Creek Road Miners, Inc. (PROP) Earnings Call Transcript

Thanks, operator. Morning, everyone, and thanks for being with us on Prairie Operating Company's Third Quarter 2025 Earnings Call. Before we get to our prepared remarks, I want to remind everyone listening that today's comments will contain forward-looking statements, and those come with certain risks, uncertainties and assumptions. Results in reality may differ materially from what any forward-looking statements suggest. We may also mention non-GAAP measures. For a fuller discussion of the risks and uncertainties that might cause actual results to diverge materially from any forward-looking statement, and for reconciliations of any non-GAAP financial measures, please refer to the company's public filings, including the Form 8-K filed Friday, November 14, 2025. With me today are Ed Kovalik, Chairman, CEO and Co-Founder; Gary Hanna, President and Co-Founder; and Greg Patton, Executive Vice President and Chief Financial Officer. With that, I'll hand the call over to our Chairman, CEO and Co-Founder, Ed Kovalik.

Thank you, Wobbe, and good morning to all of you. For Prairie, the third quarter represented yet another significant advance as we keep delivering on every aspect of our operations — operationally, financially and strategically. The progress made by our team, along with the considerable momentum we have generated as we approach year-end, makes me immensely proud. A key highlight of the quarter involved wrapping up successfully the transition service period that followed our purchase of assets from Bayswater Exploration and Production; now that Prairie holds full operational control over those Bayswater assets, we are pushing our development schedule ahead exactly as planned. I'd like to pause and express appreciation to the folks at Bayswater for the professionalism and collaboration they showed during the entire transition, which guaranteed a seamless handoff and smooth integration. As of today, Prairie operates across our larger footprint as one unified, efficient organization. Although our third-quarter production rate came in at 23,029 barrels per day, the rate we are currently achieving has risen to roughly 27,000 net barrels of oil equivalent per day, which mirrors the substantial fourth-quarter production ramp we have been guiding toward. Our latest bolt-on acquisitions further reinforce our core DJ Basin position, bringing in about 3,400 net acres along with 11 net drilling locations at an appealing average cost of approximately $680 per acre. Every one of these transactions highlights our disciplined, accretive approach to growth, enlarging our high-quality drilling inventory while preserving capital efficiency and balance sheet strength. On the operational side, flowback at our Noble pad's seven new wells has finished; moreover, completion work has wrapped up on six newly drilled wells at the Simpson pad. The Noble pad is now entirely online, and the Simpson pad should be fully online during this quarter, contributing to production growth as we move toward year-end. On the financial front, our position remains solid. Earlier in the year, we amended and upsized our $1 billion credit facility, reaffirming our borrowing base at $475 million and bringing in additional banking partners, among them Bank of America and West Texas National Bank alongside Citibank; this facility delivers ample liquidity to back our capital program and the flexibility to chase future opportunities. Through 2028, our comprehensive hedge program keeps securing strong pricing across a substantial share of our proved developed production. This prudent approach lets us safeguard cash flows, lessen volatility and plan capital deployment confidently. Going forward, our strategy stays clear and disciplined; we are centered on creating long-term shareholder value via a mix of high-return organic development, ongoing operational optimization and accretive acquisitions. Our commitment to sustainable growth, capital efficiency and balance sheet strength guides every decision we make. Prairie's foundation has never been more solid. Our growth story remains in its early chapters, and my confidence in the road ahead has never been greater. The advances achieved during this year have positioned us well to keep building momentum as we move through 2026 and afterward. Having said that, I'll hand things over now to Greg Patton, our CFO, so he can go through our financial and liquidity position in greater detail.

Thanks, Ed, and good morning, everyone. We delivered strong financial results in the third quarter of 2025. For the quarter, net income from continuing operations was $1.3 million, and adjusted EBITDA came in at $56.3 million, up more than 45% from the previous quarter. These improvements were driven by increased production volumes and commodity prices, with support from our hedge book. Turning to the top line, total revenue for the quarter was $77.7 million, supported by realized prices of $58.70 per barrel of oil, $12.27 per barrel for natural gas liquids, and $2.15 per Mcf for natural gas. For the quarter, net loss attributable to common stockholders was $22.5 million, or a loss per share of $0.44. Adjusted EBITDA came in at $56.3 million, as I mentioned earlier, which shows the operational and financial strides we continue to make. For the quarter, net cash from operating activities was $57.7 million. Total operating expenses worked out to $23.92 per BOE on a per barrel of oil equivalent basis; within that number, lease operating expenses were $7.25 per BOE, transportation and processing costs came to $1.04 per BOE, and production and ad valorem taxes were $2.21 per BOE. Depreciation, depletion and amortization expense totaled $7.57 per BOE, while general and administrative expenses were $5.79 per BOE. These figures capture integration and system implementation costs associated with the post-closing of the Bayswater transaction, and a meaningful share of them are onetime expenses. Looking ahead, our focus will remain on running efficiently, managing expenses, and capturing the benefits that come with a larger footprint, whether through acquisitions we've already completed or ones we might pursue later. We spent $69.6 million on CapEx, which matches our development plan and shows we're continuing to carry out our drilling program while staying on target with AFE costs. Turning now to where we stand financially: as of September 30, 2025, we had about $68.6 million in total liquidity, which breaks down into $58 million available through our revolving credit facility plus $10.6 million of unrestricted cash. Just to reiterate, the borrowing base and aggregated elected commitment are presently $475 million, while the facility as a whole is sized at $1 billion and comes due on March 26, 2029. The banking group behind our credit facility continues to provide plenty of financial room to move, letting us fund our development plans and look at strategic options whenever they come up. Managing risk still revolves around our hedging efforts, and we keep a broad set of hedges in place so that swings and instability in commodity prices don't hit the production we're counting on. Thanks to those hedges, we've locked in prices of $66.16 for each barrel of oil and $4.32 per MMBtu of natural gas for the rest of 2025. Then for the first quarter of 2028, the secured rates are $62.07 a barrel and $4.06 per MMBtu. We've secured pricing for most of what we produce, which in effect shields us from swings in commodity prices in the near term and puts the company in a better position to forecast cash flows and capital expenditures with greater confidence. Taking this kind of proactive step shows we remain dedicated to capital discipline and to being fiscally responsible over the long haul. Turning now to reserves. As the quarter ended, Prairie's total proved reserves came in at about 106.6 million barrels of oil equivalent. Of that number, 63.6 million BOE is categorized as Proved Developed Producing, or PDP, and the remaining 43 million BOE falls into the Proved Undeveloped, or PUD, category. Our current development inventory consists of over 600 gross drilling locations. These reserves speak to how strong our asset base is, how deep our inventory runs, and the long-term value disciplined investment and operational execution are helping us build. Turning to integration, the handover of the assets we recently acquired has gone seamlessly, and our transition service period is wrapping up. Systems are now aligned, processes have been streamlined, and we have drawn in and onboarded key personnel from companies that lead the industry. As Ed noted earlier, we want to express our thanks to the Bayswater team for the professionalism and collaboration they showed us throughout the transition period. Prairie is operating at full capacity today and sits in a strong position for continued growth. Additionally, we've taken important steps to ensure our supply chain remains steady and operates efficiently. We've invested considerable energy into building strong ties with midstream companies, and that secures dependable takeaway capacity for the projects we're developing for a long time ahead. Beyond that, we've finalized agreements with both ProFrac and Precision Drilling, and those agreements support what we plan to develop during 2026. Taken as a whole, these deals help us keep expenses in check and lower the chance that service interruptions could cause problems. I'll now turn things over to Gary Hanna, our President and Co-Founder, for a thorough update on operations.

Greg, appreciate that, and a good morning to everyone. Operationally, Prairie took another big step forward during Q3, as we closed out the transition service period tied to the Bayswater acquisition and assumed complete operational control of those assets. With that transition service period now behind us, our development schedule is being executed precisely as we laid it out. The integration process has been managed extremely well by our operations and field teams, even as we continue to generate considerable production growth along with improvements in efficiency. Right now, Prairie is producing about 27,000 BOE a day. That figure combines what we get from legacy operations, the Bayswater assets, and new drills that have come online as we executed our growth road map in Q3. Flowback work at our Noble pad has wrapped up on seven new wells, and as Ed mentioned, the early signals look encouraging. Meanwhile, at the Simpson pad, completions are nearly done on six recently drilled wells, and we expect flowback to begin inside a week. The Noble pad is currently online, and we expect the Simpson pads to be fully online sometime in the fourth quarter. Over at the Rush pad, we wrapped up drilling, completions, and drill-out work on all 11 wells and brought them online. Those wells went after several horizons spanning the Niobrara A, B, and C zones along with the Codell formation, and we look for them to add meaningfully to production growth for the remainder of 2025. On top of that, we finished and brought online nine wells at the Opal/Coalbank pad, which arrived as DUCs through the Bayswater transaction. So far, results have come in better than we anticipated, with an average IP30 of roughly 525 barrels of oil equivalent per day per well on a 2-stream gross basis. Right now, a 10-well project at our Blim pad is being drilled by the Precision rig, and we're looking for first production from it during Q1 of 2026. Alongside that new activity, Prairie continues to concentrate on getting more out of what it already owns. A sizable workover campaign is now under way, aimed at 32 wells during Q3 and Q4; to date, 31 of those workovers are done, 18 of which took place in the third quarter. Prairie has also placed plungers in 183 wells, which has lifted average oil output by 12.6% on a per-well basis. Taken together with the continuing enhancements we're making to the gas lift system and to pad efficiencies, these optimization efforts reflect Prairie's dedication to squeezing the most productivity possible out of each well. Taking everything into account, the work our field and operations groups delivered during this quarter makes me extremely proud. We completed several integrations, started production at new wells, and grew the size of our acreage holdings — and we did all of that while keeping both our balance sheet solid and our operational focus tight. With that said, I'll hand things back to Ed for his closing remarks. Eddie?

Thank you, Gary. To start, we're confirming once more that our production outlook for the entire year stays between 24,000 and 26,000 BOE per day, and that capital spending for the full year remains in the range of $260 million to $280 million. In addition, we're reiterating our guidance for full year adjusted EBITDA of $240 million to $260 million, assuming WTI prices fall somewhere between $60 and $70. Execution on the operations side and results so far this year, combined with the momentum we're seeing throughout our asset base, continue to be solid, and we keep realizing gains from better capital efficiency as well as from bringing recent acquisitions into the fold. Our method for expanding remains measured and intentional, and the possibilities that lie ahead for Prairie give us reason for optimism. The plan we're following is still centered on generating sustainable organic growth in the double digits via the drill bit, while at the same time making selective, accretive acquisitions that bolster our standing and boost value creation over the long haul. I'd like to express my gratitude to everyone on the Prairie team for the remarkable work and commitment they've shown during this period of transformation. Never before has the company's foundation been this solid, and we're wrapping up the year with strong momentum, greater scale and a defined way forward. What comes next for Prairie looks to be the most thrilling phase yet, and we appreciate our shareholders' ongoing confidence and backing; with that said, I'll hand the call back to the operator so we can open up the lines for questions.

Would you mind giving us a sense of how the M&A landscape looks right now? Also, I recall you mentioning that your bank group was fairly open to considering deals. My understanding is that your fall borrowing base redetermination hasn't happened yet — perhaps it's underway. So could you share any news on how you view the bank funding market when it comes to M&A transactions?

Leo, Ed here. I'll take the M&A question and then pass things to Greg, who can walk through the bank group redetermination. The way we've grown this company is through M&A. That's fundamental to who we are. Even so, staying disciplined matters a great deal to us — whether a potential deal is bigger or a strategic bolt-on, our eyes are always on inventory quality, capital efficiency and cash flow. Chasing valuations isn't something we do. What we want are opportunities that genuinely make Prairie stronger strategically. The SMC transaction has brought more attention to the basin. In my view, that's positive. Still, plenty of opportunities lie ahead of us.

Appreciate that, Ed. And just to touch quickly on the RBL — yeah, we're currently in the middle of the redetermination process for the fall. Nothing out of the ordinary is showing up there, maybe a slight uplift, but on a go-forward basis we're absolutely holding flat; and the borrowing group stays consistent and strong around the facts of using it to pay down the RBL as well as using it for future proceeds for potential M&A, of course, if there's PDP tied to it. So everything's in process, a very strong bank group heading into the fall redetermination, and we're looking forward to the quarter to come.

All right. Now, moving to the operations front, you both mentioned something about securing a Precision rig along with a ProFrac crew. Could you give us a bit more detail on that? Are those essentially committed for the rest of 2026? And perhaps, tying into that, what are you currently observing for leading-edge 2-mile well costs? I'm not sure what you've secured for next year, but what might that suggest about well costs as we move into '26?

Yes. Absolutely, Leo. Glad to address those. This is Greg Patton again. To start, the Precision rig's contractual date runs through April. On the ProFrac side, our arrangement is contractual but rolls over each month, and right now there aren't any increases in rates. Ultimately, as we've grown throughout the basin, they've shown themselves to be a really strong partner. From day one with them, our cycle times have been reduced by 50%; so the ProFrac process has left us quite pleased. And Precision is just as good — that's a CNG electrified rig. It meets all of Colorado's requirements. That rig makes us very happy. So in April, we'd be looking at extending it. But both of those companies are performing well. When we think about AFE costs going forward, the rig and the frac crew are the two things that make up a big chunk of that AFE and add incremental cost. Over the course of the year, as we've delivered AFEs, we've continued to bring them down. On an equivalent basis of 1,800-foot pound frac, we average right around $5.2 million to $5.3 million. In certain areas, where the reservoir calls for it, we've added more sand loading incrementally, and we've seen some results of $5.4 million to $5.5 million. But that isn't on an equivalent basis. The reason for that is straightforward: our focus is on selecting the top-tier well locations, targeting the proper porosity and the correct geologic zones within the basin. So we're quite enthusiastic that we've managed to bring costs down, and we'll keep pushing toward that $5 million threshold we've mentioned before. And if we were routinely completing 1,800-foot pound fracs, we would be extremely close to hitting that figure right now.

I'd like to zero in on the workover initiative you all called out alongside the Q3 results. Essentially, you're near the finish line there, with 31 out of those 32 wells now done. And I'm wondering when we'll get a look at, I suppose, how that plays out, what it does to the production line, and how big that effect will be, plus whether there's room for more workovers across the current assets and how that could shape up down the road?

Yeah, Gary Hanna here. I'll handle that one. Sure, the workover program, like I mentioned at the outset, totaled 32 wells for the year, and roughly half of them got finished during Q3. The remainder should wrap up in Q4; it's a continuous effort. It truly never stops. What I mean is you're constantly having to — when we assess wells and examine wellbores and perform certain tasks, we spot those workover chances. So we'll keep at that moving forward. The second piece of what you asked involved the incremental volume of about 300 barrels, 400 barrels per day from those. We've observed a fairly meaningful boost from those wells, and they're sustaining for 30, 60 days out, and we're tracking that along the way, but we're quite happy with what we're seeing, since the return on that capital spending is simply — it's excellent. So you maintain that program; it'll be something we keep doing on an ongoing basis going forward.