8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 2

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 19, 2024

Prairie Operating Co.

(Exact name of registrant as specified in its charter)

Delaware	001-41895	98-0357690
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

602 Sawyer Street, Suite 710 Houston, TX	77007
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (713) 424-4247

N/A

(Former Name or Former Address, If Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	PROP	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Explanatory Note

On January 12, 2024, Prairie Operating Co. (the “Company”) filed a Current Report on Form 8-K to announce the Company’s entry into an asset purchase agreement to acquire the assets of Nickel Road Operating LLC (“NRO”), which the Company subsequently amended by filing Amendment No. 1 to the Current Report on Form 8-K/A on February 9, 2024 (as so amended, the “Original 8-K”). This Amendment No. 2 to the Original 8-K (this “Amendment No. 2”), is being filed with the Securities and Exchange Commission solely to amend and supplement Item 9.01 of the Original 8-K, as described in Item 9.01 below. This Amendment No. 2 makes no other amendments to the Original 8-K.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired

The report prepared by Cawley, Gillespie & Associates, Inc., independent petroleum engineers, relating to the reserves of NRO as of December 31, 2023, is filed as Exhibit 99.1 hereto and is incorporated herein by reference.

The audited financial statements of NRO as of and for the years ended December 31, 2023 and December 31, 2022 are filed as Exhibit 99.2 hereto and are incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed combined financial information of the Company as of and for the year ended December 31, 2023 is filed as Exhibit 99.3 hereto and incorporated herein by reference.

(d) Exhibits

Exhibit Number	Description
23.1	Consent of Moss Adams LLP.
23.2	Consent of Cawley Gillespie & Associates Inc.
99.1	Report of Cawley, Gillespie & Associates, Inc., dated January 4, 2024, as to the reserves of Nickel Road Operating LLC as of December 31, 2023.
99.2	Audited financial statements of Nickel Road Operating LLC, as of and for the years ended December 31, 2023 and December 31, 2022.
99.3	Unaudited Pro Forma Condensed Combined Financial Information as of and for the year ended December 31, 2023.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Prairie Operating Co.
Date: March 19, 2024
	By:	/s/ Daniel T. Sweeney
		Daniel T. Sweeney
		General Counsel & Corporate Secretary

EX-23.1

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements on Form S-1 (Nos. 333-272743 and 333-276998) of Prairie Operating Co. of our report dated March 14, 2024, relating to the consolidated financial statements of Nickel Road Operating LLC and Subsidiaries as of and for the years ended December 31, 2023 and 2022, appearing in this Amendment No. 2 to the Current Report on Form 8-K of Prairie Operating Co.

/s/ Moss Adams LLP

Denver, Colorado

March 19, 2024

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT PETROLEUM RESERVE EXPERTS

We hereby consent to the references to our firm in the form and context in which they appear, and the inclusion of our report dated January 4, 2024 with respect to the estimates of reserves and future net revenues of Nickel Road Operating LLC, as of December 31, 2023, in this Amendment No. 2 to the Current Report on Form 8-K/A of the Company, and to the incorporation by reference of such reports in the Registration Statements (Nos. 333-272743 and 333-276998) on Form S-1 of the Company, filed with the U.S. Securities and Exchange Commission.

/s/ W. Todd Brooker

President

Cawley, Gillespie & Associates, Inc.

Fort Worth, Texas

March 19, 2024

EX-99.1

Exhibit 99.1

 

 

 

 

 

 

 

 

 

EX-99.2

Exhibit 99.2

Report of Independent Auditors
and Consolidated Financial Statements

Nickel Road Operating LLC and Subsidiaries

December 31, 2023 and 2022

Table of Contents

	Page
Report of Independent Auditors	1
Consolidated Financial Statements	3
Consolidated Balance Sheets	4
Consolidated Statements of Income	6
Consolidated Statements of Changes in Members’ Capital	7
Consolidated Statements of Cash Flows	8
Notes to Consolidated Financial Statements	9

Report of Independent Auditors

The Management Committee

Nickel Road Operating LLC and Subsidiaries

Report on the Audit of the Financial Statements

Opinion

We have audited the consolidated financial statements of Nickel Road Operating LLC and Subsidiaries, which comprise the consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of income, changes in members’ capital, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Nickel Road Operating LLC and Subsidiaries as of December 31, 2023 and 2022, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Nickel Road Operating LLC and Subsidiaries and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Nickel Road Operating LLC and Subsidiaries’ ability to continue as a going concern within one year after the date that the financial statements are available to be issued.

1

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with GAAS, we:

● Exercise professional judgment and maintain professional skepticism throughout the audit.

● Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Nickel Road Operating LLC and Subsidiaries’ internal control. Accordingly, no such opinion is expressed.

● Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

● Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Nickel Road Operating LLC and Subsidiaries’ ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.

Other Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplemental schedules concerning oil and gas producing properties in Notes 10 and 11 are presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Because of the significance of the matter described above, it is inappropriate to, and we do not, express an opinion on this supplementary information.

Denver, Colorado

March 14, 2024

2

Consolidated Financial Statements

3

Nickel Road Operating LLC and Subsidiaries

Consolidated Balance Sheets

December 31, 2023 and 2022

	2023			2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	336,115		$	276,039
Restricted cash		-			3,200,000
Joint interest receivable		897,804			197,655
Accrued oil and gas sales		5,658,034			3,861,311
Derivative asset, current		270,925			-
Prepaid expenses		426,404			693,325
Total current assets		7,589,282			8,228,330
OIL AND GAS PROPERTIES, at cost (successful efforts method)
Proved properties		137,855,719			113,415,744
Unproved properties		1,690,690			1,068,954
Accumulated depletion		(41,010,449	)		(25,691,574	)
Total oil and gas properties, net		98,535,960			88,793,124
OTHER NONCURRENT ASSETS
Right-of-use asset, net		325,933			-
TOTAL ASSETS	$	106,451,175		$	97,021,454

See accompanying notes.

4

Nickel Road Operating LLC and Subsidiaries

Consolidated Balance Sheets

December 31, 2023 and 2022

	2023			2022
LIABILITIES AND MEMBERS’ CAPITAL
CURRENT LIABILITIES
Accounts payable	$	1,801,926		$	1,921,542
Accrued liabilities		12,178,821			9,150,627
Due to related party		114,346			255,743
Current maturities of long-term debt, net of deferred financing costs		3,800,000			-
Short-term lease liability		192,384			-
Derivative liability, current		-			2,727,867
Total current liabilities		18,087,477			14,055,779
NONCURRENT LIABILITIES
Long-term debt, net of current portion and deferred financing costs		16,660,116			25,036,040
Long-term lease liability		133,550			-
Asset retirement obligations		1,347,493			1,167,701
Total noncurrent liabilities		18,141,159			26,203,741
Total liabilities		36,228,636			40,259,520
COMMITMENTS AND CONTINGENCIES (Note 7)
MEMBERS’ CAPITAL
Contributed capital		64,025,830			64,025,830
Distributed capital		(64,300,000	)		(58,000,000	)
Retained earnings		70,496,709			50,736,104
Total members’ capital		70,222,539			56,761,934
TOTAL LIABILITIES AND MEMBERS’ CAPITAL	$	106,451,175		$	97,021,454

See accompanying notes.

5

Nickel Road Operating LLC and Subsidiaries

Consolidated Statements of Income

Years Ended December 31, 2023 and 2022

	2023			2022
REVENUES
Oil and gas sales	$	48,169,114		$	66,059,962
OPERATING EXPENSES
Production taxes		4,408,520			4,975,383
Lease operating		4,616,425			3,942,294
Depreciation, depletion, and amortization		16,115,889			17,760,179
General and administrative		4,068,463			4,259,939
Impairment		5,077,697			-
Lease expirations		-			329,911
Total operating expenses		34,286,994			31,267,706
INCOME FROM OPERATIONS		13,882,120			34,792,256
OTHER INCOME (EXPENSE)
Interest expense		(2,025,960	)		(936,453	)
Gain on sale of oil and gas properties		5,925,755			25,331,465
Realized loss on derivative instruments		(1,021,596	)		(21,751,084	)
Unrealized gain on derivative instruments		2,998,792			3,286,777
Other income		4,227			20,029
Income tax expense		(18,000	)		(4,748	)
Interest income		15,267			41,152
Total other income		5,878,485			5,987,138
NET INCOME	$	19,760,605		$	40,779,394

See accompanying notes.

6

Nickel Road Operating LLC and Subsidiaries

Consolidated Statements of Changes in Members’ Capital

Years Ended December 31, 2023 and 2022

	Class A			Class B		Retained Earnings		Total Members’
	Capital			Capital		(Deficit)		Equity
BALANCE, January 1, 2022	$	64,025,830		$	-	$	9,956,710	$	73,982,540
Capital distributions		(58,000,000	)		-		-		(58,000,000	)
Net income		-			-		40,779,394		40,779,394
BALANCE, December 31, 2022		6,025,830			-		50,736,104		56,761,934
Capital distributions		(6,300,000	)		-		-		(6,300,000	)
Net income		-			-		19,760,605		19,760,605
BALANCE, December 31, 2023	$	(274,170	)	$	-	$	70,496,709	$	70,222,539

See accompanying notes.

7

Nickel Road Operating LLC and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2023 and 2022

	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	19,760,605		$	40,779,394
Adjustments to reconcile net income to net cash from operating activities
Depreciation, depletion, and amortization		16,115,889			17,760,179
Impairment		5,077,697			-
Amortization of debt issuance costs		104,395			140,941
Gain on sale of oil and gas properties		(5,925,755	)		(25,331,465	)
Lease expirations		-			329,911
Unrealized gain on derivative instruments		(2,998,792	)		(3,286,777	)
Change in operating assets and liabilities
Accounts receivable		(2,496,872	)		4,505,745
Prepaid expenses		266,921			(42,120	)
Accounts payables		(119,616	)		105,677
Due to related party		(141,397	)		167,993
Accrued liabilities		4,472,384			24,449
Net cash from operating activities		34,115,459			35,153,927
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of oil and gas properties		(32,429,078	)		(37,025,536	)
Proceeds from the sale of oil and gas properties		6,154,013			58,693,653
Net cash (used in) from investing activities		(26,275,065	)		21,668,117
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt		68,116,667			29,700,000
Repayment of debt		(72,633,333	)		(25,175,000	)
Debt issuance costs		(163,652	)		(19,377	)
Capital distributions		(6,300,000	)		(58,000,000	)
Net cash used in financing activities		(10,980,318	)		(53,494,377	)
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(3,139,924	)		3,327,667
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of year		3,476,039			148,372
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of year	$	336,115		$	3,476,039
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH, end of year
Cash and cash equivalents	$	336,115		$	276,039
Restricted cash		-			3,200,000
Cash, cash equivalents, and restricted cash, end of year	$	336,115		$	3,476,039
SUPPLEMENTAL CASH FLOW INFORMATION
Capital expenditures in accounts payable and accrued liabilities	$	316,880		$	-
Asset retirement obligations incurred, net	$	126,707		$	209,652
Asset retirement obligations settled	$	-		$	185,440
Right-of-use asset obtained in exchange for lease obligations	$	388,011		$	-
Cash paid for interest	$	1,821,998		$	853,027

See accompanying notes.

8

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 – Organization and Summary of Significant Accounting Policies

Organization – Nickel Road Operating LLC , a Delaware limited liability company (the Company), was formed on July 25, 2017, for the purpose of engaging in the evaluation, acquisition, exploration, drilling, development, and production of oil and gas in the United States of America. The Company shall continue in existence until it is liquidated or dissolved under the terms of the Amended Limited Liability Company Agreement (the LLC Agreement).

As a Limited Liability Company (LLC), the amount of loss at risk for each individual member is limited to the amount of capital contributed to the LLC, and unless otherwise noted, the individual member’s liability for indebtedness of an LLC is limited to the member’s capital contributions.

Basis of presentation – The Company follows accounting standards established by the Financial Accounting Standards Board (FASB). The FASB sets accounting principles generally accepted in the United States of America (GAAP) to ensure consistent reporting of the Company’s financial condition, results of operations, and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (ASC) or “Codification.”

Use of estimates in the preparation of financial statements – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Depreciation, depletion, and amortization of oil and gas properties and the impairment of proved oil and gas properties are determined using estimates of oil and gas reserves. There are numerous uncertainties in estimating the quantity of reserves and in projecting the future rates of production and timing of development expenditures, including future costs to dismantle, dispose, and restore the Company’s properties. Oil and gas reserve engineering must be recognized as a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way.

Fair value of financial instruments – The Company’s financial instruments consist of cash and cash equivalents, restricted cash, trade receivables, trade payables, accrued liabilities, and derivative financial instruments. The carrying value of cash and cash equivalents, restricted cash, trade payables, accrued liabilities, and derivative financial instruments are considered to be representative of their fair market value due to the short maturity of these instruments. The carrying amount of debt reflected on the consolidated balance sheets approximates fair value as this debt has a variable interest rate that approximates a market interest rate.

Principles of consolidation – The accompanying consolidated financial statements are consolidated and include the accounts of the Company and its wholly owned subsidiaries, Source Rock Royalty LLC, Nickel Road Development LLC, and Peak Stone Properties LLC. All significant intercompany amounts have been eliminated in consolidation.

9

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Cash and cash equivalents – The Company considers all highly liquid investments with a maturity of three months or less, when purchased, to be cash equivalents. Cash and cash equivalents are maintained at financial institutions, and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to such balances, and management believes that the Company is not exposed to any significant risks on the balances.

Restricted cash – As of December 31, 2022, the Company held restricted cash of approximately $3,200,000 for accounts held in escrow related to the Company’s sale of Oil and Gas Properties. Per the terms of the Asset Purchase Agreement, see oil and gas properties within Note 1, entered on June 1, 2022, the escrow period is defined as one year from the closing date. The restricted cash balance was released during the period ended December 31, 2023. The Company did not hold any restricted cash as of December 31, 2023.

Accounts receivable – In June of 2016, the FASB issued ASC Topic 326, Financial Instruments - Credit Losses. This new guidance replaces the current incurred loss impairment model with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. This new Current Expected Credit Losses (CECL) model applies to (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance- sheet credit exposures, (3) debt securities and financial assets measured at fair value, and (4) beneficial interests in securitized financial assets. The Company adopted this ASU effective January 1, 2023. As originally provided for in the CECL standard, the Company applied the new guidance through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, which, for the Company was January 1, 2023, with future adjustment to credit loss expectations recorded through the income statement as charges or credits to earnings. The Company’s adoption of this guidance resulted in no cumulative effect adjustment to retained earnings upon adoption and there was no significant impact to the Company’s operating results during 2023.

Accounts receivable consist of uncollateralized joint interest owner obligations due within 30 days of the invoice date, uncollateralized accrued revenues due under normal trade terms, generally requiring payment within 30 days of production, and other miscellaneous receivables. Management estimates the allowance balance using the relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts of economic conditions. No allowance for bad debts has been recorded during the years ended December 31, 2023 and 2022.

Significant customers – As of and for the year ended December 31, 2023, the Company’s largest customer generated approximately 90% of sales, and one customer accounted for approximately 95% of accrued oil and gas sales.

As of and for the year ended December 31, 2022, the Company’s two largest customers generated approximately 82% and 15% of sales, and one customer accounted for approximately 88% of accrued oil and gas sales.

10

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Oil and gas properties – The Company accounts for its oil and gas operations using the successful efforts method of accounting. Under this method, all costs associated with property acquisitions, successful exploratory wells, and development wells are capitalized. Items charged to expense generally include geological and geophysical costs, costs of unsuccessful exploratory wells, delay rentals, and oil and gas production costs. Capitalized costs of proved leasehold costs are depleted on a well-by-well basis using the units-of-production method based on total proved developed producing oil and gas reserves. Other capitalized costs of producing properties are also depleted based on total proved developed producing reserves. Depletion expense for the years ended December 31, 2023 and 2022 was approximately $16,063,000 and $17,712,000, respectively.

The Company assesses its proved oil and gas properties for impairment whenever events or circumstances indicate that the carrying value of the assets may not be recoverable, but at least annually. The impairment test compares undiscounted future net cash flows to the assets’ net book value. If the net capitalized costs exceed future net cash flows, then the cost of the property is written down to the estimated fair value. Fair value for oil and natural gas properties is generally determined based on an analysis of discounted future net cash flows adjusted for certain risk factors. General rules for asset impairment described in ASC Topic 360 also apply. Impairment of proved properties as of December 31, 2023 and 2022 was approximately $4,991,000 and $0, respectively.

Unproved properties are assessed periodically on a project-by-project basis to determine whether an impairment has occurred. Management’s assessment includes consideration of the results of exploration activities, commodity price predictions or forecasts, planned future sales, or expiration of all or a portion of such projects. Impairment of unproved properties as of December 31, 2023 and 2022 was approximately $87,000 and $0, respectively.

Gains and losses arising from sales of oil and gas properties are included in other income. However, a partial sale of proved properties within an existing field that does not significantly affect the unit-of-production depletion rate will be accounted for as a normal retirement with no gain or loss recognized. The sale of a partial interest within a proved property is accounted for as a recovery of cost. The partial sale of unproved property is accounted for as a recovery of cost when there is uncertainty of the ultimate recovery of the cost applicable to the interest retained.

On June 1, 2022, the Company entered into an Asset Purchase Agreement with a third party to sell a portion of the Company’s proved and unproved oil and gas properties. The Company sold various oil and gas properties held in the DJ Basin to a third party for $64,000,000; after purchase price adjustments total proceeds were approximately $58,694,000. The oil and gas properties sold by the Company had a carrying value of approximately $33,363,000, resulting in a gain of approximately $25,331,000.

On March 1, 2023, and closed on August 31, 2023, the Company entered into an Asset Purchase Agreement with a third party to sell the Company’s royalty assets owned by the subsidiary, Source Rock Royalty LLC. The Company sold for $7,000,000; after purchase price adjustments total proceeds were approximately $6,405,000. The oil and gas properties sold by the Company had a carrying value of approximately $2,017,000, resulting in a gain of approximately $4,388,000.

11

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Derivative financial instruments – The Company enters into derivative contracts, primarily swaps, and collars to hedge future crude oil and natural gas production in order to mitigate the risk of market price fluctuations. All derivative instruments are recorded on the balance sheet at fair value. The Company has elected not to apply hedge accounting to any of its derivative transactions; consequently, the Company recognizes mark-to-market gains and losses in earnings currently, rather than deferring such amounts in other comprehensive income for those commodity derivatives that qualify as cash flow hedges.

Asset retirement obligations – An asset retirement obligation associated with the retirement of a tangible long-lived asset is recognized as a liability in the period incurred, with an associated increase in the carrying amount of the related long-lived asset and oil and natural gas properties. The cost of the tangible asset, including the asset retirement cost, is depleted over the useful life of the asset. The asset retirement obligation is recorded at its estimated fair value, measured by reference to the expected future cash outflows required to satisfy the retirement obligation discounted at the credit-adjusted, risk-free interest rate. Accretion expense is recognized over time, as the discounted liability is accreted to its expected settlement value. Accretion expense is recorded within “Depletion, depreciation, and amortization” in the consolidated statements of operations. If the estimated future cost of the asset retirement obligation changes, an adjustment is recorded to both the asset retirement obligation and the long-lived asset. Revisions to estimated asset retirement obligations can result from changes in retirement cost estimates, revisions to estimated inflation rates, and changes in the estimated timing of abandonment.

Deferred financing costs – Deferred financing costs are capitalized and amortized over the contractual term of the related obligations. Debt issuance costs of approximately $444,000 were recognized within long-term debt as a reduction of the current outstanding balance in 2023, net of approximately $104,000 of amortization expense which is recorded as interest expense. See Note 8 for further details.

Revenue recognition – The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. Revenue from the sale of oil, natural gas liquids (NGLs), and natural gas is recognized as the product is delivered to the customers’ custody transfer points, and collectability is reasonably assured. The Company fulfills the performance obligations under the customer contracts through daily delivery of oil, NGLs, and natural gas to the customers’ custody transfer points, and revenues are recorded on a monthly basis. The prices received for oil, NGLs, and natural gas sales under the Company’s contracts are generally derived from stated market prices, which are then adjusted to reflect deductions, including transportation, fractionation, and processing. As a result, the revenues from the sale of oil, NGLs, and natural gas will decrease if market prices decline. The sales of oil, NGLs, and natural gas, as presented on the condensed consolidated statements of operations, represent the Company’s share of revenues, net of royalties and excluding revenue interests owned by others. When selling oil, NGLs, and natural gas on behalf of royalty owners or working interest owners, the Company is acting as an agent and, thus, reports the revenue on a net basis. To the extent actual volumes and prices of oil, NGLs, and natural gas sales are unavailable for a given reporting period because of timing or information not received from third parties, the expected sales volumes and prices for those properties are estimated and recorded.

12

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Income taxes – The Company is an LLC, which is not subject to U.S. federal income taxes. Rather, the Company’s taxable income flows through to the owners, who are responsible for paying the applicable income taxes on the income allocated to them. For tax years beginning on or after January 1, 2018, the Company is subject to audit rules enacted as part of the Bipartisan Budget Act of 2015 (the Centralized Partnership Audit Regime). Under the Centralized Partnership Audit Regime, any IRS audit of the Company would be conducted at the Company level, and if the IRS determines an adjustment, the default rule is that the Company would pay an “imputed underpayment,” including interest and penalties, if applicable. The Company may, instead, elect to make a “push-out” election, in which case the partners for the year that is under audit would be required to take into account the adjustments on their own personal income tax returns.

The LLC Agreement does not stipulate how the Company will address imputed underpayments. If the Company receives an imputed underpayment, a determination will be made based on the relevant facts and circumstances that exist at that time. Any payments that the Company ultimately makes on behalf of its current partners will be reflected as a dividend, rather than as a tax expense, at the time that such dividend is declared.

The Company has not recorded any liabilities as of December 31, 2023 or 2022 related to uncertain tax provisions. As of December 31, 2023 or 2022, the Company made no provision for interest or penalties related to uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and in various states. There are currently no federal or state income tax examinations underway for these jurisdictions.

Leases – In February 2016, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) which amended the existing lease accounting guidance to require lessees to recognize a right-of-use (ROU) asset and lease liability on the consolidated balance sheets for all leases with terms greater than 12 months. The Company adopted the new lease standard and all related amendments on January 1, 2022. The Company applied a modified retrospective transition approach when adopting this new guidance which resulted in no cumulative-effect adjustments to the opening balance of retained earnings. The Company also elected the package of practical expedients permitted under the transition guidance that retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. In addition, the Company has not reassessed the accounting treatment of contracts entered into prior to adoption of the new lease guidance. The Company evaluated whether its contractual arrangements entered into on or after January 1, 2022, contain leases. Specifically, the Company considered whether it can control the underlying asset and have the right to obtain substantially all of the economic benefits or outputs from the asset. The Company evaluated the contractual arrangements, including the agreements governing the operation of both the Company and the Company’s ownership interests in oil and natural gas properties. At adoption, the Company concluded it did not have leases that represented a lessee or lessor as defined in Topic 842. The Company entered into a new lease under Topic 842 during 2023.

13

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 2 – Members’ Capital

The Company is a limited liability company with membership interests issued and held by various members. The LLC Agreement authorizes Class A units and Class B units. Class A members are eligible to receive distributions. Upon formation, the Company issued a total of approximately 19,000 Class A units to members in proportion to their initial contributions. As of December 31, 2023 and 2022, $64,025,830 in cumulative capital contributions had been received.

Upon formation, 100 Class B units were granted to certain executives. Class B units are intended to provide compensation to the Class B member upon a liquidation event, subject to returns as described in the LLC Agreement. The requirements to provide compensation to the Class B members had not been met under the arrangement, nor was it considered probable the requirements would be met as of December 31, 2023 and 2022. Therefore, the grant-date fair values were inconsequential, and no amounts were recorded as of December 31, 2023 and 2022 in the accompanying consolidated financial statements.

By the terms of the LLC Agreement, distributions occur according to their respective equity interests, as defined. For the years ending December 31, 2023 and 2022 the Company made distributions to members of approximately $6,300,000 and $58,000,000, respectively.

Note 3 – Asset Retirement Obligations

Asset retirement obligations represent the estimated present value of the amount to plug, abandon, and remediate producing properties at the end of their productive lives in accordance with applicable laws. The following table summarizes the Company’s asset retirement obligation transactions for the years ending December 31, 2023 and 2022:

	2023			2022
Asset retirement obligations, beginning of year	$	1,167,701		$	1,201,468
Liabilities incurred during the year		208,832			209,652
Change in estimated plugging costs		(82,125	)		(106,690	)
Liabilities settled during the year		-			(185,440	)
Accretion of discount		53,085			48,711
Asset retirement obligation, end of year	$	1,347,493		$	1,167,701

Note 4 – Hedging and Derivative Financial Instruments

Commodity derivative agreements – The Company utilizes swap and collar contracts to hedge the effect of price changes on a portion of its future oil and natural gas production. The objective of the Company’s hedging activities and the use of derivative financial instruments is to achieve more predictable cash flows. The use of derivatives involves the risk that the counterparties to such instruments will be unable to meet the financial terms of such contracts. The derivative contracts may be terminated by a nondefaulting party in the event of default by one of the parties to the agreement.

14

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

The Company has elected not to apply hedge accounting to any of its derivative transactions, and, consequently, the Company recognizes mark-to-market gains and losses in earnings currently, rather than deferring such amounts in accumulated other comprehensive income for those commodity derivatives that would otherwise qualify as cash flow hedges. All derivative instruments are recorded on the balance sheet at fair value.

As of December 31, 2023, the Company had the following commodity derivative instruments outstanding through 2023, as summarized in the table below:

	Collars
				Weighted Average Contract Price
Commodity/Index/Maturity Period	Quantity		Units	Floor		Ceiling
Crude Oil
NYMEX
2024		247,100	BBL	$	66.55	$	79.15

Derivative assets and liabilities fair value – The fair value of the derivative commodity contracts was a net asset of approximately $271,000 and a net liability of approximately $2,728,000 at December 31, 2023 and 2022, respectively. The following table details the fair value of derivatives recorded in the accompanying consolidated balance sheets, by category:

	Fair Value		Fair Value
	December 31, 2023		December 31, 2022
Derivative asset - current	$	270,925	$	-
Derivative liability - current	$	-	$	2,727,867

Derivative gain (loss) – The following table summarizes the components of the net derivative gain (loss) line item presented in the accompanying consolidated statements of operations during the years ended December 31:

	2023			2022
Unrealized gain on derivatives	$	2,998,792		$	3,286,777
Realized loss on derivatives		(1,021,596	)		(21,751,084	)
Total gain (loss) on derivatives	$	1,977,196		$	(18,464,307	)

15

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 5 – Fair Value Measurements

The Company follows ASC 820, Fair Value Measurements and Disclosures, which establishes a hierarchy for the inputs utilized in measuring fair value. The hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1 – Quoted prices for identical assets or liabilities in active markets;

Level 2 – Quoted prices for similar assets or liabilities in active markets; and

Level 3 – Unobservable inputs for the asset or liability, such as discounted cash models.

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2023 and 2022:

	Fair Value Measurement at December 31, 2023
	Level 1		Level 2		Level 3		Total
Derivative instruments	$	-	$	270,925	$	-	$	270,925
Total investments	$	-	$	270,925	$	-	$	270,925

	Fair Value Measurement at December 31, 2022
	Level 1		Level 2		Level 3		Total
Derivative instruments	$	-	$	2,727,867	$	-	$	2,727,867
Total investments	$	-	$	2,727,867	$	-	$	2,727,867

The inputs used to determine such fair value are primarily based upon observable market data for similar instruments, including the forward curve for commodity prices based on quoted market prices and would be classified within Level 2.

Note 6 – Leases

The Company leases a compressor under a noncancellable operating lease agreement. It has been determined that the lease does not constitute a finance lease. Operating lease ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company believes any option to terminate is not reasonably certain for the operating lease agreement.

For the year ended December 31, 2023, components of lease expense were as follows:

Operating lease cost	$	68,000
Short-term lease cost	$	1,270,763

16

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

All components of lease costs are expensed within lease operating expenses on the consolidated statement of income.

There was not any lease expense under ASC 842 during the year ended December 31, 2022.

For the year ended December 31, 2023, supplemental cash flow information related to leases was as follows:

Cash paid for amounts included in measurement of lease liabilities
Operating cash flows used for operating leases (including short-term)	$	68,000
Right-of-use assets obtained in exchange for lease obligations (noncash)
Operating leases	$	388,011
Weighted-average remaining lease term (years)
Operating leases		1.7
Weighted-average discount rate
Operating leases		4.9	%

The following is the future maturities of the annual undiscounted cash flows of the operating lease liability as of December 31, 2023:

Years Ending
December 31,
2024	$	204,000
2025		136,000
Total minimum lease payments		340,000
Less imputed interest		(14,067	)
Present value of lease liability	$	325,933

Note 7 – Commitments and Contingencies

Government regulation – Many aspects of the oil and gas industry are extensively regulated by federal, state, and local governments in all areas in which the Company has operations. Regulations govern such things as drilling permits, environmental protection and pollution control, spacing of wells, the unitization and pooling of properties, reports concerning operations, royalty rates, and various other matters, including taxation. Oil and gas industry legislation and administrative regulations are periodically changed for a variety of political, economic, and other reasons. As of December 31, 2023 or 2022, the Company has not been fined or cited for any violations of governmental regulations that would have a material adverse effect upon the financial condition, capital expenditures, earnings, or competitive position of the Company in the oil and gas industry.

17

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Litigation – From time to time, the Company may be involved in litigation related to claims arising out of its operations in the normal course of business. As of the date of this report, no legal proceedings are ongoing or pending that management believes could have a materially adverse effect upon the Company’s financial condition or results of operations.

Note 8 – Long-Term Debt

Revolving Loan – On February 22, 2021, the Company entered into a revolving loan agreement (the Loan Agreement) with a maturity of February 22, 2024. The Loan Agreement provides for a maximum revolving loan (the Revolving Loan) of $35,000,000 with an initial borrowing base of $10,000,000. In October 2022, the Loan Agreement was amended. The total borrowing base and sublimit increased to $30,000,000 for the revolving loan.

All sums advanced under the Revolving Loan, together with all accrued but unpaid interest thereon, are due in full at maturity. The Loan Agreement requires the Company to maintain certain affirmative and negative covenants, including certain financial ratios defined in the Loan Agreement and second amendment, and provides the lender with a first security interest in substantially all of the Company assets. The interest rate of the Revolving Loan is the lesser of the (1) Wall Street Journal prime rate, plus the applicable margin, or (2) the Maximum Rate as defined per the Loan Agreement. The interest rate as of December 31, 2023, was 9.50%. Commitment fees equal to 0.5% of the undrawn amount are payable quarterly under this agreement. The outstanding balance on the Revolving Loan as of December 31, 2023, was $16,783,333, due in full on the maturity date of February 22, 2024. Debt issuance cost was approximately $123,000.

On March 30, 2023, the Company amended its Loan Agreement to provide for a maximum Revolving Loan of $50,000,000 which matures on February 22, 2026. As of the date of the amendment the borrowing base was increased to $35,000,000, with a sublimit of $25,000,000, and continues to be subject to regular redeterminations by the lender. Permitted distributions are subject to limitations defined within the amendment and required hedge transactions are amended such that as of December 31, 2023, and thereafter, so long as the borrowing base utilization exceeds 60%, the Company is required to maintain crude oil hedges of at least 60% of the Company’s anticipated crude oil production for a period of no less than 12 months, to be complied with on a quarterly basis.

On August 31, 2023, the Company amended its Loan Agreement to decrease the borrowing base to $33,000,000.

March 2023 Term Loan – The March 2023 amended Loan Agreement also allows for a new Term Loan (March 2023 Term Loan) in the amount of $10,000,000 which commences on the date of the amendment and continues through July 31, 2023, after which the Lender shall have no further commitment to make an advance on the March 2023 Term Loan, so long as the aggregate advances do not exceed $10,000,000. The March 2023 Term Loan shall be payable in monthly principal installments commencing on August 1, 2023, plus all accrued interest, and matures on July 1, 2024. The March 2023 Term Loan bears interest at a rate equal to the sum of the Prime Rate, plus the Applicable Margin (as defined in the Loan Agreement); provided, however, that the interest rate on the March 2023 Term Loan shall never fall below 3.75%. The outstanding balance on the March 2023 Term Loan as of December 31, 2023, was $3,800,000. The full outstanding balance is due in full on the maturity date of July 1, 2024.

18

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

September 2021 Term Loan – On September 1, 2021, the Loan Agreement was amended to establish a term loan (September 2021 Term Loan) in the amount of $12,000,000 that matured on August 31, 2022. The September 2021 Term Loan was payable in monthly principal installments commencing January 31, 2022, plus all accrued interest. Interest for the September 2021 Term Loan was fixed at 5.25%. The September 2021 Term Loan also provides the lender with a first security interest in substantially all of the Company assets. As of December 31, 2023, this loan matured and was paid off in full.

Interest expense related to the Revolving Loan and the Term Loan for the years ended December 31, 2023 and 2022, was approximately $1,922,000 and $795,000, respectively.

Note 9 – Related Parties

Management fees – The Company receives management services from Nickel Road Management LLC under the Management Services Agreement dated March 30, 2018 (the Services Agreement). In accordance with the Service Agreement, Nickel Road Management LLC provides management services, including office space and employment of all employees. The Company pays Nickel Road Management LLC a monthly amount equal to the allocated costs for monthly general and administrative expenses approved by the managers (the Development Plan and Budget). The Services Agreement will remain in effect for three years and will automatically extend for successive one-year terms coinciding with the period covered by the Development Plan and Budget unless terminated under the terms of the Services Agreement. For the years ended December 31, 2023 and 2022, the Company incurred service agreement reimbursement costs of approximately $3,781,000 and $4,122,000, respectively. For the years ending December 31, 2023 and 2022, the Company had approximately $114,000 and $256,000 in management fees due to Nickel Road Management LLC, respectively.

Note 10 – Estimated Quantities of Oil and Gas Reserves (unaudited)

Costs Incurred

The following table sets forth the costs incurred for property acquisitions, exploration, and development activities:

	Years Ended December 31,
	2023		2022
Acquisition costs
Proved	$	134,895	$	1,028,411
Unproved		720,003		1,213,079
Exploration costs
Geological and geophysical		-		-
Development costs		31,918,742		34,719,791
Total costs incurred	$	32,773,640	$	36,961,281

19

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Oil and Natural Gas Reserves

The following table sets forth the Company’s net proved oil and gas reserves and the changes in net proved oil and gas reserves for the years ended December 31, 2021, 2022, and 2023. All of the Company’s proved reserves are located in the state of Colorado in the United States of America.

	Oil (Bbl)			Gas (Mcf)			Liquids (Bbl)			BOE
Proved reserves at December 31, 2021		9,150,124			16,386,179			4,126,059			16,007,213
Revisions		(1,806,746	)		875,476			(850,846	)		(2,511,680	)
Extensions		2,238,184			5,752,187			1,031,821			4,228,703
Divestiture of reserves		(1,705,171	)		(3,197,920	)		(785,350	)		(3,023,508	)
Acquisition of reserves		-			-			-			-
Production		(618,787	)		(919,804	)		(161,585	)		(933,673	)
Proved reserves at December 31, 2022		7,257,604			18,896,118			3,360,099			13,767,056
Revisions		177,709			485,626			(40,027	)		218,620
Extensions		1,992,949			4,513,455			786,530			3,531,722
Divestiture of reserves		(155,373	)		(286,151	)		(49,733	)		(252,798	)
Acquisition of reserves		-			-			-			-
Production		(616,616	)		(887,881	)		(149,000	)		(913,596	)
Proved reserves at December 31, 2023		8,656,273			22,721,167			3,907,869			16,351,003
Proved developed reserves at
December 31, 2021		3,731,662			6,669,807			1,182,570			6,025,867
December 31, 2022		2,599,724			6,452,542			1,103,821			4,778,969
December 31, 2023		2,481,059			7,689,981			1,287,231			5,049,954
Proved undeveloped reserves at
December 31, 2021		5,418,462			9,716,372			2,943,489			9,981,346
December 31, 2022		4,657,880			12,443,576			2,256,278			8,988,087
December 31, 2023		6,175,214			15,031,186			2,620,638			11,301,050

20

Nickel Road Operating LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 11 – Standardized Measure of Discounted Future Net Cash Flows (unaudited)

The standardized measure of discounted future net cash flows from the Company’s proved oil and gas reserves is presented in the following table:

	Years Ended December 31,
	2023			2022
Future cash inflows	$	797,665,069		$	883,016,626
Future production costs and taxes		(304,141,326	)		(293,548,055	)
Future development costs		(170,282,285	)		(147,621,778	)
Future income tax expense		-			-
Future net cash flows		323,241,458			441,846,793
10% annual discount for estimated timing of cash flows		(149,312,372	)		(197,175,725	)
Standardized measure of discounted future net cash flows	$	173,929,086		$	244,671,068

The following are the principal sources of change in standardized measure of discounted future net cash flows from the Company’s proved oil and gas reserves:

	Years Ended December 31,
	2023			2022
Balance, beginning of year	$	244,671,068		$	259,924,928
Net change in prices and production costs		(98,531,959	)		66,158,782
Net change in future development costs		3,286,634			(18,682,942	)
Oil and gas net revenue		(39,144,165	)		(57,149,450	)
Extensions		31,061,825			52,216,906
Acquisition of reserves		-			-
Divestiture of reserves		(8,286,790	)		(48,657,637	)
Revisions of previous quantity estimates		3,822,640			(49,945,233	)
Previously estimated development costs incurred		21,453,129			15,239,276
Net change in taxes		-			-
Accretion of discount		24,467,107			25,992,493
Changes in timing and other		(8,870,403	)		(426,055	)
Balance, end of year	$	173,929,086		$	244,671,068

Estimated net future cash flows represent an estimate on future net revenues from the production of proved reserves using average sales prices along with estimates of the operating costs, production taxes, and future development and abandonment costs necessary to produce such reserves. The Company’s proved reserves as of December 31, 2023 and 2022, were measured using commodity prices based on the twelve-month unweighted arithmetic mean of the first day of the month price for the period of January through December. No deduction has been reflected for depreciation, depletion, or any direct cost, such as general and administrative costs.

Note 12 – Subsequent Events

On January 11, 2024, the Company entered into an Asset Purchase Agreement (the Transaction) with Prairie Operating Co., LLC (Prairie) to sell all of the Company’s interests in its oil and gas properties effective February 1, 2024, for cash proceeds of $83.0 million, subject to customary closing adjustments, and additional cash consideration of $11.5 million for existing permitted locations drilled by Prairie. The Transaction has not closed as of the date the financial statements were available to be issued.

In conjunction with the Transaction, the Company liquidated its open hedge positions in January 2024 resulting in net cash proceeds of approximately $223,000. On January 31, 2024, the Company received a waiver of the minimum hedge transaction requirement from the lender through July 1, 2024. The Revolving Loan is reflected as a long-term debt on the Company’s balance sheet as of December 31, 2023. However, should the Company fail to repay the loan in full, reapply required hedges, or receive another such waiver from the lender, the Revolving Loan could become due on July 1, 2024.

The Company has reviewed all subsequent events through March 14, 2024, the date the consolidated financial statements were available to be issued.

21

EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

As previously disclosed, Prairie Operating Co. (the “Company”) entered into an asset purchase agreement, dated January 11, 2024 (the “NRO Agreement”), by and among the Company, Nickel Road Development LLC, Nickel Road Operating LLC (“NRO”) and Prairie Operating Co., LLC (“Prairie LLC”), to acquire certain assets of NRO for total consideration of $94.5 million (the “Purchase Price”), subject to certain closing price adjustments and other customary closing conditions (the “NRO Acquisition”). The Purchase Price consists of $83.0 million in cash and $11.5 million in deferred cash payments. The Company deposited $9 million of the Purchase Price into an escrow account on January 11, 2024 (the “Deposit”), which will be released to NRO upon the earlier of the date of the closing of the NRO Acquisition pursuant to the NRO Agreement (the “Closing”) and August 15, 2024. Portions of the Deposit are subject to earlier release under certain circumstances if the Closing has not occurred on or prior to June 17, 2024.

The Company is providing the following unaudited pro forma condensed combined financial information to aid in the analysis of the financial aspects of the following:

(i) the proposed issuance and sale of shares of common stock of the Company, par value $0.01 per share (“Common Stock”), in an underwritten public offering (the “Offering”);

(ii) the NRO Acquisition;

(iii) the sale of all of the Company’s cryptocurrency miners (the “Mining Equipment”) and the assignment of all of the Company’s rights and obligations under the Master Services Agreement, dated February 16, 2023, by and between Atlas Power Hosting, LLC and the Company, to a private purchaser pursuant to an asset purchase agreement, dated January 23, 2024 (the “Crypto Sale”); and

(iv) the merger of Creek Road Merger Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Merger Sub”), with and into Prairie LLC, with Prairie LLC surviving and continuing to exist as a Delaware limited liability company and a wholly owned subsidiary of the Company pursuant to that certain Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2023, by and among the Company, Merger Sub and Prairie LLC (the “Merger” and collectively, with the Offering, the NRO Acquisition and the Crypto Sale, the “Transactions”).

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses” and presents the combination of historical financial information of the Company and Prairie LLC, adjusted to give effect to the Transactions and subsequent events thereto (the “Subsequent Events”) as described in Note 3 below.

The unaudited pro forma condensed combined balance sheet as of December 31, 2023 combines the historical balance sheet of the Company as of December 31, 2023 on a pro forma basis as if the Transactions and the Subsequent Events, described in Note 3 below, had been consummated on December 31, 2023.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2023 combine the historical statements of operations of the Company, the historical statements of operations of Creek Road Miners, Inc. and the historical consolidated statements of operations of NRO, as applicable, for such periods on a pro forma as if the Transactions and Subsequent Events, described in Note 3 below, had been consummated on January 1, 2023.

The unaudited pro forma condensed combined financial information is based on, and should be read in conjunction with:

(a) the Company’s audited historical consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 19, 2024;

(b) the Company’s unaudited historical condensed consolidated financial statements and related notes for the three months ended March 31, 2023 included in its Quarterly Report on Form 10-Q/A for the period ended March 31, 2023, filed with the SEC on June 16, 2023;

(c) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Prairie Operating Co.” included in the Company’s Annual Report on Form 10-K for the year ended 2023, filed with the SEC on March 19, 2024;

(d) NRO’s audited consolidated financial statements for the year ended December 31, 2023, included in the Company’s Amendment to its Current Report on Form 8-K/A, filed with the SEC on March 19, 2024; and

(e) the section in this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Nickel Road Operating LLC”.

The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only and does not necessarily reflect what the Company’s financial condition or results of operations would have been had the Transactions or Subsequent Events, described in Note 3 below, occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information do not project the Company’s future financial condition and results of operations. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of this filing and certain assumptions that management believes are factually supportable and are expected to have a continuing impact on the Company’s results of operations, and are subject to change as additional information becomes available and analyses are performed.

Description of the Merger and Related Transactions

On May 3, 2023 (the “Merger Closing Date”), the Company completed the Merger, and upon consummation thereof, the Company changed its name from “Creek Road Miners, Inc.” to “Prairie Operating Co.” (the “Merger Closing”). Prior to the consummation of the Merger, the Company effectuated certain restructuring transactions in the following order and issued an aggregate of 3,375,288 shares of Common Stock (excluding shares reserved for issuance and unissued subject to certain beneficial ownership limitations) and 4,423 shares of Series D preferred stock, par value $0.01 per share (“Series D Preferred Stock”):

(i) the Company’s Series A preferred stock, par value $0.0001 per share (“Series A Preferred Stock”), Series B preferred stock, par value $0.0001 per share (“Series B Preferred Stock”), and Series C preferred stock, par value $0.0001 per share (“Series C Preferred Stock”), plus accrued dividends, were converted, in the aggregate, into shares of Common Stock;

(ii) the Company’s 12% senior secured convertible debentures (the “Original Debentures”), plus accrued but unpaid interest and a 30% premium, were exchanged, in the aggregate, for (a) the 12% amended and restated senior secured convertible debentures (collectively, the “AR Debentures”) in the principal amount of $1,000,000 in substantially the same form as their respective Original Debentures, (b) shares of Common Stock and (c) shares of Series D Preferred Stock;

(iii) accrued fees payable to the certain members of the board of directors of the Company in the amount of $110,250 were converted into shares of Common Stock;

(iv) accrued consulting fees of the Company in the amount of $318,750 payable to Bristol Capital, LLC (“Bristol Capital”) were converted into shares of Common Stock; and

(v) all amounts payable pursuant to certain convertible promissory notes were converted into shares of Common Stock.

Prior to the Merger Closing, the Company’s then-existing warrants to purchase shares of Common Stock, warrants to purchase shares of Series B Preferred Stock and options to purchase shares of Common Stock were cancelled and retired and ceased to exist without the payment of any consideration to the holders thereof.

At the effective time of the Merger, all membership interests in Prairie LLC were converted into the right to receive each member’s pro rata share of 2,297,668 shares of Common Stock.

At the effective time of the Merger, the Company assumed and converted options to purchase membership interests of Prairie LLC outstanding and unexercised as of immediately prior to the effective time of the Merger into non-compensatory options to acquire 8,000,000 shares of Common Stock for $7.14 per share (“Non-Compensatory Options”), which are only exercisable if specific production hurdles are achieved, and the Company entered into option agreements at the effective time of the Merger with each of Gary C. Hanna, Edward Kovalik, Paul Kessler and a third-party investor. An aggregate of 2,000,000 Non-Compensatory Options are subject to be transferred to the Series D PIPE Investors (as defined below), based on their then percentage ownership of Series D Preferred Stock to the aggregate Series D Preferred Stock issued in connection with the Series D PIPE outstanding and held by all Series D PIPE Investors as of the Merger Closing Date, if the Company does not meet certain performance metrics by May 3, 2026.

In addition, in connection with the Merger Closing, the Company consummated the purchase of oil and gas leases, including all of the right, title and interest in, to and under certain undeveloped oil and gas leases in Weld County, Colorado in the DJ Basin of Exok, Inc., an Oklahoma corporation (“Exok”), together with certain other associated assets, data and records, consisting of approximately 3,158 net mineral acres in, on and under approximately 4,494 gross acres from Exok for $3,000,000 pursuant to that certain Amended and Restated Purchase and Sale Agreement, dated as of May 3, 2023 (the “Exok Agreement”), by and among the Company, Prairie LLC and Exok (the “Exok Transaction”).

To fund the Exok Transaction, the Company sold an aggregate of approximately $17.38 million of Series D Preferred Stock with a stated value of $1,000 per share and convertible into shares of Common Stock at a price of $5.00 per share, Series A warrants to purchase 3,475,250 shares of Common Stock at an exercise price of $6.00 per share (“Series D A Warrants”) and Series B warrants to purchase 3,475,250 shares of Common Stock at an exercise price of $6.00 per share (“Series D B Warrants”) in a private placement (the “Series D PIPE”) pursuant to securities purchase agreements, dated May 3, 2023, by and between the Company and each of the investors thereto (the “Series D PIPE Investors”).

The Merger has been accounted for as a reverse asset acquisition under existing GAAP. For accounting purposes, Prairie LLC was treated as acquiring Merger Sub in the Merger. See Note 1 for further discussion.

Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Prairie LLC with the acquisition being treated as the equivalent of Prairie LLC issuing stock for the net assets of the Company. On the Merger Closing Date, the assets and liabilities of the Company were recorded based upon relative fair values, with no goodwill or other intangible assets recorded.

The assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information. The pro forma adjustments do not consider borrowings, financings and other transactions that may have occurred subsequent to December 31, 2023 other than the Subsequent Events described in Note 3 below and reflected in the pro forma financial information, nor do they reflect anticipated financings or other transactions that may occur in the future, other than the Offering.

NRO Acquisition

On January 11, 2024, the Company entered into the NRO Agreement to acquire the assets of NRO for total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions. The Purchase Price consists of $83.0 million in cash and $11.5 million in deferred cash payments. The Company deposited $9 million of the Purchase Price into an escrow account on January 11, 2024, which will be released to NRO upon the earlier of the date of the Closing and August 15, 2024. Portions of the Deposit are subject to earlier release under certain circumstances if the Closing has not occurred on or prior to June 17, 2024.

The NRO Acquisition is expected to be accounted for as an asset acquisition in accordance with ASC 805. The estimated fair value of the consideration to be paid by us and allocation of that amount to the underlying assets acquired, on a relative fair value basis, will be recorded on our books as of the date of the Closing of the NRO Acquisition. Additionally, costs directly related to the NRO Acquisition are capitalized as a component of the Purchase Price.

Subsequent Events

Deposit on NRO Acquisition

In conjunction with the NRO Acquisition, the Company deposited $9 million of the Purchase Price into an escrow account on January 11, 2024, which will be released to NRO upon the earlier of the date of the Closing and August 15, 2024, or earlier under certain circumstances.

Sale of Cryptocurrency Mining Equipment

On January 23, 2024, the Company completed the Crypto Sale, for consideration consisting of (i) $1.0 million in cash and (ii) $1.0 million (plus accrued interest) in deferred cash payments to be made out of a portion of the future net revenues associated with the Mining Equipment. See “Description of the Crypto Sale.”

Unaudited Pro Forma Condensed Combined Balance Sheet

as of December 31, 2023

	Prairie Operating Co. (Historical)			Nickel Road (Historical)			Nickel Road Transaction Accounting Adjustments			Cryptocurrency Asset Sale Adjustments			Subsequent Event Adjustments			Equity Financing		Combined Pro Forma
								(See Note 6)			(See Notes 5 and 6)			(See Notes 3 and 6)			(See Note 7)
Assets
Current assets:
Cash and cash equivalents	$	13,036,950		$	336,115		$	(74,000,000	)(b)	$	1,000,000	(c)	$	(9,000,000	)(a)	$	90,000,000	$	20,036,950
								(336,115	)(j)					—
Accounts and other receivable		329,750			—			—			—			—			—		329,750
Joint interest receivable		—			897,804			(897,804	)(j)		—			—			—		—
Accrued oil and gas sales		—			5,658,034			(5,658,034	)(j)		—			—			—		—
Derivative asset, current		—			270,925			(270,925	)(j)		—			—			—		—
Prepaid expenses		164,391			426,404			(426,404	)(j)		—			—			—		164,391
Note receivable		—			—			—			1,000,000	(c)		—			—		1,000,000
Total current assets		13,531,091			7,589,282			(81,589,282	)		2,000,000			(9,000,000	)		90,000,000		22,531,091
Property and equipment
Oil and natural gas properties, successful efforts method of accounting		28,705,404			—			93,989,761	(b)		—			—			—		122,695,165
Proved properties		—			137,855,719			(137,855,719	)(b)		—			—			—		—
Unproved properties		—			1,690,690			(1,690,690	)(b)		—			—			—		—
Accumulated depletion		—			(41,010,449	)		41,010,449	(b)		—			—			—		—
Cryptocurrency mining equipment		4,293,422			—			—			(4,293,422	)(c)		—			—		—
Less: Accumulated depreciation, depletion and amortization		(1,111,115	)		—			—			1,111,115	(c)		—			—		—
Total property and equipment, net		31,887,711			98,535,960			(4,546,199	)		(3,182,307	)		—			—		122,695,165
Deposits on oil and natural gas properties		—			—			(9,000,000	)(b)		—			9,000,000	(a)		—		—
Operating lease assets		155,253			325,933			(325,933	)(j)		—			—			—		155,253
Deferred transaction costs		108,956			—			(108,956	)(b)		—			—			—		—
Total assets	$	45,683,011		$	106,451,175		$	(95,570,370	)	$	(1,182,307	)	$	—		$	90,000,000	$	145,381,509
Liabilities, Members’ Capital and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	5,374,494		$	—		$	66,044	(b)	$	—			—		$	—	$	5,440,538
Accounts payable		—			1,801,926			(1,801,926	)(j)		—			—			—		—
Accrued liabilities		—			12,178,821			(12,178,821	)(j)		—			—			—		—
Accrued interest and expenses - related parties		—			114,346			(114,346	)(j)		—			—			—		—
Current maturities of long-term debt		—			3,800,000			(3,800,000	)(j)		—			—			—		—
Operating lease liabilities, current		41,890			192,384			(192,384	)(j)		—			—			—		41,890
Deferred purchase price, current		—			—			3,123,533	(b)		—			—			—		3,123,533
Total current liabilities		5,416,384			18,087,477			(14,897,900	)		—			—			—		8,605,961
Long-term liabilities:
Long-term debt, net of current portion and deferred financing costs		—			16,660,116			(16,660,116	)(j)		—			—			—		—
Deferred purchase price, long-term		—			—			6,855,806	(b)		—			—			—		6,855,806
Asset retirement obligations		—			1,347,493			(512,072	)(b)		—			—			—		835,421
Operating lease liabilities, long-term		93,817			133,550			(133,550	)(j)		—			—			—		93,817
Total long-term liabilities		93,817			18,141,159			(10,449,931	)		—			—			—		7,785,045
Total liabilities		5,510,201			36,228,636			(25,347,831	)		—			—			—		16,391,006
Commitments and contingencies
Members’ capital		—			70,222,539			(70,222,539	)(j)		—			—			—		—
Stockholders’ equity:
Preferred stock; 50,000 shares authorized:
Series D convertible preferred stock; $0.01 par value; 20,627 shares issued and outstanding		206			—			—			—			—			—		206
Series E convertible preferred stock; $0.01 par value; 20,000 shares issued and outstanding		200			—			—			—			—			—		200
Common stock; $0.01 par value; 500,000,000 shares authorized and 9,826,719 shares issued and outstanding, actual* and 19,469,921 shares issued and outstanding, as adjusted		98,267			—			—			—			—			96,432		194,699
Additional paid-in capital		118,927,814			—			—			—			—			89,903,568		208,831,382
Accumulated deficit		(78,853,677	)		—			—			(1,182,307	)(c)		—			—		(80,035,984	)
Total stockholders’ equity		40,172,810			—			—			(1,182,307	)		—			90,000,000		128,990,503
Total liabilities, members’ capital and stockholders’ equity	$	45,683,011		$	106,451,175		$	(95,570,370	)	$	(1,182,307	)	$	—		$	90,000,000	$	145,381,509

Unaudited Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2023

	Prairie Operating Co. (Historical)			Creek Road Miners, Inc. (As Adjusted)			Nickel Road (Historical)			Creek Road Miners, Inc. Acquisition Adjustments			Nickel Road Transaction Accounting Adjustments			Cryptocurrency Asset Sale Adjustments			Equity Financing		Combined Pro Forma
				(See Note 2)						(See Note 6)			(See Note 6)			(See Notes 5 and 6)			(See Note 7)
Revenue:
Cryptocurrency mining	$	1,545,792		$	73,584		$	—		$	—		$	—		$	(1,619,376	)(c)	$	—	$	—
Oil and gas sales		—			—			48,169,114			—			(899,352	)(h)		—			—		47,269,762
Total revenues		1,545,792			73,584			48,169,114			—			(899,352	)		(1,619,376	)		—		47,269,762
Operating costs and expenses:
Cryptocurrency mining costs (exclusive of depreciation and amortization shown below)		548,617			80,140			—			—			—			(628,757	)(c)		—		—
Depreciation, depletion and amortization		983,788			116,724			16,115,889			141,885	(d)		(11,236,147	)(g)		(1,242,397	)(c)		—		4,879,742
Production taxes		—			—			4,408,520			—			(438,939	)(h)		—			—		3,969,582
Lease operating		—			—			4,616,425			—			—			—			—		4,616,425
General and administrative		16,269,045			1,119,277			4,068,463			170,120	(e)		—			—			—		21,626,905
Stock based compensation		—			170,120			—			(170,120	)(e)		—			—			—		—
Impairment of cryptocurrency mining equipment		17,072,015			—			—			—			—			(17,072,015	)(c)		—		—
Impairment of oil and natural gas properties		—			—			5,077,697			—			—			—			—		5,077,697
Exploration		263,757			—			—			—			—			—			—		263,757
Total operating expenses		35,137,222			1,486,261			34,286,994			141,885			(11,675,086	)		(18,943,169	)		—		40,434,107
Income (loss) from operations		(33,591,430	)		(1,412,677	)		13,882,120			(141,885	)		10,775,733			17,323,793			—		6,835,654
Other income (expense):
Interest income		248,073			—			15,267			—			—			—			—		263,340
Interest expense		(121,834	)		(214,344	)		(2,025,960	)		120,076	(f)		1,277,510	(i)		—			—		(964,552	)
Gain on sale of oil and gas properties		—			—			5,925,755			—			(5,925,755	)(j)		—			—		—
Realized loss on derivative instruments		—			—			(1,021,596	)		—			1,021,596	(j)		—			—		—
Unrealized gain (loss) on derivative instruments		—			—			2,998,792			—			(2,998,792	)(j)		—			—		—
Other income (expense)		—			—			4,227			—			(4,227	)(j)		—			—		—
Loss on adjustment to fair value - warrant liabilities		(39,797,994	)		—			—			—			—			—			—		(39,797,994	)
Loss on adjustment to fair value - AR Debentures		(3,790,428	)		—			—			—			—			—			—		(3,790,428	)
Loss on adjustment to fair value - Obligation Shares		(1,477,103	)		—			—			—			—			—			—		(1,477,103	)
Liquidated damages		(548,144	)		—			—			—			—			—			—		(548,144	)
Total other income (expense)		(45,487,430	)		(214,344	)		5,896,485			120,076			(6,629,668	)		—			—		(46,314,881	)
Income (loss) from operations before provision for income taxes		(79,078,860	)		(1,627,021	)		19,778,605			(21,809	)		4,146,065			17,323,793			—		(39,479,227	)
Provision for income taxes		—			—			(18,000	)		—			18,000	(j)		—			—		—
Income (loss) from continuing operations	$	(79,078,860	)	$	(1,627,021	)	$	19,760,605		$	(21,809	)	$	4,164,065		$	17,323,793		$	—	$	(39,479,227	)
Income (loss) per common share:
Income (loss) per share, basic	$	(16.51	)	$	(4.02	)															$	(2.39	)
Income (loss) per share, diluted	$	(16.51	)	$	(4.02	)															$	(2.39	)
Weighted average common shares outstanding, basic		4,788,412			428,611						1,646,741									9,643,202		16,506,966
Weighted average common shares outstanding, diluted		4,788,412			428,611						1,646,741									9,643,202		16,506,966

Note 1. Basis of Pro Forma Presentation

The NRO Acquisition is expected to be accounted for as an asset acquisition in accordance with ASC 805. The estimated fair value of the consideration to be paid by us and allocation of that amount to the underlying assets acquired, on a relative fair value basis, will be recorded on our books as of the date of the Closing of the NRO Acquisition. Additionally, costs directly related to the NRO Acquisition are capitalized as a component of the Purchase Price.

The Crypto Sale requires presentation as discontinued operations upon the issuance of future financial statements in accordance with GAAP. Pursuant to the requirements of Article 3 of Regulation S-X, the Crypto Sale is considered a significant disposition and requires pro forma presentation in accordance with Article 11 of Regulation S-X.

The Merger was accounted for as a reverse asset acquisition under existing GAAP. For accounting purposes, Prairie LLC was treated as acquiring Merger Sub in the Merger.

Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Prairie LLC with the acquisition being treated as the equivalent of Prairie LLC issuing stock for the net assets of the Company. On the Merger Closing Date, the assets and liabilities of the Company were recorded based upon relative fair values, with no goodwill or other intangible assets recorded.

The unaudited pro forma condensed combined balance sheet as of December 31, 2023 combines the historical balance sheet of the Company as of December 31, 2023 on a pro forma basis in accordance with Article 11 of Regulation S-X, as amended, as if the Transactions and the Subsequent Events, described in Note 3 below, had been consummated on December 31, 2023.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2023 combines the historical statements of operations of the Company and the historical consolidated statements of operations of NRO, as applicable, for such periods on a pro forma basis as if the Transactions and Subsequent Events, described in Note 3 below, had been consummated on January 1, 2023.

The pro forma basic and diluted earnings (loss) per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of shares of Common Stock outstanding, assuming the Transactions and Subsequent Events, described in Note 3 below, occurred on January 1, 2023.

The unaudited pro forma condensed combined financial information is based on, and should be read in conjunction with, the audited historical financial statements of the Company as of and for the year ended December 31, 2023 and NRO as of and for the year ended December 31, 2023 and the notes thereto, as well as the disclosures contained in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Prairie Operating Co.” included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 19, 2024, the unaudited historical financial statements of the Company as of and for the three months ended March 31, 2023 and the notes thereto, included in the Company’s Quarterly Report on Form 10-Q/A for the three months ended March 31, 2023, filed with the SEC on June 16, 2023 and the section in this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Nickel Road Operating LLC.”

The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only and does not necessarily reflect what the Company’s financial condition or results of operations would have been had the Transactions or Subsequent Events, described in Note 3 below, occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information do not project the Company’s future financial condition and results of operations. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of this filing and certain assumptions that management believes are factually supportable and are expected to have a continuing impact on the Company’s results of operations, and are subject to change as additional information becomes available and analyses are performed.

Note 2. Creek Road Miners, Inc. As Adjusted Historical Financial Statement Information

The historical financial statements of Creek Road Miners, Inc. (“Creek Road”) included in the Company’s Quarterly Report on Form 10-Q/A filed with the SEC on June 16, 2023 include the historical statement of operations of Creek Road for the three months ended March 31, 2023. Given the Merger was not completed until May 3, 2023, for pro forma purposes herein in order to determine the Creek Road, As Adjusted amounts, Creek Road’s results of operations for the three months ended March 31, 2023, have been added to Creek Road’s results of operations for the period from April 1, 2023, through May 2, 2023, as reflected in the Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2023.

	Creek Road
	For the Three Months Ended March 31, 2023			For the Period from April 1, 2023 through May 2, 2023			As Adjusted
Revenue:
Cryptocurrency mining	$	—		$	73,584		$	73,584
Total revenues		—			73,584			73,584
Operating costs and expenses:
Cryptocurrency mining costs (exclusive of depreciation and amortization shown below)		6,305			73,835			80,140
Depreciation, depletion and amortization		64,576			52,148			116,724
General and administrative		576,289			542,988			1,119,277
Stock based compensation		170,120			—			170,120
Total operating expenses		817,290			668,971			1,486,261
Income (loss) from operations		(817,290	)		(595,387	)		(1,412,677	)
Other income (expense):
Interest expense		(154,076	)		(60,268	)		(214,344	)
Total other income (expense)		(154,076	)		(60,268	)		(214,344	)
Income (loss) from operations before provision for income taxes		(971,366	)		(655,655	)		(1,627,021	)
Provision for income taxes		—			—			—
Income (loss) from continuing operations	$	(971,366	)	$	(655,655	)	$	(1,627,021	)
Income (loss) per common share:
Income (loss) per share, basic	$	(2.49	)	$	(1.53	)	$	(4.02	)
Income (loss) per share, diluted	$	(2.49	)	$	(1.53	)	$	(4.02	)
Weighted average common shares outstanding, basic		428,611			428,611			428,611
Weighted average common shares outstanding, diluted		428,611			428,611			428,611

Note 3. Subsequent Events

Deposit on NRO Acquisition

In conjunction with the NRO Acquisition, the Company deposited $9 million of the Purchase Price into an escrow account on January 11, 2024, which will be released to NRO upon the earlier of the date of the Closing and August 15, 2024, or earlier under certain circumstances.

Sale of Cryptocurrency Mining Equipment

On January 23, 2024, the Company completed the sale of all of the Mining Equipment for consideration consisting of (i) $1.0 million in cash and (ii) $1.0 million (plus accrued interest) in deferred cash payments to be made out of a portion of the future net revenues associated with the Mining Equipment. See “Description of Crypto Sale.”

Note 4. Preliminary Purchase Price

The preliminary allocation of the total Purchase Price in the NRO Acquisition, on a relative fair value basis, is based upon management’s estimates of and assumptions related to the fair value of assets to be acquired and liabilities to be assumed as of the date of the Closing of the transaction using currently available information. Because the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on our financial position and results of operations may differ significantly from the pro forma amounts included herein.

The preliminary purchase price allocation is subject to change due to several factors, including but not limited to changes in the estimated fair value of assets acquired and liabilities assumed as of the date of the Closing of the transaction, which could result from changes in future oil and natural gas commodity prices, reserve estimates, interest rates, as well as other factors.

The consideration transferred, assets acquired and liabilities assumed by the Company are expected to be initially recorded as follows:

Consideration:
Cash consideration (1)	$	74,000,000
Deposit on oil and gas properties (2)		9,000,000
Deferred cash consideration (3)		9,979,340
Direct transaction costs (4)		175,000
Total consideration	$	93,154,340
Assets acquired:
Oil and gas properties	$	93,989,761
Liabilities assumed:
Asset retirement obligation, long-term	$	835,421

(1)	Includes preliminary customary purchase price adjustments.
(2)	Represents the Deposit paid by the Company to NRO (See Note 3).
(3)	Represents the estimated fair value of $11.5 million of deferred cash consideration to be paid to NRO over a period of up to 18 months from the date of the Closing.
(4)	Represents estimated transaction costs associated with the NRO Acquisition which have been capitalized in accordance with ASC 805-50.

The consideration will be allocated to the assets acquired and liabilities assumed on a relative fair value basis. The fair value measurements of assets acquired and liabilities assumed, on a relative fair value basis, are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of oil and gas properties and asset retirement obligations were measured using the discounted cash flow technique of valuation.

Significant inputs to the valuation of oil and gas properties include estimates of: (i) reserves, (ii) future operating and development costs, (iii) future commodity prices, (iv) future plugging and abandonment costs, (v) estimated future cash flows, and (vi) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates and are the most sensitive and subject to change.

Note 5. Crypto Sale

On January 23, 2024, we completed the Crypto Sale for consideration consisting of (i) $1.0 million in cash and (ii) $1.0 million (plus accrued interest) in deferred cash payments to be made out of a portion of the future revenues associated with the Mining Equipment. For purposes of the pro forma financial statements, this was a significant disposition and resulted in a net loss of $1.2 million. It requires presentation within discontinued operations upon the issuance of future financial statements.

Note 6. Unaudited Pro Forma Adjustments

The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of December 31, 2023 and in the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2023 are as follows:

(a) Reflects the adjustment for the Company’s Deposit utilized to partially fund the NRO Acquisition.

(b) Reflects the adjustment to record the assets acquired and liabilities assumed, on a relative fair value basis, in the NRO Acquisition along with transfer of consideration.

(c) Reflects the adjustment to record the Crypto Sale.

(d) Reflects the adjustment to depreciation expense required to reflect a decrease in the estimated useful life of acquired cryptocurrency mining assets of approximately one year.

(e) Reflects the reclassification of stock based compensation to conform to the Company’s financial statement presentation.

(f) Reflects the adjustment to interest expense from the conversion of notes payable and the Original Debentures.

(g) Reflect the adjustment for depreciation, depletion and amortization expense associated with the assets acquired in the NRO Acquisition reflecting a decrease in depreciable asset base after the purchase price allocation along with a decrease in the units of production depletion rate.

(h) Reflects the adjustments to reflect the NRO Acquisition based on information provided by NRO with respect to assets acquired and removing amounts related to assets not acquired.

(i) Reflects the adjustment to recognize interest expense on the deferred cash consideration recognized pursuant to the preliminary purchase price allocation (see Note 4) on an effective interest method.

(j) Reflects the adjustment to remove the financial statement effect of amounts related to assets that were not acquired and liabilities that were not assumed in the NRO Acquisition.

Note 7. Equity Financing

We expect to generate gross proceeds of $100.0 million (before underwriting discounts and commissions and offering expenses) from the Offering, which we intend to use to fund the remaining cash consideration in the NRO Acquisition and the remainder for general corporate purposes. After deducting the underwriting discounts and commissions and offering expenses payable by us, the total net proceeds are expected to be approximately $90.0 million. Based on the closing price of the Company’s Common Stock on March 8, 2024 of $10.37, we expect to issue approximately 9.6 million shares of Common Stock (assuming no exercise of the underwriters’ option to purchase additional shares). The following table summarizes the estimated Common Stock to be issued resulting from a 10% fluctuation in the market price of the shares of Common Stock:

	Share Price		Common Stock Issued
As presented	$	10.37		9,643,202
10% increase		11.41		8,764,242
10% decrease		9.33		10,718,114

Note 8. Supplemental Unaudited Combined Oil and Natural Gas Reserves and Standardized Measure Information

The following table sets forth information with respect to the historical and combined estimated proved oil and natural gas reserves as of December 31, 2023 for Prairie and NRO. Future exploration, exploitation and development expenditures, as well as future commodity prices and service costs, will affect the quantity of reserve volumes. The reserve estimates shown below were determined using the average first day of the month price for each of the preceding 12 months for oil and natural gas for the year ended December 31, 2023. Estimated future costs to settle asset retirement obligations have been included in the calculation of the Standardized Measure for each period present.

	Prairie		Nickel Road		Pro Forma Combined
Estimated Proved Developed Reserves:
Oil (Bbl)		—		2,481,059		2,481,059
Natural Gas (Mcf)		—		7,689,981		7,689,981
Natural Gas Liquids (Bbl)		—		1,287,231		1,287,231
Total (Boe)(1)		—		5,049,954		5,049,954
Estimated Proved Undeveloped Reserves:
Oil (Bbl)		—		6,175,214		6,175,214
Natural Gas (Mcf)		—		15,031,186		15,031,186
Natural Gas Liquids (Bbl)		—		2,620,638		2,620,638
Total (Boe)(1)		—		11,301,050		11,301,050
Estimated Proved Reserves:
Oil (Bbl)		—		8,656,273		8,656,273
Natural Gas (Mcf)		—		22,721,167		22,721,167
Natural Gas Liquids (Bbl)		—		3,907,869		3,907,869
Total (Boe)(1)		—		16,351,003		16,351,003

(1) Assumes a ratio of 6 Mcf of natural gas per Boe.

The following table sets forth summary information with respect to historical and combined oil and natural gas production for the year ended December 31, 2023 for Prairie and NRO. The NRO oil and natural gas production data presented below was derived from the supplemental oil and gas reserve information (unaudited) included in notes to the audited financial statements for the year ended December 31, 2023 of NRO and information provided by NRO.

	Prairie		Nickel Road (Total)		NRO (Unacquired)			NRO Acquired(1)		Pro Forma Combined
Oil (Bbl)		—		616,616		(10,720	)		605,896		605,896
Natural Gas (Mcf)		—		887,881		(21,807	)		866,074		866,074
Natural Gas Liquids (Bbl)		—		149,000		(3,847	)		145,153		145,153
Total (Boe)(2)		—		913,596		(18,201	)		895,395		895,395

(1)	Represents production data associated with the assets acquired from NRO.
(2)	Assumes a ratio of 6 Mcf of natural gas per Boe.

The following unaudited combined estimated discounted future net cash flows reflect Prairie and NRO as of December 31, 2023. The unaudited combined Standardized Measure of discounted future net cash flows are as follows:

	Prairie		NRO (Total)(1)			Combined
Future cash inflows	$	—	$	797,665,069		$	797,665,069
Future production costs		—		(304,141,326	)		(304,141,326	)
Future development costs		—		(170,282,285	)		(170,282,285	)
Future income tax expense		—		—			—
Future net cash flows		—		323,241,458			323,241,458
10% annual discount for estimated timing of cash flows		—		(149,312,372	)		(149,312,372	)
Standardized Measure of discounted future net cash flows	$	—	$	173,929,086		$	173,929,086

(1) Represents the total amounts as reported in NRO’s consolidated financial statements as of and for the year ended December 31, 2023.

XML

Cover	Mar. 19, 2024
Cover [Abstract]
Document Type	8-K/A
Amendment Flag	true
Amendment Description	Amendment No. 2
Document Period End Date	Mar. 19, 2024
Entity File Number	001-41895
Entity Registrant Name	Prairie Operating Co.
Entity Central Index Key	0001162896
Entity Tax Identification Number	98-0357690
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	602 Sawyer Street
Entity Address, Address Line Two	Suite 710
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77007
City Area Code	(713)
Local Phone Number	424-4247
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	PROP
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false