May 3, 2028 and the Series D B Warrants expired on May 3, 2024. All such warrants must be exercised for cash.

On April 8, 2024, the Company entered into an Amendment and Waiver of Exercise Limitations Letter Agreement (the “Letter Agreement”) with Bristol Investment to amend certain terms of the Series D A Warrants and Series D B Warrants held by Bristol Investment. Each of the Series D PIPE Warrants held by Bristol Investment is subject to a limitation on exercise if as a result of such exercise or conversion, the holder would own more than 4.99% of the outstanding shares of the Company’s Common Stock (the “Beneficial Ownership Limitation”), which may be increased by the holder upon written notice to the Company, to any specified percentage not in excess of 9.99% (the “Beneficial Ownership Limitation Ceiling”). The Letter Agreement increases the Beneficial Ownership Limitation Ceiling from 9.99% to 19.99%. Pursuant to the Letter Agreement, Bristol Investment further notified the Company of its intent to immediately increase the Beneficial Ownership Limitation Ceiling to 19.99% and the parties agreed to waive the waiting period with respect to such notice.

No Series D A Warrants were exercised during the year ended December 31, 2025. During the year ended December 31, 2024, Series D A Warrants to purchase 189,489 shares of Common Stock were exercised for total proceeds to the Company of $1.1 million. As of December 31, 2025 and 2024, Series D A Warrants providing the right to purchase 3,215,761 shares of Common Stock were outstanding with a remaining contractual life of 2.3 and 3.3 years, respectively.

During the year ended December 31, 2024, the remainder of the Series D B Warrants to purchase 1,400,250 shares of Common Stock were exercised for total proceeds to the Company of $8.4 million, resulting inno outstanding Series D B Warrants as of December 31, 2025 or 2024.

Series E PIPE Warrants

The Series E PIPE Warrants provide the warrant holders with the right to purchase 8,000,000 shares of Common Stock at an exercise price of $6.00 per share. The Series E A Warrants expire on August 15, 2028 and the Series E B Warrants expired on August 15, 2024. All such warrants must be exercised for cash.

As of December 31, 2025 and 2024, Series E A Warrants providing the right to purchase 4,000,000 shares of Common Stock were outstanding, with a remaining contractual life of 2.6 and 3.6 years, respectively.

During the year ended December 31, 2024, all of the Series E B Warrants were exercised, resulting in the issuance of 4,000,000 shares of Common Stock, for total proceeds to the Company of $24.0 million. As a result, there wereno outstanding Series E B warrants as of as of December 31, 2025 or 2024.

Exok Warrants

Upon closing of the Merger, the Company consummated the purchase of oil and gas leases from Exok, Inc. (“Exok”), including all of Exok’s 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, for $3.0 million (the “First Exok Acquisition”). On August 15, 2023, Prairie LLC exercised the option it acquired in the First Exok Acquisition and purchased additional oil and gas leases from Exok, consisting of approximately 20,300 net leasehold acres in, on and under approximately 32,580 gross acres (the “Second Exok Acquisition”) for total consideration of $25.3 million. The total consideration consisted of $18.0 million in cash to Exok, which was funded with the Series E PIPE, and equity consideration to certain affiliates of Exok consisting of (i)670,499 shares of Common Stock, and (ii)670,499 warrants providing the right to purchase shares of Common Stock at $7.49 per share (the “Exok Warrants”). The Exok Warrants provide the warrant holders with the right to purchase 670,499 shares of Common Stock at an exercise price of $7.49 per share. The Exok Warrants expire on August 15, 2028 and may be exercised in a cashless manner under certain circumstances. On December 31, 2025 and 2024,670,499 Exok Warrants providing the right to purchase shares of Common Stock were outstanding with a remaining contractual life of 2.6 and 3.6 years, respectively.

Subordinated Note Warrants

As discussed in Note 10 – Debt above, 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. The Subordinated Note Warrants vest in equal tranches, beginning on September 30, 2024, every 3 months until the Subordinated Note is repaid. Upon vesting, the Subordinated Note Warrants will be exercisable at any time until September 30, 2029, at an exercise price of $8.89, subject to adjustments as provided under the terms of the Subordinated Note Warrants. As of December 31, 2025 and 2024, Subordinated Note Warrants providing the right to purchase 856,165 shares and 570,778 shares, respectively, of Common Stock with a remaining contractual life of 3.8 years and 4.8 years, respectively, had vested and were outstanding.

The Company has determined that the Subordinated Note Warrants should be accounted for as a liability pursuant to ASC 480. In accordance with ASC 815, the Company recorded the Subordinated Note Warrants at fair value and will remeasure the fair value for each reporting period with changes in fair value recognized in earnings. As of December 31, 2025 and 2024, the fair value of the Subordinated Note Warrants is $0.3 million and $4.2 million, respectively. Refer to Note 6 – Fair Value Measurementsfor a further discussion of the fair value of the Subordinated Note Warrants.

As discussed in Note 13 – Mezzanine Equity above, pursuant to the securities purchase agreement with the Series F Preferred Stockholder, upon the one–year anniversary of the issuance date of the Series F Preferred Stock, if any Series F Preferred Stock is outstanding, and the other conditions set forth in the Series F Certificate of Designation have been satisfied, the Company will issue to the Series F Preferred Stock Warrants to the Series F Preferred Stockholder. On March 25, 2026, the Company and the Series F Preferred Stockholder entered into the Series F Preferred Stock Warrant Amendment, which, among other things, changes the issuance date of the Series F Preferred Stock Warrants from the first anniversary of the issuance date of the Series F Preferred Stock to April 7, 2026. The Series F Preferred Stock Warrants allow the Series F Preferred Stockholder to purchase a number of shares of the Company’s Common Stock equal to the quotient of (1)125% of the Stated Value of all Series F Preferred Stock held on the original issuance date of the Series F Preferred Stock (the “Original Issuance Date”), divided by (2) the average of the 10 daily volume–weighted average per share trading prices of the Company’s Common Stock during the 10 trading days prior to the original issuance date. As of December 31, 2025, the Series F Preferred Stock Warrants hadnot been issued.

If issued, the Series F Preferred Stock Warrants would be immediately exercisable and would expire on the fifth anniversary of the Original Issuance Date. The Series F Preferred Stock Warrants would have an initial exercise price per share equal to 110% of the average of the 10 daily per share volume–weighted average prices of the Common Stock during the 10 trading days prior to the Original Issuance Date. The exercise price and number of shares of Common Stock issuable upon exercise is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Common Stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders.

The Company has determined that the Series F Preferred Stock Warrants are not considered indexed to the Company’s own stock because the potential number of common shares to be issued upon the exercise of such warrants will vary based on the amount of Series F Preferred Stock outstanding on April 7, 2026. As such, the Company has determined that the Series F Preferred Stock Warrants should be accounted for as liabilities pursuant to ASC 480. In accordance with ASC 815, the Company has recorded the Series F Preferred Stock Warrants at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings. As of December 31, 2025, the fair value of the Series F Preferred Stock Warrants was $90.1 million compared to $22.1 million at the time of issuance which is presented on the Company’s consolidated balance sheet as a liability with a corresponding amount recognized as Series F Preferred Stock in mezzanine equity. The Company recognized the change in fair value of $68.0 million as a component of loss on adjustment to fair value – embedded derivatives, debt, and warrants on its consolidated statement of operations for the year ended December 31, 2025, respectively. Refer to Note 6 – Fair Value Measurementsfor a further discussion of the fair value of the Series F Preferred Stock Warrants.

Note 16–Long–Term Incentive Compensation

Incentive Award Plan

The Company’s long–term incentive plan for employees, directors, consultants, and other service providers (as amended and restated effective as of September 5, 2024, as further amended effective June 4, 2025, and as may be further amended from time to time, the “LTIP”) provides for the grant of all or any of the following types of equity–based awards: (i) incentive stock options qualified as such under U.S. federal income tax laws; (ii) stock options that do not qualify as incentive stock options; (iii) stock appreciation rights; (iv) restricted stock awards; (v) restricted stock units (“RSUs”), which may also include performance stock awards (“PSUs”); (vi) stock awards; (vii) dividend equivalents; (viii) other stock–based awards; (ix) cash awards; and (x) substitute awards. During the three months ended June 30, 2025, the Company received shareholder approval to increase the number of shares available for issuance under the LTIP, resulting in the reservation of 15,000,000 total shares of Common Stock for issuance pursuant to awards under the LTIP. As of December 31, 2025,2,619,116 shares are available for grant under the LTIP.

Stock–Based Compensation

The Company’s stock–based compensation awards are classified as either equity awards or liability awards in accordance with GAAP. The fair value of an equity–classified award is determined at the grant date and is amortized to general and administrative expense on a graded attribution basis over the vesting period of the award. The Company accounts for forfeitures of stock–based compensation awards as they occur. The fair value of a liability–classified award is determined on a quarterly basis beginning at the grant date until final vesting. Changes in the fair value of liability–classified awards are recorded to general and administrative expense over the vesting period of the award.

RSUs and PSUs granted under the LTIP can immediately vest (A) upon a termination due to (i) death, (ii) disability, or (iii) retirement, in the case of employee awards, or (B) in connection with a change in control; provided that for employee RSU or PSU awards, such accelerated vesting upon a change in control only applies to the extent no provision is made in connection with a change in control for the assumption of awards previously granted or there is no substitution of such awards for new awards. To the extent an employee’s RSU or PSU award is assumed or substituted in connection with the change in control, if a participant is terminated by the Company without “cause” or the employee terminates for “good reason” (each as defined in the applicable award agreement), then each RSU or PSU award will become fully vested.

Equity–Classified Restricted Stock Units

The Company has granted RSUs to employees which primarily vest ratably over athree–year period, subject to the employees continued service through each applicable vesting date. The Company has also granted RSUs to directors and advisors, some of which vest ratably over athree–year period and some of which vestone year following the grant date, subject to the director’s or advisor’s continued service through the vesting date. The fair values of these RSU awards are based on the price of the Company’s Common Stock as of each relevant grant date.

The following table presents the Company’s equity–classified RSU activity for the years indicated:

During the years ended December 31, 2025 and 2024, the Company recognized stock–based compensation costs of $9.7 million and $6.8 million, respectively, related to its equity–classified RSUs.

As of December 31, 2025, there was $11.8 million of total unrecognized compensation cost related to the Company’s unvested equity–classified RSUs, which is expected to be recognized over a weighted–average period of 2.1 years.

Equity–Classified Performance Stock Units

In September 2025 and 2024, the Company granted PSUs to certain of its employees. The PSUs vest and become earned upon the achievement of certain performance goals based on the Company’s relative total shareholder return as compared to the performance peer group during the performance period, in each case, at the end of athree–year performance period, and generally subject to the employees continued service throughout the performance period. Per the PSU agreements, these awards can be settled in either stock or cash, as determined by the Committee; however, unless the Committee determines otherwise, these PSUs will be settled in stock; therefore, the Company classified these PSUs as equity awards. The number of shares of Common Stock that a holder of the PSUs earns at the end of the performance period may range from 0% to 200% of the target number of PSUs granted, as determined by the Company’s total shareholder return relative to a group of peers over the performance period, which represents a market condition per ASC 718.

The Company engaged a third–party valuation expert to assist in preparing the fair value of the PSUs granted in September 2025 and 2024. These estimates were derived using a Monte Carlo simulation model as of the grant date of the PSUs, using the significant inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

The following table presents the Company’s equity–classified PSU activity for the years indicated:

During the years ended December 31, 2025 and 2024, the Company recognized stock–based compensation costs of $5.0 million and $1.6 million, respectively, related to its equity–classified PSUs.

As of December 31, 2025, there was $14.2 million of total unrecognized compensation cost related to the Company’s unvested equity–classified PSUs, which is expected to be recognized over a weighted–average period of 2.2 years.

Liability–Classified Restricted Stock Units

The Company has also granted RSUs to certain of its directors and advisors, which primarily vestone year following the grant date, subject to the director’s or advisor’s continued service through the applicable vesting date. Such RSUs are payable 60% in Common Stock and 40% in either cash or Common Stock (or a combination thereof), as determined by the Committee. The Company has accounted for the portion of the awards that can be settled in cash as liability–classified awards and accordingly records the changes in the market value of the instruments to general and administrative expense over the vesting period of the award.

The following table presents the Company’s liability–classified RSU activity for the years indicated:

During the years ended December 31, 2025 and 2024, the Company recognized stock–based compensation costs of $0.1 million and $0.3 million, respectively, related to its liability–classified RSUs.

As of December 31, 2025, there was less than $0.1 million of total unrecognized compensation cost related to liability–classified RSUs, which is expected to be recognized over a weighted–average period of 0.4 years. The amount of unrecognized compensation cost for liability–classified awards will fluctuate over time as they are marked to market.

Note 17 – Earnings Per Share

The Company’s Series D Preferred Stock, unvested RSUs, and unvested PSUs are considered participating securities, as such, basic and diluted earnings (loss) per share is calculated using the two–class method, which proportionally allocates net income (loss) attributable to Prairie Operating Co. common stockholders between the Common Stock and the participating securities on an “as–converted” basis. However, the Series D Preferred Stock, RSU, and PSU holders do not have a contractual obligation to share in the Company’s losses, therefore, in periods of a net loss, no portion of such losses are allocated to the participating securities.

The following table presents the calculations of basic and diluted loss per share for the years indicated:

The following table presents the potentially dilutive securities which were not included in the computation of diluted loss per share for the years indicated because their inclusion would be anti–dilutive:

Note 18 – Income Taxes

As discussed in Note 2 – Summary of Significant Accounting Policies, the Company has retrospectively adopted ASU 2023–09 for the annual period ended December 31, 2025 and has conformed its income tax disclosures below to reflect the additional disclosure requirements around income taxes, specifically related to the rate reconciliation and income taxes paid.

The following table presents the Company’s provision for income taxes for continuing operations for the years indicated:

For the years ended December 31, 2025 and 2024, the Company had income from operations before income taxes of $53.7 million and a loss from operations before income taxes of $39.9 million, respectively. The Company’s effective rate for its provision for income taxes differs from the federal statutory rate as follows for the years indicated:

The Company’s cash taxes paid, net of refunds, were as follows for the years indicated:

Deferred income taxes are provided to reflect the future tax benefits of temporary differences between the tax basis of assets and liabilities, operating losses, and credit carryforwards to the extent which management assesses that realization is more likely than not. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. The Company closely monitors and weighs all available evidence, including both positive and negative, in making its determination whether to maintain a valuation allowance.

As a result of negative evidence as of December 31, 2024, the Company recognized a full valuation allowance as of December 31, 2024. However, due to cumulative income and positive evidence as of December 31, 2025, the Company released the majority of the valuation allowance, except for a valuation allowance of $6.7 million related to certain net operating losses which are not considered to be more–likely–than–not realizable as of December 31, 2025.

The following table presents the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating losses and tax credit carryforwards which give rise to deferred tax assets and liabilities for the years indicated:

The Company had the following net operating losses (“NOLs”) as of the years presented in the following table. The Company didnot have any tax credit carryforwards for either of the years presented.

The Company believes that it is likely that an ownership change as defined in Section 382 of the Code has occurred. If the Company has experienced such an ownership change, utilization of the NOLs would be subject to an annual limitation, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long–term, tax–exempt rate, and then could be subject to additional adjustments, as required. Any such limitation may result in the expiration of a portion of the NOLs before utilization. Any carryforwards that expire prior to utilization as a result of the limitation will be removed from deferred tax assets with a corresponding adjustment to the valuation allowance.

The Company files income tax returns in the U.S. and various state jurisdictions and is subject to examination in the various jurisdictions in which it files. The Company’s tax years 2022 to present remain open for federal examination. Additionally, tax years 2010 through 2021 remain subject to examination for the purpose of determining the amount of federal NOL. The number of years open for state tax audits varies, depending on the state, but is generally from three tofive years.

The Company didnot have any unrecognized tax benefits as of December 31, 2025 or 2024.

Note 19 –Related Party Transactions

Common Stock Options. As described in Note 15 – Common Stock Options and Warrants, upon consummation of the Merger, the Company entered into Option Agreements with each of Gary C. Hanna, former President and Director as of March 3, 2026, Edward Kovalik, former Chairman of the Board and Chief Executive Officer as of March 3, 2026, Paul L. Kessler, who is a former Director of the Company, and BOKA. Erik Thoresen, a director of the Company, is affiliated with BOKA.

On August 30, 2023, the Company, Gary C. Hanna, former President and Director as of March 3, 2026, Edward Kovalik, former Chairman of the Board and Chief Executive Officer as of March 3, 2026, Bristol Capital, and Georgina Asset Management entered into a non–compensatory option purchase agreement, pursuant to which Georgina Asset Management agreed to purchase, and each of the sellers agreed to sell to Georgina Asset Management, non–compensatory options to acquire an aggregate of 200,000 shares of Common Stock for the option purchase. In December 2023, Mr. Hanna assigned all of his remaining options to Gracemont Enterprises LP, an entity controlled by Mr. Hanna. In January 2024, Georgina Asset Management transferred its options to Westwood pursuant to an assignment. In September 2024, Mr. Kovalik assigned all of his remaining options to Blue Trail Partners, LLC, an entity controlled by Mr. Kovalik. Refer to Note 20 – Subsequent Eventsfor a discussion of Mr. Hanna and Mr. Kovalik’s separation from the Company.

On September 30, 2024, the Company, BOKA, Rose Hill, Anchorman, and Blackstem entered into a non–compensatory option purchase agreement, pursuant to which each of the Option Purchasers agreed to purchase, and BOKA agreed to sell to the Option Purchasers, Merger Options to acquire an aggregate of 800,000 shares of Common Stock, for an exercise price of $0.25 per share. The Company didnot receive any proceeds from the transfer of the Merger Options and the terms of the Option Agreements were not amended or modified in any way in connection with the transfers. Refer to Note 15 – Common Stock Options and Warrantsfor a further discussion of these options.

Series D PIPE. As described in Note 14 – Stockholders’ Equity, Bristol Investment, an entity affiliated with Paul L. Kessler, who is a former Director of the Company, purchased $1,250,000 of Series D Preferred Stock and Series D PIPE Warrants in the Series D PIPE. First Idea Ventures LLC, an entity affiliated with Jonathan H. Gray, a director of the Company, purchased $750,000 of Series D Preferred Stock and Series D PIPE Warrants in the Series D PIPE. First Idea International Ltd. (included with First Idea Ventures LLC), an entity affiliated with Jonathan H. Gray, purchased $254,875 of Series D Preferred Stock and Series D PIPE Warrants from another holder. Additionally, the O’Neill Trust, which is the sole Series E PIPE Investor, was also an investor in the Series D PIPE. Refer to Note 14 – Stockholders’ Equityand Note 15 – Common Stock Options and Warrants and for a further discussion of the Series D PIPE.

Series E PIPE. As described in Note 15 – Common Stock Options and Warrants, to fund the Second Exok Acquisition, the Company entered into a securities purchase agreement with the Series E PIPE Investor, the O’Neill Trust, 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. Refer to Note 14 – Stockholders’ Equityand Note 15 – Common Stock Options and Warrants for a further discussion of the Series E PIPE.

Consent and Agreement. On August 15, 2024, the Company entered into a Consent and Agreement (the “Consent and Agreement”) with the O’Neill Trust, pursuant to which the O’Neill Trust (a) consented to, and waived any and all negative covenants with respect to, any and all transactions the Company may consummate in connection with the funding of the NRO Acquisition and its ongoing operations; (b) released its mortgage on certain property of the Company, which was established in favor of the O’Neill Trust securing the Company’s obligations under the Series E Certificate; and (c) agreed to (i) amend Section 6(d) of the Series E Certificate to increase the Beneficial Ownership Limitation Ceiling from 9.99% to 49.9%, (ii) subject to consent from the requisite holders of the Series D Preferred Stock, amend Section 6(d) of the Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (the “Series D Certificate”) to increase the Beneficial Ownership Limitation, as defined in the Series D Certificate, from 9.99% to 49.9% and (iii) amend Section 2(e) of each of the O’Neill Trust’s Series D A Warrant and Series E A Warrant and Section 2(d) of the O’Neill Trust’s Series E B Warrant to increase the Beneficial Ownership Limitation Ceiling from 25% to 49.9%.

In connection with the increase to the Beneficial Ownership Limitation Ceiling, the O’Neill Trust agreed pursuant to the Consent and Agreement that (i) until its remaining Series D Preferred Stock, Series D PIPE Warrants, and Series E PIPE Warrants are exercised or converted, as applicable, it will not acquire any other shares of Common Stock of the Company, and (ii) for a period often years following the date of the Consent and Agreement, it will not, directly or indirectly, acquire by means of public equity trading markets, any Common Stock or other securities with underlying Common Stock, to the extent the O’Neill Trust would beneficially own the voting, investment or economic control over 49.9% of the Common Stock of the Company.

The O’Neill Trust further agreed that if at any time it beneficially owns, or exercises control over, shares of Common Stock with voting rights that exceed 29.9% of the Common Stock of the Company (the “Voting Threshold”), the Company shall exercise the voting rights with respect to such shares of Common Stock beneficially owned in excess of the Voting Threshold in the same proportion as the outstanding Common Stock (excluding Common Stock beneficially owned, directly or indirectly, by the O’Neill Trust or any Affiliate (as defined in the Consent and Agreement) of the O’Neill Trust, but including any securities of the Company eligible to vote with the Common Stock on an as–converted basis) voted on all matters submitted to a vote of the holders of Common Stock of the Company.

Subordinated Promissory Note and Subordinated Note Warrants. As described in Note 10 – Debt, on September 30, 2024, the Company issued the Subordinated Note in a principal amount of $5.0 million, which has a maturity date of March 17, 2027 to the Noteholders. Pursuant to the terms of the Subordinated Note, the Company also issued the Subordinated Note Warrants to the Noteholders, which provide the Noteholders with the ability to purchase up to 1,141,552 shares of Common Stock, vesting in tranches based on the date of repayment of the Subordinated Note. The Noteholders are entities controlled by Jonathan H. Gray, a director of the Company. Refer to Note 10 – Debt and Note 15 – Common Stock Options and Warrants for a further discussion of the Subordinated Note and the Subordinated Note Warrants.

Discontinued Operations – Deferred Purchase Price Note Receivable. In January 2024, the Company completed the Crypto Sale, resulting in a Deferred Purchase Price note receivable of $1.0 million. As of June 30, 2025, the note receivable balance was $0.5 million and in July 2025, Fifty Shades Limited, an entity controlled by Jonathan H. Gray, a director of the Company, paid off the Deferred Purchase Price note receivable for $0.4 million. Refer to Note 4 – Discontinued Operations for a further discussion of the Crypto Sale and the Deferred Purchase Price note receivable.

Note 20 –Subsequent Events

Hedging Program

During the first quarter of 2026, the Company executed a portfolio of hedges securing the following weighted–average prices through the indicated periods:

Leadership Changes

On March 3, 2026, the Company announced several leadership changes, including the voluntary resignation of its Chief Executive Officer and Chairman, Edward Kovalik, and the retirement of its President and Director, Gary C. Hanna. The Company’s Board of Directors has appointed Richard N. Frommer, a member of the Board of Directors, to serve as Interim President and Chief Executive Officer of the Company, while it conducts a search for a permanent President and Chief Executive Officer. Additionally, the Board of Directors has also appointed Erik Thoresen to serve as Chairman of the Board. The Company’s wholly owned subsidiary, Prairie Operating Employee Co., LLC, has entered into separation agreements with Mr. Kovalik and Mr. Hanna with respect to the terms of their separation from the Company, which were negotiated on behalf of the Company by a special committee of the Board composed entirely of independent directors.

Pursuant to the Company’s separation agreement with Mr. Kovalik (the “Kovalik Separation Agreement”), Mr. Kovalik will receive a lump sum severance payment of approximately $2.5 million, his 2025 annual incentive bonus of approximately $0.8 million, and a payout of his unused, accrued vacation and paid–time–off benefits. In addition, the Kovalik Separation Agreement provides that all of Mr. Kovalik’s unvested time–based RSUs will immediately vest and all of Mr. Kovalik’s unvested PSUs will be immediately forfeited. The Company’s separation agreement with Mr. Hanna (the “Hanna Separation Agreement” and, together with the Kovalik Separation Agreement, the “Separation Agreements”) provides that Mr. Hanna will receive his 2025 annual incentive bonus of approximately $0.7 million and a payout of his unused, accrued vacation and paid–time–off benefits. Pursuant to the Hanna Separation Agreement, all of Mr. Hanna’s unvested RSUs will immediately vest, and Mr. Hanna will retain all of his unvested PSUs through the end of the applicable performance period, which is consistent with the treatment of such performance awards in the event of retirement under Mr. Hanna’s applicable award agreements.

The Separation Agreements also provide that Mr. Kovalik and Mr. Hanna will retain their respective fully vested non–compensatory stock options but will assign their respective overriding royalty interests in certain of the Company’s Genesis/Exok assets. Mr. Kovalik and Mr. Hanna have also each agreed to vote the shares of the Company’s Common Stock they beneficially own in favor of the Board’s recommendation at any annual or special meeting of the Company’s stockholders over the next three years, and that any lockup agreements entered into by Mr. Kovalik and Mr. Hanna, including with the Series F Preferred Stockholder, will remain in full force and effect in accordance with the terms thereof.

On March 25, 2026, the Company and the Series F Preferred Stockholder entered into the Series F Preferred Stock Warrant Amendment, which, among other things, changes the issuance date of the Series F Preferred Stock Warrants from the first anniversary of the issuance date of the Series F Preferred Stock to April 7, 2026. Additionally, the Series F Preferred Stock Warrant Amendment provides that the Company will pay the Series F Preferred Stockholder an aggregate amount equal to $3.0 million on April 6, 2026, unless the obligation to pay such fee has been waived by the Series F Preferred Stockholder in their sole discretion.

Note 21 –Supplemental Oil and Gas Disclosures (Unaudited)

Costs Incurred in Oil and Natural Gas Property Acquisition, Exploration, and Development Activities

The following table presents the costs incurred in oil and natural gas acquisition, exploration, and development activities for the years indicated:

For the year ended December 31, 2025, the Company’s proved property acquisition costs incurred include $515.9 million of proved property acquired in the Bayswater Acquisition, $2.3 million of which relates to the asset retirement obligations costs assumed in the acquisition. Refer to Note 3 – Acquisitions for a further discussion. For the year ended December 31, 2025, the development costs incurred includes $152.9 million of development costs for wells which came online during the year and $23.2 million of development costs for wells which were in the process of being completed and are expected to come online throughout the first quarter of 2026.

Proved Reserves

Proved reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible, from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. There are numerous uncertainties inherent in estimating the quantities of proved oil and natural gas reserves and periodic revisions to estimated reserves and future cash flows may be necessary as a result of numerous factors, including reservoir performance, new drilling, oil, natural gas, and NGL prices, changes in costs, technological advances, new geological or geophysical data, or other economic factors. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas ultimately recovered or reserve quantities reported by other entities.

The Company’s reserve estimates as of December 31, 2025, are based on reserve reports prepared by CG&A in accordance with the rules and regulations of the SEC in Regulation S–X, Rule 4–10. All of the Company’s proved reserves presented below are located in the DJ Basin. The Company’s estimated proved reserves and the related net revenues and Standardized Measure were determined using the 12–month unweighted arithmetic average of the first–day–of–the–month price for each month in the period January through December (“SEC Prices”). The SEC Prices are adjusted for treating costs and/or crude quality and gravity corrections. For the years ended December 31, 2025 and 2024, SEC Prices, inclusive of adjustments, used in the calculations were $65.34 per Bbl and $74.63 per Bbl, respectively, of oil, $3.39 million per MMBtu and $1.60 per MMBtu, respectively, of natural gas, and $19.28 per Bbl and $21.63 per Bbl of NGLs, respectively.

The following table presents the quantities of the Company’s estimated proved, proved developed, and proved undeveloped oil, natural gas, and NGL reserves and the changes in the quantities of estimated proved oil, natural gas, and NGL reserves for the years indicated:

During the year ended December 31, 2024, the Company’s estimated proved reserves were 26.1 MMBoe, primarily comprised of acquisitions throughout the year. The NRO Acquisition, which closed on October 1, 2024, resulted in 23.3 MMBoe of estimated proved reserves and the acquisition of the Shelduck assets in February 2024 resulted in 2.8 MMBoe of estimated proved reserves. During the year ended December 31, 2025, the Company’s estimated proved reserves were 121.1 MMBoe, primarily comprised of acquisitions resulting in 95.3 MMBoe and revisions resulting in 6.4 MMBoe throughout the year.

Standardized Measure of Discounted Future Net Cash Flows

The Standardized Measure is the present value, discounted at 10%, of future net cash flows from estimated proved reserves calculated using the 12–month unweighted arithmetic average of the first–day–of–the–month price for each month in the period January through December (with consideration of price changes only to the extent provided by contractual arrangements). The estimated future net cash flows are reduced by projected future development, plug and abandonment, and production (excluding DD&A and any impairments of oil and natural gas properties) costs and estimated future income tax expenses.

Although the Company’s estimates of total proved reserves, development costs, and production rates were based on the best available information, the development and production of the oil and natural gas reserves may not occur in the periods assumed. Actual prices realized, costs incurred, and production quantities may vary significantly from those used. Therefore, the Standardized Measure should not be considered to represent the Company’s estimate of the expected revenues or the fair value of its proved oil, natural gas, and NGL reserves.

The following table presents the Standardized Measure relating to the Company’s estimated proved oil and natural gas reserves for the years indicated:

The following table presents the changes in the Standardized Measure relating to the Company’s estimated proved oil and natural gas reserves for the years indicated: