Prairie Operating Co
For the period ended Dec 31, 2024. Filed Mar 6, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 6, 2025
PROP$0.39-4.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-19.
0001493152-24-010380
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsFinancial Statements and Supplementary DataReports of Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of OperationsConsolidated Statements of Members’ Deficit/Stockholders’ EquityCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-06.
0001493152-25-009423
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsFinancial Statements and Supplementary DataThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 120 previous paragraphs and 135 current paragraphs.
11 unchanged; 19 reworded; 104 added; 90 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 13 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (104)
Current report
Our discussion includes forward–looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward–looking statements as a result of a number of factors, including those described under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in the Annual Report. Except as otherwise indicated or required by the context, references to the “Company,” “we,” “us,” “our” or similar terms refer to Prairie Operating Co.
Current report
We are an independent oil and gas company focused on the acquisition and development of crude oil, natural gas, and NGLs. Our assets and operations are strategically located in the oil region of rural Weld County, within the DJ Basin. We believe the DJ Basin to be one of the premier resource plays in the U.S. Weld County boasts some of the lowest break-even prices in the U.S., and has a long production history that has proven and consistent results. The productivity of this resource is demonstrated by the integral role that Weld County holds in Colorado’s energy economy, having produced 82% of Colorado’s oil production as of December 2024.
Current report
As of December 31, 2024, our E&P assets consist of our Central Weld Assets, Genesis and Genesis Bolt–on Assets, and the Exok Option Purchase assets. Our Central Weld Assets were acquired from NRO in October 2024 and included 26 revenue producing oil and natural gas wells. Our total Genesis Assets include approximately 18,100 net leasehold acres in, on and under approximately 31,000 gross acres and our Central Weld Assets include approximately 5,640 net leasehold acres, on and under approximately 6,000 gross acres. We commenced drilling wells on our Genesis Bolt-on Assets in the third quarter of 2024 and all eight wells began producing in February 2025.
Current report
Recent Developments
Current report
On February 6, 2025, we and certain of our subsidiaries entered into the Bayswater PSA with Bayswater, pursuant to which we agreed to acquire the Bayswater Assets from Bayswater for a purchase price of $602.8 million, subject to certain closing price adjustments.
Current report
The Bayswater Acquisition has an outside closing date of March 15, 2025, subject to customary closing conditions, with an economic effective date of December 1, 2024. However, there can be no assurance that a closing will occur. The Bayswater PSA contains customary representations, warranties and covenants of us and Bayswater for a transaction of this nature.
Current report
Development Program Launch
Current report
During the third quarter of 2024, we commenced our initial drilling program, starting with an 8-well pad on Shelduck South, part of the Genesis Bolt–on Assets acquired in February 2024. The Shelduck South development consists of eight two-mile lateral wells across 1,115 gross leasehold acres, targeting the Niobrara B and C formations. We spud our first well on September 5, 2024 and all eight wells began producing in February 2025.
Current report
On August 15, 2024, we and NRO agreed to amend certain terms of the NRO Agreement, pursuant to which, 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 us.
Current report
On October 1, 2024, we 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. We completed the final settlement with NRO in December 2024, which resulted in a final purchase price of $55.5 million.
Current report
Credit Facility
Current report
On December 16, 2024, we, as borrower, entered into a reserve-based credit agreement with Citibank, N.A. (“Citi”), as administrative agent and the financial institutions party thereto (the “Credit Facility Agreement”), which has a maximum credit commitment of $1.0 billion and is set to mature on December 16, 2026 (collectively, the “Credit Facility”). The Credit Facility is guaranteed by all of our restricted subsidiaries and is secured by a first-priority security interest on substantially all of our oil and natural gas properties and substantially all of our personal property assets, subject to customary exceptions. As of December 31, 2024, the Credit Facility had a borrowing base and an aggregate elected commitment of $44.0 million and a $5.0 million sublimit for the issuance of letters of credit. The borrowing base is subject to semi-annual redeterminations based upon the value of our oil and gas properties as determined in a reserve report dated as of January and July of each year, subject to certain interim redeterminations.
Current report
As of December 31, 2024, we had $28.0 million of revolving borrowings and no letters of credit outstanding under the Credit Facility, resulting in $7.2 million of availability for future borrowings and letters of credit. Refer toLiquidity and Capital Resources - Significant Sources of Liquiditybelow for a further discussion of the Credit Facility. On February 3, 2025, we entered into the First Amendment to the Credit Facility Agreement (the “First Amendment”), which among other things, increased the borrowing base and the aggregate elected commitments to $60.0 million.
Current report
Standby Equity Purchase Agreement
Current report
On September 30, 2024, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD., a Cayman Islands exempt limited company (“Yorkville”), whereby, subject to certain conditions, we have the right, not the obligation, to sell to Yorkville 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. Each issuance and sale of shares by us to Yorkville pursuant to the SEPA (“Advance”) is subject to a maximum limit equal to 100% of the aggregate volume traded of our Common Stock on the Nasdaq Stock Market during the five trading days immediately prior to the date of the Advance Notice. The shares will be issued and sold to Yorkville at a per share price equal to 97% of the lowest daily volume weighted average price of Common Stock for three consecutive trading days commencing on the trading day immediately following Yorkville’s receipt of an Advance Notice. On September 30, 2024, pursuant to the SEPA, we paid Yorkville a structuring fee of $25,000 and a Commitment Fee by issuing Yorkville 100,000 shares of Common Stock. Our right to sell shares to Yorkville under the SEPA was contingent upon us having an effective registration statement, which was declared effective by the SEC on December 20, 2024. Refer toLiquidity and Capital Resources - Significant Sources of Liquiditybelow for a further discussion of the SEPA.
Current report
Senior Convertible Note
Current report
On September 30, 2024, Yorkville advanced an initial $15.0 million (the “Pre-Paid Advance”) to us and we issued a convertible promissory note (the “Senior Convertible Note”), with an interest rate of 8.00% and a maturity date of September 30, 2025. Our obligations with respect to the Pre-Paid Advance and under the Senior Convertible Note are guaranteed by Prairie LLC, a subsidiary of the Company, and 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 may convert the Pre-Paid Advance into shares of Common Stock at any time at the Conversion Price. We may, 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.
Current report
In December 2024, and in conjunction with the Credit Facility Agreement, we 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. Additionally, in January and February 2025, Yorkville converted the remaining $11.3 million of the Senior Convertible Note in exchange for 2.1 million shares of Common Stock. Refer toLiquidity and Capital Resources - Significant Sources of Liquiditybelow for a further discussion of the Senior Convertible Note.
Current report
Subordinated Promissory Note and Subordinated Note Warrants
Current report
On September 30, 2024, we 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, with a maturity of December 31, 2025. The Subordinated Note has an interest rate of 10.00% and the Noteholders are entitled to a minimum return on capital of up to 2.0x upon the repayment, prepayment or acceleration of the obligations, or the occurrence of certain other triggering events under the Subordinated Note. Pursuant to the terms of the Subordinated Note, we 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.
Current report
In December 2024, and in conjunction with the Credit Facility Agreement, we made a $1.8 million payment on the Subordinated Note, resulting in a principal balance of $3.2 million as of December 31, 2024. Refer toLiquidity and Capital Resources - Significant Sources of Liquiditybelow for a further discussion of the Subordinated Note and Subordinated Note Warrants.
Current report
Factors Affecting the Comparability of Financial Results
Current report
On August 15, 2024, we and NRO agreed to amend certain terms of the NRO Agreement, pursuant to which, 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. Additionally on August 15, 2024, $6.0 million of the Deposit was released to NRO and the remaining $3.0 million was returned to us.
Current report
On October 1, 2024, we 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. We completed the final settlement with NRO in December 2024, which resulted in a final purchase price of $55.5 million.
Current report
Crypto Sale
Current report
As previously discussed, we acquired our cryptocurrency mining operations in May 2023, concurrent with the Merger. On January 23, 2024, we sold all of our Mining Equipment for consideration consisting of (i) $1.0 million in cash and (ii) $1.0 million in deferred cash payments, 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. As of December 31, 2024, we have received $0.3 million of the Deferred Purchase Price.
Current report
Commodity Prices
Current report
Since oil, natural gas, and NGL prices are the most significant factors impacting our results of operations, continued price variations can have a material impact on our financial results and capital expenditures. In an effort to reduce the impact of price volatility, and in compliance with requirements under our Credit Facility Agreement, we enter into derivative contracts to economically hedge a portion of our estimated production from our proved, developed, producing oil and natural gas properties against adverse fluctuations in commodity prices. By doing so, we believe we can mitigate, but not eliminate, the potential negative effects of decreases in oil and natural gas prices on our cash flows from operations. However, our hedging activity could reduce our ability to benefit from increases in oil and natural gas prices. Further, we could sustain losses to the extent our oil and natural gas derivative contract prices are lower than market prices and, conversely, we could recognize gains to the extent our oil and natural gas derivative contract prices are higher than market prices. Refer toResults of Operations - Other income and expenses below for a discussion of our recognized gains or losses on derivative contracts.
Current report
As of December 31, 2024, we had the following outstanding crude oil and natural gas derivative contracts in place, which settle monthly and are indexed to NYMEX West Texas Intermediate and NYMEX Henry Hub, respectively:
Current report
Results of Operations
Current report
Revenue, Production, and Average Realized Price
Current report
The following table presents the components of our revenue, production, and average realized sales price for the periods indicated:
Current report
Oil revenue and production. For the year ended December 31, 2024, our oil production was 96.1 MBbls resulting in oil revenue of $6.6 million and an average realized price of $68.60 per barrel. All of our oil revenue for the year ended December 31, 2024 was derived from the assets acquired in the NRO Acquisition, which closed on October 1, 2024. We did not have any oil revenue prior to the NRO Acquisition.
Current report
Natural gas revenue and production. For the year ended December 31, 2024, our natural gas production was 245.1 MMcf resulting in natural gas revenue of $0.6 million and an average realized price of $2.25 per MMcf. All of our natural gas revenue for the year ended December 31, 2024 was derived from the assets acquired in the NRO Acquisition, which closed on October 1, 2024. We did not have any natural gas revenue prior to the NRO Acquisition.
Current report
NGL revenue and production. For the year ended December 31, 2024, our NGL production was 33.0 MBbls resulting in NGL revenue of $0.8 million and an average realized price of $24.03 per MBbl. All of our NGL revenue for the year ended December 31, 2024 was derived from the assets acquired in the NRO Acquisition, which closed on October 1, 2024. We did not have any NGL revenue prior to the NRO Acquisition.
Current report
Operating expenses
Current report
The following table presents the components of our operating expenses for the periods indicated:
Current report
NM: A per Boe calculation is not meaningful due to a zero-value denominator.
Current report
Lease operating expenses. For the year ended December 31, 2024, lease operating expenses (“LOE”) increased $1.3 million compared to the year ended December 31, 2023, fully driven by LOE recognized for the properties acquired in the NRO Acquisition, which closed on October 1, 2024.
Current report
Gathering, transportation, and processing expenses. For the year ended December 31, 2024, gathering, transportation, and processing expenses increased $0.9 million compared to the year ended December 31, 2023, fully driven by the gathering, transportation, and processing expenses recognized for the properties acquired in the NRO Acquisition, which closed on October 1, 2024.
Showing the first 40 of 104 passages. Open the source sections for the rest.
Removed paragraphs (90)
Previous report
As of December 31, 2023, all of the Company’s E&P assets were acquired in the Exok Transaction (as described herein) and Exok Option Purchase (as defined herein) and consist of certain oil and gas leasehold interests with no existing oil and gas production or revenue. In February 2024, we acquired the Genesis Bolt-on Assets offsetting our existing assets. We refer to the assets acquired in these transactions as our “Genesis Assets.” In all, the total Genesis Assets include 24,351 net mineral acres in, on and under 37,985 gross acres. In addition, in January 2024, we entered into a definitive agreement with NRO to acquire producing acreage and PUDs that are complementary to our existing acreage, which we refer to as the “Central Weld Assets.” We have no current drilling or completion operations. As such, our current activities are focused on obtaining requisite permits to begin drilling wells on our Genesis Assets, as well as funding and closing the NRO Acquisition, which we anticipate in the first half of 2024. In 2023, we also engaged in cryptocurrency mining operations and these operations accounted for all of our revenues in 2023. In January 2024, we divested all of our cryptocurrency mining assets. See “Business—Recent Developments” for more information regarding the NRO and Genesis Bolt-On Assets acquisitions, as well as the sale of our Cryptocurrency mining operations.
Previous report
Background
Previous report
The Merger, Exok Transaction and Related Events
Previous report
In connection with the Merger, we acquired oil and gas leases covering approximately 3,158 net mineral acres in, on and under 4,494 gross acres from Exok for $3.0 million. To fund the Exok Transaction, the Company sold an aggregate of approximately $17.4 million of Series D Preferred Stock with a stated value of $1,000 per share and convertible into shares of common stock at a price of $5.00 per share, Series A warrants to purchase 3,475,250 shares of common stock at an exercise price of $6.00 per share (“Series D A Warrants”) and Series B warrants to purchase 3,475,250 shares of common stock at an exercise price of $6.00 per share (“Series D B Warrants”) in a private placement (the “Series D PIPE”) pursuant to securities purchase agreements, dated May 3, 2023, by and between the Company and each of the investors thereto (the “Series D PIPE Investors”).
Previous report
On August 15, 2023, the Company exercised its option under the Exok Transaction to purchase approximately 20,328 net mineral acres in, on and under approximately 32,695 additional gross acres from Exok (the “Exok Option Assets”). The Company acquired this acreage for $25.3 million consisting of (i) $18.0 million in cash (the “Cash Consideration”) to Exok, (ii) issuance of 670,499 shares of the Company’s common stock and warrants to purchase 670,499 shares of common stock (“Exok Warrants”) to affiliates of Exok, and (iii) direct transaction costs. The Cash Consideration was funded from the Series E preferred issuance (see below).
Previous report
The Company received an aggregate of $20.0 million in proceeds from the Series E private placement (the “Series E PIPE”) in exchange for 20,000 shares of Series E preferred stock, par value $0.01 per share (“Series E Preferred Stock”) along with 39,614 shares of the Company’s common stock, and Series A warrants to purchase 4,000,000 shares of the Company’s common stock (the “Series E A Warrants”) and Series B warrants to purchase 4,000,000 shares of common stock (the “Series E B Warrants” and together with the Series E A Warrants, the “Series E PIPE Warrants”).
Previous report
See “Business—Background” for more information regarding the Merger, the Exok Transaction and related events in 2023.
Previous report
Reverse Stock Split
Previous report
On October 16, 2023, the Company effected the Reverse Stock Split at an exchange ratio of 1:28.5714286. Unless otherwise noted, all per share and share amounts presented herein have been retroactively adjusted for the effect of the Reverse Stock Split.
Previous report
Cryptocurrency Mining Operations and Sale
Previous report
For the year ended December 31, 2023, we generated all of our revenue through our cryptocurrency mining activities. During 2023, our cryptocurrency mining activities consisted of engaging Atlas Power Hosting, LLC (“Atlas”) to operate our cryptocurrency mining assets, some of which were owned by Creek Road prior to the Merger and others that we acquired following the Merger. Pursuant to the Atlas MSA, we did not own, control or take custody of Bitcoin during 2023; rather, Atlas retained all Bitcoin rewards and remitted net revenue from cryptocurrency mining to us in the form of US dollars pursuant to the Atlas MSA. Since the Merger was accounted for as a reverse asset acquisition, our cryptocurrency mining operations are reported as commencing on May 3, 2023, concurrent with the Merger and prior revenues and expenses of Creek Road related to cryptocurrency mining activities are not presented in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or the accompanying financial statements.
Previous report
On January 23, 2024, we completed the Crypto Sale, pursuant to which we sold all of our cryptocurrency assets and assigned our interests under the Atlas MSA to the Crypto Purchaser. Accordingly, we do not expect to engage in cryptocurrency mining activities in 2024 or thereafter. This disposition did not meet the requirements of held for sale classification at December 31, 2023, but will require presentation as discontinued operations in prospective financial statements. We expect to recognize a loss of $1.1 million in conjunction with this disposition. See “Business—Sale of Crypto Assets” for more information about the sale of our cryptocurrency assets and assignment of the Atlas MSA.
Previous report
NRO Acquisition
Previous report
Liquidity
Previous report
The Company had a net loss of $79.1 million for the year ended December 31, 2023 and working capital (defined as current assets less current liabilities) of $8.1 million at December 31, 2023. Cash and cash equivalents totaled $13.0 million at December 31, 2023. Our current working capital decreased upon the $9.9 million deposit payment associated with the NRO Agreement and acquisition of the Genesis Bolt-on Assets and is expected to further decrease in the future due to expenses incurred in connection with our business and until revenue is recognized from our E&P business and/or we raise additional capital through the exercise of existing warrants or through the public and/or private markets. We cannot predict if we will be profitable in the near future, or ever. We may continue to incur losses for an indeterminate period of time and may be unable to achieve profitability. An extended period of losses and negative cash flow may prevent us from successfully operating and expanding our business. See “—Liquidity and Capital Resources,” “Risk Factors—We will require significant additional capital to fund our growing operations; we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations,” “*Risk Factors—We have historically incurred significant losses, and may be unable to generate profitability. Our ability to successfully operate and expand our business is dependent on the consummation of the NRO Acquisition or our ability to raise additional capital to support our drilling program on our existing assets,”*and “Risk Factors—We will require significant additional capital to fund our growing operations; we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations” for more information.
Previous report
Loss from operations
Previous report
Loss from operations increased $33.2 million for the year ended December 31, 2023, compared to the period from June 7, 2022 (date of inception) through December 31, 2022. The $1.5 million increase in cryptocurrency mining revenues resulting from the commencement of such operations upon the Merger was more than offset by a $34.7 million increase in operating costs and expenses, as discussed below.
Previous report
Operating Costs and Expenses
Previous report
Operating costs and expenses increased $34.7 million for the year ended December 31, 2023 compared to the period from June 7, 2022 (date of inception) to December 31, 2022.
Previous report
Cryptocurrency mining. The increase in cryptocurrency mining costs of $0.5 million for the year ended December 31, 2023 over the period from June 7, 2022 (date of inception) to December 31, 2022, respectively, is due to the commencement of cryptocurrency operations upon the Merger.
Previous report
Depreciation, depletion and amortization. The increase of $1.0 million in depreciation, depletion and amortization (“DD&A”) for the year ended December 31, 2023 over the period from June 7, 2022 (date of inception) to December 31, 2022 is due to the commencement of cryptocurrency operations upon the Merger. There was no DD&A associated with E&P for any of the respective periods.
Previous report
Impairment of cryptocurrency mining equipment. The impairment of $17.1 million for the year ended December 31, 2023 is due to the $16.6 million adjustment required to write-off the excess of the allocated purchase price of the Merger over the fair value of the acquired net assets, the subsequent write-off of $0.2 million shipping and customs fees incurred on cryptocurrency miners after the Merger and $0.3 million for impairment of the remaining mobile data centers and deposits on mobile data centers at December 31, 2023.
Previous report
Exploration. The increase in exploration expenses of $0.3 million for the year ended December 31, 2023 over the period from June 7, 2022 (date of inception) to December 31, 2022 is due to delay rentals incurred on oil and gas leases. There were no such costs in 2022.
Previous report
Other income and expenses
Previous report
Interest income. Interest income for the year ended December 31, 2023 increased $0.2 million compared to the period from June 7, 2022 (date of inception) to December 31, 2022. This increase was entirely due to interest earned on our cash balance in the current period and not in the prior year period.
Previous report
Interest expense. Interest expense for the year ended December 31, 2023 increased $0.1 million compared to the period from June 7, 2022 (date of inception) to December 31, 2022. This increase was entirely due to interest on the AR Debentures and SBA loan resulting from the Merger and certain financing costs incurred in 2023.
Previous report
Loss on adjustment to fair value – warrant liabilities. The loss for the year ended December 31, 2023 increased $39.8 million compared to the period from June 7, 2022 (date of inception) to December 31, 2022. This increase was entirely due to the change in fair value of warrant liabilities that were reclassified from and to permanent equity during the period. The change in fair value was due to the increase in the share price of the Company’s common stock.
Previous report
Loss on adjustment to fair value - AR Debentures. The loss for the year ended December 31, 2023 increased $3.8 million compared to the period from June 7, 2022 (date of inception) to December 31, 2022. These increases were entirely due to the change in fair value of the AR Debentures from the Merger through the date of their conversion in October 2023. The change in fair value was primarily due to the increase in the share price of the Company’s common stock.
Previous report
Loss on adjustment to fair value - Obligation Shares. The loss for the year ended December 31, 2023 increased $1.5 million compared to the period from June 7, 2022 (date of inception) to December 31, 2022, respectively. This increase was entirely due to the change in fair value of the Obligation Shares (as defined herein) liability from the Merger through issuance of the Obligation Shares in September 2023. The change in fair value was due to the increase in the share price of the Company’s common stock.
Previous report
In addition, in order to close the NRO Acquisition, we will need to raise $74 million in cash, subject to customary closing adjustments. We do not currently have sufficient cash or committed capital to close the NRO Acquisition. While we are seeking to raise the necessary capital through an offering of common stock, there is no assurance that we will be successful in raising sufficient funds from the proposed offering or through other sources. If we are unable to raise sufficient funds to close the NRO Acquisition, or if we are unable to close the acquisition for other reasons, we will need to seek other sources of capital to fund our development activity and operations until our other E&P assets are generating revenues. Under certain circumstances, if we are unable to close the NRO Acquisition, we would lose the deposit. See “Risk Factors* – We do not currently have sufficient funds or committed financing necessary to consummate the NRO Acquisition and the NRO Agreement does not include a financing condition*.”
Previous report
We expect to continue funding our business and strategic plans with cash on hand and proceeds from exercises of warrants, if any. Currently, we have no debt outstanding. We expect to enter into a revolving credit facility primarily to support our hedging program, but we do not intend to utilize such facility to fund our drilling program. We believe our approach to leverage will permit us to grow production while mitigating adverse impacts of commodity price volatility. We expect that limiting our use of leverage will provide flexibility to slow our development pace when commodity prices are not supportive and to accelerate when prices rise. In the near term, we intend to primarily deploy our cash flow towards development.
Previous report
Analysis of Cash Flow Changes for the Year Ended December 31, 2023 and Period from June 7, 2022 (date of inception) through December 31, 2022
Previous report
Operating Activities
Previous report
Net cash used in operating activities was $11.9 million for the year ended December 31, 2023, compared to $0.0 million in the prior year period. The increase resulted primarily from a net loss of $79.1 million, which was partially offset by the add back for non-cash expenses for the impairment of cryptocurrency mining equipment of $17.1 million, losses on adjustment to fair value of certain financial instruments of $45.1 million, stock based compensation expense of $2.9 million, change in working capital of $1.1 million and depreciation and amortization expense of $1.0 million.
Previous report
Net cash used in operating activities for the period from June 7, 2022 (date of inception) to December 31, 2022 was related to bank charges and is reflective of the Company’s limited activity initially after its formation.
Previous report
Investing Activities
Previous report
Net cash used in investing activities was $23.7 million for the year ended December 31, 2023 and primarily resulted from the $21.2 million acquisition of unproved oil and gas properties, cash paid in the reverse asset acquisition, net of cash received of $2.0 million and capital investments of $0.4 million.
Previous report
There was no cash used in or provided by investing activities for the period from June 7, 2022 (date of inception) to December 31, 2022 reflective of the Company’s limited activity initially after formation.
Previous report
Financing Activities
Previous report
Net cash provided by financing activities was $48.6 million for the year ended December 31, 2023, compared to $0.1 million for the period from June 7, 2022 (date of inception) to December 31, 2022, and primarily resulted from $17.4 million of proceeds from the Series D PIPE, $20.0 million from the Series E PIPE, and $12.5 million from the exercise of warrants, partially offset by financing costs of $1.1 million and $0.2 million from the payoff of the SBA loan.
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Reworded paragraphs (19)
Previous wording
On May 3, 2023, the Company completed the Merger, 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. Upon consummation of the Merger, the Company changed its name from “Creek Road Miners, Inc.” to “Prairie Operating Co.” The Merger was accounted for as a reverse asset acquisition; as a result, our cryptocurrency mining operations are reported as commencing on May 3, 2023, concurrent with the Merger and prior revenues and expenses of Creek Road related to cryptocurrency mining activities are not presented in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or the accompanying financial statements.
Current wording
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Previous wording
You should read the following discussion and analysis of our financial condition and results of operations for the fiscal years ended December 31, 2023 and 2022 together with our consolidated financial statements and related notes and other financial information appearing in this Annual Report. The discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in the Annual Report.
Current wording
The following discussion and analysis of our financial condition and results of operations for the year ended December 31, 2024 and 2023 should be read in conjunction with our consolidated financial statements and related notes to those financial statements and other financial information appearing in this Annual Report.
Previous wording
We are an independent oil and gas company focused on the acquisition and development of crude oil, natural gas and NGLs. We currently hold attractive acreage in the DJ Basin that our experienced management team intends to develop, deploying next-generation technology and techniques in an environmentally efficient manner. In addition to growing production through our drilling operations, we also seek to grow our business through accretive acquisitions, 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.
Current wording
We seek to deliver energy in an environmentally efficient manner by deploying next-generation technology and techniques. In addition to growing production through our drilling operations, we also seek to grow our business through accretive acquisitions, 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.
Previous wording
On January 11, 2024, we entered into the NRO Agreement, to acquire the Central Weld Assets for total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions. The Purchase Price consists of $83.0 million in cash and $11.5 million in deferred cash payments. The Company deposited $9 million of the Purchase Price into an escrow account on January 11, 2024, which will be released to Seller upon the earlier of the closing date and August 15, 2024 (the “Outside Date”). Portions of the Deposit are subject to earlier release under certain circumstances if the closing has not occurred on or prior to June 17, 2024. See “Business—Recent Developments—NRO Acquisition” for a description of the NRO Agreement. We expect to fund the transaction through a combination of public and/or private issuance of common stock, cash on hand, and proceeds from existing warrant exercises. While we expect to close the NRO Acquisition in the first half of 2024, such acquisition is subject to a number of closing conditions. Satisfaction of some of these conditions is beyond our control. If these conditions are not satisfied or waived, the NRO Acquisition will not be completed. See “Risk Factors—Risks Related to the NRO Acquisition.”
Current wording
On January 11, 2024, we entered into the NRO Agreement to acquire the Central Weld Assets, located in the DJ Basin in Weld County, Colorado for total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions. The Purchase Price consisted of $83.0 million in cash and $11.5 million in deferred cash payments. Pursuant to the NRO Agreement, we deposited $9.0 million of the Purchase Price into an escrow account on January 11, 2024.
Previous wording
General and administrative. General and administrative expenses for the year ended December 31, 2023 increased $15.8 million over the period from June 7, 2022 (date of inception) to December 31, 2022. This was primarily due to employment and benefit costs of $4.5 million, stock-based compensation of $3.0 million, investor relations costs of $2.8 million, legal and accounting costs of $1.8 million, Board fees and expenses $1.0 million, professional services of $0.6 million, insurance of $0.4 million and other costs of $1.7 million.
Current wording
*General and administrative expenses.*For the year ended December 31, 2024, general and administrative expenses increased $14.3 million compared to the year ended December 31, 2023. This increase aligns with the growth of our E&P business during the year ended December 31, 2024 and was primarily driven by incremental stock–based compensation of $5.7 million, employee and benefit expenses of $4.0 million, legal and accounting costs of $2.4 million, financing commitment fees of $0.6 million, investor relations costs of $0.4 million, and insurance and rent costs of $0.4 million.
Previous wording
Liquidated damages. Liquidated damages of $0.5 million were recorded for the year ended December 31, 2023 as a result of the registration statement registering the resale of certain shares of the Company’s common stock and shares of common stock underlying the Series D Preferred Stock and Series D PIPE Warrants having not been declared effective within the timeframe required under the related registration rights agreement. There were no such costs in 2022.
Current wording
Liquidated damages. For the year ended December 31, 2023, we recognized liquidated damages expense of $0.5 million due to the registration statement registering the resale of certain shares of our Common Stock and the shares of Common Stock underlying the Series D Preferred Stock and Series D PIPE Warrants not being declared effective within the timeframe required under the related registration rights agreement. We did not recognize any liquidated damage expense during the year ended December 31, 2024.
Previous wording
Our E&P activities will require us to make significant operating and capital expenditures. In 2023, our primary sources of liquidity were the Series D PIPE and the Series E PIPE, which funded the purchase of the Initial Genesis Assets and working capital, as well as proceeds from the exercise of warrants, which funded, among other things, working capital and the deposit for the NRO Acquisition in 2024. Since we sold our only revenue-generating assets in January 2024 and do not yet have any operating E&P assets, we will require additional capital to fund our development program and operations. Our primary uses of cash have been for the acquisition and development of oil and natural gas properties and payments of general, administrative and operating costs.
Current wording
Our E&P activities will require us to make significant operating and capital expenditures. In 2023, our primary sources of liquidity were the proceeds from the Series D PIPE and the Series E PIPE, which funded the purchase of the initial Genesis Assets and working capital, as well as proceeds from the exercise of warrants, which funded, among other things, working capital and the deposit for the NRO Acquisition in 2024. We commenced drilling wells on our Genesis Bolt-on Assets in the third quarter of 2024 and those wells began producing in February 2025.
Previous wording
We do not currently have significant capital commitments outside of the NRO Acquisition. However, even if we are able to close the NRO Acquisition, we expect that we will need to access additional capital through public and/or private markets in order to fund our E&P development and strategy. The availability of such additional capital is subject to numerous factors including prices of oil and natural gas and the overall health of the U.S. and global economic environment and are largely outside of the control of the Company. There can be no assurance that the Company can obtain such additional capital. The amount and allocation of future capital expenditures will depend upon a number of factors, including the amount and timing of cash flows from operations, investing and financing activities, and timing and cost of additional capital sources.
Current wording
Our development program is dependent upon our cash flow from operations generated from our assets and our ability to obtain additional financing through our SEPA and Credit Facility. Additionally, we could obtain additional financing through public and private capital markets; however, the availability of additional capital would be subject to numerous factors outside of our control including prices of oil and natural gas and the overall health of the U.S. and global economic environments. There can be no assurance that we will be able to obtain such additional capital. The amount and allocation of future capital expenditures will depend upon a number of factors, including the amount and timing of cash flows from operations, investing and financing activities, and the timing and cost of additional capital sources.
Previous wording
Because we are the operator of all of our acreage, the timing and level of our capital spending is largely discretionary and within our control. We could choose to defer a portion of planned capital expenditures depending on a variety of factors, including, but not limited to, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs, the level of participation by other working interest owners, the success of our drilling activities, prevailing and anticipated prices for oil, natural gas and NGLs, the availability of necessary equipment, infrastructure and capital.
Current wording
We currently plan to be the operator on substantially all of our acreage. As a result, we anticipate that the timing and level of our capital spending will largely be discretionary and within our control. We could choose to defer a portion of our planned capital expenditures depending on a variety of factors, including, but not limited to, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs, the level of participation by other working interest owners, the success of our drilling activities, prevailing and anticipated prices for oil, natural gas, and NGLs, the availability of necessary equipment, infrastructure and capital.
Previous wording
We define working capital as current assets less current liabilities. At December 31, 2023 we had working capital of $8.1 million and at December 31, 2022 we had a working capital deficit of $2.1 million. Our current working capital decreased upon the deposit payment associated with the NRO Agreement and is expected to further decrease in the future due to expenses incurred in connection with our business and until revenue is recognized from our E&P business and/or we raise additional capital through the exercise of existing warrants or through the public and/or private markets. Cash and cash equivalents totaled $13.0 million and $0.1 million at December 31, 2023 and December 31, 2022, respectively.
Current wording
We define working capital as current assets less current liabilities. As of December 31, 2024, we had a working capital deficit of $44.7 million and cash and cash equivalents of $5.2 million and as of December 31, 2023, we had working capital of $8.1 million and cash and cash equivalents of $13.0 million.
Previous wording
The following table summarizes our cash flows for the periods indicated:
Current wording
The following table summarizes our cash flows for the years indicated:
Previous wording
The Company had a net loss of $79.1 million for the year ended December 31, 2023. We cannot predict if we will be profitable in the near future, or ever. We may continue to incur losses for an indeterminate period of time and may be unable to achieve profitability. An extended period of losses and negative cash flow may prevent us from successfully operating and expanding our business. We may be unable to achieve or sustain profitability on a quarterly or annual basis. At December 31, 2023, we had cash and cash equivalents of $13.0 million, working capital of $8.1 million, and an accumulated deficit of $78.9 million.
Current wording
For the year ended December 31, 2024, we had a net loss of $40.9 million. We cannot predict if or when we will be profitable, and we may continue to incur losses for an indeterminate period of time. Additionally, we may be unable to achieve or sustain profitability on a quarterly or annual basis and extended periods of losses and negative cash flow may prevent us from successfully operating and expanding our business. As of December 31, 2024, we had cash and cash equivalents of $5.2 million, a working capital deficit of $44.7 million, and an accumulated deficit of $119.8 million.
Previous wording
The assessment of liquidity and going concern requires the Company to make estimates of future activity and judgments about whether the Company can meet its obligations and has adequate liquidity to operate. Significant assumptions used in the Company’s forecasted model of liquidity in the next 12 months include our current cash position and our ability to manage spending. Based on an assessment of these factors, management believes that the Company will have adequate liquidity for its operations for at least the 12 months from the date the Company’s financial statements are issued.
Current wording
The assessment of liquidity requires management to make estimates of future activity and judgments about whether we can meet our obligations, have adequate liquidity to operate, and maintain compliance with the applicable financial covenants of our Credit Facility Agreement, as discussed above. Significant assumptions used in our forecasted model of liquidity in the next 12 months include our current cash position and our ability to manage spending. Based on an assessment of these factors, management expects that our cash balance, expected revenues from our existing producing wells and newly producing Shelduck wells, and liquidity available under the SEPA and Credit Facility and potential offerings under the effective Form S-3 registration statement will be sufficient to meet our obligations over the next 12 months and fulfil the financial covenant requirements under our Credit Facility Agreement, as discussed above.
Previous wording
E&P. We follow the successful efforts method of accounting for our oil and natural gas properties. Under this method, exploration costs such as exploratory geological and geophysical costs, expiration of unproved leasehold, delay rentals and exploration overhead are expensed as incurred. All costs related to production, general corporate overhead and similar activities are also expensed as incurred. All property acquisition costs and development costs are capitalized when incurred.
Current wording
We follow the successful efforts method of accounting for our oil and natural gas properties. Under this method, exploration costs such as exploratory geological and geophysical costs, expiration of unproved leasehold, delay rentals, and exploration overhead are expensed as incurred. All costs related to production, general corporate overhead, and similar activities are also expensed as incurred. All property acquisition costs and development costs are capitalized when incurred.
Previous wording
Exploratory drilling costs are initially capitalized, or suspended, pending the determination of proved reserves. If proved reserves are found, drilling costs remain capitalized and are classified as proved properties. Costs of 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 we determine 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. We review the status of all suspended exploratory drilling costs quarterly. Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of natural gas and oil are capitalized.
Current wording
In successful efforts accounting, exploratory drilling costs are initially capitalized, or suspended, 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 we determine 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. We review the status of all suspended exploratory drilling costs quarterly. Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of natural gas and oil, are capitalized.
Previous wording
Costs of drilling and equipping successful wells, costs to construct or acquire facilities, and associated asset retirement costs are depreciated using the unit-of-production (“UOP”) method based on total estimated proved developed oil and natural gas reserves. Costs of acquiring proved properties, including leasehold acquisition costs transferred from unproved properties, are depleted using the UOP method based on total estimated proved developed and undeveloped reserves.
Current wording
The costs of drilling and equipping successful wells, costs to construct or acquire facilities, and associated asset retirement costs are depreciated using the UOP method based on total estimated proved developed oil and natural gas reserves. Costs for wells in the process of being drilled, significant nonproducing properties, and in-process development projects are excluded from depletion until the related project is completed and proved producing reserves are established or, if unsuccessful, abandonments expense is recognized. The costs of acquiring proved properties, including leasehold acquisition costs transferred from unproved properties, are depleted using the UOP method based on total estimated proved developed and undeveloped reserves.
Previous wording
When circumstances indicate that the carrying value of proved oil and natural gas properties may not be recoverable, we compare 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 our 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. If applicable, we utilize 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.
Current wording
When circumstances indicate that the carrying value of proved oil and natural gas properties may not be recoverable, we compare 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 our 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 ASC 820. If applicable, we utilize 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.
Previous wording
The Company is subject to various litigation, claims and proceedings, that arise in the ordinary course of business. The Company recognizes a liability for such loss contingencies when it believes 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. 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.
Current wording
We recognize a liability for loss contingencies when we believe 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, we accrue that amount. When no amount within the range is a better estimate than any other amount we accrue the minimum amount in the range.
Previous wording
We account 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 tax bases. 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 be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. At December 31, 2023, the Company had a full valuation allowance to offset its net deferred tax assets.
Current wording
We account 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 be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. As of December 31, 2024, we had a full valuation allowance to offset its net deferred tax assets.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
As discussed above, on January 11, 2024, we entered into the NRO Agreement to acquire the Central Weld Assets, located in the DJ Basin in Weld County, Colorado for total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions. Pursuant to the NRO Agreement, we deposited $9.0 million of the Purchase Price into an escrow account on January 11, 2024.