Prairie Operating Co. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2025 and 2024 should be read in conjunction with our condensed consolidated financial statements and related notes to those financial statements that are included elsewhere in this report, as well as our audited consolidated financial statements and related notes and the related “Management’s Discussion and Analysis of Financial Condition and Results or Operations” in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Additionally, refer to “Cautionary Statement Regarding Forward-looking Statements” at the beginning of this Quarterly Report on Form 10-Q. Except as otherwise indicated or required by the context, references to the “Company,” “we,” “us,” “our” or similar terms refer to Prairie Operating Co. Overview We are an independent oil and gas company focused on the acquisition and development of crude oil, natural gas, and NGLs. Our assets and operations are strategically located in the oil region of rural Weld County, Colorado, within the DJ Basin. We believe that the DJ Basin is one of the premier resource plays in the U.S., as Weld County boasts some of the lowest break-even prices in the U.S., and has a long production history which has proven and consistent results. The productivity of this resource is demonstrated by the integral role that Weld County holds in Colorado’s energy economy, having produced approximately 85% of Colorado’s oil production to date. As of September 30, 2025, our assets included approximately 65,000 net leasehold acres in, on and under approximately 92,000 gross acres. We strive to deliver energy in an environmentally efficient manner by deploying next-generation technology and techniques. In addition to growing production through our drilling operations, we intend to continue growing our business through accretive acquisitions, such as the NRO Acquisition, which closed in October 2024, the Bayswater Acquisition, which closed in March 2025, and the Edge Acquisition, which closed in July 2025, focusing on assets with the following criteria: (i) producing reserves, with opportunities to add accretive, undeveloped bolt–on acreage; (ii) ample, high rate–of–return inventory of drilling locations that can be developed with cash flow reinvestment; (iii) strong well–level economics; (iv) liquids–rich assets; and (v) accretive valuation. Recent Developments Edge Acquisition On July 2, 2025, we entered into an agreement to acquire certain assets from Edge Energy for a total purchase price of $12.5 million, subject to certain closing price adjustments, payable in cash. Pursuant to the Edge Acquisition, we acquired 47 operated and non-operated wells on approximately 11,000 net acres. We closed the Edge Acquisition on July 3, 2025 and funded the transaction by borrowing on our Credit Facility. Additionally, the Edge Acquisition assets include the fully permitted Simpson pad, which we began developing in August 2025, as well as 7 other fully permitted locations. Third Exok Acquisition On August 8, 2025, we completed the Third Exok Acquisition and acquired approximately 5,500 net acres from Exok for $1.6 million. Bayswater Acquisition and Funding Transactions On February 6, 2025, we and certain of our subsidiaries entered into the Bayswater PSA with Bayswater, pursuant to which we and certain of our subsidiaries agreed to acquire the Bayswater Assets from Bayswater for a purchase price of $602.8 million, subject to certain closing price adjustments. On March 26, 2025, we amended and restated our Credit Facility Agreement. The Credit Facility is scheduled to mature on March 26, 2029, and the Amended & Restated Credit Agreement provides for a maximum credit commitment of $1.0 billion under the Credit Facility. As of September 30, 2025, the Amended & Restated Credit Agreement had a borrowing base of $475.0 million and an aggregate elected commitment of $475.0 million. Further, on March 26, 2025, we issued Common Stock in a public offering, resulting in proceeds of $41.4 million, net of $2.4 million of underwriting discounts and commissions, and issued the Series F Preferred Stock, resulting in approximately $137.2 million of net proceeds, after deducting the advisor fees and offering expenses. We closed the Bayswater Acquisition on March 26, 2025, paying approximately $482.5 million in cash to Bayswater, $15.0 million of which was deposited in escrow pending the completion of the Additional Working Interest Acquisition, which Bayswater acquired and assigned to us on April 11, 2025, and issuing 3,656,099 shares of our Common Stock to Bayswater. We funded the cash portion of the Bayswater Purchase Price with cash on hand, the proceeds from the issuance of Common Stock and the issuance of the Series F Preferred and borrowings under our Credit Facility. On June 6, 2025, we received an interim settlement payment from Bayswater of $30.7 million, $16.1 million of which related to the time period between the post effective date to the close date of the acquisition, which resulted in a decrease to the purchase price. We completed the final settlement with Bayswater on October 15, 2025, which resulted in Bayswater paying us $31.7 million, as such, we will finalize the purchase accounting for the Bayswater Acquisition in the fourth quarter of 2025. Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below for a further discussion of issuance of the Series F Preferred Stock and Credit Facility. 37 Table of Contents Drilling and Completion Activities On April 1, 2025, we launched the development program at our Rusch pad development in Weld County, which consists of 11 two-mile lateral wells. The Rusch wells came online late in September 2025 and are expected to contribute meaningful production in the fourth quarter of 2025. On April 28, 2025, we announced our plan to begin completions on nine previously drilled but uncompleted wells acquired in the recent Bayswater Acquisition. Completion activities at the Opal Coalbank pad began in May 2025, and the wells came online mid-July 2025 with initial average two-stream gross production of 525 Boe/d. On June 1, 2025, after we completed drilling at our Rusch pad, we moved the drilling rig to our Noble pad development in Weld County, which consists of 7 wells. As of September 30, 2025, the Noble pad is in the drill-out phase with first production expected in the fourth quarter of 2025. In September 2025, after we completed drilling at our Noble pad, we moved the drilling rig to our recently acquired Simpson pad development in Weld County, which consists of 6 wells. Completion activities at the Simpson pad are expected to be finalized in the fourth quarter of 2025 and first production is expected towards the end of 2025. Hedging Program In October and November 2025, we executed a portfolio of hedges to maintain the hedging requirement under our Amended & Restated Credit Agreement. These hedges secured prices of $60.45 per barrel through the rest of 2025, $60.02 per barrel in 2026 and 2027, and $60.62 per barrel through the fourth quarter of 2028, and $4.07 per MMBtu through 2027. At-the-Market Offering On June 20, 2025, we entered into an Equity Distribution Agreement with Citigroup Global Markets Inc. and Truist Securities, Inc., as managers. Pursuant to the agreement, we have the option to sell shares of Common Stock up to an aggregate offering price of $75.0 million through the Managers. The Common Shares sold under the ATM Offering, if any, will be made under our Registration Statement on Form S-3 which was declared effective on May 2, 2025. We anticipate the net proceeds from the ATM Offering will be used for general corporate purposes, which may include, among other things, advancing our development and drilling program, repayment of existing indebtedness, or financing potential acquisition opportunities. As of September 30, 2025, we have not issued any shares under the ATM Offering. Factors Affecting the Comparability of Financial Results Commodity Prices Since oil, natural gas, and NGL prices are the most significant factors impacting our results of operations, continued price variations can have a material impact on our financial results and capital expenditures. In an effort to reduce the impact of price volatility, and in compliance with requirements under our Amended & Restated Credit Agreement, we enter into derivative contracts to economically hedge a portion of our estimated production from our proved, developed, producing oil and natural gas properties against adverse fluctuations in commodity prices. By doing so, we believe we can mitigate, but not eliminate, the potential negative effects of decreases in oil, natural gas, and NGL prices on our cash flows from operations. However, our hedging activity could reduce our ability to benefit from increases in oil, natural gas, and NGL prices. Further, we could sustain losses to the extent our oil, natural gas, and NGL derivative contract prices are lower than market prices and, conversely, we could recognize gains to the extent our oil, natural gas, and NGL derivative contract prices are higher than market prices. Refer to Results of Operations - Other income and expenses below for a discussion of our recognized gains or losses on derivative contracts. As of September 30, 2025, we had the following outstanding crude oil, natural gas, and NGL derivative contracts in place, which settle monthly and are indexed to NYMEX West Texas Intermediate, NYMEX Henry Hub, and Mount Belvieu OPIS, respectively: Settling October 1, 2025 through December 31, 2025 Settling January 1, 2026 through December 31, 2026 Settling January 1, 2027 through December 31, 2027 Settling January 1, 2028 through December 31, 2028 Crude Oil Swaps: Notional volume (Bbls) 717,598 2,241,616 1,592,503 471,907 Weighted average price ($/Bbl) $ 67.85 $ 64.42 $ 64.16 $ 63.47 Natural Gas Swaps: Notional volume (MMBtus) 3,017,447 11,413,134 9,874,626 4,406,357 Weighted average price ($/MMBtu) $ 4.33 $ 4.08 $ 4.07 $ 4.00 Ethane Swaps: Notional volume (Bbls) 85,845 288,956 232,375 51,809 Weighted average price ($/Bbl) $ 11.91 $ 11.54 $ 11.05 $ 11.28 Propane Swaps: Notional volume (Bbls) 149,550 509,724 417,744 94,220 Weighted average price ($/Bbl) $ 28.74 $ 26.36 $ 26.51 $ 26.00 Iso Butane Swaps: Notional volume (Bbls) 18,772 63,185 50,812 11,328 Weighted average price ($/Bbl) $ 35.62 $ 33.92 $ 30.22 $ 29.63 Normal Butane Swaps: Notional volume (Bbls) 51,933 174,809 140,580 31,343 Weighted average price ($/Bbl) $ 38.32 $ 35.24 $ 31.37 $ 30.37 Pentane Plus Swaps: Notional volume (Bbls) 38,716 130,321 104,802 23,366 Weighted average price ($/Bbl) $ 46.17 $ 53.05 $ 52.40 $ 52.49 38 Table of Contents Edge Acquisition On July 2, 2025, we entered into an agreement to acquire certain assets from Edge Energy for a total purchase price of $12.5 million, subject to certain closing price adjustments, payable in cash. Pursuant to the Edge Acquisition, we acquired 47 operated and non-operated wells on approximately 11,000 net acres. We closed the Edge Acquisition on July 3, 2025 and funded the transaction by borrowing on our Credit Facility. Bayswater Acquisition As discussed above, we closed the Bayswater Acquisition on March 26, 2025, for total cash consideration $482.5 million, $15.0 million of which was deposited in escrow pending the completion of the Additional Working Interest Acquisition, which Bayswater acquired and assigned to us on April 11, 2025, and we issued the Equity Consideration to Bayswater. On June 6, 2025, we received an interim settlement payment from Bayswater of $30.7 million, $16.1 million of which related to the time period between the post effective date to the close date of the acquisition, resulting in a decrease in the purchase price. We completed the final settlement with Bayswater on October 15, 2025, which resulted in Bayswater paying us $31.7 million, as such, we will finalize the purchase accounting for the Bayswater Acquisition in the fourth quarter of 2025. NRO Acquisition As discussed above, on January 11, 2024, we entered into the NRO Agreement to acquire the Central Weld Assets, located in the DJ Basin in Weld County, Colorado for total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions. Pursuant to the NRO Agreement, we deposited $9.0 million of the NRO Purchase Price into an escrow account on January 11, 2024. On August 15, 2024, we and NRO agreed to amend certain terms of the NRO Agreement, pursuant to which 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. Additionally on August 15, 2024, $6.0 million of the Deposit was released to NRO and the remaining $3.0 million was returned to us. On October 1, 2024, we closed the NRO Acquisition and paid $49.6 million to NRO 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. We completed the final settlement with NRO in December 2024, which resulted in a final purchase price of $55.5 million. Crypto Sale We acquired our cryptocurrency mining operations in May 2023, concurrent with the Merger. On January 23, 2024, we sold all of our Mining Equipment for consideration consisting of (i) $1.0 million in cash and (ii) $1.0 million in deferred cash payments, 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. In July 2025, we received $0.4 million to satisfy the remaining Deferred Purchase Price note receivable. Results of Operations Revenue, Production, and Average Realized Price The following table presents the components of our revenue, production, and average realized price for the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 (1) 2024 Revenues (in thousands) Crude oil sales $ 64,906 $ — $ 133,635 $ — Natural gas sales 7,571 — 14,105 — NGL sales 5,244 — 10,898 — Total revenues $ 77,721 $ — $ 158,638 $ — Production: Oil (MBbls) 1,106 — 2,149 — Natural gas (MMcf) 3,513 — 7,338 — NGL (MBbls) 428 — 957 — Total production (MBoe) (2) 2,120 — 4,329 — Average sales volumes per day (Boe/d) 23,029 — 15,917 — Average realized price (excluding effects of derivatives): Oil (per MBbl) $ 58.70 $ — $ 62.18 $ — Natural gas (per MMcf) $ 2.15 $ — $ 1.92 $ — NGL (per MBbl) $ 12.27 $ — $ 11.39 $ — Average price (per MBoe) $ 36.68 $ — $ 36.64 $ — Average realized price (including effects of derivatives): Oil (per MBbl) $ 61.39 $ — $ 65.25 $ — Natural gas (per MMcf) $ 3.68 $ — $ 2.78 $ — NGL (per MBbl) $ 11.56 $ — $ 10.62 $ — Average price (per MBoe) $ 40.47 $ — $ 39.45 $ — (1) Total revenues and production for the nine months ended September 30, 2025, include revenue and production volumes from the assets acquired from Bayswater beginning on March 26, 2025, the closing date of the acquisition, through September 30, 2025. (2) MBoe is calculated using six MMcf of natural gas equivalent to one MBbl of oil. 39 Table of Contents For the three and nine months ended September 30, 2025, the majority of our total production volumes and revenues were attributable to properties acquired in the Bayswater Acquisition, which closed on March 26, 2025. As such, our production and revenues for the nine months ended September 30, 2025 include the production and resulting revenue from the Bayswater Acquisition from March 26, 2025 through September 30, 2025. Additionally, we did not have any production or revenue prior to the NRO Acquisition, which closed in October 2024. Operating expenses The following table presents the components of our operating expenses for the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 (1) 2024 (In thousands, except per Boe amounts) Lease operating expenses $ 15,371 $ — $ 28,732 $ — Transportation and processing 2,200 — 4,567 — Ad valorem and production taxes 4,676 — 12,049 — Depreciation, depletion, and amortization 16,037 — 30,353 — Accretion of asset retirement obligation 76 — 147 — Exploration expenses 40 25 785 524 General and administrative expenses 12,273 8,790 34,268 24,905 Total operating expenses $ 50,673 $ 8,816 $ 110,901 $ 25,430 Operating expenses per Boe: Lease operating expenses $ 7.25 NM $ 6.64 NM Transportation and processing 1.04 NM 1.05 NM Ad valorem and production taxes 2.21 NM 2.78 NM Depreciation, depletion, and amortization 7.57 NM 7.01 NM Accretion of asset retirement obligation 0.04 NM 0.03 NM Exploration expenses 0.02 NM 0.18 NM General and administrative expenses 5.79 NM 7.92 NM Total operating expenses $ 23.92 NM $ 25.61 NM NM: A per Boe calculation is not meaningful due to a zero-value denominator. (1) Total operating expenses for the nine months ended September 30, 2025, include operating expenses for the assets acquired from Bayswater beginning on March 26, 2025, the closing date of the acquisition, through September 30, 2025. Operating expenses per Boe for the nine months ended September 30, 2025 are calculated over production volumes which include volumes from the assets acquired from Bayswater beginning on March 26, 2025, the closing date of the acquisition, through September 30, 2025. Lease operating expenses . For the three and nine months ended September 30, 2025, lease operating expenses (“LOE”) increased $15.4 million and $28.7 million, respectively, compared to the same periods of 2024. These increases in LOE were primarily driven by increased production as a result of our Bayswater Acquisition and NRO Acquisition, which closed on March 26, 2025 and October 1, 2024, respectively. We did not incur any LOE prior to the closing of the NRO Acquisition on October 1, 2024. Transportation and processing expenses . For the three and nine months ended September 30, 2025, transportation and processing expenses increased $2.2 million and $4.6 million, respectively, compared to the same periods of 2024. These increases were mostly attributable to increased production driven by our Bayswater Acquisition and NRO Acquisition, which closed on March 26, 2025 and October 1, 2024, respectively. We did not incur any transportation and processing expenses prior to the closing of the NRO Acquisition on October 1, 2024. Ad valorem and production taxes . For the three and nine months ended September 30, 2025, ad valorem and production taxes increased $4.7 million and $12.0 million, respectively, compared to the same periods of 2024. These increases in ad valorem and production taxes were mostly driven by increased production as a result of our Bayswater Acquisition and NRO Acquisition, which closed on March 26, 2025 and October 1, 2024, respectively. We did not incur any ad valorem and production taxes prior to the closing of the NRO Acquisition on October 1, 2024. Depreciation, depletion, and amortization . For the three and nine months ended September 30, 2025, depreciation, depletion, and amortization (“DD&A”) expenses increased $16.0 million and $30.4 million, respectively, compared to the same periods of 2024. These increases in DD&A were largely attributable to increased production as a result of our Bayswater Acquisition and NRO Acquisition, which closed on March 26, 2025 and October 1, 2024, respectively. We did not recognize any DD&A related to oil and natural gas properties prior to the closing of the NRO Acquisition on October 1, 2024. 40 Table of Contents General and administrative expenses. For the three months ended September 30, 2025, general and administrative expenses increased $3.5 million compared to the three months ended September 30, 2024. This increase was primarily driven by a $5.0 million increase in non-cash stock–based compensation and employee and benefit expenses and $1.4 million of litigation expenses incurred during the period, partially offset with a $2.3 million decrease in accounting, legal, and professional services costs. For the nine months ended September 30, 2025, general and administrative expenses increased $9.4 million compared to the nine months ended September 30, 2024. This increase was partially driven by a $6.7 million increase in non-cash stock–based compensation and employee and benefit expenses, $1.4 million of litigation expenses incurred during the period, and a $1.2 million increase in insurance, rent, and vehicle expense. Other (expenses) income The following table presents the components of our other (expenses) income for the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (In thousands) Interest expense $ (9,039 ) $ — $ (19,541 ) $ — Realized gain on derivatives 8,012 — 12,175 — Unrealized gain on derivatives 962 — 24,052 — Loss on adjustment to fair value – embedded derivatives, debt, and warrants (25,914 ) — (30,451 ) — Loss on debt issuance — (3,039 ) — (3,039 ) Interest income and other 218 432 381 538 Other expenses $ (25,761 ) $ (2,607 ) $ (13,384 ) $ (2,501 ) Interest expense. For the three and nine months ended September 30, 2025, interest expense increased $9.0 million and $19.5 million compared to the same periods of 2024, respectively, primarily driven by interest on the Credit Facility incurred during the periods. Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below for a further discussion of the Credit Facility. Realized gain on derivatives. For the three and nine months ended September 30, 2025 and 2024, the realized gain on derivatives was $8.0 million and $12.2 million, respectively, driven by favorable changes in cash settlements during the period. We did not have any outstanding derivative contracts during the three and nine months ended September 30, 2024; therefore, we did not recognize any realized gain or loss on derivatives for the period. Refer to Factors Affecting the Comparability of Financial Results – Commodity Prices above for a further discussion of our derivative contracts. Unrealized gain on derivatives. For the three and nine months ended September 30, 2025 and 2024, the unrealized gain on derivatives was $1.0 million and $24.1 million, respectively, driven by favorable changes in the fair value of our open derivative contracts as of September 30, 2025. We did not have any outstanding derivative contracts during the three and nine months ended September 30, 2024; therefore, we did not recognize any unrealized gain or loss on derivatives for the period. Refer to Factors Affecting the Comparability of Financial Results – Commodity Prices above for a further discussion of our derivative contracts. Loss on adjustment to fair value – embedded derivatives, debt, and warrants. We have several financial instruments that are or were previously valued at fair value on a recurring basis; therefore, we recognize the changes in fair value at each remeasurement period as a loss on adjustment to fair value – embedded derivatives, debt, and warrants on our condensed consolidated statements of operations for the period. For the three months ended September 30, 2025, the loss on adjustment to fair value – embedded derivatives, debt, and warrants reflects a loss on fair value of $19.1 million for the Series F Preferred Stock warrants and a loss on fair value of $7.0 million for the Series F Preferred Stock embedded derivatives partially offset with a gain on fair value of $0.2 million for the Subordinated Note. For the nine months ended September 30, 2025, the loss on adjustment to fair value – embedded derivatives, debt, and warrants reflects losses on fair value of $40.7 million for the Series F Preferred warrants, $5.5 million for the Senior Convertible Note, and $0.1 million for the Subordinated Note which were partially offset by gains on fair value of $13.9 million for the Series F Preferred embedded derivatives, $3.9 million for the Subordinated Note Warrants, and $0.8 million for the SEPA recognized during the period. Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below for a further discussion of the SEPA, the Senior Convertible Note, the Subordinated Note, and the Series F Preferred Stock warrants and embedded derivatives. Loss on debt issuance . For the three and nine months ended September 30, 2024, the loss on debt issuance of $3.0 million reflects the loss recognized for the issuance of the Subordinated Note and the Subordinated Note Warrants. As discussed above, we had elected the fair value option to account for both the Subordinated Note and the Subordinated Note Warrants and engaged a third-party to determine the fair value of both instruments at issuance. As of September 30, 2024, the total fair value of the Subordinated Note and the Subordinated Note Warrants exceeded the proceeds of $5.0 million; as a result, we have recognized a loss on debt issuance of $3.0 million on our condensed consolidated statements of operations for the three and nine months ended September 30, 2024. Discontinued operations The following table presents the components of our net loss from discontinued operations for the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (In thousands) Cryptocurrency mining revenue $ — $ — $ — $ 193 Cryptocurrency mining costs — — — (55 ) Depreciation and amortization — — — (102 ) Loss from sale of cryptocurrency mining equipment — — — (1,081 ) Loss from discontinued operations before income taxes — — — (1,045 ) Provision for income taxes — — — — Net loss from discontinued operations $ — $ — $ — $ (1,045 ) 41 Table of Contents For the nine months ended September 30, 2025, the net loss from discontinued operations decreased $1.0 million compared to the nine months ended September 30, 2024. As discussed above, we completed the Crypto Sale in January 2024; therefore, we only had cryptocurrency mining revenue or related expenses during a portion of the nine months ended September 30, 2024. However, we recognized a $1.1 million loss on the sale of cryptocurrency mining equipment. Refer to Factors Affecting the Comparability of Financial Results – Crypto Sale above for a further discussion of the Crypto Sale. Non-GAAP Financial Measures Adjusted EBITDA Adjusted EBITDA is used by management to evaluate the performance of our business, make operational decisions, and assess our ability to generate cashflows. Management believes Adjusted EBITDA provides investors with helpful information to better understand the underlying performance trends of our business, facilitate period-to-period comparisons, and assess the company’s operating results. Adjusted EBITDA is derived from net income (loss) from continuing operations and is adjusted for income tax expense, depreciation, depletion, and amortization, accretion of asset retirement obligations, non-cash stock-based compensation, interest expense (income), net, non-cash loss on adjustment to fair value – embedded derivatives, debt, and warrants, loss on debt issuance, unrealized gain on derivatives, and litigation settlement expense, all as applicable. We adjust net income (loss) from continuing operations for the items listed above to arrive at Adjusted EBITDA because these amounts can vary substantially between periods and companies within our industry depending upon accounting methods, book values of assets, capital structures, and the method by which assets were acquired. Adjusted EBITDA has limitations as an analytical tool, including that it excludes certain items that affect our reported financial results. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income calculated in accordance with GAAP or as an indicator of our operating performance or liquidity. Additionally, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. The following table presents the reconciliation of Net income (loss) from continuing operations to Adjusted EBITDA for the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 (1) 2024 (In thousands) Net income (loss) from continuing operations reconciliation to Adjusted EBITDA: Net income (loss) from continuing operations $ 1,287 $ (11,424 ) $ 34,353 $ (28,975 ) Adjustments: Depreciation, depletion, and amortization 16,037 — 30,353 — Accretion of asset retirement obligations 76 — 147 — Non-cash stock-based compensation 4,123 1,511 7,908 5,836 Interest expense (income), net 8,613 (432 ) 18,952 108 Non-cash loss on adjustment to fair value – embedded derivatives, debt, and warrants (2) 25,914 — 30,451 — Loss on debt issuance (3) — 3,039 — 3,039 Unrealized gain on derivatives (962 ) — (24,052 ) — Non-recurring litigation settlement expense 1,227 — 1,406 — Income tax expense — — — — Adjusted EBITDA $ 56,315 $ (7,304 ) $ 99,518 $ (19,992 ) (1) Net income (loss) from continuing operations for the nine months ended September 30, 2025 includes revenue and related expenses attributable to the assets acquired from Bayswater beginning on March 26, 2025, the closing date of the acquisition, through September 30, 2025. (2) Reflects the changes in the fair values of the financial instruments for which we have elected to value at fair value on a recurring basis and the Series F Preferred Stock warrants and embedded derivatives. Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below for a further discussion. (3) Reflects the loss recognized for the issuance of the Subordinated Note and the Subordinated Note Warrants in the third quarter of 2024. Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below for a further discussion. Liquidity and Capital Resources Overview Our E&P activities will require us to make significant operating and capital expenditures. In 2024, our primary sources of liquidity were proceeds from the issuances of Common Stock, the Senior Convertible Note, and the Subordinated Note, which were primarily used to fund the NRO Acquisition in October 2024. Additionally, in December 2024, our Form S-3 registration statement became effective, and we entered into a reserve-based Credit Facility with Citi. Additionally, as discussed above, on March 26, 2025, we amended and restated our Credit Facility, which now has a maximum credit commitment of $1.0 billion and is scheduled to mature on March 26, 2029. As of September 30, 2025, the Amended & Restated Credit Agreement had a borrowing base of $475.0 million and an aggregate elected commitment of $475.0 million. Further, we issued Common Stock in a public offering, resulting in proceeds of $41.4 million, net of $2.4 million of underwriting discounts and commissions and issued the Series F Preferred Stock, resulting in approximately $137.2 million of net proceeds, after deducting the advisor fees and offering expenses. We used cash on hand, the proceeds from the Common Stock and Series F Preferred Stock issuances, and borrowings under the Amended & Restated Credit Agreement to close the Bayswater Acquisition on March 26, 2025. At the closing of the Bayswater Acquisition, we paid Bayswater approximately $482.5 million in cash, $15.0 million of which was deposited in escrow pending the Additional Working Interest Acquisition, which Bayswater acquired and assigned to us on April 11, 2025, and issued 3,656,099 shares of Common Stock to Bayswater. Additionally, on June 20, 2025, we entered into the ATM Offering, which allows us to sell shares of our Common Stock up to an aggregate offering price of $75.0 million through the Managers. Sales of the shares of Common Stock sold under the ATM Offering, if any, will be made under our Registration Statement on Form S-3, which was declared effective by the SEC on May 2, 2025. As of September 30, 2025, we have not issued any shares under the ATM Offering. Management expects that our cash balance, expected revenues from the producing Bayswater wells, and liquidity available under the Amended & Restated Credit Agreement, proceeds from the ATM Offering, and potential offerings under our effective Form S-3 registration statement will be sufficient to fund our development program and operations. 42 Table of Contents Our development program is dependent upon our cash flow from operations generated from our assets and our ability to obtain additional financing through our Credit Facility. Additionally, we could obtain additional financing through public and private capital markets; however, the availability of additional capital would be subject to numerous factors outside of our control including prices of oil and natural gas and the overall health of the U.S. and global economic environments. There can be no assurance that we will be able to obtain such additional capital. The amount and allocation of future capital expenditures will depend upon a number of factors, including the amount and timing of cash flows from operations, investing and financing activities, and the timing and cost of additional capital sources. We currently plan to be the operator on substantially all of our acreage. As a result, we anticipate that the timing and level of our capital spending will largely be discretionary and within our control. We could choose to defer a portion of our planned capital expenditures depending on a variety of factors, including, but not limited to, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs, the level of participation by other working interest owners, the success of our drilling activities, prevailing and anticipated prices for oil, natural gas, and NGLs, and the availability of necessary equipment, infrastructure and capital. Working Capital We define working capital as current assets less current liabilities. As of September 30, 2025, we had a working capital deficit of $24.0 million and cash and cash equivalents of $10.6 million and as of December 31, 2024, we had a working capital deficit of $44.7 million and cash and cash equivalents of $5.2 million. Cash Flows from Operating, Investing, and Financing Activities The following table summarizes our cash flows for the periods indicated: Nine Months Ended September 30, 2025 2024 (In thousands) Net cash provided by (used in) operating activities $ 67,384 $ (5,658 ) Net cash used in investing activities (608,536 ) (13,982 ) Net cash provided by financing activities 546,600 46,655 Net increase in cash and cash equivalents 5,448 27,015 Cash and cash equivalents, beginning of the period 5,192 13,037 Cash and cash equivalents, end of the period $ 10,640 $ 40,052 Operating activities. Net cash provided by operating activities totaled $67.4 million during the nine months ended September 30, 2025 and net cash used in operating activities totaled $5.7 million during the nine months ended September 30, 2024, respectively. The $73.1 million increase in our net cash provided by operating activities was primarily attributable to increased revenue during the period, partially offset by increased operating expenses, largely driven by the Bayswater Acquisition, which closed on March 26, 2025. Additionally, we did not have any revenue prior to the NRO Acquisition, which closed in October 2024. Investing activities. Net cash used in investing activities totaled $608.5 million and $14.0 million during the nine months ended September 30, 2025 and 2024, respectively. The $594.5 million increase in our net cash used in investing activities was largely driven by cash paid for the Bayswater Acquisition of $467.5 million. Additionally, our expenditure for the development of oil and natural gas properties increased $117.5 million during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Financing activities. Net cash provided by financing activities totaled $546.6 million for the nine months ended September 30, 2025, driven by $43.8 million from the issuance of Common Stock, net of related issuance costs of $3.6 million, $148.3 million from the issuance of the Series F Preferred Stock, net of related issuance costs of $12.2 million, $389.0 million from borrowings under the Credit Facility, net of related issuance costs of $15.7 million, and $0.6 million of cash received for option exercises during the period. These increases were slightly offset by a $3.2 million repayment of the Subordinated Note. Net cash provided by financing activities totaled $46.7 million for the nine months ended September 30, 2024, driven by proceeds of $33.5 million from the exercise of Series D B and Series E B warrants, $3.0 million of proceeds from the issuance of the Subordinated Note, and $15.0 million of proceeds from the issuance of Common Stock, partially offset by the related issuance costs of $4.9 million. 43 Table of Contents Significant Sources of Liquidity Credit Facility. On December 16, 2024, we, as borrower, entered into the Credit Facility Agreement with Citi, as administrative agent and the financial institution party. On February 3, 2025, we entered into the first amendment to the Credit Facility Agreement, which among other things, increased the borrowing base and the aggregate elected commitments to $60.0 million. On March 26, 2025, we entered into the Amended & Restated Credit Agreement with Citi, as administrative agent, and the financial institutions party thereto, pursuant to which the Credit Facility Agreement was amended and restated. On June 6, 2025, we entered into the First Amendment to our Amended & Restated Credit Agreement, which added Bank of America N.A. and West Texas National Bank as lenders under the Credit Facility. The Credit Facility is scheduled to mature on March 26, 2029, and the Amended & Restated Credit Agreement provides for a maximum credit commitment of $1.0 billion under the Credit Facility. As of September 30, 2025, the Amended & Restated Credit Agreement had a borrowing base of $475.0 million and an aggregate elected commitment of $475.0 million. The Amended & Restated Credit Agreement includes a $47.5 million sublimit for the issuance of letters of credit. The borrowing base is subject to semi-annual redeterminations based upon the value of our oil and gas properties as determined in a reserve report dated as of January and July of each year, subject to certain interim redeterminations. We are subject to certain financial covenants and customary restrictive covenants under the Credit Facility. The financial covenants require us to maintain, for each fiscal quarter commencing with the fiscal quarter ending March 31, 2025, a Net Leverage Ratio (as defined in the Amended & Restated Credit Agreement) of no greater than 3.00 to 1.00 and a Current Ratio (as defined in the Amended & Restated Credit Agreement) of at least 1.00 to 1.00. As of September 30, 2025, we are in compliance with all covenants under the Amended & Restated Credit Agreement. As of September 30, 2025 and December 31, 2024, we had $417.0 million and $28.0 million, respectively, of revolving borrowings and no letters of credit outstanding under the Credit Facility, resulting in $58.0 million and $7.2 million, respectively, of availability for future borrowings and letters of credit. Additionally, as of September 30, 2025 and December 31, 2024, we had $13.5 million and $1.7 million, respectively, of unamortized deferred financing costs associated with our Credit Facility, which is presented as a non-current asset on the condensed consolidated balance sheet. These costs will be amortized to interest expense on the accompanying condensed consolidated statements of operations on a straight-line basis over the life of the Credit Facility. Prairie Operating Co. is a holding company which owns no operating assets and has no significant operations independent of its subsidiaries. The Credit Facility is guaranteed by all of Prairie Operating Co’s .restricted subsidiaries and is secured by a first-priority security interest on substantially all of its oil and natural gas properties and substantially all of its personal property assets, subject to customary exceptions. The assets, liabilities, and results of operations of Prairie Operating Co. and its guarantor subsidiaries are not materially different than our condensed consolidated financial statements. Standby Equity Purchase Agreement. On September 30, 2024, we entered into the SEPA with Yorkville, whereby, subject to certain conditions, we have the right, but not the obligation, to sell to Yorkville up to $40.0 million shares of Common Stock, at any time and in an 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 Advance by us under the SEPA is subject to a maximum limit equal to 100% of the aggregate volume traded of our 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 Yorkville’s receipt of an Advance Notice. On September 30, 2024, pursuant to the SEPA, we paid Yorkville a structuring fee of $25,000 and a Commitment Fee by issuing Yorkville 100,000 shares of Common Stock. Pursuant to the SEPA, we may issue up to a total of 4,198,343 shares of Common Stock within the cap of 19.99% of our issued and outstanding Common Stock as of the SEPA Effective Date through Advances under the SEPA, upon conversion of the Senior Convertible Note or through any other issuances of Common Stock thereunder. However, per the Series F Certificate of Designation, we may only request an Advance Notice on the SEPA if the Series F Preferred Stock is fully converted or redeemed. We have 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, we had recorded the SEPA at its fair value of $0.8 million and recorded the corresponding $0.8 million change in fair value as a component of loss on adjustment to fair value – embedded derivatives, debt, and warrants on our condensed consolidated statement of operations for the year ended December 31, 2024. Since we do not have the ability to request an Advance Notice on the SEPA if the Series F Preferred Stock is outstanding, we have determined that the fair value of the SEPA as of September 30, 2025 is $0, resulting in a gain of $0.8 million, which is presented in loss on adjustment to fair value – embedded derivatives, debt, and warrants on our condensed consolidated statement of operations for the nine months ended September 30, 2025. Senior Convertible Note. On September 30, 2024, Yorkville advanced the Pre-Paid Advance of $15.0 million to us, and we issued the Senior Convertible Note to Yorkville, with an interest rate of 8.00% and a maturity date of September 30, 2025. Yorkville had the option to convert the Pre-Paid Advance into shares of Common Stock at any time at the conversion price (as defined in the Senior Convertible Note agreement). We had the option to, 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, we had the option to convert the Pre-Paid Advance into shares of Common Stock at any time at the conversion price (as defined in the Senior Convertible Note agreement), however, a conversion requested by us would not result in us receiving cash but instead would be applied towards reducing the outstanding balance of the Senior Convertible Note. On the issuance date, we determined that certain features of the Senior Convertible Note required bifurcation and separate accounting as embedded derivatives and had elected the fair value option to account for the Senior Convertible Note; therefore, in accordance with ASC 815, we recorded the Senior Convertible Note at fair value. In December 2024, and in conjunction with the Credit Facility Agreement, we 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. However, due to the election of the fair value option, we reported the Senior Convertible Note at its fair value of $12.6 million on our condensed consolidated balance sheet as of December 31, 2024. During the first quarter of 2025, Yorkville converted the remaining $11.3 million of the Senior Convertible Note in exchange for 2.1 million shares of Common Stock, resulting in a principal balance of $0 as of September 30, 2025. As a result, we recognized a loss on adjustment to fair value – embedded derivatives, debt, and warrants of $5.5 million on our condensed consolidated statement of operations for the nine months ended September 30, 2025. 44 Table of Contents Subordinated Promissory Note and Subordinated Note Warrants. On September 30, 2024, we entered into the Subordinated Note with the Noteholders in a principal amount of $5.0 million, which has a maturity date of March 17, 2027. The Noteholders are entities controlled by Jonathan H. Gray, who is a director of the Company, therefore the Subordinated Note and Subordinated Note Warrants are presented as related-party on our condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024. 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. In December 2024, and in conjunction with the Credit Facility Agreement, we made a $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, we issued the Subordinated Note Warrants to purchase up to 1,141,552 shares of Common Stock to the Noteholders, which vest in tranches based on the date of repayment of the Subordinated Note. As of September 30, 2025 and December 31, 2024, Subordinated Note Warrants providing the right to purchase 570,778 shares of Common Stock had vested and were outstanding. At the time of issuance, we determined that certain features of the Subordinated Note and the Subordinated Note Warrants required bifurcation and separate accounting as embedded derivatives and elected the fair value option to account for the Subordinated Note and the Subordinated Note Warrants; therefore, in accordance with ASC 815, we recorded the Subordinated Note and the Subordinated Note Warrants at fair value and remeasured 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 $4.6 million. On March 26, 2025, in connection with the closing and financing of the Bayswater Acquisition, we paid $3.2 million of the outstanding balance under the Subordinated Note. Pursuant to the terms of the payoff letter, we and the Noteholders agreed that the remaining $1.5 million outstanding Subordinated Note balance would be converted to principal, will accrue interest at a rate of 15% of per annum, and all principal and other amounts owed (other than interest) pursuant to the Subordinated Note will not be redeemable for any reason while any of the Series F Preferred Stock remain outstanding. Therefore, we have determined that changes to the Subordinated Note included in the payoff letter qualify as an extinguishment of debt and therefore elected to forgo the previous fair value option election. As such, we now present the Subordinated Note at its face value of $1.5 million as of September 30, 2025. Series F Preferred Stock and Series F Preferred Stock Warrants. On March 24, 2025, we entered into a securities purchase agreement with the Series F Preferred Stockholder, pursuant to which the Series F Preferred Stockholder agreed to purchase for an aggregate of $148.3 million (i) 148,250 shares of Series F Preferred Stock, with a Stated Value of $1,000 per share, convertible into shares of Common Stock and (ii) upon the one-year anniversary of the issue date of the Series F Preferred Stock, subject to the satisfaction of certain conditions, the Series F Preferred Stock Warrants to purchase shares of common stock. The Series F Preferred Offering closed on March 26, 2025, and we received approximately $137.2 million of net proceeds, after deducting advisor fees and offering expenses. We used the proceeds from the Series F Preferred Offering to fund a portion of the Bayswater Acquisition, which closed on March 26, 2025. The Series F Preferred Stockholder is entitled to receive, on a cumulative basis, dividends on each share of Series F Preferred Stock at a rate per annum equal to 12%, payable in cash on March 1, June 1, September 1 and December 1 of each calendar year, beginning on June 1, 2025. Alternatively, according to the Series F Certificate of Designation, we may elect to pay the dividends entirely or partially in shares of Common Stock. Additionally, the Series F Certificate of Designation states that six months after the anniversary date of the maturity of our Amended & Restated Credit Agreement the dividend rate will increase to 25%. We elected to pay the June 1 and September 1, 2025 dividends by issuing the Series F Preferred Stockholder 1,305,000 and 1,806,000 shares, respectively, of Common Stock. The Series F Preferred Stockholder may convert all or a portion its shares of Series F Preferred Stock into shares of Common Stock at any time at a Standard Conversion rate of 202.0202 shares of Common Stock per share of Series F Preferred Stock, subject to certain adjustments as described in the Series F Certificate of Designation. The Series F Preferred Stockholder also has the option to convert all or a portion of its shares of Series F Preferred Stock using an Alternative Conversion Rate (as defined in the Series F Certificate of Designation) in lieu of the conversion rate, subject to an Alternative Conversion Cap (as defined in the Series F Certificate of Designation) for each quarter. During the three and nine months ended September 30, 2025, 16,000 and 19,250 shares of Series F Preferred Stock, respectively, were converted into 6,364,000 and 7,390,000 shares of Common Stock, respectively, using the Alternative Conversion. 45 Table of Contents We have determined that the Series F Preferred Stock should be classified as mezzanine equity because it is currently redeemable at the Series F Preferred Stockholder’s option. Additionally, we determined that certain features of the Series F Preferred Stock require bifurcation and separate accounting as embedded derivatives and that the Series F Preferred Stock Warrants should be accounted for as liabilities because they are not considered indexed to our stock since the potential number of common shares to be issued upon the exercise of such warrants will vary based on the amount of Series F Preferred Stock outstanding on March 26, 2026. On the date of issuance, in accordance with ASC 815, we recorded a liability of $25.5 million for the fair value of the Series F Preferred Stock embedded derivatives and a liability of $22.1 million for the fair value of the Series F Preferred Stock. As a result, on March 26, 2025, we recognized the Series F Preferred Stock in mezzanine equity based on its relative fair value of $92.6 million, after allocating $47.6 million of the proceeds to the embedded derivative features and the Series F Preferred Stock Warrants. Additionally, we recorded issuance costs of $12.2 million as a reduction to the allocated proceeds. As of September 30, 2025, in accordance with ASC 480, we adjusted the value of the Series F Preferred Stock to reflect its maximum redemption amount of $158.7 million resulting in a remeasurement of Series F Preferred Stock of $20.0 million and $93.1 million accretion of the presented on the condensed consolidated statement of operations for the three and nine months ended September 30, 2025, respectively. At-the-Market Sales Agreement. On June 20, 2025, we entered into an Equity Distribution Agreement with Citigroup Global Markets Inc. and Truist Securities, Inc., as managers. Pursuant to the Equity Distribution Agreement, we have the option to sell shares of our Common Stock up to an aggregate offering price of $75.0 million through the Managers. All Common Stock sold under the Equity Distribution Agreement, if any, will be made under our Registration Statement on Form S-3, which was declared effective on May 2, 2025. We currently anticipate any net proceeds from the ATM Offering will be used for general corporate purposes, which may include, among other things, advancing our development and drilling program, repayment of existing indebtedness, or financing potential acquisition opportunities. Additionally, per the Series F Certificate of Designation, the Series F Preferred Stockholder could require us to use a portion of the net proceeds from sales of the ATM Offering to redeem a number of shares of its Series F Preferred Stock. As of September 30, 2025, we have not issued any shares under the ATM Offering. Liquidity Analysis For the three and nine months ended September 30, 2025, we had a net loss attributable to Prairie Operating Co.’s common stockholders of $22.5 million and $67.5 million, respectively. We cannot predict if we will be able to sustain profitability on a quarterly or annual basis and extended periods of losses and negative cash flow may prevent us from successfully operating and expanding our business. As of September 30, 2025, we had cash and cash equivalents of $10.6 million, a working capital deficit of $24.0 million, and an accumulated deficit of $85.4 million. The assessment of liquidity requires management to make estimates of future activity and judgments about whether we can meet our obligations, have adequate liquidity to operate, and maintain compliance with the applicable financial covenants of our Amended & Restated Credit Agreement, as discussed above. Significant assumptions used in our forecasted model of liquidity in the next 12 months include our current cash position and our ability to manage spending. Based on an assessment of these factors, management expects that our cash balance, expected revenues from our existing producing wells, and liquidity available under the Credit Facility, proceeds from the ATM Offering, and potential offerings under our effective Form S-3 registration statement will be sufficient to meet our obligations over the next 12 months and fulfill the financial covenant requirements under our Amended & Restated Credit Agreement. As discussed above, following the amendment of our Credit Facility in March 2025, which increased the borrowing base to $475.0 million, our Form S-3 registration statement becoming effective in December 2024, and the launch of the ATM Offering in June 2025, we have the ability to access funds through various sources to meet our working capital needs. Our ability to borrow under our Amended & Restated Credit Agreement does not require action on the part of management, other than requesting the borrowing. As of September 30, 2025, we have availability of $58.0 million under the Credit Facility, which is more or equal to our liquidity needs; therefore, substantial doubt about our ability to continue as a going concern does not exist. Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations is based upon the accompanying condensed consolidated financial statements. These financial statements have been prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the amounts reported for assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. These estimates and assumptions include estimates for reserve quantities and estimated future cash flows associated with proved reserves, reserves of credit losses, accruals for potential liabilities, the valuation of the Subordinated Note warrants issued in the third quarter of 2024, the valuation of the Series F Preferred Stock, the fair value of commodity derivative instruments, and the realization of deferred tax assets. Management believes its estimates and assumptions to be reasonable under these circumstances. Certain estimates and assumptions are inherently unpredictable, and actual results could differ from those estimates. We have provided a full discussion of our significant accounting policies, estimates, and judgments in Note 2 – Summary of Significant Accounting Policies in our 2024 Annual Report on Form 10–K for the fiscal year ended December 31, 2024. Refer to Significant Sources of Liquidity above for a discussion of the accounting policies, estimates, and judgments used in accounting for the Series F Preferred Stock, which was issued in March 2025. Other than accounting for the Series F Preferred Stock at its issuance date of March 26, 2025, we have not changed any of our significant accounting policies, estimates, or judgments during the nine months ended September 30, 2025. Off–Balance Sheet Arrangements We do not have any off–balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not required. 46 Table of Contents