Prairie Operating reports 45% Q3 adjusted EBITDA increase; production surges to 27,000 boe per day following Bayswater asset acquisition.

Good morning and welcome to the Prairie Operating Company third quarter 2025 earnings conference call. Today's call is being recorded at this time. I would like to turn the call over to Wabi Polexmail, Vice President of Investor Relations and Capital Markets. Please go ahead.

Thank you Operator Good morning everyone and thank you for joining us for Prairie Operating Company's third quarter 2025 earnings call. Before we provide our prepared remarks, I would like to remind all participants that our comments today will include forward looking statements which are subject to certain risks, uncertainties and assumptions. Actual results could differ materially from those in any forward looking statements. Additionally, we may refer to non GAAP measures. For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward looking statement as well as the reconciliations of any non GAAP financial measures, please see the Company's public filings including the Form 8K filed Friday, Nov. 14, 2025. Joining me today are Ed Kovlick, chairman, CEO and co founder, Gary Hannah, President and Co Founder and Greg Patton, Executive Vice President and Chief Financial Officer. With that, I'll turn the call over to our Chairman, CEO and Co Founder Ed Kovlick.

Thanks Wabi and good morning everyone. The third quarter marked another major step forward for Prairie as we continue to execute across all facets of operationally, financially and strategically. I'm incredibly proud of the progress our team has made and the strong momentum we've built as we move toward the end of the year. One of the most significant milestones of the quarter was the successful completion of the transition service period following our acquisition of assets from Bayswater Exploration and Production. With Prairie assuming full operational control of the Bayswater assets, we are driving our development schedule forward as planned. I want to take a moment to thank the Bayswater team for their professionalism and collaboration throughout the transition process, which ensured a seamless handoff and smooth integration. Today, PRAIRIE is operating across our expanded footprint as a unified, efficient organization. While our production rate in the third quarter was 23,029 barrels per day, our current production rate has increased to approximately 27,000 net barrels of oil equivalent per day, reflecting the significant production ramp in the fourth quarter that we have been guiding towards. Our recent bolt on acquisitions further strengthen our core DJ basin position, adding approximately 3,400 net acres and 11 net drilling locations at an attractive average cost of roughly $680 per acre. Each of these transactions underscores our disciplined and accretive approach to growth, expanding our high quality drilling inventory while maintaining capital efficiency and balance sheet strength. Operationally, flowback on the seven new wells at our Noble Pad is now complete. In addition, completion activities have been finalized on six newly drilled wells at the Simpson Pad. The Noble Pad is now fully online and the Simpson Pad expected to be fully online this quarter Adding to Production Growth as we head into year end, financially, we remain in a solid position. Earlier this year we amended and expanded our $1 billion credit facility, reaffirming our borrowing base at 475 million and adding new banking partners including bank of America and West Texas national bank alongside Citibank. This facility provides ample liquidity to support our capital program and flexibility to pursue future opportunities. Our comprehensive hedge program continues to secure strong pricing across a significant portion of of our proved developed production through 2028. This prudent approach allows us to protect cash flows, reduce volatility and plan capital deployment with confidence. Looking ahead, our strategy remains clear and disciplined. We're focused on building long term shareholder value through a combination of high return, organic development, continued operational optimization and accretive acquisitions. Every decision we make is guided by our commitment to sustainable growth, capital efficiency and balance sheet strength. Prairie's foundation has never been stronger. Our growth story is still in its early chapters and I'm more confident than ever in the road ahead. The progress we've made this year has set the stage for continued momentum and into 2026 and beyond. With that, I'll now turn the call over to our CFO Greg Patten to walk through the financial and liquidity position in more detail.

Thanks Ed and good morning everyone. For the third quarter of 2025, we delivered strong financial results. Net income from continued operations for the quarter totaled $1.3 million, with adjusted EBITDA coming in at $56.3 million, representing over a 45% increase quarter over quarter. These improvements were driven by a combination of higher production volumes and commodity pricing supported by our hedge book. From a top line perspective, we reported total revenue of $77.7 million for the quarter, 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. Net loss attributable to common stockholders for the quarter was 22.5 million, representing a loss per share of $0.44. As mentioned, adjusted EBITDA totaled $56.3 million, underscoring the operational and financial progress we continue to make. Net cash provided by operating activities was $57.7 million for the quarter. Looking at our results on a per barrel of oil equivalent basis, total operating expenses were $23.92 per boe. This includes lease operating expenses of $7.25 per boe, transportation and processing costs of $1.04 per boe and production in ad valorem taxes of $2.21 per boe, depreciation, depletion and amortization expense came in at $7.57 per boe and general and administrative expenses were $5.79 per boe. These metrics reflect integration and system implementation costs associated with the post closing of the Bayswater transaction, of which a significant portion are related to one time expenses. As we move forward, we will continue our focus on operational efficiency, cost control and the benefits of increased scale from current and potential future acquisitions. Our CAPEX came in at $69.6 million consistent with our development plan and reflective of the continued execution of our drilling program and targeted AFE costs. Turning to our financial position, as of September 30, 2025 our total liquidity was approximately $68.6 million consisting of $58 million of availability under our revolving credit facility and 10.6 million in unrestricted cash. As a reminder, the borrowing base and aggregated elected Commitment is currently $475 million with an overall facility size of $1 billion and a maturity date of March 26, 2029. Our credit facility and associated banking syndicate continue to provide us ample financial flexibility to support our development program and evaluate strategic opportunities as they arise. Our hedging program remains central to our risk management approach as we maintain a comprehensive hedge portfolio to protect our expected production from commodity price fluctuation and volatility. These hedges secure pricing of $66.16 per barrel of oil and $4.32 per MMBtu of natural gas through the remainder of 2025 and $62.07 per barrel and $4.06 per MMBtu through the first quarter of 2028. By locking in pricing for the majority of our production, we effectively insulate ourselves from near term commodity price volatility and position the company to more reliably forecast cash flows and capital expenditures. This proactive approach demonstrates our continued commitment to capital discipline and long term fiscal responsibility. Turning to Reserves Prairie ended the quarter with total proved reserves of approximately 106.6 million barrels of oil equivalent. Of this total 63.6 million boe is classified as proved developed producing with the remaining 43 million boe in the proved undeveloped PUD category. Our current Development inventory includes over 600 gross drilling locations. These reserves reflect the quality of our asset base, the depth of our inventory and the long term value we are building through disciplined investment and operational execution on integration the transition of the recently acquired assets has been seamless. With our transition service period coming to an end, we've aligned systems, streamlined processes and attracted and brought on board key personnel from industry leading companies. As mentioned earlier by Ed, we would like to thank the Bayswater team for their professionalism and collaboration throughout the transition period. PRAIRIE is now running at full capacity and is well positioned for continued growth. We've also taken key steps to ensure continuity and efficiency across our supply chain. We have focused a significant effort on building relationships with midstream providers, ensuring guaranteed takeaway optionality for our development programs for the foreseeable future. Additionally, we have secured contracts with both PROFRAC and Precision Drilling supporting our development plans for 2026. These contracts collectively help manage costs and mitigate potential service disruptions. With that, I'll turn the call over to Gary Hanna, our President and co Founder, to provide a detailed operational update.

Thank you Greg and good morning to everyone. Operationally, the third quarter marked another important step forward for Prairie as we completed the transition service period following the Bayswater acquisition and assumed full operational control of these assets. With the transition service period now concluded, we're executing against our development schedule as planned. Our operations and field teams have done an outstanding job managing the integration process, but we continue to deliver meaningful production growth and efficiency gains. As of today, Prairie's current production rate stands at approximately 27,000 boe per day, reflecting the combined impact of our legacy operations, the Bayswater assets and new drills coming online as we executed our growth roadmap through the third quarter. As Ed mentioned, flowback operations are now complete on seven new wells in our Noble Pad where early indications are encouraging. We're also finalizing completions on six newly drilled wells on the Simpson Pad and anticipate beginning flow back in the next week. The Noble Pad is currently online and we expect the Simpson Pads will be fully online in the fourth quarter. At the Rush pad, drilling and completions and drill out operations for all 11 wells were finalized and turned to sales. These wells targeted multiple horizons across the Niobrara A, B and C zones and the Codell formation, and we expect them to be meaningfully contribute to our production growth through the remainder of 2025. In addition, we successfully completed and turned the sales nine wells on the Opal Coal bank pad that were acquired as DUCs in the Bayswater transaction Initial results have exceeded our expectations with an average IP30 of roughly 525 barrel of oil equivalent per day per well on a two stream gross basis. Our precision rig is currently drilling a 10 well occupation at our blimpad which we expect to be turned to line in the first quarter of 2026. Beyond new drilling, Prairie remains focused on optimizing its existing asset base. The company has launched a robust workover program targeting 32 wells across the third and fourth quarters with 31 workovers completed to date, including 18 in the third quarter. Additionally, Prairie has installed plungers across 183 wells, resulting in an average oil production increase of 12.6% per well. These optimization initiatives, along with ongoing improvements to the gas lift system and pad efficiencies, underscore Prairie's commitment to maximizing per well productivity. Overall, I'm incredibly proud of what our operations and field teams have accomplished this quarter. We've managed multiple integrations, brought new wells online and expanded our acreage footprint, all while maintaining a strong balance sheet and operational discipline. And with that, I'll turn it back to Ed for closing comments.

Ed thanks Gary. We are reaffirming our full year production guidance range of 24,000 to 26,000 boe per day along with our full year capital expenditure guidance range of 260 to 280 million dollars. Lastly, we are reaffirming our full year adjusted EBITDA guidance range of 240 to 260 million based on a WTI price range of $60 to $70. Our operational execution and performance year to date along with the momentum across our portfolio remains strong and we continue to benefit from improved capital efficiency and the integration of recent acquisitions. We continue to take a disciplined and deliberate approach to growth and we're encouraged by the opportunities ahead. For Prairie Strategy remains focused on driving sustainable double digit organic growth through the drill bit while selectively pursuing accretive M and A that strengthens our position and enhances long term value creation. I want to extend my appreciation to the entire Prairie team for their exceptional effort and dedication throughout this transformative period. The Company's foundation has never been stronger and we're finishing the year with solid momentum, increased scale and a clear path forward. Prairie's next chapter is shaping up to be our most exciting yet and we're grateful for the continued trust and support of our shareholders. With that, I'll turn the call back over to the operator to open the line for questions.

Thank you ladies and gentlemen. If you would like to ask a question, please press Star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question comes from the line of Leo Mariani with Roth. Please proceed.

Good morning guys. Could you maybe just talk about what you see in the current kind of M and A environment, you know, at this point in time? And then additionally, I know you made some comments that your bank group was kind of supportive of looking at deals. I don't think you guys have had your fall borrowing base redetermination yet. Maybe that's in process. So just kind of any update in terms of how you kind of see the bank money market for any M and A deals as well.

Good morning, Leo, this is Ed. I can speak to M and A and hand it over to Greg to discuss the redetermination process with the bank group. You know, look, we built this company on the back of M and A. It's a core principle of our company. But at the same time we're really focused on remaining disciplined. Whether it's a larger potential deal or a strategic bolt on. We're always focused on inventory quality, capital efficiency and cash flow. We're not really chasing valuations. We're looking for opportunities that really strategically strengthen Prairie. There has been more attention on the basin as a result of the SM City transaction. I think that's a good thing. But there are plenty of opportunities ahead of us.

Thanks, Ed. And to just kind of briefly brush on the RBL, yes, we are in the middle of the process to redetermine for the fall redetermination process. We're not seeing any, any outside the normal items occur there. Potentially a slight uplift, but absolutely holding flat on a go forward basis. And the borrowing group remains consistent and strong in and around the facts of utilizing paying down the RBL as well as utilizing it for future proceeds for potential ma, of course, if there's PDP associated with it. So all in process. Very strong bank group going into the fall redetermination and looking forward to the quarter to come.

Okay. And then just on the operational side, you guys spoke of kind of locking in a precision rig and a pro frac crew. Can you provide a little bit more color around that? Are those kind of locked in for the balance of 20, 26 and maybe just to dovetail around that? Where are you seeing leading edge two mile? Well costs right now and don't know what you lie locked in for next year, but what does that kind of potentially imply for, well, costs as we get into 26?

Yeah, sure, Leo, happy to touch on those. Again, Greg Patton here. Ultimately, our contractual date for the Precision rig extends through April. In terms of Profrac, we are contractually locked in on a month by month basis with them with no rate escalations at the current time. Ultimately they've been a great partner for us as we've kind of developed through the basin. We've cut in half our cycle times with them from the first inception. So, you know, we're very pleased with the PROFRAC process there. And Precision is equally. It's a CNG electrified rig. It meets all the criteria of Colorado. We're very happy with that rig. So we would look to extend that come April. But everything is going well between those two companies as we kind of look at a go forward basis in terms of AFE costs. Those two, the rig and the frac crew provide incremental aspects in large components of that AFE. As we've delivered AFEs throughout the year, we've continued to bring those down as we kind of average them out on a 1800 foot pound frac equivalent basis. We're right in that 5.2, $5.3 million average. We have incrementally added additional sand loading as the reservoir deems necessary in certain places. And we've seen some 5.4, $5.5 million results. But that's not an equivalent basis. That's just because we are trying to put away the best wellbores and the right porosity rock and the right formations in the basin. And so we are very excited about the fact that we've been able to reduce the costs and ultimately we will continue to strive towards that $5 million marker we've previously talked about. And if we were putting away 1,800 foot pound fracs on a regular basis, we would be very, very close to that number at the time being.

Okay, thank you. Very thorough.

The next question comes from the line of John Davenport with Johnson Rice. Please proceed.

Hey, good morning and thanks for taking my question today. I wanted to focus on the work of a program that you guys highlighted with the third quarter results. You're basically at the end of that, you know, being 31 of those 32 wells completed. And I'm curious when we'll see, I guess, the results from that, what the impact is on the production line and what the magnitude of that will be along with is there Runway for additional Workovers with the existing assets and what that might look like in the future.

Yeah, this is Gary Hanna. I'll take that. Yeah, the workover program as I set forth in the early time was 32 wells for the year. We got about half of those done in Q3. The rest of those will be completed in Q4. That is an ongoing process. It never ends really. I mean you're always needing to. As we evaluate wells and look at wellbores and do certain work, we identify those work over opportunities. So we'll continue to do that going forward. The other part of your question was the adds about 300 barrels, 400 barrels addition of those per day. We've seen a pretty significant uplift on those wells and they're holding for 30, 60 days out and we're monitoring that as we go. But we're very pleased with the results. The return on that, that capital expenditure is just, you know, it's great. So you continue that program, it's going to be something we do continuously ongoing in the future.

All right, perfect. I think that that is it for me. Thank you. Thank you.

The next question comes from the line of Tim Moore with Clear Street. Please proceed. Thanks. I just have two questions. What other improvements maybe have you made since taking full operational control of Bayswater? I mean, I know Gary's mentioned twice now the work over count and the pro factor efficiencies. Just like to care about, just hear about elaborating on any optimization plan or tactics or any low hanging fruit you think you'll work on the next couple quarters.

Yeah, you know, in the process of going through the workovers, you know, we're finding other improvements in the wells that are quick and inexpensive. And so that program is sort of the tip of the spear for us in terms of optimizing all of the assets. In terms of other optimization opportunity, we're looking at things like optimizing compression, optimizing some other facets of our facilities, design, repairing some facilities and so forth. So you know, we're trying to recognize most of the opportunity in that arena before the end of the year and are pretty much well on our way to doing so.

Thanks Ed, that's helpful. The only other question I have for you, Ed, or even Greg, how should we really think about the capital expenditure budget for next year? You know, let's just assume maybe a tiny bit of your high end of the CAPEX range shifts into early next year. I mean, is 300 million capex next year feasible from what you're seeing?

You know, we're not prepared yet to guide on next year, but you know, I think there's a lot of opportunity for us and you know, at the right time, we'll let you know what that number looks like.

Okay, thanks. That's it for my questions. The next question comes from the line of Chris Detner with wcr. Please proceed. Sure. Good morning everyone. Just wanted to step back and see if you guys give us another overview on how you've been able to bring up your production from the acquisition and now you've kind of taken over the assets.

Yeah. Good morning, Chris. Happy to address that. So, you know, we've pretty much been spot on with the guidance that we've provided in terms of our development program. As you know, there's quite a bit of delay in the DJ in terms of recognizing the production ramp from wells drilled, completed and til'd. We're starting to see the benefit of that. So as you know, again, as previously stated, we've optimized the production that we purchased after getting the transition service period completed in August and September, we brought all of our tils online as planned and were no longer impacted by offsetting fracs as we were in Q2. And so that's really driven production to the levels that we previously guided.

Okay, excellent. And I think you mentioned in your remarks, Eddie, that you done a couple bolt on acreage deals that I think you said $680 per acre, is that right or did I hear that correctly? Or could you add any colors to, you know, roughly like what part of the basin it was in?

You know, I can't tell you exactly where it is. That's our, that's our secret sauce. But you know what I'll say though is that we love the little deals. You know, it's sort of our version of Moneyball in the basin. Of course, you know, the big deals grab all the headlines. But you know, all of these bolt ons of reserves, locations and permits are really core to our strategy. And there's still a lot of sort of orphaned assets like this throughout the basin that we're able to take advantage of.

And Chris, I'll just add to that in terms of these acquisitions, that particular one we referenced is in and amongst available takeaway systems offsetting other production from other operators. And so we're very happy to keep targeting, as Ed said, those individual opportunistic bolt ons.

Okay, is it close to your, like some of your acreage or is it, and can you characterize it to be more rural versus some of the suburban type of acreage.

It's not a step out away from our acreage, Chris. It's contiguous to our positions.

Okay, perfect. That's all I've got, guys. Thank you.

Thank you. Thank you. This concludes question and answer session, and this will conclude today's conference. You may disconnect your lines at this time. And we thank you for your participation.