Prairie Operating Co. (PROP) Earnings Call Transcript

Thanks, operator, and good morning to all of you. We appreciate everyone for being on Prairie Operating Company's call covering the full year-end 2025 results. Before we move into our prepared remarks, I want to remind each participant that comments made today will contain forward-looking statements, and those are subject to certain risks, uncertainties and assumptions. Results actually achieved could differ materially from what any forward-looking statements suggest. On top of that, we might reference non-GAAP measures. For a more detailed discussion of the risks and uncertainties that could cause results actually achieved to differ materially from any forward-looking statements, as well as the reconciliations of any non-GAAP financial measures, please see the company's public filings, including the Form 8-K filed Monday, March 30th, 2026; we have also posted an updated investor presentation to our website. With me today are Rich Frommer, Interim CEO and President, and Greg Patton, Executive Vice President and Chief Financial Officer. With that, I'll turn the call over to our Interim CEO and President, Rich Frommer.

Appreciate that, Wobbe, and hello everybody. For Prairie, 2025 marked a year of significant change; we wrapped up the entire integration of the properties we picked up from Bayswater Exploration & Production, and at the same time kept growing our inventory under favorable economics. Beyond those acquisitions, we posted solid operational results, achieved considerable output gains, and made our balance sheet stronger. Across the whole year, Prairie's total production came in at roughly 6.75 million BOE, equivalent to an average of 18,500 BOE, and we closed out the year running at about 28,000 net BOE each day, which speaks to the robust activity ramp and the way we carried out our development program. Worth pointing out, that reported figure of 18,500 BOE per day leaves out the pro forma first quarter output from the Bayswater properties, which had been baked into our initial guidance. Had those volumes been counted, our production for the entire year would have landed near 24,000 BOE per day, amounting to nearly a 4x jump in output compared with the prior year and falling within our guidance range. During 2025, we closed a set of bolt-on deals that reinforced our position in the core DJ Basin even further; altogether, six transactions were completed, bringing in about 44,000 net acres when Bayswater is counted, and we grew our portfolio with top-tier proved inventory, all the while keeping balance sheet metrics accretive and sticking to a disciplined stance on allocating capital. On the operational side, we turned on several pads over the course of the year, among them the Noble, Simpson, Rauch, and the Opal Coal Bank, and we kept pushing development forward across our wider asset base. Those efforts added substantially to our production gains and leave us positioned for ongoing momentum as we move into 2026. Financially speaking, Prairie shored up its foundation considerably during 2025, bringing in about $242 million of revenue along with $156 million in Adjusted EBITDA, which underscores both the scale and the earnings capacity of this platform. As with production, these revenue and EBITDA numbers exclude the pro forma input from Bayswater's properties during the first quarter. If you factor that in, revenue and EBITDA for the full year would have come to roughly $315 million and $220 million, respectively, which is slightly under our EBITDA guidance of $240 million. After the year ended, the company obtained an extension of the anniversary warrant date, moving it from March 26, 2026 to April 7, 2026, which gives us extra time as we keep talking through matters tied to our capital structure. Going forward, our approach hasn't changed. The board and management are on the same page, concentrating on disciplined capital allocation, strong operational execution, and producing sustainable growth together with long-term shareholder value; with that, I'll hand things over to Greg.

Thank you, Rich, and good morning to all of you. I'll walk through Prairie's results for the full year 2025, along with key points on liquidity, hedging, and the balance sheet. For the full year, Prairie brought in total revenue of roughly $242 million, or $315 million when Bayswater is included. That was driven by realized prices of $63.87 per barrel of oil, $17.93 per barrel of NGL, and $1.65 per Mcf of natural gas, including derivative impacts — amounting to an increase in revenues of almost 3,000% compared with the prior year. Net loss attributable to common stockholders came to $60.9 million, or $1.35 per share, largely due to non-cash expenses tied to a Series F Preferred and other financial instruments. Adjusted EBITDA came in at approximately $156 million, a major step up from the previous year and a clear sign of the company's strong operational and financial performance. As Rich mentioned, that number excludes the pro forma contribution from the Bayswater assets during the first quarter. If those amounts were included, Adjusted EBITDA for the full year would have been about $220 million, slightly under our guidance of $240 million. Notably, we hit our production guidance while spending far less capital than we had originally planned — roughly 35% under our stated CapEx guidance, which highlights both our capital efficiency and the strength of our operational execution. Net cash provided by operating activities was $153.9 million, while capital expenditures came to approximately $183.4 million, which was about $90 million below the midpoint of our guidance. On a per BOE basis, lease operating expense was $6.14. Transportation and processing was $1.32. Production and ad valorem taxes were $3.15, and G&A was $7.50 per BOE, of which $5.29 came from cash G&A, reflecting our ongoing emphasis on controlling costs and driving greater efficiencies. As of December 31st, 2025, Prairie held roughly $109 million of liquidity, with a borrowing base and elected commitment of $475 million under its credit facility. Hedging continues to be a central part of our strategy, with a substantial share of expected production hedged at attractive prices through 2029, which gives us strong cash flow visibility and downside protection. Prairie finished the year with 121.1 million BOE of proved reserves, including a balanced mix of proved, developed, and undeveloped reserves, with a PV-10 value of approximately $1.2 billion, highlighting the substantial value of our assets. All in all, 2025 represented a transformative step forward in strengthening Prairie's financial position, scaling the business, and positioning the company for continued growth. I'll now move to an operational overview. From an operational standpoint, 2025 was a defining year for Prairie. We successfully completed the integration of acquired assets, took on full operational control, and carried out a multiple pad development program across our DJ Basin footprint. Importantly, we delivered a 0.0 safety record for the year, reflecting perfect safety performance with 0 incidents — an outcome that speaks to the dedication, discipline, and operational excellence of our field team. As mentioned earlier, during the year, we completed and turned to sales wells across multiple pads, including Noble, Simpson, Rusch, and Opal Coal Bank. What we've achieved so far has either matched or surpassed what we set out to do, and it keeps confirming how solid our inventory is and how well we execute. Beyond fresh development work, Prairie stayed committed to optimization efforts, such as workovers and improvements to artificial lift, which helped boost base production along with performance and efficiency; on top of that, we locked in important agreements covering services and infrastructure for 2026, which locks down operational continuity and backs our future development. Throughout the year the team performed at a high level, producing robust outcomes while handling integration and keeping capital discipline intact. Management and the board of directors stay tightly aligned on a common dedication to disciplined capital allocation, ongoing optimization of the company's capital structure, and delivering sustainable long-term value to shareholders. The leadership team is centered on strengthening our financial position, pushing operational excellence, and acting with integrity in every part of the business. With that, I'll turn it back to Rich for closing remarks.

Thanks, Greg. So, as we think about 2026, we're putting out full-year guidance that reflects how strong our asset base is and the momentum we've got coming out of 2025. We're looking at average production of roughly 25,500 to 27,500 BOE per day, and capex of $200 million to $220 million. Adjusted EBITDA should come in somewhere between $240 million and $260 million, and that assumes a weighted average WTI price of $60 to $64, hedges included. Our strategy hasn't changed: we focus on high-return organic growth, keep the balance sheet strong, and stay flexible so we can go after accretive opportunities. Prairie is coming out of 2025 at a much bigger scale, with a deep inventory of high-quality locations and an operating platform that's proven itself. We think we're in a good spot to keep delivering operational and financial success in 2026 and beyond. On behalf of our board, I'd like to thank everyone on the Prairie team for how dedicated they've been and for their execution all through 2025, and I also want to thank our shareholders for their continued trust and support as we move into the next phase of growth. With that, I'll hand the call back to the operator so we can open the line for questions.

Yes. Hey, everyone. I was hoping you might give us a bit more detail regarding output. You know, you had an exit rate of 28,000 boe/d. Your guidance for this year is somewhat, you know, beneath that figure. Could you perhaps walk us through, like, approximately where you expect us to land in Q1 on production, and what sort of cadence do you see across the year? Has output been declining lately? Do you anticipate it rising again, you know, at some stage during the year? Any detail at all on cadence and production would really help.

Yes. Good morning, Leo. This is Greg Patton. Glad to discuss our plan a bit for 2026. As you noted, we finished the year on a high point for the year, ultimately developing new locations; we are reoccupying pads that have incremental additional locations available to them in the first quarter. I'd characterize that as not infilling wells, but rather using that pad to drill other pads. Our Blehm Schneider is a prime example, for those of you listening on the phone, where we did have to come in and shut down the whole Blehm facility and operations. Our Q1 production figure is lower. That figure, you're going to see an average for Q1 closer to the 23-ish range. Ultimately, that's simply due to that shut-in production, not necessarily typical declines, as we would all expect finishing the year from 28,000 boe/d but because we had to shut in incremental pads. Same situation on our Elder pad, where we drilled three separate DSUs from the Elder pad, that we've gone and reoccupied. During that first quarter of the year, the Blehm., the Elder, as we've drilled those incremental locations in our drill plan for the year, is going to have the lowest production. Bringing those all back online, plus the new flush production on those two pads as we get into Q2 here, we'll keep ramping up and serve as a continual gradual increase throughout the year to exit the year again. That's a bit of detail in and around Q1 moving into Q2. There will be, at the close of Q2, some offset fracs that we anticipate. They don't appear to be significant at this point in time, depending on how far away ultimately those fracs propagate. We believe that it's ultimately a gradual incline from this point forward to the end of the year.

All right, that's useful. Could you perhaps spend a moment discussing how the wells have been producing for the company? Looking at a few specifics from your release, the Opal Coal Bank wells came in at roughly 725 BOE each day. The Noble wells, along with the ones drilled afterward, sat lower at 550, while Simpson, apparently your most recent set, dropped further to 500. Is the team approaching these wells any differently? It appears output has been slipping somewhat in the newer wells compared with earlier ones. Perhaps address that a bit and explain what you're observing.

Yes. In terms of flowback, Opal Coal Bank clearly exceeded our expectations. We're very pleased with how Opal Coal Bank turned out. Noble has performed decently, though offset operators—chiefly Chevron—have affected it. Regarding their frack schedule, we've spent the last several months battling those wells against the neighboring fracks. With luck, things settle down somewhat more as we enter the year's second quarter. In our view, the Simpson wells have actually done fairly well; bringing them online, however, required more time than we'd expected. Equipment arrival delays caused us issues, mainly with our gas lift systems. Once those gas lift systems showed up on schedule and we could start up those wells closer to the flowback pattern we prefer, they've been hitting type curve. Looking ahead, we think they'll remain along that sort of trend line, even though reaching that point took considerably longer than we'd initially planned. Still, we remain quite optimistic about what those wells might achieve, based on the dynamics and pressures we observe at the site, plus what our operators report back during daily route reviews, and so on.

All right, that's useful. I also wanted to ask if you could give us a rough sense of where the company's share count stands right now. I'm aware that it's been climbing for you folks over some period now. About what level are we at today? Could you share a bit more detail on where things stand regarding the preferred refinancing — the restructuring, I mean? I understand you picked up the extension on the timeline, which as I recall is due in roughly seven days. Any information on that would be appreciated.

Certainly, and I always value the openness in these questions regarding the pref; we recognize that in the end, securing these assets and running them the way we have has been extremely accretive for us, though it carries certain dilutive aspects, which all of us understand. Clearly, the waiver, in my view, shows we remain in solid dialogue with the holder of that pref, which is High Trail Capital/Hudson Bay Capital Management. As we've kept growing and expanding, they've proven to be an excellent partner. They've used that pref in the ways it was intended to be used and converted it. Leo, I'll sort of merge the two questions together here. In the end, with that pref being converted, our share count has risen. As that count has risen — when we closed out the year, we sat in the low sixties for what I'd call the issued and outstanding share count; conversions have kept happening. Our stock has seen some genuinely strong volume trading. We're grateful for the shareholder base we have today. As we keep executing, delivering results, and so on, High Trail has seized the opportunity in the market to convert additional amounts of that outstanding. To give you those figures precisely — we haven't finished Q1, so I'll hold off on that. For now, I'll say the number is up from that low sixties figure we had at year-end.

All right, thank you.

Hello, and good morning to all of you. What I wanted to ask about is how you plan to prioritize cash flow in 2026. From what I can see, your guidance points to a modest amount of free cash flow being generated. What's your thinking on how that free cash flow that's available would be put to use? Reducing debt could be one target, or possible acquisitions could be another. Should acquisitions be something you'd consider, what would your approach be to funding them?

Appreciate that, Chris, and good morning to you as well. Nice to hear from you. So, yes, I believe your read on the guidance was accurate — modest free cash flow generation across the year. Again, that assumes a mid-$60s price deck on average together with our hedges. Looking at where the market sits right now, it could prove more accretive for the company. In the end, we can't know what the year will bring, so we've kept a very conservative model and plan in place for the year. When we think about that cash flow generation and how it gets used, per your question, it would go toward building out the remainder of the asset base in terms of our financials. Our aim is a robust financial balance sheet, which we have worked for and developed to this date. Boosting the company's liquidity and further deleveraging the balance sheet beyond what we accomplished at the end of the year are all imperative goals of the board. That's the alignment we share with the board and with management. As we kind of move all of this forward, asset acquisitions sit at the heart of our aspirations; we've completed nine acquisitions to date that have bolstered and built the significance of our balance sheet and our reserves to date; every one of those was done at very accretive metrics. We'll keep looking at acquisitions. If they're accretive, we'll consider bolting them on or tacking them onto our contiguous acreage blocks. We've done that predominantly through cash flow and small draws on the RBL to support PDP as we've acquired it. My expectation is that we continue doing that, the same type of acquisitions and growth perspectives with the company. Not over-leveraging the balance sheet, not growing just to grow, maintaining a cash flow metric, albeit growing accretively where possible.