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 energy company focused on the acquisition and development of crude oil, natural gas and natural gas liquids (“NGLs”). The Company assets and operations are strategically located in the oil region of rural Weld County, within the Denver–Julesburg Basin (the “DJ Basin”) of Colorado. In addition to growing production through its drilling operations, the Company also seeks to grow its business through accretive acquisitions, such as the acquisition of the Genesis Bolt–on Assets (as defined herein) in February 2024 and the NRO Acquisition (as defined herein), which closed in October 2024. Refer toNote 4 – Acquisitions and Merger for a full discussion of the acquisitions.

As of December 31, 2024, the Company’s exploration and production (“E&P”) assets consist of its Central Weld Assets (as defined herein), Genesis and Genesis Bolt–on Assets (as defined herein), and the Exok Option Purchase assets (as defined herein). The Company’s Central Weld Assets were acquired from Nickel Road Development LLC and Nickel Road Operating LLC (collectively, “NRO”) in October 2024 and include 26 revenue producing oil and natural gas wells. As of December 31, 2024, the Company’s total Genesis Assets include approximately 18,100 net leasehold acres in, on and under approximately 31,000 gross acres and total Central Weld Assets include approximately 5,640 net leasehold acres, on and under approximately 6,000 gross acres. The Company commenced drilling wells on its Genesis Bolt-on Assets in the third quarter of 2024 and all eight wells began producing in February 2025.

Previously, the Company focused on cryptocurrency mining until the sale of its cryptocurrency miners in January 2024. The Company’s cryptocurrency mining operations commenced on May 3, 2023 concurrent with the Merger (as defined herein). Prior to January 2024, all of the Company’s revenue was generated through its cryptocurrency mining activities from assets that were acquired in the Merger. Upon the closing of the Crypto Sale (as defined herein), the Company exited the cryptocurrency mining business. All results and activities from these assets and operations have been classified as discontinued operations in the Company’s consolidated financial statements. Refer toNote 3 – Discontinued Operations for a full discussion of the discontinued operations.

Merger Agreement and Related Transactions

On May 3, 2023, the Company completed its merger with Prairie Operating Co., LLC, a Delaware limited liability company (“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.”

Upon the Merger, membership interests in Prairie LLC were converted into the right to receive each member’s pro rata share of 2,297,668 shares of Common Stock. The Merger was accounted for as a reverse asset acquisition under existing accounting principles generally accepted in the United States (“GAAP”). For accounting purposes, Prairie LLC was treated as acquiring Merger Sub in the Merger. Refer toNote 4 – Acquisitions and Mergerfor a further discussion.

On October 16, 2023, the Company effected areverse 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 for all periods presented.

Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Prairie LLC with the acquisition being treated as the equivalent of Prairie LLC issuing stock for the net assets of the Company. At the date of the Merger, the assets and liabilities of the Company were recorded based upon relative fair values, with no goodwill or other intangible assets recorded.

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 periods presented in accordance with GAAP and the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company owns 100% of 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.

Liquidity Analysis

During the year ended December 31, 2024, the Company had a net loss of $40.9 million. The Company cannot predict if or when it will be profitable and may continue to incur losses for an indeterminate period of time. Additionally, the Company may be unable to achieve or sustain profitability on a quarterly or annual basis and extended periods of losses and negative cash flow may prevent it from successfully operating and expanding its business. As of December 31, 2024, the Company 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.

On September 30, 2024, the Company entered into the SEPA (as defined herein), a Subordinated Note (as defined herein), and a Senior Convertible Note (as defined herein). The Company closed the NRO Acquisition (as defined herein) on October 1, 2024, 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. The Company used the remainder of the Senior Convertible Note proceeds and the Subordinated Note proceeds to fund its drilling program. On December 16, 2024, the Company entered into a reserve-based Credit Facility (as defined herein) with Citibank, N.A. (“Citi”) and borrowed $28.0 million to help fund its working capital needs. Refer toNote 10 – Debt for a discussion of the Credit Facility, Senior Convertible Note, and Subordinated Note issuances and toNote 14 – Common Stock for a discussion of the issuance of Common Stock.

The assessment of liquidity requires management to make estimates of future activity and judgments about whether the Company can meet its obligations, have adequate liquidity to operate, and maintain compliance with the applicable financial covenants of its Credit Facility Agreement, as discussed inNote 10 – Debt. Significant assumptions used in the Company’s forecasted model of liquidity in the next 12 months include its current cash position and ability to manage spending. Based on an assessment of these factors, management expects that the Company’s cash balance, expected revenues from its existing producing wells 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 its obligations over the next 12 months and fulfil the financial covenant requirements under its Credit Facility Agreement, as discussed inNote 10 – Debt.

Since entering into the SEPA in September 2024 and the Credit Facility Agreement in December 2024 and with the Form S-3 registration statement becoming effective in December 2024, the Company has the ability to access funds to meet its working capital needs. Since the Company’s ability to request an Advance under the SEPA does not require action on the part of management, other than requesting the Advance, and the maximum Advance amount is less or equal to the Company’s liquidity needs, substantial doubt about the Company’s ability to continue as a going concern does not exist.

Segment Information

The Company operates in one business segment, the acquisition, development, and production of crude oil, natural gas, and NGLs (the “Operating Segment,”), primarily in the U.S. DJ Basin. This is consistent with the internal reporting provided to the Company’s executive team, which is the chief operating decision maker (“CODM”) and includes the Chief Operating Officer, President, Chief Financial Officer, and Executive Vice President of Operations.

The Company’s Operating Segment produces and sells crude oil, natural gas, and NGL volumes, which is reported as oil, natural gas, and NGL revenue on its consolidated statements of operations for the years ended December 31, 2024 and 2023. The Company’s revenue recognition policy and other accounting policies for its Operating Segment are the same as its companywide accounting policies discussed below inNote 2 – Summary of Significant Accounting Policies. The Operating Segment’s major customers during the year ended December 31, 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, 2024 or 2023 and the Operating Segment significant expenses are the same as those reported on the consolidated statements of operations for the years ended December 31, 2024 and 2023.

The CODM assesses the performance of the Operating Segment and decides how to allocate resources based on the Company’s net income (loss), as reported on the consolidated statements of operations. Additionally, net income (loss) on the consolidated statements of operations is used to monitor budget versus actual results of the Operating Segment and to benchmark against the Company’s competitors. The CODM’s measure of the Operating Segment assets is reported as total assets on the consolidated balance sheets.

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 reserves of credit losses, accruals for potential liabilities, estimates and assumptions made in valuing assets and debt instruments issued in the Merger, the valuation of the SEPA, Senior Convertible Note, the Subordinated Note, and warrants issued in the third quarter of 2024, discussed further inNote 10 – Debt, the fair value of its derivative instruments, and the realization of deferred tax assets.

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, 2024 and 2023, the Company had cash and cash equivalents of $5.2 million and $13.0 million, respectively.

Accounts Receivable

Oil, natural gas, and NGL revenue receivable consists of uncollateralized accrued oil, natural gas, and NGL revenue due under normal trade terms, generally requiring payment within 30 days of production. 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 abandon (“P&A”) costs that 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 that are past due.

The Company did not have any producing wells prior to the NRO Acquisition (as defined herein), which closed on October 1, 2024. Following the NRO Acquisition, during the fourth quarter of 2024, two of the Company’s largest customers accounted for approximately 80% and 15% of its oil, natural gas, and NGL revenues. Those same two customers accounted for approximately 78% and 20% of the Company’s accrued 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. However, the Company does not believe the loss of any single purchaser would materially impact its operating results, as crude oil, natural gas, and NGL are fungible products with well-established markets and numerous purchasers.

Oil and Natural Gas Properties

The Company follows the successful efforts method of accounting for its 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.

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 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. The Company reviews 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.

The 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 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.

The following table presents the costs of unproved properties excluded from the Company’s UOP depreciation calculation as of December 31, 2024 and the periods such costs were incurred:

Proceeds from the sales of individual oil and natural gas properties and the capitalized costs of individual properties sold or abandoned are credited and charged, respectively, to accumulated depreciation, depletion and amortization, if doing so does not materially impact the depletion rate of an amortization base. Generally, no gain or loss is recognized until an entire amortization base is sold. However, a gain or loss is recognized from the sale of less than an entire amortization base if the disposition is significant enough to materially impact the depletion rate of the remaining properties in the amortization base.

When circumstances indicate that the carrying value of proved oil and natural gas properties may not be recoverable, 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. 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.

Other Property and Equipment

Other property and equipment primarily consists of office furniture and fixtures which are depreciated using the straight line method over their estimated useful lives of 5 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 toNote 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 toNote 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 G&A over the life of the policy.

Deferred Financing Costs

Deferred financing costs include origination, legal, and other fees incurred to issue debt or amend existing credit facilities. Deferred financing costs related to the Company’s Credit Facility (as defined herein) are capitalized to other non–current assets 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 toNote 10 - Debt for a discussion of the Company’s Credit Facility.

Notes Receivable

As discussed further below inNote 3 – Discontinued Operations, the Company sold all of its cryptocurrency miners (the “Mining Equipment”) in January 2024. The consideration included $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. As of December 31, 2024, the Company presents the Deferred Purchase Price payment as a note receivable on its consolidated balance sheet, $0.5 million of which is classified as current and $0.2 million of which is classified as non–current, based on when the payments are expected. The Company did not have a note receivable balance on its consolidated balance sheet as of December 31, 2023.

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, 2024, none of the Company’s active leases contain purchase or termination options that are reasonably certain to be exercised.

The Company has several operating leases for office space and vehicles used in its daily operations, for which it records the related lease costs as G&A expenses on the accompanying consolidated statements of operations.

Asset Retirement Obligations

The Company’s oil and natural gas properties include estimates of future expenditures to P&A 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 P&A 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 P&A 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 toNote 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 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.

Liabilities at Fair Value

As discussed inNote 10 – Debt andNote 14 – Common Stock, on September 30, 2024, the Company entered into the SEPA and issued the Senior Convertible Note, the Subordinated Note, and the Subordinated Note Warrants. All three of these agreements contain features which must be evaluated for embedded derivatives and bifurcation pursuant to ASC Topic 815, Derivatives and Hedging (“ASC 815”). As such, the Company has elected to account for the SEPA, the Senior Convertible Note, the Subordinated Note, and the Subordinated Note Warrants using the fair value option. Refer toNote 6 – Fair Value Measurementsfor a full discussion of the fair values of the SEPA, the Senior Convertible Note, the Subordinated Note, and the Subordinated Note Warrants.

Revenue Recognition

The Company recognizes revenue from the sales of oil, natural gas, and NGLs at the point that control of the produced oil, natural gas, and NGL volumes are transferred to the customer.

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

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 gathering, transportation, and processing expenses within its consolidated statements of operations. Gathering, transportation, and processing expenses incurred prior to the transfer of control are recorded gross within gathering, transportation, and processing in the accompanying statements of operations.

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 accrued in oil, natural gas, and NGL revenue accounts receivable on the accompanying consolidated balance sheets. 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.

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. Therefore, 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 operating expense 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. In these contracts, the Company may elect to take residue gas and/or NGLs in-kind at the tailgate of the processing plant and subsequently market the product. Through the marketing process, the Company delivers the product to the purchaser at a contractually agreed-upon delivery point and receives a specified index price from the purchaser. This purchaser can be the natural gas processor or the processor can market the product on the Company’s behalf to a third-party purchaser. In both scenarios, the Company is the principal in the transaction as control of the product remains with the Company throughout the process and any fees paid to the processor are considered to be for a distinct service with an identifiable benefit that is sufficiently separable. Therefore, the Company recognizes revenue when control transfers to the ultimate purchaser at the delivery point based on the index price received from the purchaser and records the gathering, processing, and compression fees attributable to the gas processing contract, as well as any transportation fees incurred to deliver the product to the purchaser, are presented as a component of operating expense in the accompanying consolidated statements of operations.

General and Administrative Expenses

General and administrative (“G&A”) 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 LOE when they are directly attributable to maintaining the production of its operated oil and natural gas properties. For oil and natural gas properties for which the Company is the operator, it reduces G&A 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. G&A expenses also include software fees and audit, legal, and other professional service fees. 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 G&A expense.

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 perASC Topic 718, Compensation—Stock Compensation. As such, the fair value of the PSUs awards is determined by a third party 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 (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 withASC Topic 718, Compensation - Stock Compensation. The Company has elected to not estimate the forfeiture rate of its RSUs and PSUs in its initial calculation of compensation expense, but instead will adjust compensation expense for forfeitures as they occur. Refer toNote 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 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, the Company had a full valuation allowance to offset its net deferred tax assets.

Earnings (Loss) Per Common Share

The two–class method of computing earnings per share is required for entities that have participating securities. The two–class method is an earnings allocation formula that determines earnings per share for participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. The Company’s Series D Preferred Stock (as defined herein) is a participating security and the Company’s Series E Preferred Stock (as defined herein) was considered a participating security when the shares were outstanding during the year ended December 31, 2023. These participating securities do not have a contractual obligation to share in the Company’s losses. Therefore, in periods of net loss, no portion of such losses are allocated to participating securities.

Basic earnings (loss) per common share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of Common Stock outstanding each period.

Dilutive EPS is calculated by dividing adjusted net income (loss) attributable to common stockholders by the weighted average number of shares of Common Stock outstanding each period, which includes the effect of potentially dilutive securities. Potentially dilutive securities for the diluted EPS calculation consists of (i) Series D Preferred Stock, (ii) Series E Preferred Stock, when the shares were outstanding during the year ended December 31, 2023, (iii) warrants to purchase Common Stock, and (iv) exercisable Common Stock options. Diluted EPS reflects the dilutive effect of the participating securities using the two–class method or the treasury stock method, whichever is more dilutive.

Basic and diluted earnings (loss) attributable to common stockholders is the same for the year ended December 31, 2024 and 2023 because the Company has only incurred losses and all potentially dilutive securities are anti–dilutive.

The following table presents the potentially dilutive securities which were not included in the computation of diluted earnings (loss) attributable to common stockholders for the year ended December 31, 2024 because their inclusion would be anti–dilutive:

The following table presents the potentially dilutive securities which were not included in the computation of diluted earnings (loss) attributable to common stockholders for the year ended December 31, 2023 because their inclusion would be anti–dilutive:

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 and income taxes for the periods presented:

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 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 is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

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 2023-03”), 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.

Note 3–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”). As of December 31, 2024, the Company presents the Deferred Purchase Price payment as a note receivable on its consolidated balance sheet, $0.5 million of which is classified as current and $0.2 million of which is classified as non–current, based on when the payments are expected. The Company did not have a note receivable balance on its consolidated balance sheet as of December 31, 2023. The Company recognized a loss of $1.1 million related to this disposition on its consolidated statement of operations and statement of cash flows for the year ended December 31, 2024.

The Company has presented the related assets and liabilities associated with discontinued operations separately as discontinued operations on its consolidated balance sheets as of December 31, 2024 and 2023. The following table presents the major classes of assets included as part of discontinued operations in the Company’s consolidated balance sheets for the periods indicated:

Additionally, the Company has presented the financial results associated with discontinued operations separately as discontinued operations on its consolidated statements of operations for the year ended December 31, 2024 and 2023 and its consolidated statements of cash flows for the year ended December 31, 2024 and 2023. The following table presents the major classes of line items constituting the loss from discontinued operations on the Company’s consolidated statements of operations and consolidated statements of cash flows for the periods presented:

Note 4–Acquisitions and Merger

On January 11, 2024, the Company entered into an asset purchase agreement (the “NRO Agreement”) with Nickel Road Development LLC, Nickel Road Operating, LLC, (“NRO”) and Prairie LLC 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 toNote 10 – Debtfor a discussion of the Senior Convertible Note and toNote 14 – Common Stock 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 purchase price of $55.5 million.

The NRO Acquisition was accounted for as an asset acquisition in accordance with ASC Topic 805 - Accounting for Business Combinations. 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:

Genesis Bolt–on Acquisition

On February 5, 2024, the Company acquired 1,280 gross leasehold acres on drillable spacing unit and eight proved undeveloped drilling locations in the DJ Basin (the “Genesis Bolt–on Assets”) from a private seller for $0.9 million. These assets offset the other oil and gas assets held by the Company in northern Weld County, Colorado.

Initial Genesis Asset Acquisitions

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 “Exok Transaction”).

On August 15, 2023, Prairie LLC exercised the option it acquired in the Exok Transaction and purchased additional oil and gas leases from Exok, consisting of approximately 25,240 net leasehold acres in, on and under approximately 32,580 gross acres (the “Exok Option Purchase”) 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 (as defined herein), and equity consideration to certain affiliates of Exok consisting of (i)670,499 shares of Common Stock, and (ii) warrants providing the right to purchase 670,499 shares of Common Stock at $7.43 per share (the “Exok Warrants”). Refer toNote 15 – Common Stock Options and Warrantsfor a discussion of the Exok Warrants.

Merger with Creek Road Miners, Inc.

Under the terms of the Merger, the Company issued 2,297,668 shares of Common Stock to the members of Prairie LLC in exchange for all of the membership interests of Prairie LLC. Additionally, and as a condition of the Merger,4,423 shares of Series D Preferred Stock (as defined herein) were issued to holders of the 12% amended and restated senior secured convertible debentures (collectively, the “AR Debentures”). Refer toNote 10 – Debt for a discussion of the AR Debentures.

The purchase price was calculated based on the fair value of Common Stock that the Company’s stockholders, immediately prior to the Merger, owned after the Merger, and the fair value of the Series D Preferred Stock issued to the holders of the AR Debentures. Since there was no active trading market for the membership interests of Prairie LLC, the fair value of the Company’s Common Stock represented a more reliable measure of the fair value of consideration transferred in the Merger. The Company’s Common Stock was based upon a quoted price in an active market, which is considered a Level 1 fair value input. The fair value of the 4,423 shares of Series D Preferred Stock was determined using a valuation model with unobservable inputs, which are considered Level 3 inputs on the fair value hierarchy.

The following table presents the total purchase price on May 3, 2023, the closing date of the Merger:

The purchase price for the Merger was allocated to the net assets acquired on the basis of their relative fair values. The fair values of the current assets acquired and current liabilities (excluding the convertible debentures) assumed in the Merger were determined to approximate carrying value due to their short–term nature. The fair value of the mining equipment was determined using estimated replacement values of the same or similar equipment and, as such, are considered Level 3 inputs in the fair value hierarchy. The fair value of the secured convertible debentures was calculated as described above. The fair value of the share issuance liability was calculated based on the quoted price of the Company’s Common Stock and, as such, is considered a Level 1 measurement on the fair value hierarchy.

The following table presents the allocation of the purchase price to the net assets acquired on May 3, 2023, the closing date of the Merger:

Note 5–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. Currently, the Company only has commodity swap contracts outstanding, which guarantee a fixed price on contracted volumes over specified time periods. However, in the future, the Company could utilize other types of derivative instruments including call and purchased options, put spreads, collars, and three-way collars. As of December 31, 2024, the Company’s derivative counterparty is Citi, which is the administrative agent and lender of its reserve-based credit agreement (the “Credit Facility”).

As of December 31, 2024, 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 and NYMEX Henry Hub, 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, the aggregate net gains and losses resulting from changes in the fair values of its outstanding derivatives and the settlement of derivative instruments during the period are recognized as part of the loss on derivatives, net on the accompanying consolidated statements of operations. Additionally, all of the Company’s hedge positions are currently in a liability position, therefore, there is no offsetting in the presentation of its derivative instruments.

The following table presents the net fair values of the Company’s derivative instruments, recorded on the consolidated balance sheet for the period presented:

The following table presents the components of loss on derivatives, net reflected on the accompanying consolidated statement of operations and cash flows for the period presented:

The Company did not have any outstanding derivatives contracts or any derivative settlements during the year ended December 31, 2023.

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 nonrecurring basis. Per ASC Topic 820,Fair Value Measurements and Disclosures, 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.

Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the Company’s liabilities which were measured at fair value on a recurring basis as of December 31, 2024 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, 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 a current liability.

The Company has elected the fair value option for the financial instruments listed below, as such, it 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 – debt and warrants on its consolidated statements of operations and consolidated statement of cash flows. The following table presents the changes in the Company’s financial instruments presented at fair value for the periods presented:

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 December 31, 2024:

*Standby Equity Purchase Agreement.*On September 30, 2024, the Company 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, the Company has the right, 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’s right to sell shares to Yorkville under the SEPA was contingent upon the Company having an effective registration statement, which was declared effective by the SEC on December 20, 2024. 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.

As of December 31, 2024, the fair value of the SEPA was determined by a third-party using a Monte Carlo simulation model and 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, 2024, the fair value of the SEPA is $0.8 million, which resulted in corresponding loss on adjustment to fair value – debt and warrants of $0.8 million on the Company’s consolidated statement of operations and consolidated statement of cash flows for the year ended December 31, 2024. Refer toNote 10 – Debt for a further discussion of the SEPA.

*Senior Convertible Note.*Additionally, on September 30, 2024, Yorkville advanced an initial $15.0 million (the “Pre-Paid Advance”) to the Company and the Company issued a convertible promissory note (the “Senior Convertible Note”), with an interest rate of 8.00% and a maturity date of September 30, 2025. The Company has determined that certain features of the Senior Convertible Note require bifurcation and separate accounting as embedded derivatives. As such, the Company has 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 will remeasure the fair value each reporting period with changes in fair value recognized in earnings.

As of December 31, 2024, the fair value of the Senior Convertible Note was determined by a third-party using a Monte Carlo simulation model and 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, 2024, the fair value of the Senior Convertible Note is $12.6 million, which resulted in a loss on adjustment to fair value – debt and warrants of $2.1 million on the Company’s consolidated statement of operations and consolidated statement of cash flows for the year ended December 31, 2024. Refer toNote 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, 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. The Company has determined that certain features of the Subordinated Note require bifurcation and separate accounting as embedded derivatives. As such, the Company has 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 will remeasure the fair value each reporting period with changes in fair value recognized in earnings.

As of December 31, 2024, the fair value of the Subordinated Note was determined by a third-party using a credit default valuation model using the significant inputs listed below, which are considered unobservable inputs which are corroborated by market data and are therefore considered Level 2 inputs within the fair value hierarchy.

As of December 31, 2024, the fair value of the Subordinated Note is $4.6 million, which resulted in a loss on adjustment to fair value – debt and warrants of $1.1 million on the Company’s consolidated statement of operations and consolidated statement of cash flows for the year ended December 31, 2024. Refer toNote 10 – Debtfor a further discussion of the Subordinated Note.

Subordinated Note Warrants.As discussed inNote 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 fair value of the Subordinated Note Warrants was determined by a third-party 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, 2024, the fair value of the Subordinated Note Warrants was $4.2 million compared to $2.8 million as of September 30, 2024, the date of the Subordinated Note Warrants issuance. The Company recognized the $1.4 million change in fair value as 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. Refer toNote 15 – Common Stock Options and Warrantsfor a further discussion of the Subordinated Note Warrants.

*AR Debentures.*Through September 2023, the fair value of the Company’s AR Debentures was based on a widely accepted valuation methodology that utilizes (i) the Company’s Common Stock price, (ii) value of the debt component, and (iii) the value of the equity component.

The key unobservable inputs in the valuation model listed below could change significantly and result in significantly higher or lower fair values at different measurement dates; therefore, they are considered Level 3 inputs within the fair value hierarchy.

The AR Debentures were converted in October 2023; therefore, the Company stopped remeasuring the change in fair value at that time. The fair value at conversion was determined using the Company’s Common Stock price. On October 11, 2023, the date that the AR Debentures were fully converted, the fair value of the AR Debentures was $5.8 million, compared to $2.0 million at the date of the Merger. The Company recognized the $3.8 million change in fair value as 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, 2023. Refer toNote 10 – Debt for a further discussion of the AR Debentures.

Common Stock Obligation Shares. As discussed inNote 14 – Common Stock, as a result of the Merger and related transactions, the Company had the obligation to issue 205,970 shares of Common Stock (the “Obligation Shares”). The fair value of the Obligation Shares was based on the quoted price of the Company’s Common Stock and, as such, was considered a Level 1 input within the fair value hierarchy. The underlying shares were fully issued on September 7, 2023, therefore, the Company stopped remeasuring the change in the fair value of the obligation at that time.

On September 7, 2023, the date that the underlying shares were fully issued, the fair value of the Obligation Shares was $1.5 million. The Company recognized the $1.5 million change in fair value as 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, 2023. Refer toNote 14 – Common Stock for a further discussion of the Obligation Shares.

Reclassified Warrant Liabilities. In September 2023, pursuant to ASC 815, the Company adopted a sequencing policy to determine how to allocate authorized and unissued shares among commitments to deliver shares. The sequence was based upon reclassifying securities with the latest maturity date first. Refer toNote 14 – Common Stock for a discussion of the share sequencing. This sequencing and the lack of sufficient authorized shares required the Company to reclassify a portion of the Series D A Warrants and all of the Series E A Warrants to liabilities at various dates throughout the year ended December 31, 2023 (collectively, the “Reclassified Warrant Liabilities”).

The fair values of the Reclassified Warrant Liabilities at their respective reclassification dates throughout the year ended December 31, 2023 were determined by a third-party using Black-Scholes option-pricing models and the key inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

At the time of the reclassification, the total fair value of the Reclassified Warrant Liabilities reclassified to liabilities was $25.9 million. The total fair value of the Reclassified Warrant Liabilities at the time they were transferred back to equity was $65.9 million. The Company recognized the $39.8 million change in fair value as 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, 2023. Refer toNote 14 – Common Stock for a further discussion of the Reclassified Warrant Liabilities.

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

Acquisition and merger–related assets and liabilities. The fair values of assets acquired and liabilities assumed in an acquisition or merger are measured on a non–recurring basis on the acquisition or merger 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 toNote 2 – Acquisitions and Mergerfor a further discussion of the Company’s acquisitions and merger.

Note 7–Property and Equipment, net

The Company’s property and equipment, net consisted of the following for the periods presented:

As of December 31, 2024, the unproved properties balance includes $38.0 million of development costs for wells which were in the process of being completed. These wells began producing in February 2025 and will be reflected in proved properties in the first quarter of 2025.

Note 8 –Asset Retirement Obligation

The following table presents the changes in the Company’s asset retirement obligations for the periods presented:

The Company did not have any producing assets until the NRO Acquisition was closed on October 1, 2024, therefore it did not have any asset retirement obligations prior to that date. Refer to*Note 4**–*Acquisitions and Merger 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 periods presented:

Note 10 –Debt

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

The following table presents the components of interest expense reflected in the Company’s consolidated statements of operations for the periods 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 (the “Credit Facility Agreement”), which has a maximum credit commitment of $1.0 billion and is set to mature on December 16, 2026. The Credit Facility is guaranteed by all of the Company’s restricted subsidiaries and is secured by a first-priority security interest on substantially all of the Company’s oil and natural gas properties and substantially all of the Company’s 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 the Company’s oil and gas properties as determined in a reserve report dated as of January and July of each year, subject to certain interim redeterminations. On February 3, 2025, the Company entered into the First Amendment to the Credit Facility Agreement (the “First Amendment”), which among other things, increased the borrowing base and the aggregate elected commitments to $60.0 million.

As of December 31, 2024, the Company 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. Borrowing under the Credit Facility bear 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 3.00% to 4.00% per annum for Term SOFR loans (plus a 0.10% per annum adjustment) and 2.00% to 3.00% for Alternate Base Rate loans. There is also a commitment fee of 0.50% on the undrawn commitments.

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 Agreement) of no greater than 2.50 to 1.00 and a Current Ratio (as defined in the Credit Agreement) of at least 1.00 to 1.00. The Credit Facility Agreement also includes conditional equity cure rights that will enable the Company to cure certain breaches of these financial maintenance covenants. Further, beginning March 1, 2025, the Credit Facility Agreement requires the Company and its restricted subsidiaries to always hedge not less than 80% of projected production from their proved developed producing reserves and certain wells through December 31, 2028.

Additionally, the Credit Facility Agreement contains various restrictive covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to, subject to certain exceptions: (i) incur indebtedness; (ii) incur liens; (iii) declare or pay dividends, distributions or make other restricted payments; (iv) repay or redeem other indebtedness; (v) make investments; (vi) change their respective lines of business or acquire or make any expenditures in oil and gas properties outside the U.S.; (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 U.S.; (xiii) enter into certain contracts or agreements that prohibit or restrict liens on property in favor of the administrative agent or restrict any restricted subsidiary from paying dividends or making distributions; (xiv) allow gas imbalances, take-or-pay or other prepayments with respect to the Company’s proved oil and gas properties; (xv) engage in certain marketing activities; (xvi) enter into sale and leasebacks; and (xvii) make or incur any capital expenditure or leasing or acquisition expenditure in oil and gas properties that are not borrowing base properties.

As of December 31, 2024, the Company has $1.7 million of unamortized deferred financing costs associated with its Credit Facility, which is presented in other non-current assets on the consolidated balance sheet. These costs will be amortized to interest expense on the accompanying statements of operations on a straight-line basis over the life of the Credit Facility.

Standby Equity Purchase Agreement

On September 30, 2024, the Company entered into the SEPA with Yorkville, whereby, subject to certain conditions, the Company has the right, 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”).

Any purchases under an Advance will be subject to certain limitations, including that Yorkville cannot acquire (i) any shares that would result in the Yorkville, including its affiliates, beneficially owning more than 4.99% of the Company’s outstanding Common Stock at the time of an Advance or (ii) more than 19.99% of the Company’s issued and outstanding Common Stock as of the SEPA Effective Date (the “Exchange Cap”), subject to limited exceptions.

Pursuant to the SEPA, the Company may issue up to a total of 4,198,343 shares of Common Stock within the Exchange Cap through Advances under the SEPA, upon conversion of the Senior Convertible Note or through any other issuances of Common Stock thereunder. However, per the SEPA, the Company does not have access to issue an Advance Notice until the Pre-Paid Advance of $15.0 million (the Senior Convertible Note) is fully repaid.

In connection with the SEPA, the Company entered into a registration rights agreement (the “SEPA Registration Rights Agreement”) with Yorkville pursuant to which the Company agreed to file a registration statement registering the resale of the Common Stock shares underlying the SEPA, the Pre- Paid Advance, and the Commitment Fee. The Company’s right to sell shares to Yorkville under the SEPA was contingent upon the Company having an effective registration statement, which was declared effective by the SEC on December 20, 2024.

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 Fees 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 toNote 6 – Fair Value Measurementsfor a further discussion of the fair value of the SEPA.

Senior Convertible Note

On September 30, 2024, Yorkville advanced the Pre-Paid Advance of $15.0 million to the Company and the Company issued the Senior Convertible Note, 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 are 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 may convert the Pre-Paid Advance into shares of Common Stock at any time at the Conversion Price (as defined in the SEPA). The Company 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. Additionally, the Company may also convert the Pre-Paid Advance into shares of Common Stock at any time at the Conversion Price, however, a conversion requested by us would not result in the Company receiving cash but instead would be applied towards reducing the outstanding balance of the Senior Convertible Note.

In December 2024, and in conjunction with the Credit Facility Agreement, the Company made a $3.7 million payment on the Senior Convertible Note, resulting in a principal balance of $11.3 million as of December 31, 2024. 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.

The Company has determined that certain features of the Senior Convertible Note require bifurcation and separate accounting as embedded derivatives. As such, the Company has 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 will remeasure the fair value each reporting period with changes in fair value recognized in earnings. As of December 31, 2024, the fair value of the Senior Convertible Note is $12.6 million, which resulted in a loss on adjustment to fair value – debt and warrants of $1.3 million on the Company’s consolidated statement of operations and consolidated statement of cash flows for the year ended December 31, 2024. Refer toNote 6 – Fair Value Measurementsfor a further discussion of the fair value of the Senior Convertible Note.

Subordinated Promissory Note

On September 30, 2024 (the “Subordinated Note Effective Date”), the Company entered into the Subordinated Note with the Noteholders, as defined above, in a principal amount of $5.0 million, with a maturity of December 31, 2025. Refer toNote 18 – Related Party Transactions for a further discussion about the Subordinated Note and the Noteholders. The Subordinated Note has an interest rate of 10.00% and the Noteholders are entitled to a minimum return on capital of up to 2.0x upon the repayment, prepayment or acceleration of the obligations, or the occurrence of certain other triggering events under the Subordinated Note. The Subordinated Note is guaranteed by Prairie LLC pursuant to a global guaranty agreement entered into by Prairie LLC in favor of the Noteholders on the Subordinated Note Effective Date. The Subordinated Note is subordinated to the prior payment in full in cash to the Senior Convertible Note and any future senior secured revolving credit facility of the Company entered into after the Subordinated Note Effective Date. On December 16, 2024, the Company and the Noteholders agreed to amend the Subordinated Note (the “Amended and Restated Subordinated Note Agreement”), to, among other things, extend the maturity date of the Subordinated Note to March 17, 2027. Additionally, the Amended and Restated Subordinated Note Agreement modified certain provisions to better align with the Credit Facility Agreement. In December 2024, and in conjunction with the Credit Facility Agreement, the Company made an $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, vesting in tranches based on the date of repayment of the Subordinated Note. As of December 31, 2024, Subordinated Note Warrants providing the right to purchase 570,778 shares of Common Stock had vested and were outstanding. Refer toNote 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.

The Company has determined that certain features of the Subordinated Note and the Subordinated Note Warrants require bifurcation and separate accounting as embedded derivatives. As such, the Company has elected the fair value option to account for the Subordinated Note and the Subordinated Note Warrants; therefore, in accordance with ASC 815, the Company has recorded the Subordinated Note and the Subordinated Note Warrants at fair value and will remeasure the fair values each reporting period with changes in fair value recognized in earnings.

On September 30, 2024, the issuance date of the Subordinated Note and the Subordinated Note Warrants, 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 recognized a loss on debt issuance of $3.0 million on its consolidated statement of operations and consolidated statement of cash flows for the year ended December 31, 2024. Refer toNote 15 – Common Stock Options and Warrants below for a further discussion of the Subordinated Note Warrants.

As of December 31, 2024, the fair value of the Subordinated Note is $4.6 million, which resulted in a loss on adjustment to fair value – debt and warrants of $1.1 million on the Company’s consolidated statement of operations and consolidated statement of cash flows for the year ended December 31, 2024. Refer toNote 6 – Fair Value Measurementsfor a further discussion of the fair value of the Subordinated Note and the Subordinated Note Warrants.

Amended and Restated Senior Secured Convertible Debentures

In connection with the Merger, the Company entered into 12% amended and restated senior secured convertible debentures due December 31, 2023 with each of Bristol Investment Fund, Ltd. (“Bristol Investment”) and Barlock 2019 Fund, LP (“Barlock”), in the principal amount of $1.0 million each. Refer toNote 18 – Related Party Transactions for a further discussion about Bristol Investment and Barlock.

The Company determined that the AR Debentures contained certain features which required bifurcation and separate accounting as embedded derivatives. As such, the Company elected to initially and subsequently measure the AR Debentures in their entirety at fair value with changes in fair value recognized in earnings in accordance with ASC 815. On October 11, 2023, the date that the AR Debentures were fully converted, the fair value of the AR Debentures was $5.8 million, compared to $2.0 million at the date of the Merger. The Company recognized the $3.8 million change in fair value as 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, 2023. Refer toNote 6 – Fair Value Measurementsfor a further discussion of the fair value of the AR Debentures.

Small Business Administration Loan

Upon the Merger, the Company assumed a loan agreement with the Small Business Administration (“SBA”). The loan accrued interest at a rate of 3.75% and was scheduled to mature in September 2050. The Company elected to fully repay the SBA loan and the accrued interest in September 2023, which is presented as part of financing cash outflows on the consolidated statement of cash flows for the year ended December 31, 2023.

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. 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 lease agreements could include options to renew the lease, terminate the lease early, or purchase the underlying asset(s). The Company determines the lease term at the lease commencement date as the non–cancellable period of the lease, including any options to extend or terminate the lease when such an option is reasonably certain to be exercised. The Company recognizes variable lease payments in the period they are incurred. Certain leases contain both lease and non–lease components, which the Company has chosen to account for separately. As of December 31, 2024 and 2023, 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 periods presented:

The Company’s weighted–average remaining lease terms and discount rates as of December 31, 2024 are as follows:

The Company has several operating leases for office spaces and vehicles used in its daily operations, under non–cancellable operating leases expiring through 2030. The Company recognizes lease expense for these leases on a straight–line basis.

The following table presents the components of the Company’s lease costs during the periods presented:

As of December 31, 2024, 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 periods indicated:

Note 12 –Commitments and Contingencies

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.

Note 13–Preferred Stock

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 toNote 15 – Common Stock Options and Warrants for a further description of the Series D PIPE Warrants.

Additionally, upon the closing of the Merger, holders of the AR Debentures were issued 4,423 shares of Series D Preferred Stock. No warrants were issued with or are associated with these shares.

During the years ended December 31, 2024 and 2023, there were conversions of 6,170 and 1,172 shares of Series D Preferred Stock, respectively, into 1,234,090 and 234,424 shares of Common Stock, respectively. As of December 31, 2024 and 2023, there were 14,457 and 20,627 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 toNote 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 toNote 18 – 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, 2024 and 2023, there were zero and 20,000 shares, respectively, of Series E Preferred Stock outstanding.

Note 14–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 to one 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 (the “Board”) out of legally available funds. However, the current policy of the Board 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.

In conjunction with the closing of the Merger, the Company issued (i)2,297,669 shares of Common Stock to the former members of Prairie LLC in exchange for their membership interests in Prairie LLC and (ii)3,860,898 shares of Common Stock were deemed issued to former stockholders of Creek Road Miners, Inc. As a result of the Merger and related transactions, the Company had the obligation to issue 205,970 shares of Common Stock. On September 7, 2023, the date that the underlying shares were fully issued, the fair value of the Obligation Shares was $1.5 million. The Company recognized the $1.5 million change in fair value as 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, 2023. The Company stopped recording the change in the fair value of the obligation when the underlying shares were fully issued on September 7, 2023. Refer toNote 6 – Fair Value Measurementsfor a further discussion of the fair value of the Obligation Shares.

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 Common Stock, 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.

2023 Share Sequencing and Reclassifications

As of September 30, 2023, the Company had 500,000,000 common shares authorized and 7,074,742 common shares issued and outstanding as adjusted for the reverse stock split, as discussed inNote 1 – Organization, Description of Business, and Basis of Presentation. On September 30, 2023, and without consideration of the reverse stock split, there were insufficient authorized and unissued shares for the Company to satisfy all of its commitments to deliver shares. The Company adopted a sequencing policy to determine how to allocate authorized and unissued shares among commitments to deliver shares pursuant to ASC 815-40. The sequence is based upon reclassifying securities with the latest maturity date first.

The Company’s sequencing policy resulted in the allocation of authorized and unissued shares in the following order at September 30, 2023 (i) AR Debentures, (ii) Legacy Warrants (as defined herein) (March 2024 expiration), (iii) Series D B Warrants, (iv) restricted stock units issued to directors and an advisor (refer toNote 16 – Long–Term Incentive Compensation), (v) Series E B Warrants, (vi) restricted stock units issued to employees (refer toNote 16 – Long–Term Incentive Compensation) and Legacy Warrants (September 2024 – January 2027 expiration), (vii) Series D A Warrants, (viii) Series E A Warrants, (ix) Exok Warrants, (x) Series D Preferred Stock, (xi) Series E Preferred Stock and (xii) Merger Options. This sequencing and the lack of sufficient authorized shares required the Company to reclassify Reclassified Warrant Liabilities to liabilities at fair value during the three months ended September 30, 2023. At the time of the reclassification, the total fair value of the Reclassified Warrant Liabilities reclassified to liabilities was $25.9 million. The total fair value of the Reclassified Warrant Liabilities at the time they were transferred back to equity was $65.9 million. The Company recognized the $39.8 million change in fair value as 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, 2023. Refer toNote 6 – Fair Value Measurements for a discussion of the Reclassified Warrant Liabilities fair value.

Additionally, and due to the lack of sufficient authorized shares, the Company’s Series D Preferred Stock and Series E Preferred Stock were reclassified to mezzanine equity at their maximum redemption value during the three months ended September 30, 2023. Upon the effectiveness of the reverse stock split in October 2023 (refer toNote 1 – Organization, Description of Business, and Basis of Presentation), the Company had sufficient authorized shares of Common Stock issuable upon the conversion or exercise of all of its issued and outstanding securities and therefore, reclassified the warrant liabilities and mezzanine equity into permanent equity effective in October 2023.

Note 15–Common Stock Options and Warrants

Merger Options

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 then entered into amended and restated non–compensatory option agreements (the “Option Agreements”) with each of Gary C. Hanna, Edward Kovalik, 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, Edward Kovalik, 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.

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 did not 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.

None of the Merger Options were exercisable as of December 31, 2024 or December 31, 2023.

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 $49.71 per share (the “Legacy Warrants”). As of December 31, 2024 and 2023, Legacy Warrants providing the right to purchase 43,438 and 53,938 shares of Common Stock, respectively, were outstanding with a weighted average remaining contractual life of 0.6 and 2.2 years, respectively.

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.

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. Additionally, during the year ended December 31, 2023, Series D A Warrants to purchase Common Stock were exercised on a cashless basis resulting in a net issuance of 41,980 shares of Common Stock. During the years ended December 31, 2024 and 2023, Series D B Warrants to purchase 1,400,250 and 2,075,000 shares, respectively, of Common Stock were exercised for total proceeds to the Company of $8.4 million and $12.5 million, respectively.

As of December 31, 2024 and 2023, Series D A Warrants providing the right to purchase 3,215,761 and 3,405,250 shares of Common Stock, respectively, were outstanding with a remaining contractual life of 3.3 and 4.3 years, respectively. As of December 31, 2024, all of the Series D B Warrants have been exercised and as of December 31, 2023, Series D B Warrants providing the right to purchase 1,400,250 shares of Common Stock were outstanding with a remaining contractual life of 0.3 years.

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.

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 of December 31, 2024 and 2023, Series E A Warrants providing the right to purchase 4,000,000 shares of Common Stock with a remaining contractual life of 3.6 and 4.6 years, respectively, were outstanding. As of December 31, 2024, all of the Series E B Warrants have been exercised and as of December 31, 2023, Series E B Warrants providing the right to purchase 4,000,000 shares of Common Stock with a remaining contractual life of 0.6 years were outstanding.

Exok Warrants

As discussed inNote 4 – Acquisitions and Merger, the Company issued warrants in connection with the Exok Transaction completed in August 2023. The Exok Warrants provide the warrant holders with the right to purchase 670,499 shares of Common Stock at an exercise price of $7.43 per share. The Exok Warrants expire on August 15, 2028 and may be exercised in a cashless manner under certain circumstances. On December 31, 2024 and 2023, Exok Warrants providing the right to purchase 670,499 shares of Common Stock with a remaining contractual life of 3.6 and 4.6 years, respectively, were outstanding.

Subordinated Note Warrants

As discussed inNote 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.

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 each reporting period with changes in fair value recognized in earnings. As of December 31, 2024, the fair value of the Subordinated Note Warrants is $4.2 million. Refer toNote 6 – Fair Value Measurementsfor a further discussion of the fair value of the Subordinated Note Warrants.

On September 30, 2024, in connection with the Subordinated Note, the Company entered into 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.

As of December 31, 2024, Subordinated Note Warrants providing the right to purchase 570,778 shares of Common Stock with a remaining contractual life of 4.8 years had vested and were outstanding.

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, 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; (viii) dividend equivalents; (ix) other stock–based awards; (x) cash awards; and (xi) substitute awards. Subject to adjustment in accordance with the terms of the LTIP,7,500,000 shares of the Company’s Common Stock are reserved for issuance pursuant to awards under the LTIP. As of December 31, 2024, there are 5,501,356 shares 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. There were no forfeitures during the years ended December 31, 2024 and 2023. 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 a three-year period, subject to the employees continued service through each applicable vesting date. The Company has also granted RSUs to directors and advisors which primarily vest one 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 periods indicated:

During the years ended December 31, 2024 and 2023, the Company recognized stock–based compensation costs of $6.8 million and $2.9 million, respectively, related to its equity–classified RSUs.

As of December 31, 2024, there was $6.9 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 1.2 years.

Equity–Classified Performance Stock Units

In September 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 a three-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 Compensation Committee of the Board (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 Topic 718,Compensation—Stock Compensation.

The fair value of the PSUs granted in September 2024 was determined by a third-party using a Monte Carlo simulation model as of the grant date, 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 periods indicated:

During the year ended December 31, 2024, the Company recognized stock–based compensation costs of $1.6 million related to its equity–classified PSUs. The Company did not recognize any stock–based compensation costs for its equity–classified PSUs during the year ended December 31, 2023 because there were no PSUs granted until June 2024.

As of December 31, 2024, there was $5.7 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 2.0 years.

Liability–Classified Restricted Stock Units

The Company has also granted RSUs to certain of its directors and advisors, which primarily vest one 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 periods indicated:

During the years ended December 31, 2024 and 2023, the Company recognized stock–based compensation costs of $0.3 million and $0.1 million, respectively, related to its liability–classified RSUs.

As of December 31, 2024, 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 -Income Taxes

The following table presents the Company’s provision (benefit) for income taxes for continuing operations for the periods indicated:

The following table presents the reconciliation between the provision (benefit) for income taxes included in the Company’s consolidated statement of operations with the provision (benefit) which would result from the application of a blended statutory federal and state income tax rate of 24.4% for the periods presented:

Deferred income taxes are provided to reflect the future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.

The Company’s deferred tax assets have been reduced by a valuation allowance due to a determination made that it is more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. 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 the significant weight placed on the Company’s cumulative negative earnings position, the Company’s net deferred tax asset has been reduced by a full valuation allowance as of December 31, 2024.

The following table presents the temporary differences and carryforwards which give rise to deferred tax assets and liabilities for the periods presented:

As of December 31, 2024 and 2023, the Company has U.S. federal income tax net operating loss carryforwards (“NOLs”) of approximately $56.3 million and $35.7 million, respectively, available to reduce future U.S. taxable income. As of December 31, 2024, $8.9 million of the $56.3 million federal NOLs expire during the years 2030 through 2037, while $47.4 million do not have expiration dates. Additionally, as of December 31, 2024 and 2023, the Company has state NOLs of approximately $65.5 million and $44.9 million, respectively, available to reduce future U.S. taxable income. As of December 31, 2024, $42.4 million of the $65.5 million state NOLs expire during the years 2040 through 2043, while $21.1 million do not have expiration dates.

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 2021 to present remain open for federal examination. Additionally, tax years 2010 through 2020 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, 2024 or 2023.

Note 18 –Related Party Transactions

AR Debentures.As described inNote 10 – Debt, in connection with the closing of the Merger, the Company entered into the AR Debentures with Bristol Investment, which is managed by Paul L. Kessler who is a former Director of the Company, and Barlock, which is controlled by Scott D. Kaufman who is a former President, Chief Executive Officer, and Director of the Company. In October 2023, conversion notices were received from holders of the AR Debentures and the Company issued 400,666 shares of Common Stock to affect the conversion. This represented the full conversion of the AR Debentures, together with the accrued interest due to one of the holders.

Common Stock Options. As described inNote 15 – Common Stock Options and Warrants, upon consummation of the Merger, the Company entered into Option Agreements with each of Gary C. Hanna, Edward Kovalik, 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, Edward Kovalik, 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.

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 did not 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 toNote 15 – Common Stock Options and Warrants for a full discussion of these options.

Series D PIPE.As described inNote 13 – Preferred Stock, 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 toNote 13 – Preferred StockandNote 15 – Common Stock Options and Warrants and for a full discussion of the Series D PIPE.

The Company entered into registration rights agreements with each of the Series D PIPE Investors whereby the Company is required to pay liquidated damages if the resale of the underlying shares of Common Stock is not registered by the Securities and Exchange Commission by August 31, 2023. The resale registration statement with respect to such shares was declared effective in December 2023, as such, the Company recognized an expense of $0.5 million for the liquidated damages during the year ended December 31, 2023. There wereno such damages incurred or paid in the year ended December 31, 2024.

Series E PIPE.As described inNote 13 – Preferred Stock, to fund the Exok Option Purchase, 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 toNote 13 – Preferred StockandNote 15 – Common Stock Options and Warrants for a full 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 Series D Certificate to increase the Beneficial Ownership Limitation 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 of ten 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 inNote 10 – Debt, on September 30, 2024, the Company issued the Subordinated Note in a principal amount of $5.0 million, with a maturity of December 31, 2025 to the Noteholders, First Idea Ventures LLC and The Hideaway Entertainment LLC. Pursuant to the terms of the Subordinated Note, the Company also issued the Subordinated Note Warrants to the Noteholders, which provide the Noteholders 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 toNote 10 – Debt andNote 15 – Common Stock Options and Warrants for a further discussion of the Subordinated Note and the Subordinated Note Warrants.

Note 19 –Subsequent Events

On February 6, 2025, the Company and certain of its subsidiaries into a Purchase and Sale Agreement (the “Bayswater PSA”) with Bayswater Resources, LLC, Bayswater Fund III-A, LLC, Bayswater Fund III-B, LLC, Bayswater Fund IV-A, LP, Bayswater Fund IV-B, LP, Bayswater Fund IV-Annex, LP, and Bayswater Exploration & Production, LLC (collectively, “Bayswater”), pursuant to which it agreed to acquire certain oil and gas assets from Bayswater for a purchase price of $602.8 million, subject to certain closing price adjustments (collectively, the “Bayswater Acquisition”).

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 the Company and Bayswater for a transaction of this nature.

Series D Preferred Stock Conversion

In January 2025, the O’Neill Trust converted 8,000 shares of Series D Preferred Stock into 1,600,000 shares of Common Stock. As a result, they no longer hold any Series D Preferred Stock.

Note 20 –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 periods indicated:

For the year ended December 31, 2024, the Company’s proved property acquisition costs incurred include $63.6 million of proved property acquired in the NRO Acquisition, $0.2 million of which relates to the asset retirement obligations costs assumed in the acquisition. Refer toNote 4 – Acquisitions and Merger for a further discussion.

For the year ended December 31, 2024, the development costs incurred includes $38.0 million of development costs for wells which were in the process of being completed and began producing in February 2025.

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, 2024, 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 year ended December 31, 2024, SEC Prices, inclusive of adjustments, used in the calculations were $74.63 per Bbl of oil, $1.60 per Mcf of natural gas, and $21.63 per Bbl of NGLs.

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 periods 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.

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, P&A, 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 periods 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 periods indicated: