What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-14 · 442 added, 263 removed, 155 unchanged (82% of the section changed)

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.

The following discussion and analysis of our financial condition and results of operations for the three and six months ended June 30, 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.

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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

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.

As of June 30, 2026, our assets included approximately 68,500 net leasehold acres in, on and under approximately 97,600 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:

continue growing our business through accretive acquisitions, focusing on assets with the following criteria:

(i) producing reserves, with opportunities to add accretive, undeveloped bolt–on acreage;

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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.

Our 2026 capital expenditure guidance is $185.0 million to $195.0 million.

As of June 30, 2026, cash expenditure for the development of oil and natural gas properties totaled $132.6 million, with an additional

$12.4 million incurred in accounts payable and accrued expenses.

Refer to Factors Affecting the Comparability of Financial Results – Capital Program below for a further discussion of our current

capital program.

In December 2025, we moved our drilling rig to our Blehm/Schneider pad, which consists of 10 wells in Weld County.

These wells came online in April 2026 with initial average two-stream gross production of 700 Boe/d.

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.

Drilling at the Elder East and West pad was completed during the first quarter of 2026 and the wells came online in May 2026 with initial average

two-stream gross production of 915 Boe/d.

In February, we began drilling at our Opal Coalbank pad, which consists of eight wells.

Completion activities at the Opal Coalbank pad began in May 2026, and the wells came online towards the end of June 2026 with initial average two-stream

gross production of 450 Boe/d.

After we completed drilling at our Opal Coalbank pad, we moved the drilling rig to our Burnett pad development in Weld County, which consists of four wells.

Completion activities at the Burnett pad were finalized

at the end of July 2026 and the well came online shortly after.

Following the Burnett pad, we moved the drilling rig to our Castor pad development in Weld County, which consists of 6 wells.

Completion activities at the Castor pad are expected to be finalized mid-way through third quarter of 2026 and

first production is expected during the third quarter of 2026.

Series F Preferred Stock Letter Agreements and Series F Preferred Stock Anniversary Warrants Amendments

On March 25, 2026, we entered into the First Series F Preferred Stock Warrant Amendment, which, among other things, extended the issuance date of Series F Preferred Stock Anniversary Warrants from March 26, 2026 to

April 7, 2026.

On April 6, 2026, we 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 Anniversary Warrants from April 7, 2026 to April 9, 2026.

On April 8, 2026, we entered into the First Series F Preferred Stock Letter Agreement, pursuant to which, among other things, we repurchased 13,727 shares of Series F Preferred Stock from the Series F Preferred

Stockholder for the Series F Preferred Stock Repurchase Price, the cash portion of which was $19.0 million.

Additionally, pursuant to the Series F Preferred Stock Letter Agreement, we issued the First Series F Preferred Stock Penny Warrants to the Series F Preferred

Stockholder, and agreed that, if on July 8, 2026, which date was subsequently extended to August 7, 2026 and further extended to August 31, 2026, for any reason, the Series F Preferred Stock Anniversary Warrants have not been issued to the

Series F Preferred Stockholder, we will issue the Series F Second Penny Warrants.

Further, pursuant the Series F Preferred Stock Letter Agreement, upon the Series F Preferred Stockholders receipt of the Series F Preferred Stock Repurchase

Price and the issuance of the First Series F Preferred Stock Penny Warrants, the Series F Preferred Stockholder waived our obligation to pay the $3.0 million extension fee.

On June 10, 2026, we entered into the Second Series F Preferred Stock Letter Agreement.

Among other things, the Second Series F Preferred Stock Letter Agreement further extended the issuance date of the Series F Preferred Stock Anniversary

Warrants to August 7, 2026 and reduced the number of Common Stock shares issuable upon exercise of the Series F Preferred Stock Anniversary Warrants to a number of shares equal to the quotient of (i) 65% of the Stated Value of all Series F

Preferred Stock held on the Series F Preferred Stock Anniversary Warrant Issuance Date, divided by (ii) the average of the 10 daily volume-weighted average per share trading prices of the Common Stock during the 10 trading-days prior to the

Series F Preferred Stock Anniversary Warrant Issuance Date.

Additionally, we granted the Series F Preferred Stockholder the Incremental Share Rights.

On August 7, 2026, we entered into another the Third Series F Preferred Stock Letter Agreement, which, among other things, extended the issuance date of the Series F Preferred Stock Anniversary Warrant from August

7, 2026 to August 14, 2026.

The Third Series F Preferred Stock Letter Agreement also amends the First Series F Preferred Stock Letter Agreement to extend the issuance date of the Second Series F Preferred Stock Penny Warrants from August 7, 2026

to August 14, 2026, so that if on August 14, 2026 (rather than August 7, 2026 as provided by the First Series F Preferred Stock Letter Agreement), for any reason, the Series F Preferred Stock Anniversary Warrants are not issued to the Series F

Preferred Stockholder, we will issue the Second Series F Preferred Stock Penny Warrants to the Series F Preferred Stockholder.

On August 14, 2026, we entered into the Fourth Series F Preferred Stock Letter Agreement, which, among other things, extended the

issuance date of Series F Preferred Stock Anniversary Warrants from August 14, 2026 to August 31, 2026.

The Fourth Series F Preferred Stock Letter Agreement also amends the First Series F Preferred Stock Letter Agreement and the Third Series

F Preferred Stock Letter Agreement to extend the issuance date of the Second Series F Preferred Stock Penny Warrants from August 7, 2026 to August 14, 2026 and subsequently to August 31, 2026, so that if on August 31, 2026 (rather than August

7, 2026 and August 14, 2026 as provided by the First Series F Preferred Stock Letter Agreement and the Third Series F Preferred Stock Letter Agreement), for any reason, the Series F Preferred Stock Anniversary Warrants are not issued to the

Series F Preferred Stockholder, we will issue the Second Series F Preferred Stock Penny Warrants to the Series F Preferred Stockholder.

Additionally, the Fourth Series F Preferred Stock Letter Agreement waives the breach of the Current Ratio

covenant as a Triggering Event through January 1, 2027.

Factors Affecting the Comparability of Financial Results

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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.

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

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

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 June 30, 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:

April 1, 2026

January 1, 2027

January 1, 2028

January 1, 2029

Crude Oil Swaps:

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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.

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

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.

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Three Months Ended

Six Months Ended

Revenues (in thousands)

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Natural gas sales (2) (3)

NGL sales (3)

Total revenues

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Average realized price (excluding effects of derivatives):

Oil (per MBbl)

Natural gas (per MMcf)

NGL (per MBbl)

Average price (per MBoe)

Oil (per Bbl)

Natural gas (per Mcf) (2) (3)

NGL (per Bbl) (3)

Average price (per Boe)

Average realized price (including effects of derivatives):

Oil (per MBbl)

Natural gas (per MMcf)

NGL (per MBbl)

Average price (per MBoe)

Oil (per Bbl)

Natural gas (per Mcf) (2) (3)

NGL (per Bbl) (3)

Average price (per Boe)

Total revenues and production for the six months ended June 30, 2025, include revenue and production volumes from the assets acquired from Bayswater beginning on March 26, 2025, the closing date of the

Bayswater Acquisition, through June 30, 2025.

For the three months ended June 30, 2026, we realized negative natural gas sales revenue and average realized prices (excluding and including the effects of derivatives) due to lower gross sales, driven by

decreased pricing during the quarter, compared to gathering and processing fees.

We have reclassified certain gathering and processing fees presented net within natural gas and NGL sales for the three and six months ended June 30, 2025 to conform with the allocation used during the three

and six months ended June 30, 2026.

This reallocation has no impact on our total revenues or net income (loss) attributable to Prairie Operating Co.

as reported on the condensed consolidated statements of operations.

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.

For the three months ended June 30, 2026, total revenue increased 45% to $98.9 million from $68.1 million during the three months ended June 30, 2025.

This change was primarily driven by a 40%

increase in average realized price per Boe (excluding the effects of derivatives) and a 4% increase in production volumes, attributable to incremental production volumes from new wells coming online as development activities were completed

throughout the first half of 2026.

For the six months ended June 30, 2026, total revenue increased 125% to $182.3 million from $80.9 million during the six months ended June 30, 2025.

This increase was largely due to an 84%

increase in production volumes, 40% of which is attributable to the production volumes from the properties acquired in the Bayswater Acquisition, which closed on March 26, 2025, and 60% of which is attributable to incremental production volumes

from new wells coming online as development activities were completed throughout the second half of 2025 and the first quarter of 2026.

Additionally, average realized price per Boe (excluding the effects of derivatives) increased 22% during the

six months ended June 30, 2026 compared to the six months ended June 30, 2025.

Operating expenses

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Three Months Ended

Six Months Ended

(In thousands, except per Boe amounts)

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Total operating expenses

Total operating expenses for the six months ended June 30, 2025, include operating expenses for the assets acquired from Bayswater beginning on March 26, 2025, the closing date of the Bayswater

Acquisition, through June 30, 2025.

Operating expenses per Boe for the six months ended June 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 Bayswater Acquisition, through June 30, 2025.

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.

For the three months ended June 30, 2026, lease operating expense (“LOE”) increased to $13.6 million compared to $11.3 million for the three months

ended June 30, 2025, primarily driven by new wells coming online as development activities were completed throughout the second half of 2025 and the first quarter of 2026.

Additionally, our transaction services agreement with Bayswater ended

at the end of May 2025 and we fully took over field operations at that time, resulting in incremental employee and benefit expenses recognized during the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

increases were partially offset by decreased operating costs across all categories during the three months ended June 30, 2026 compared to the three months ended June 30, 2025, as we continue to streamline efficiencies and optimize operating

costs at the properties acquired in the Bayswater Acquisition.

Additionally, LOE includes $0.6 million of workover expenses incurred during the three months ended June 30, 2026 and $0.5 million of non-operated LOE recognized during the three

months ended June 30, 2026.

We did not incur any workover expenses or recognize any non-operated LOE during the three months ended June 30, 2025.

For the six months ended June 30, 2026, LOE increased to $28.5 million compared to $13.4 million for the six months ended June 30, 2025, driven by the additional properties acquired in the Bayswater Acquisition, which closed on March 26,

2025, resulting in incremental operating costs.

Additionally, approximately 36% of the LOE increase is attributable to new wells coming online as development activities were completed throughout the second half of 2025 and the first quarter of

LOE also includes $1.5 million of workover expenses incurred during the six months ended June 30, 2026 and $1.1 million of non-operated LOE recognized during the six months ended June 30, 2026.

We did not incur any workover expenses or

recognize any non-operated LOE during the six months ended June 30, 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.

For the three months ended June 30, 2026, transportation and processing expenses remained relatively flat at $2.4 million compared to

$2.2 million for the three months ended June 30, 2025.

For the six months ended June 30, 2026, transportation and processing expenses increased to $4.9 million compared to $2.4 million for the six months ended June 30, 2025.

The increase in transportation and

processing expenses was largely driven by increased production as a result of our Bayswater Acquisition, which closed on March 26, 2025, and new wells coming online as development activities were completed throughout the second half of 2025 and

the first two quarters of 2026.

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.

For the three months ended June 30, 2026, ad valorem and production taxes increased to $8.0 million compared to $6.4 million for the three

months ended June 30, 2025.

The increase in ad valorem and production taxes is attributable to incremental production fees levied by the state of Colorado beginning in January 2026 and incremental ad valorem for equipment on pad sites incurred

during the three months ended June 30, 2026, which were not incurred during the three months ended June 30, 2025.

For the six months ended June 30, 2026, ad valorem and production taxes increased to $14.8 million compared to $7.4 million for the six months ended June 30, 2025.

The increase in ad valorem and production taxes

was largely driven by increased production as a result of our Bayswater Acquisition, which closed on March 26, 2025, and new wells coming online as development activities were completed throughout the second half of 2025 and the first two

quarters of 2026.

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.

For the three months ended June 30, 2026, depreciation, depletion, and amortization (“DD&A”) expenses increased to $17.1

million compared to $12.3 million for the three months ended June 30, 2025, primarily driven by increased production from new wells coming online as development activities were completed throughout the first half of 2026.

For the six months ended June 30, 2026, DD&A expenses increased to $32.9 million compared to $14.4 million for the six months ended June 30, 2025, driven by increased production as a result of our Bayswater

Acquisition, which closed on March 26, 2025, and new wells coming online as development activities were completed throughout the first half of 2026.

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

For the three months ended June 30, 2026, we recorded $0.2 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.

We did not record any abandonment and impairment related to unproved properties for the three months ended June 30, 2025.

For the six months ended June 30, 2026, we recorded $0.6 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 six months ended June 30, 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:

For the three months ended June 30, 2026, general and administrative expenses decreased to $12.0 million compared to $16.4 million for

the three months ended June 30, 2025.

The 27% decrease in general and administrative expenses is attributable to decreased investor relations costs of $3.0 million, employee and benefit expenses of $1.6 million, and transition services agreement

fees associated with the Bayswater Acquisition of $0.7 million, partially offset with an increase of $0.9 million in non-cash stock-based compensation expense and $0.8 million in other non-recurring litigation and severance settlement expenses.

For the six months ended June 30, 2026, general and administrative expenses increased to $28.8 million compared to $22.0 million for the six months ended June 30, 2025.

The 31% increase in general and administrative

expenses is attributable to incremental non-cash stock-based compensation expense of $5.4 million, other non-recurring litigation and severance settlement expenses of $4.2 million, and $1.5 million of employee and benefit expenses.

increase was partially offset by decreased investor relations costs of $3.1 million and transition services agreement fees associated with the Bayswater Acquisition of $0.7 million.

Other income (expenses)

The following table presents the components of our other income (expenses) for the periods indicated:

Three Months Ended

Six Months Ended

(In thousands)

Interest expense

Loss on derivatives, net

Loss on adjustment to fair value – embedded derivatives, debt, and warrants

Gain (loss) on derivatives, net

Gain (loss) on adjustment to fair value – financial instrument liabilities

Interest income and other

Other expenses

Other income (expenses)

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.

For the three months ended June 30, 2026, interest expense remained relatively flat at $10.0 million compared to $9.1 million for the three months ended

June 30, 2025.

For the six months ended June 30, 2026, interest expense increased $7.7 million compared to the same period of 2025, primarily driven by interest on the Credit Facility incurred during the period.

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,

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.

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.

Gain (loss) on derivatives, net.

For the three months ended June 30, 2026, gain on derivatives, net was $45.1 million compared to $28.2 million for the three months ended

June 30, 2025.

The change in gain on derivatives, net was primarily due to a $54.6 million increase in unrealized gain on derivatives driven by favorable changes in the fair value of our open derivative contracts as of June 30, 2026 compared to

April 1, 2026.

This increase was partially offset with an increase in our realized loss on derivatives of $37.6 million for the three months ended June 30, 2026 due to unfavorable changes in cash settlements during the period compared to the

three months ended June 30, 2025.

For the six months ended June 30, 2026, loss on derivatives, net was $132.0 million compared to a gain on derivatives, net of $27.3 million for the six months ended June 30, 2025.

The change in loss on derivatives,

net was primarily due to a $108.2 million increase in unrealized loss on derivatives driven by unfavorable changes in the fair value of our open derivative contracts as of June 30, 2026 compared to January 1, 2026.

Additionally, our realized loss

on derivatives increased by $51.0 million for the six months ended June 30, 2026 due to unfavorable changes in cash settlements during the period compared to the six months ended June 30, 2025.

Refer to Factors

Affecting the Comparability of Financial Results – Commodity Prices above for a further discussion of our derivative contracts.

Gain (loss) on adjustment to fair value – financial instrument liabilities.

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 gain (loss) on adjustment to fair value – financial instrument liabilities on our condensed consolidated statements of operations for

For the three months ended June 30, 2026, the gain on adjustment to fair value – financial instrument liabilities reflects gains on fair value of $53.6 million for the Series F Preferred Stock Anniversary Warrants, $10.9 million for

the Series F Preferred Stock embedded derivatives, and $0.7 million for the Subordinated Note, which were partially offset by a $15.3 million loss on fair value for the issuance of the Incremental Share Right liability and a $1.8 million loss on

fair value for conversions of the Series F Preferred Stock.

For the six months ended June 30, 2026, the gain on adjustment to fair value – financial instrument liabilities reflects gains on fair value of $29.3 million for the Series F Preferred Stock

Anniversary Warrants, $11.0 million for the Series F Preferred Stock embedded derivatives, and $0.3 million for the Subordinated Note, which were partially offset by a $15.3 million loss on fair value for the issuance of the Incremental Share

Right liability and a $8.9 million loss on fair value for conversions of the Series F Preferred Stock.

Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below for a further

discussion of the Series F Preferred Stock Anniversary Warrants, the Series F Preferred Stock embedded derivatives, the Incremental Share Rights liability, and the Subordinated Note Warrants.

Income Tax (Expense) Benefit

For the three and six months ended June 30, 2026, we recognized income tax expense of $19.8 million and an income tax benefit of $18.6 million, respectively, resulting in effective income tax rates

of 15.4% and 29.9%, respectively.

The difference between our effective income tax rates and the statutory blended rates for both the three and six months ended June 30, 2026 relate to excess tax benefits from stock-based compensation awards and

tax deduction limitations on the compensation of covered individuals.

We did not recognize any income tax benefit or expense for the six months ended June 30, 2025.

Non-GAAP Financial Measures

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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.

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) attributable to Prairie Operating Co.

and is adjusted depreciation, depletion, and amortization, abandonment and impairment of unproved properties,

non-cash stock-based compensation, interest expense, net, unrealized (gain) loss on derivatives, non-cash (gain) loss on adjustment to fair value – financial instrument liabilities, litigation and severance settlement expense, and income tax

expense (benefit), all as applicable.

We adjust net income (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.

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) attributable to Prairie Operating Co.

to Adjusted EBITDA for the periods indicated:

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

Net loss attributable to Prairie Operating Co.

Net income (loss) attributable to Prairie Operating Co.

Depreciation, depletion, and amortization

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Interest expense, net

Unrealized loss on derivatives

Non-cash loss on adjustment to fair value – embedded derivatives, debt, and warrants (2)

Unrealized (gain) loss on derivatives

Non-cash (gain) loss on adjustment to fair value – financial instrument liabilities (3)

Litigation and severance settlement expense

Income tax benefit (3)

Income tax expense (benefit) (4)

Adjusted EBITDA

Net income attributable to Prairie Operating Co.

for the six months ended June 30, 2025 includes revenue and related expenses attributable to the assets acquired from Bayswater beginning on March 26, 2025,

the closing date of the Bayswater Acquisition, through June 30, 2025.

Reflects the abandonment of unproved locations which we have deemed non–core and allowed to expire.

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.

Reflects deferred income tax benefit recognized for the three months ended March 31, 2026.

Refer to Liquidity and Capital Resources - Significant

Sources of Liquidity below for a further discussion.

Reflects the deferred income tax expense and benefit recognized for the three and six months ended June 30, 2026, respectively.

Liquidity and Capital Resources

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.

In the second half of 2025 and throughout the first two quarters 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 Equity Distribution Agreement in connection with our 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 June 30, 2026, we have

issued 772,594 shares under the ATM Offering, which resulted in net proceeds of $1.8 million.

Working Capital

We define working capital as current assets less current liabilities.

As of June 30, 2026 and December 31, 2025, we had a working capital deficit of $125.5 million and $46.1 million, respectively, and cash and cash equivalents of less than

$0.1 million.

Capital Program

Our 2026 capital expenditure guidance is $185.0 million to $195.0 million.

Our current capital program consists of a one rig and one frac crew cadence throughout the year.

Since January 1, 2026, we have drilled 27

wells across four pads, 21 of which have come online as of the issuance date of this report.

During the six months ended June 30, 2026, our cash expenditures for the development of oil and natural gas properties totaled $132.6 million, with

an additional $12.4 million incurred in accounts payable and accrued expenses.

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

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.

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;

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.

economic environments.

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.

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,

Six Months Ended June 30,

(In thousands)

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Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

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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.

$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.

Net cash provided by operating activities totaled $94.3 million and $9.7 million during the six months ended June 30, 2026 and 2025, respectively.

$84.5 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.

$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.

Net cash used in investing activities totaled $143.9 million and $522.3 million during the six months ended June 30, 2026 and 2025, respectively.

$378.4 million decrease in our net cash used in investing activities was largely driven by cash paid for the Bayswater Acquisition of $467.5 million during the six months ended June 30, 2025, which was partially offset by a $78.6 million increase

in expenditure for the development of oil and natural gas properties during the six months ended June 30, 2026.

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.

Net cash provided by financing activities totaled $49.6 million and $518.0 million for the six months ended June 30, 2026 and 2025, respectively.

$468.4 million decrease in net cash provided by 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 $3.3 million, $148.3 million from the issuance of the Series F Preferred Stock, net of related issuance costs of $11.1 million, and $359.0

million from borrowings under the Credit Facility, net of related issuance costs of $15.7 million.

Financing activities for the six months ended June 30, 2026 were attributable to $134.0 million of borrowings on the Credit Facility, partially

offset by repayments of $64.0 million and Credit Facility amendment fees of $1.9 million.

Additionally, we redeemed a portion of the Series F Preferred Stock for $19.0 million and issued shares of Common Stock under our ATM Offering, which

resulted in net proceeds of $1.8 million.

Significant Sources of Liquidity

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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.

On March 26, 2025, we entered

into the Credit Facility Agreement, 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 Agreement, which added Bank of America N.A.

West Texas National Bank as lenders under the Credit Facility.

On June 10, 2026, we entered into the second amendment to the Credit Facility Agreement, which among other things, reaffirmed the borrowing base of $475.0 million, modified certain

covenants relating to our distributable free cash flow and certain other reporting and notice requirements, and increased the cadence of scheduled borrowing base redeterminations and the number of interim borrowing base redeterminations which

may occur in any fiscal year.

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

As of June 30, 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.

The borrowing base is subject to quarterly redeterminations based upon the value of our oil and gas properties as

determined in a reserve report immediately preceding April 1 st , July 1 st , and October 1st 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 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

The financial covenants require us to maintain, for each fiscal quarter, 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.

In August 2026, we entered into an amendment to our Credit Facility Agreement which modifies

the Current Ratio covenant requirement to at least 0.50 to 1.00 for the quarters ended June 30, 2026 through December 31, 2026.

Additionally, the amendment established a new covenant which requires our net monthly production to not fall

below an average number specified in the amendment, which will be measured on a rolling three-month average, beginning September 30, 2026.

After giving effect to the amendment, we are in compliance with all covenants under the Credit Facility as of

June 30, 2026.

As of June 30, 2026 and December 31, 2025, we had $436.0 million and $366.0 million, respectively, of revolving borrowings and no letters of credit outstanding under the Credit Facility, resulting in $39.0 million and

$109.0 million, respectively, of availability for future borrowings and letters of credit.

Additionally, as of June 30, 2026 and December 31, 2025, we had $12.7 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.

These costs are amortized to interest expense on the condensed consolidated statements of operations on a

straight–line basis over the life of the Credit Facility.

During the three and six months ended June 30, 2026, we amortized $1.0 million and $2.0 million, respectively, of deferred financing costs into interest expense on the condensed

consolidated statements of operations.

During the three and six months ended June 30, 2025, we amortized $0.9 million and $1.2 million, respectively, of deferred financing costs into interest expense on the condensed consolidated statements of

Subordinated Promissory Note and Subordinated Note Warrants.

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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.

therefore, the Subordinated Note and Subordinated Note Warrants are presented as related-party

on our condensed consolidated balance sheets as of June 30, 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 entering into the Credit Facility, 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.

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.

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.

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.

of the Subordinated Note.

As of June 30, 2026 and December 31, 2025, Subordinated Note Warrants providing the right to purchase 856,165 shares of Common Stock had vested and were outstanding.

Series F Preferred Stock and Series F Preferred Stock Anniversary 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 Series F Preferred Stock Anniversary Warrant Issuance Date, subject to the satisfaction of certain conditions, the Series F Preferred Stock Anniversary Warrants.

The Series F Preferred

Offering closed on March 26, 2025, and we received approximately $136.1 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.

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

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 Anniversary Warrants should be accounted for as liabilities because they

are not considered indexed to our stock since the potential number of Common Stock shares to be issued upon the exercise of such warrants will vary based on the amount of Series F Preferred Stock outstanding on the Series F Preferred Stock

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 Anniversary Warrants.

Additionally, we recorded the issuance costs of $12.2 million as a reduction to the allocated proceeds.

Series F Preferred Stock Certificate of Designation .

The Series F Preferred Stockholder is entitled to receive, on a cumulative basis, dividends on each

share of Series F Preferred Stock at the Series F Preferred Stock Stated Dividend Rate 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 Preferred

Stock Certificate of Designation, we may elect to pay the dividends entirely or partially in shares of Common Stock.

Additionally, the Series F Preferred Stock Certificate of Designation states that six months after the anniversary date of the

maturity of our Credit Facility the Series F Preferred Stock Stated Dividend Rate will increase to 25%.

We have elected to pay the March 1, 2026 and June 1, 2026 dividends by issuing the Series F Preferred Stockholder 2,352,000 and 3,276,000

shares of Common Stock, respectively.

Additionally, on April 8, 2026, we redeemed a portion of the Series F Preferred Stock, discussed further below, and issued the Series F Preferred Stockholder 109,816 shares of Common Stock related to

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 Preferred Stock 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 Preferred Stock Certificate of Designation, as supplemented by the First Series F Preferred Stock Letter Agreement) in lieu of the conversion

rate, subject to an Alternative Conversion Cap (as defined in the Series F Preferred Stock Certificate of Designation) for each quarter.

During the three and six months ended June 30, 2026, 6,273 and 29,323 shares of Series F Preferred Stock,

respectively, were converted into 4,352,402 and 22,454,702 shares of Common Stock, respectively, using the Alternative Conversion.

Further, the Series F Preferred Stock Certificate of Designation also contains certain financial covenants which require us to

maintain, for each fiscal quarter a Net Leverage Ratio of no greater than 2.50 to 1.00 and a Current Ratio of at least 1.00 to 1.00.

The breach of these covenants results in a Triggering Event (as defined in the Series F Preferred Stock

Certificate of Designation).

We are required to submit the current fiscal quarter covenant calculations to the Series F Preferred Stockholder the month after our financial statements are available for issuance and the Series F Preferred Stock

Certificate of Designation does not require us to notify the Series F Preferred Stockholder of any non-compliance prior to the issuance of the compliance certificate.

Additionally, the Series F Preferred Stock Certificate of Designation allows

for the Triggering Event to be waived but does not specify a cure period;

therefore, we can either request a waiver from the Series F Preferred Stockholder after submitting our compliance certificate or we can cure the Triggering Event by

demonstrating compliance at any time prior to the quarter subsequent to the Triggering Event.

As discussed above, on August 14, 2026, the Series F Preferred Stockholder waived any breach of the Current Ratio covenant from qualifying as a

Triggering Event through January 1, 2027.

If a Triggering Event occurs the Series F Preferred Stockholder is entitled to receive, on a cumulative basis, Trigger Dividends,

which will accrue daily and compound quarterly from, and including, the date of such Triggering Event, but excluding, the date such Triggering Event is cured and all outstanding Trigger Dividends have been paid.

Pursuant to the Series F

Preferred Stock Certificate of Designation, we have the option to pay the Trigger Dividends in shares of Common Stock.

Series F Preferred Stock and Series F Preferred Stock Anniversary Warrants Amendments and Letter Agreements.

On March 25, 2026, we entered into the First

Series F Preferred Stock Warrant Amendment, which, among other things, extended the issuance date of the Series F Preferred Stock Anniversary Warrants from March 26, 2026 to April 7, 2026.

Pursuant to the First Series F Preferred Stock Warrant

Amendment, we agreed to pay the Series F Preferred Stockholder a $3.0 million extension fee, which was waived by the Series F Preferred Stockholder on April 8, 2026.

On April 6, 2026, we entered into the Second Series F Preferred Stock Warrant Amendment, which among other things, amended and restated the First Series F Preferred Stock Warrant Amendment to extend the issuance

date of the Series F Preferred Stock Anniversary Warrants from April 7, 2026 to April 9, 2026.

On April 8, 2026, we entered into the First Series F Preferred Stock Letter Agreement, pursuant to which, among other things, we repurchased 13,727 shares of

Series F Preferred Stock from the Series F Preferred for the Series F Preferred Stock Repurchase Price, the cash portion of which was $19.0 million.

Additionally, pursuant to the First Series F Preferred Stock Letter Agreement, we

issued the Series F Preferred Stockholder the First Series F Preferred Stock Penny Warrants, and agreed that, if on July 8, 2026, which date was subsequently extended to August 7, 2026 and further extended to August 31, 2026, for any

reason, the Series F Preferred Stock Anniversary Warrants have not been issued to the Series F Preferred Stockholder, we will issue the Second Series F Preferred Stock Penny Warrants.

Further, pursuant to the First Series F Preferred

Stock Letter Agreement, upon the Series F Preferred Stockholder’s receipt of the Series F Preferred Stock Repurchase Price and the issuance of the First Series F Preferred Stock Penny Warrants, the Series F Preferred Stockholder waived

our obligation to pay the $3.0 million extension fee.

Additionally, the First Series F Preferred Stock Letter Agreement amended the definition of the Market Stock Payment Price used in calculating the Alterative Conversion Rate to be based upon the average of the two

lowest daily volume-weighted average per share trading prices of our Common Stock during any five consecutive trading-day period that occurred within the 35 trading-day period ending on the date of such calculation (in lieu of the five

trading-day period previously set forth in the set forth in the Series F Preferred Stock Certificate of Designation).

The parties further agreed that the Cash Sweep Amount set forth in the Series F Preferred Stock Certificate of Designation

shall mean (a) with respect to any Cash Sweep Financing (as defined in the Series F Preferred Stock Certificate of Designation), 50% of the net proceeds from such financing and (b) with respect to any Distributable Free Cash Flow Action (as

defined in the Series F Preferred Stock Certificate of Designation), 25% of the amount of such dividend, distribution, prepayment, or investment, as applicable.

We may request to settle the Cash Sweep Amount in Common Shares.

Finally, the First Series F Preferred Stock Letter Agreement also extended the issuance date of the Series F Preferred Stock Anniversary Warrants from April 9, 2026 to July 8, 2026 and reduced the

number of Common Stock shares issuable upon exercise of the Series F Preferred Stock Anniversary Warrants from (1) a number of shares equal to the quotient of (i) 125% of the Stated Value of all Series F Preferred Stock held on the Original

Issuance Date, divided by (ii) the average of the 10 daily volume–weighted average per share trading prices of our Common Stock during the 10 trading-days prior to Original Issuance Date, to (2) a number of shares equal to the quotient of (i)

75% of the Stated Value of all Series F Preferred Stock held on July 8, 2026, divided by (ii) the average of the 10 daily volume–weighted average per share trading prices of the our during the 10 trading-days prior to the Series F Preferred

Stock Anniversary Warrant Issuance Date.

On June 10, 2026, we entered into the Second Series F Preferred Stock Letter Agreement.

Pursuant to the Second Series F Preferred Stock Letter Agreement, among other

things, the parties further extended the issuance date of the Series F Preferred Stock Anniversary Warrants to August 7, 2026, which date was subsequently extended to August 31, 2026 and reduced the number of Common Stock shares issuable

upon exercise of the Series F Preferred Stock Anniversary Warrants to a number of shares equal to the quotient of (i) 65% of the Stated Value of all Series F Preferred Stock held on the Series F Preferred Stock Anniversary Warrant Issuance

Date, divided by (ii) the average of the 10 daily volume-weighted average per share trading prices of the Common Stock during the 10 trading-days prior to the Series F Preferred Stock Anniversary Warrant Issuance Date.

Additionally, pursuant to the Second Series F Preferred Stock Letter Agreement, we issued the Incremental Share Rights to the Series F Preferred Stockholder, which allow the Series F Preferred Stockholder to convert

any remaining shares of Series F Preferred Stock into an incremental amount of additional shares of our Common Stock in an aggregate amount not to exceed 21,156,339 shares of Common Stock.

While the Series F Preferred Stock are outstanding,

the Incremental Share Rights can be converted at any time and at any price.

After full conversion or redemption of the Series F Preferred Stock, any Incremental Share Rights can only be converted at and above the Nasdaq minimum floor price of

Remeasurement of Series F Preferred Stock.

We accounted for the changes set forth in the First Series F Preferred Stock Letter Agreement as a modification.

Additionally, we determined that the partial redemption of the Series F Preferred Stock pursuant to the First Series F Preferred Stock Letter Agreement should be aggregated and treated as a single transaction with the modification.

pursuant to ASC 480, we adjusted the value of the Series F Preferred Stock to reflect its maximum redemption value immediately prior to and following the First Series F Preferred Stock Letter Agreement, resulting in a loss on remeasurement of

Series F Preferred Stock of $46.9 million.

To account for the partial redemption of the Series F Preferred Stock, we increased the fair value of the Series F Preferred Stock embedded derivative, resulting in a deemed dividend of $7.4 million,

and decreased the fair value of the Series F Preferred Stock Anniversary Warrant liability, resulting in a deemed dividend of $51.3 million, both of which are presented as components of the remeasurement of Series F Preferred Stock line item on

the condensed consolidated statements of operations for the three and six months ended June 30, 2026.

As of June 30, 2026, in accordance with ASC 480, we adjusted the Series F Preferred Stock to reflect its maximum redemption value of $43.2 million, resulting in a remeasurement of Series F Preferred Stock of

$91.0 million and $76.8 million, which is presented in the remeasurement of Series F Preferred Stock line item on the condensed consolidated statements of operations for the three and six months ended June 30, 2026, respectively.

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 each conversion, we reduce the balance of the Series F Preferred Stock by the carrying value of the converted shares, which, as of June 30, 2026, has resulted in a decrease of $3.7 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.

and Truist Securities, Inc., as

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.

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.

existing indebtedness, or financing potential acquisition opportunities.

As of June 30, 2026, we have issued 772,594 shares under the ATM Offering, which resulted in net proceeds of $1.8 million.

Additionally, the Series F Preferred Stock Certificate of Designation, as amended by the First Series F Preferred Stock Letter Agreement, includes a Cash Sweep provision, which requires us to provide the Series F

Preferred Stockholder with 50% of any net proceeds raised by financing.

The Series F Preferred Stock Certificate of Designation allows for the Cash Sweep Amount to be settled in Common Stock shares, which is how we intend to settle the Cash

Sweep Amount related to any sales under the ATM Offering.

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.

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

For the three and six months ended June 30, 2026, we had net income attributable to Prairie Operating Co.

common stockholders of $193.8 million and $19.4 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 June 30, 2026, we had cash and cash equivalents of less than $0.1 million, a

working capital deficit of $125.5 million, and an accumulated deficit of $131.4 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 in Significant Sources of Liquidity, on August 14, 2026, we entered into an amendment to our Credit Facility Agreement which modified the Current

Ratio covenant requirement to at least 0.50 to 1.00 for the quarters ended June 30, 2026 through December 31, 2026.

Additionally, the amendment established a new covenant which requires our net monthly production to not fall below an average number specified in the amendment, which will be measured on a rolling three-month average, beginning September 30, 2026.

Significant assumptions used in our forecasted model of liquidity in the next 12 months include our current cash position and our ability

to generate sufficient revenues from our existing producing wells and newly developed wells which will continue coming online in the second half of 2026 to meet our working capital needs and maintain compliance with the applicable financial

covenants, as recently amended, of our Credit Facility.

Our near-term capital funding needs have historically been addressed with borrowings under our Credit Facility.

As of June 30, 2026, we have availability of $39.0 million under the Credit

Facility, which may or may not be sufficient to meet our obligations over the next 12 months.

Additionally, in June 2025, we entered into the Equity Distribution Agreement with the Managers.

Pursuant to the agreement, we have the option to sell

our Common Stock up to an aggregate offering price of $75.0 million through the Managers to raise additional funding to cover our short-term liquidity needs.

As such, we believe that revenues from our existing producing wells, incremental revenues from our newly developed wells which will come online in the second half of

2026, borrowings under our Credit Facility, and sales under the ATM Offering will be sufficient to cover our liquidity needs and maintain compliance with the applicable financial covenants of our Credit Facility.

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.

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 Anniversary 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.

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

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Item 2. Management’s Discussion and Analysis