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 months ended March 31, 2026 and 2025 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, 2025. 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 March 31, 2026, our assets included approximately 68,700 net leasehold acres in, on and under approximately 99,500 gross acres. In addition to growing production through our drilling operations, we intend to continue growing its business through accretive acquisitions, 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 Drilling and Completion Activities In December 2025, we moved our drilling rig to our Blehm pad and then our Schneider pad, both of which are in Weld County and consist of five wells each. Completion activities at the Blehm and Schneider pads were in the final stages as of March 31, 2026 and the wells came online early in April 2026. We then moved the drilling rig to our Elder East and West pad, which consists of nine wells. Drilling at the Elder East and West pad was completed during the first quarter of 2026 and completion activities are ongoing, with first production expected towards the end of May 2026. The drilling rig is currently at our Opal Coalbank pad, which consists of eight wells. Drilling activities at the Opal Coalbank pad completed early in April 2026 and completion activities are expected to continue throughout the second quarter of 2026, with first production expected towards the beginning of the third quarter of 2026. Series F Preferred Stock and the Series F Securities Purchase Agreement Amendments On March 25, 2026, we and the Series F Preferred Stockholder entered into the First Series F Preferred Stock Warrant Amendment, which, among other things, extended the issuance date of Series F Preferred Stock Warrants from March 26 to April 7, 2026 (which was subsequently further extended to July 8, 2026). On April 6, 2026, we and the Series F Preferred Stockholder entered into the Second Series F Preferred Stock Warrant Amendment. Among other things, the Second Series F Preferred Stock Warrant Amendment amended and restated the First Series F Preferred Stock Warrant Amendment to extend the issuance date of the Series F Preferred Stock Warrants from April 7 to April 9, 2026. On April 8, 2026, we and the Series F Preferred Stockholder entered into the Series F Letter Agreement, pursuant to which, among other things, that we repurchased 13,727 shares of Series F Preferred Stock from the Series F Preferred Stockholder on April 8, 2026 for an aggregate purchase price of $19.0 million payable in cash, plus all accrued but unpaid dividends on such shares of Series F Preferred Stock through and including the date upon which such shares of Series F Preferred Stock were repurchased (which accrued and unpaid dividends were paid in the form of our Common Stock issued to the Series F Preferred Stockholder in an amount equal to all such accrued but unpaid dividends, divided by the Market Stock Payment Price (as defined in the Series F Certificate of Designation as of the date of the Series F Letter Agreement, rounded up to the next whole share). Additionally, pursuant to the Series F Letter Agreement, we issued the Series F First Penny Warrants to the Series F Preferred Stockholder, and if on July 8, 2026, for any reason, the Series F Preferred Stock Warrants have not been issued to the Series F Preferred Stockholder, we will issue the Series F Second Penny Warrants. Further, per the Series F Letter Agreement, upon the Series F Preferred Stockholders receipt of the Series F Preferred Repurchase Price and the issuance of the Series F First Penny Warrants, the Series F Preferred Stockholder waived our obligation to pay the previously announced $3.0 million extension fee. 34 Table of Contents Factors Affecting the Comparability of Financial Results Commodity Prices Since oil, natural gas, and NGL prices are the most significant factors impacting our results of operations, continued price variations can have a material impact on our financial results and capital expenditures. In an effort to reduce the impact of price volatility, and in compliance with requirements under our Credit Facility, we enter into derivative contracts to economically hedge a portion of our estimated production from our proved, developed, producing oil and natural gas properties against adverse fluctuations in commodity prices. By doing so, we believe we can mitigate, but not eliminate, the potential negative effects of decreases in oil, natural gas, and NGL prices on our cash flows from operations. However, our hedging activity could reduce our ability to benefit from increases in oil, natural gas, and NGL prices. Further, we could sustain losses to the extent our oil, natural gas, and NGL derivative contract prices are lower than market prices and, conversely, we could recognize gains to the extent our oil, natural gas, and NGL derivative contract prices are higher than market prices. Refer to Results of Operations - Other expenses below for a discussion of our recognized gains or losses on derivative contracts. As of March 31, 2026, we had the following outstanding crude oil, natural gas, and NGL derivative contracts in place, which settle monthly and are indexed to NYMEX West Texas Intermediate, NYMEX Henry Hub, and Mount Belvieu OPIS, respectively: Settling April 1, 2026 through December 31, 2026 Settling January 1, 2027 through December 31, 2027 Settling January 1, 2028 through December 31, 2028 Settling January 1, 2029 through December 31, 2029 Crude Oil Swaps: Notional volume (Bbls) 3,775,808 4,662,503 2,862,307 210,000 Weighted average price ($/Bbl) $ 62.86 $ 62.51 $ 62.17 $ 61.57 Natural Gas Swaps: Notional volume (MMBtus) 10,957,305 14,082,126 5,606,357 400,000 Weighted average price ($/MMBtu) $ 4.07 $ 4.08 $ 4.02 $ 4.11 Ethane Swaps: Notional volume (Bbls) 309,747 400,675 220,109 — Weighted average price ($/Bbl) $ 11.25 $ 10.70 $ 9.96 $ — Propane Swaps: Notional volume (Bbls) 436,790 522,684 199,160 — Weighted average price ($/Bbl) $ 28.64 $ 26.85 $ 25.93 $ — Iso Butane Swaps: Notional volume (Bbls) 60,157 74,572 35,088 — Weighted average price ($/Bbl) $ 35.19 $ 31.77 $ 30.77 $ — Normal Butane Swaps: Notional volume (Bbls) 153,300 184,140 74,903 — Weighted average price ($/Bbl) $ 35.71 $ 31.95 $ 30.36 $ — Pentane Plus Swaps: Notional volume (Bbls) 126,531 160,242 78,806 — Weighted average price ($/Bbl) $ 54.79 $ 53.31 $ 52.81 $ — 2025 Acquisitions 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. We completed the final settlement with Bayswater on October 15, 2025, which resulted in total consideration of $475.6 million. In July 2025, we entered into an agreement to acquire certain assets from Edge Energy for a total purchase price of $12.5 million payable in cash, subject to certain closing price adjustments. We closed the Edge Acquisition on July 3, 2025, which included 13 operated wells on approximately 11,300 net acres and funded the transaction by borrowing under our Credit Facility. In August 2025, we completed the Third Exok Acquisition, acquiring approximately 5,000 net acres for $1.6 million. In October 2025, we acquired certain assets from Summit and Crown for a total purchase price of $2.3 million, subject to certain closing adjustments, payable in cash. The Summit and Crown Acquisitions included the acquisition of five operated wells on approximately 3,400 net acres. 35 Table of Contents 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 March 31, 2026 2025 Revenues (in thousands) Crude oil sales $ 67,838 $ 10,788 Natural gas sales 8,956 1,223 NGL sales 6,623 1,579 Total revenues $ 83,417 $ 13,590 Production: Oil (MBbls) 999 161 Natural gas (MMcf) 3,538 437 NGL (MBbls) 497 61 Total production (MBoe) (1) 2,086 295 Average sales volumes per day (Boe/d) 23,182 3,278 Average realized price (excluding effects of derivatives): Oil (per MBbl) $ 67.91 $ 67.01 Natural gas (per MMcf) $ 2.53 $ 2.80 NGL (per MBbl) $ 13.33 $ 25.80 Average price (per MBoe) $ 39.99 $ 46.07 Average realized price (including effects of derivatives): Oil (per MBbl) $ 56.49 $ 63.78 Natural gas (per MMcf) $ 1.82 $ 2.20 NGL (per MBbl) $ 12.76 $ 25.80 Average price (per MBoe) $ 33.19 $ 43.42 (1) MBoe is calculated using six MMcf of natural gas equivalent to one MBbl of oil. For the three months ended March 31, 2026, total revenue increased $69.8 million and total production increased 1,791 MBoe compared to the three months ended March 31, 2025. The majority of the increase was attributable to the Bayswater Acquisition, which closed on March 26, 2025. Additionally, approximately 30% of the increase was attributable to new wells coming online as development activities were completed throughout the second half of 2025 and the first quarter of 2026. Operating expenses The following table presents the components of our operating expenses for the periods indicated: Three Months Ended March 31, 2026 2025 (In thousands, except per Boe amounts) Lease operating expenses $ 14,841 $ 2,012 Transportation and processing 2,496 907 Ad valorem and production taxes 6,792 957 Depreciation, depletion, and amortization 15,844 2,123 Exploration expenses 298 287 Abandonment and impairment of unproved properties 412 — General and administrative expenses 16,886 5,551 Total operating expenses $ 57,569 $ 11,837 Operating expenses per Boe: Lease operating expenses $ 7.11 $ 6.82 Transportation and processing 1.20 3.07 Ad valorem and production taxes 3.26 3.24 Depreciation, depletion, and amortization 7.60 7.20 Exploration expenses 0.14 0.97 Abandonment and impairment of unproved properties 0.20 — General and administrative expenses 8.09 18.82 Total operating expenses $ 27.60 $ 40.13 36 Table of Contents Lease operating expenses . For the three months ended March 31, 2026, lease operating expenses (“LOE”) increased $12.8 million compared to the three months ended March 31, 2025. The increase in LOE was largely driven by increased production as a result of our Bayswater Acquisition, which closed on March 26, 2025. Additionally, LOE includes $0.7 million of workover expenses incurred during the three months ended March 31, 2026 and $0.5 million of non-operated LOE recognized during the three months ended March 31, 2026. We did not incur any workover expenses or recognize any non-operated LOE during the three months ended March 31, 2025. Transportation and processing expenses . For the three months ended March 31, 2026, transportation and processing expenses increased $1.6 million compared to the three months ended March 31, 2025, primarily driven by increased production as a result of our Bayswater Acquisition, which closed on March 26, 2025. Ad valorem and production taxes . For the three months ended March 31, 2026, ad valorem and production taxes increased $5.8 million compared to the three months ended March 31, 2025, primarily driven by increased production as a result of our Bayswater Acquisition, which closed on March 26, 2025. Depreciation, depletion, and amortization . For the three months ended March 31, 2026, depreciation, depletion, and amortization expenses increased $13.7 million compared to the three months ended March 31, 2025, largely attributable to increased production as a result of our Bayswater Acquisition, which closed on March 26, 2025. Abandonment and impairment of unproved properties. For the three months ended March 31, 2026, we recorded $0.4 million of abandonment and impairment related to unproved properties, which reflects unproved locations that we have deemed non–core and allowed to expire. We did not record any abandonment and impairment related to unproved properties for the three months ended March 31, 2025. General and administrative expenses . For the three months ended March 31, 2026, general and administrative expenses increased $11.3 million compared to the three months ended March 31, 2025. This increase was largely attributable to incremental non-cash stock–based compensation and employee and benefit expenses of $7.7 million driven by the increase in headcount as a result of the Bayswater Acquisition, which closed on March 26, 2025. Additionally, we incurred $3.3 million in non-recurring litigation and severance expenses during the three months ended March 31, 2026. Other expenses The following table presents the components of our other expenses for the periods indicated: Three Months Ended March 31, 2026 2025 (In thousands) Interest expense $ (8,197 ) $ (1,378 ) Loss on derivatives, net (177,060 ) (898 ) Loss on adjustment to fair value – embedded derivatives, debt, and warrants (31,851 ) (2,164 ) Interest income and other 193 70 Other expenses $ (216,915 ) $ (4,370 ) Interest expense. For the three months ended March 31, 2026, interest expense increased $6.8 million compared to the three months ended March 31, 2025, 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. Loss on derivatives, net. For the three months ended March 31, 2026, loss on derivatives, net was $177.1 million compared to $0.9 million for the three months ended March 31, 2025. The change in loss on derivatives, net was primarily due to a $162.8 million increase in unrealized loss on derivatives driven by unfavorable changes in the fair value of our open derivative contracts as of March 31, 2026. Additionally, our realized loss on derivatives increased by $13.4 million for the three months ended March 31, 2026 due to unfavorable changes in cash settlements during the period compared to the three months ended March 31, 2025. Refer to Factors Affecting the Comparability of Financial Results – Commodity Prices above for a further discussion of our derivative contracts. 37 Table of Contents 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 March 31, 2026, the loss on adjustment to fair value – embedded derivatives, debt, and warrants reflects losses on fair value of $24.3 million for the Series F Preferred Stock Warrants and $0.4 million for the Subordinated Note Warrants, which were partially offset by gains on fair value of less than $0.1 million for the Series F Preferred Stock embedded derivatives. For the three months ended March 31, 2025, the loss on adjustment to fair value – embedded derivatives, debt, and warrants reflects losses on fair value of $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 $2.4 million for the Subordinated Note Warrants, $0.8 million for the SEPA, and $0.1 million for the Series F Preferred Stock embedded derivatives recognized during the period. Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below for a further discussion of the Series F Preferred Stock Warrants and embedded derivatives and the Subordinated Note Warrants. Income Tax Benefit For the three months ended March 31, 2026, we recognized an income tax benefit of $38.4 million, resulting in an effective income tax rate of 20.1%. We did not recognize any income tax benefit or expense for the three months ended March 31, 2025. 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 loss attributable to Prairie Operating Co. and is adjusted for income tax benefit, depreciation, depletion, and amortization, abandonment and impairment of unproved properties, non-cash stock-based compensation, interest expense, net unrealized loss on derivatives, non-cash loss on adjustment to fair value – embedded derivatives, debt, and warrants, litigation and severance settlement expense, and income tax expense, all as applicable. We adjust net loss attributable to Prairie Operating Co. 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 loss attributable to Prairie Operating Co. to Adjusted EBITDA for the periods indicated: Three Months Ended March 31, 2026 2025 (In thousands) Net loss attributable to Prairie Operating Co. $ (152,673 ) $ (2,617 ) Adjustments: Depreciation, depletion, and amortization 15,844 2,123 Abandonment and impairment of unproved properties (1) 412 — Non-cash stock-based compensation 5,805 1,324 Interest expense, net 8,130 1,308 Unrealized loss on derivatives 162,883 898 Non-cash loss on adjustment to fair value – embedded derivatives, debt, and warrants (2) 31,851 2,164 Litigation and severance settlement expense 3,345 — Income tax benefit (3) (38,394 ) — Adjusted EBITDA $ 37,203 $ 5,200 (1) Reflects the abandonment of unproved locations which we have deemed non–core and allowed to expire. (2) Reflects the changes in the fair values of the financial instruments measured at fair value on a recurring basis. Refer to Liquidity and Capital Resources – Significant Sources of Liquidity below for a further discussion. (3) Reflects deferred income tax benefit recognized for the three months ended March 31, 2026. 38 Table of Contents Liquidity and Capital Resources Overview Our production and development activities will require us to make significant operating and capital expenditures. In the second half of 2025 and throughout the first quarter of 2026, our primary sources of liquidity were borrowings on our Credit Facility, which has a borrowing base of $475.0 million and an aggregate elected commitment of $475.0 million. 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 March 31, 2026, we had not issued any shares under the ATM Offering. Management expects that our cash balance, expected revenues from our 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 fund our development program and operations. 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 March 31, 2026, we had a working capital deficit of $181.0 million and cash and cash equivalents of $0.3 million and as of December 31, 2025, we had a working capital deficit of $46.1 million and cash and cash equivalents of less than $0.1 million Cash Flows from Operating, Investing, and Financing Activities The following table summarizes our cash flows for the periods indicated: Three Months Ended March 31, 2026 2025 (In thousands) Net cash provided by operating activities $ 42,268 $ 16,932 Net cash used in investing activities (36,337 ) (528,431 ) Net cash (used in) provided by financing activities (5,688 ) 521,279 Net increase in cash and cash equivalents 243 9,780 Cash and cash equivalents, beginning of the period 20 5,192 Cash and cash equivalents, end of the period $ 263 $ 14,972 Operating activities. Net cash provided by operating activities totaled $42.3 million and $16.9 million during the three months ended March 31, 2026 and 2025, respectively. The $25.3 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. Investing activities. Net cash used in investing activities totaled $36.3 million and $528.4 million during the three months ended March 31, 2026 and 2025, respectively. The $492.2 million decrease in our net cash used in investing activities was largely driven by cash paid for the Bayswater Acquisition of $474.6 million. Additionally, our expenditure for the development of oil and natural gas properties decreased $4.9 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to timing of capital projects. 39 Table of Contents Financing activities. Net cash used in financing activities totaled $5.7 million for the three months ended March 31, 2026, and net cash provided by financing activities totaled $521.3 million for the three months ended March 31, 2025. The $527.0 million decrease in net cash used in financing activities was mostly due to financing activities completed during the three months ended March 31, 2025 to fund the Bayswater Acquisition, which closed on March 26, 2025. These financing activities included $43.8 million from the issuance of Common Stock, net of related issuance costs of $3.1 million, $148.3 million from the issuance of the Series F Preferred Stock, net of related issuance costs of $1.2 million, and $349.0 million from borrowings under the Credit Facility, net of related issuance costs of $12.5 million. Financing activities for the three months ended March 31, 2026 were attributable to the $60.5 million of repayments on the Credit Facility, partially offset with borrowings of $56.0 million. Significant Sources of Liquidity Credit Facility . On December 16, 2024, we, as borrower, entered into a reserve–based credit agreement with Citi, as administrative agent and the financial institution party. On February 3, 2025, we entered into the first amendment to our reserve–based credit agreement with Citi, 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 Credit Facility, which amended and restated our existing reserve–based credit agreement with Citi. On June 6, 2025, we entered into the first amendment to our Credit Facility, 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 provides for a maximum credit commitment of $1.0 billion. As of March 31, 2026, the Credit Facility had a borrowing base of $475.0 million and an aggregate elected commitment of $475.0 million and 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 immediately preceding April 1st and October 1st of each year, subject to certain interim redeterminations. The borrowing base of $475.0 million was reaffirmed with the 2025 mid–year redetermination. 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 Credit Facility) of no greater than 3.00 to 1.00 and a Current Ratio (as defined in the Credit Facility) of at least 1.00 to 1.00. As of March 31, 2026, we are in compliance with all covenants under the Credit Facility. As of March 31, 2026 and December 31, 2025, we had $361.5 million and $366.0 million, respectively, of revolving borrowings and no letters of credit outstanding under the Credit Facility, resulting in $113.5 million and $109.0 million, respectively, of availability for future borrowings and letters of credit. Additionally, as of March 31, 2026 and December 31, 2025, we had $11.7 million and $12.6 million, respectively, of unamortized deferred financing costs associated with our Credit Facility, which are presented as debt issuance costs, net on the condensed consolidated balance sheets. 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. During the three months ended March 31, 2026 and 2025, we amortized $1.0 million and less than $0.1 million, respectively, of deferred financing costs into interest expense on the accompanying condensed consolidated statements of operations. 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 March 31, 2026 and December 31, 2025. The Subordinated Note had an interest rate of 10.00% and the Noteholders were 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. 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 our Series F Preferred Stock remains outstanding. 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 March 31, 2026 and December 31, 2025, Subordinated Note Warrants providing the right to purchase 856,165 shares of Common Stock had vested and were outstanding. 40 Table of Contents Series F Preferred Stock and Series F Preferred Stock Warrants. On March 24, 2025, we entered into the Series F Preferred 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 Anniversary Warrant Issuance Date, subject to the satisfaction of certain conditions, the Series F Preferred Stock Warrants. 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. On March 25, 2026, we and the Series F Preferred Stockholder entered into the First Series F Preferred Stock Warrant Amendment, which, among other things, extended to issuance date of the Series F Preferred Stock Warrants from March 26 to April 7, 2026 (which was subsequently further extended to July 8, 2026). As part of the amendment, we agreed to pay the Series F Preferred Stockholder a $3.0 million fee, which was payable on April 7, 2026. However, as discussed in Recent Developments , the Series F Preferred Stockholder waived the $3.0 million extension fee as part of the partial redemption of the Series F Preferred Stock on April 9, 2026. 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 Credit Facility the dividend rate will increase to 25%. We elected to pay the March 1, 2026 dividends by issuing the Series F Preferred Stockholder 2,352,000 shares 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 months ended March 31, 2026, 23,050 shares of Series F Preferred Stock were converted into 18,102,300 shares of Common Stock using the Alternative Conversion. 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 the Anniversary Warrant Issuance Date. 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 the issuance costs of $12.2 million and the amendment fees of $3.3 million, which were payable as of March 31, 2026, as a reduction to the allocated proceeds. As of March 31, 2026, in accordance with ASC 480, we adjusted the value of the Series F Preferred Stock to reflect its maximum redemption amount of $122.1 million, resulting in a remeasurement of Series F Preferred Stock of $17.1 million which is presented in the remeasurement of Series F Preferred Stock line item on the condensed consolidated statement of operations for the three months ended March 31, 2026. Additionally, at each conversion, we reduce the balance of the Series F Preferred Stock by the carrying value of the converted shares, which, as of March 31, 2026, has resulted in a decrease of $28.8 million from December 31, 2025. 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 March 31, 2026, we had not issued any shares under the ATM Offering. 41 Table of Contents Liquidity Analysis For the three months ended March 31, 2026, we had a net loss attributable to Prairie Operating Co.’s common stockholders of $174.4 million. 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 March 31, 2026, we had cash and cash equivalents of $0.3 million, a working capital deficit of $181.0 million, and an accumulated deficit of $240.4 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 Credit Facility, 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 Credit Facility. 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 Credit Facility does not require action on the part of management, other than requesting the borrowing. As of March 31, 2026, we have availability of $113.5 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, depletion of proved developed oil and natural gas reserves, asset retirement obligations, accruals for our oil, natural gas, and NGL revenues and any potential liabilities, the valuation of the Series F Preferred Stock, Series F Preferred Stock Warrants, and our stock–based compensation, including performance based awards, the fair value of commodity derivative instruments, the realization of deferred tax assets, and any acquisition–related purchase price allocations. 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 2025 Annual Report on Form 10–K for the fiscal year ended December 31, 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. 42 Table of Contents