Prairie Operating Co. (Nasdaq: PROP; the “Company” or “Prairie”)
today announced it has entered into a definitive agreement to
acquire the assets of Nickel Road Operating LLC (“NRO”) for a total
consideration of $94.5 million, subject to certain closing price
adjustments and other customary closing conditions. The total
consideration consists of $83 million in cash and $11.5 million in
deferred cash payments. The effective date of the transaction
is February 1, 2024.
The acquisition is expected to be accretive to
Prairie’s shareholders across key financial metrics including
production, reserves, and free cash flow. Furthermore, the
addition of NRO’s assets strategically expands Prairie’s core
operating area, increases inventory of high rate-of-return drilling
locations, and provides additional flexibility to the 2024 drill
schedule. The transaction adds over 5,500 net leasehold acres
and 62 fully permitted proven undeveloped (“PUD”) drilling
locations. The 84% liquids weighted assets produce approximately
3,370 net Boepd and add third-party engineered proven reserves
estimated at 22.2 MMboe and $254 million in PV10 value, according
to an independent, third-party reserve report by Cawley, Gillespie
& Associates, Inc. (“CG&A”) using SEC pricing as of
December 31, 2023.
NRO’s assets and operations are located near
Prairie’s existing DJ Basin operations in largely rural Weld
County, Colorado. The permitted PUDs are expected to payout
in approximately 1 year from the onset of production and are
economic in a low commodity price environment, with operational
break-evens below $30/bbl WTI. (1) In addition, existing
infrastructure provides takeaway capacity and opportunities to
improve efficiencies.
"This acquisition increases and strengthens our
overall position within a top-tier U.S. shale basin and aligns with
our strategy of creating value through accretive acquisitions,”
stated Ed Kovalik, Chairman and Chief Executive Officer of the
Company. “Furthermore, the transaction positions us to
accelerate our development program within free cash flow,
supporting the Company’s stated goal of debt-free, long-term
growth.”
Gary Hanna, President of the Company, added,
“Today’s announcement underscores our commitment and ability to
create value for our shareholders through accretive acquisitions.
Today’s target rich environment gives us ample opportunity to
continue executing our acquisition strategy. These assets
strategically enhance our existing operations, enabling us to
capitalize on operational efficiencies in the DJ Basin.”
Strategic Drivers & Asset Overview:
(1)
- 3,370 net Boepd (84% liquids) flowing from 26 operated
horizontal wells
- 5,500 net contiguous acres across four lateral targets
- 90% held by production (“HBP”)
- 94% working interest in seven operated Drilling and Spacing
Units (“DSUs”) 74% net revenue interest
- Adds 62 permitted PUDs
- Free cash flow expected to support full field development
program
- No exposure to federal leases
- Key infrastructure in place to support development plan
Financial Highlights: (1)
- Expected to be immediately accretive to key financial metrics,
including production, reserves, and cash flow
- Adds 22.2 MMboe and $254 million in 1P PV10 value
- Adds 5.3 MMboe and $104 million in PDP PV10 value
- Cash flow from PDP operations expected to be ~$40 million over
the next twelve months
- Average IRRs of 75% and discounted ROI of 1.9x
- Net payout after approximately 1 year of production per
well
- Development Break-even below $30/bbl WTI
Transaction Metrics: (1)
Based on an effective date of February 1, 2024,
and existing production of approximately 3,370 Boepd, the
transaction metrics are as follows:
- PV15 of Proved Developed Producing (“PDP”) reserves
- Implied multiple of 2.3x NTM cash flow
- $28,000 per net flowing Boe
- $17,000 per net acre
- $4.25 per Boe of 1P reserves of 22.2 MMboe, as determined by
CG&A. Including approximately $182 million of net undiscounted
future development capital results in a recycle ratio of
approximately 3.6x times.
A summary of reserves and values as of December
31, 2023 and as determined by CG&A follows.
|
Reserve Category |
Formation |
Well
Count |
Net
Oil (mbo) |
Net
Gas (mmcf) |
Net
NGL (mbngl) |
Net
Equiv. (mboe) |
PV10
($000s) |
PDP |
|
|
|
|
|
|
|
|
Codell |
7 |
746 |
1,145 |
189 |
1,125 |
26,582 |
|
Niobrara |
19 |
1,909 |
6,733 |
1,160 |
4,191 |
77,313 |
|
|
Total |
26 |
2,655 |
7,878 |
1,349 |
5,317 |
103,895 |
|
|
|
|
|
|
|
|
|
PUD |
|
|
|
|
|
|
|
|
Codell |
19 |
2,697 |
4,379 |
715 |
4,142 |
42,269 |
|
Niobrara |
43 |
6,141 |
19,483 |
3,392 |
12,780 |
107,252 |
|
|
Total |
62 |
8,838 |
23,862 |
4,107 |
16,922 |
149,521 |
|
|
|
|
|
|
|
|
|
|
TOTAL PROVED |
|
88 |
11,493 |
31,740 |
5,456 |
22,239 |
253,416 |
Note: PV10 is a non-GAAP financial measure. See
the “Non-GAAP Financial Measure” section below.
- Based on CG&A reserve report using SEC pricing as of
December 31, 2023, and NRO provided lease operating statements and
corporate financial statements
Additional Information
A company presentation describing the
acquisition can be found on the Company’s website
(www.prairieopco.com). The transaction is currently expected
to close in the first half of 2024. The Company expects to fund the
transaction through a combination of public and / or private
issuance of common stock, cash on hand, and proceeds from existing
warrant exercises.
Non-GAAP Financial Measures
PV10 is derived from the Standardized Measure of
Discounted Future Net Cash Flows (“Standardized Measure”), which is
the most directly comparable GAAP financial measure for proved
reserves. PV10 is a computation of the Standardized Measure
on a pre-tax basis. PV10 is equal to the Standardized Measure at
the applicable date, before deducting future income taxes
discounted at 10 percent. We believe that the presentation of
PV10 is relevant and useful to our investors as supplemental
disclosure to the Standardized Measure, or after-tax amount,
because it presents the discounted future net cash flows
attributable to our reserves before considering future corporate
income taxes and our current tax structure. While the standardized
measure is dependent on the unique tax situation of each company,
PV10 is based on prices and discount factors that are consistent
for all companies.
About Prairie Operating Co.
Prairie Operating Co. is a publicly-traded
company engaged in the development, exploration, and production of
oil, natural gas, and natural gas liquids with operations focused
on unconventional oil and natural gas reservoirs located in
Colorado focused on the Niobrara and Codell formations. The company
also owns crypto miner computer assets, complementary to its energy
assets. The Company is dedicated to developing affordable, reliable
energy to meet the world’s growing demand while continuing to
protect the environment. To learn more, visit
www.prairieopco.com.
Forward-Looking Statements
The information included herein and in any oral
statements made in connection herewith include “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements, other than statements of
present or historical fact included herein, are forward-looking
statements. When used herein, including any oral statements made in
connection herewith, the words “could,” “should,” “will,” “may,”
“believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,”
the negative of such terms and other similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain such identifying words. These
forward-looking statements are based on the Company’s current
expectations and assumptions about future events and are based on
currently available information as to the outcome and timing of
future events. Statements concerning oil and gas reserves also may
be deemed to be forward looking statements in that they reflect
estimates based on certain assumptions that the resources involved
can be economically exploited. Except as otherwise required by
applicable law, the Company disclaims any duty to update any
forward-looking statements, all of which are expressly qualified by
the statements in this section, to reflect events or circumstances
after the date hereof. The Company cautions you that these
forward-looking statements are subject to risks and uncertainties,
most of which are difficult to predict and many of which are beyond
the control of the Company. These risks include, but are not
limited to, the ultimate outcome of the acquisition of NRO by the
Company; the Company’s ability to consummate the proposed
transaction with NRO; the Company’s ability to finance the proposed
transaction with NRO; the possibility that the Company may be
unable to achieve expected free cash flow accretion, production
levels, drilling, operational efficiencies and other anticipated
benefits within the expected time-frames or at all and to
successfully integrate NRO’s operations with those of the Company;
that such integration may be more difficult, time-consuming or
costly than expected; that operating costs, customer loss and
business disruption may be greater than expected following the
proposed transaction or the public announcement of the proposed
transaction; uncertainties inherent in estimating quantities of
oil, natural gas and NGL reserves and projecting future rates of
production and the amount and timing of development expenditures;
commodity price and cost volatility and inflation; general
economic, financial, legal, political, and business conditions and
changes in domestic and foreign markets; the risks related to the
growth of the Company’s business; and the effects of competition on
the Company’s future business. Should one or more of the risks or
uncertainties described herein and in any oral statements made in
connection therewith occur, or should underlying assumptions prove
incorrect, actual results and plans could differ materially from
those expressed in any forward-looking statements. There may be
additional risks not currently known by the Company or that the
Company currently believes are immaterial that could cause actual
results to differ from those contained in the forward-looking
statements. Additional information concerning these and other
factors that may impact the Company’s expectations can be found in
the Company’s periodic filings with the Securities and Exchange
Commission (the “SEC”), including the Company’s Annual Report on
Form 10-K filed with the SEC on March 31, 2023, and any
subsequently filed Quarterly Report and Current Report on Form 8-K.
The Company’s SEC filings are available publicly on the SEC’s
website at www.sec.gov.
Reserve Information
The Company obtained the reserve report
information referenced herein from CG&A with respect to the
reserves of NRO. The reserves were calculated in accordance with
SEC guidelines using the price of $76.97 per barrel for oil, $2.252
per MCF for gas, and $20.619 per barrel for NGL. The base rates of
oil of $78.22 bbl and gas of $2.637 per million British Thermal
Units (MMBtu) were based upon WTI-Cushing spot prices (EIA) during
2023 and upon Henry Hub spot prices (Platts Gas Daily) during 2023,
respectively. The reserve classifications and the economic
considerations applied in the reserve report conform to the
criteria set forth in the 2018 Petroleum Resources Management
System (PRMS) approved by the Society of Petroleum Engineers (SPE).
All reserve estimates represent CG&A’s best judgment based on
data available at the time of preparation of the reserve report,
and CG&A’s assumptions as to future economic and regulatory
conditions. It should be realized that the reserves are actually
recovered, the revenue derived from, and the actual cost incurred
could be more or less than the estimated amounts.
Investor Relations Contact:Wobbe
Ploegsmawp@prairieopco.com832.274.3449
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