8-K/A
Prairie Operating Co. (PROP)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
AmendmentNo. 3
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Dateof Report (Date of earliest event reported): April 9, 2024
PrairieOperating Co.
(Exact name of registrant as specified in its charter)
| Delaware | 001-41895 | 98-0357690 |
|---|---|---|
| (State<br> or other jurisdiction<br><br> <br>of<br> incorporation) | (Commission<br><br> <br>File<br> Number) | (IRS<br> Employer<br><br> <br>Identification<br> No.) |
| 602 Sawyer Street, Suite 710<br><br> <br>Houston, TX | 77007 | |
| --- | --- | |
| (Address<br> of principal executive offices) | (Zip<br> Code) |
Registrant’stelephone number, including area code: (713) 424-4247
N/A
(FormerName 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<br> communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement<br> 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<br> of each class | Trading<br> Symbol(s) | Name<br> of each exchange on which registered |
|---|---|---|
| Common<br> Stock, par value $0.01 per share | PROP | The<br> 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 and Amendment No. 2 to the Current Report on Form 8-K/A on February 9, 2024 and March 19, 2024, respectively (as so amended, the “Original 8-K”). This Amendment No. 3 to the Original 8-K (this “Amendment No. 3”), 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. 3 makes no other amendments to the Original 8-K.
Item9.01 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 February December 31, 2023, is filed as Exhibit 99.1 hereto and is 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 99.2 hereto and incorporated herein by reference.
(d) Exhibits
| Exhibit Number | Description |
|---|---|
| 23.1 | 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 (incorporated by reference to Exhibit 99.2 of the Company’s Amendment No. 2 to the Registration Statement on Form S-1/A, filed with the SEC on April 9, 2024). |
| 99.2 | Unaudited Pro Forma Condensed Combined Financial Information as of and for the year ended December 31, 2023. |
| 104 | Cover<br> 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:<br> April 9, 2024 | ||
| By: | /s/ Daniel T. Sweeney | |
| Daniel<br> T. Sweeney | ||
| General<br> Counsel & Corporate Secretary |
Exhibit23.1
CONSENTOF 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. 3 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/ Cawley, Gillespie & Associates, Inc.
Fort Worth, Texas
April 8, 2024
Exhibit 99.2
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<br> proposed issuance and sale of shares of common stock of the Company, par value $0.01 per share (“Common Stock”), in an<br> underwritten public offering (the “Offering”); |
|---|---|
| (ii) | the<br> NRO Acquisition; |
| (iii) | the<br> sale of all of the Company’s cryptocurrency miners (the “Mining Equipment”)<br> and the assignment of all of the Company’s rights and obligations under the Master<br> Services Agreement, dated February 16, 2023, by and between Atlas Power Hosting, LLC and<br> the Company, to a private purchaser pursuant to an asset purchase agreement, dated January<br> 23, 2024 (the “Crypto Sale”); and |
| (iv) | the<br> merger of Creek Road Merger Sub, LLC, a Delaware limited liability company and a wholly owned<br> subsidiary of the Company (“Merger Sub”), with and into Prairie LLC, with Prairie<br> LLC surviving and continuing to exist as a Delaware limited liability company and a wholly<br> owned subsidiary of the Company pursuant to that certain Amended and Restated Agreement and<br> Plan of Merger, dated as of May 3, 2023, by and among the Company, Merger Sub and Prairie<br> LLC (the “Merger” and collectively, with the Offering, the NRO Acquisition and<br> 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<br> Company’s audited historical consolidated financial statements and related notes included in its Annual Report on Form 10-K/A<br> for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 20,<br> 2024; |
|---|---|
| (b) | the<br> Company’s unaudited historical condensed consolidated financial statements and related notes for the three months ended March<br> 31, 2023 included in its Quarterly Report on Form 10-Q/A for the period ended March 31, 2023, filed with the SEC<br> on June 16, 2023; |
| (c) | the<br> 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/A for the year ended 2023, filed with<br> the SEC on March 20, 2024; |
| --- | --- |
| (d) | NRO’s<br> audited consolidated financial statements for the year ended December 31, 2023, included in the Company’s Amendment<br> to its Current Report on Form 8-K/A, filed with the SEC on March 19, 2024; and |
| (e) | the<br> 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<br> Company’s Series A preferred stock, par value $0.0001 per share (“Series A Preferred<br> Stock”), Series B preferred stock, par value $0.0001 per share (“Series B Preferred<br> Stock”), and Series C preferred stock, par value $0.0001 per share (“Series C<br> Preferred Stock”), plus accrued dividends, were converted, in the aggregate, into shares<br> of Common Stock; |
|---|---|
| (ii) | the<br> Company’s 12% senior secured convertible debentures (the “Original Debentures”),<br> plus accrued but unpaid interest and a 30% premium, were exchanged, in the aggregate, for<br> (a) the 12% amended and restated senior secured convertible debentures (collectively, the<br> “AR Debentures”) in the principal amount of $1,000,000 in substantially the same<br> form as their respective Original Debentures, (b) shares of Common Stock and (c) shares of<br> Series D Preferred Stock; |
| (iii) | accrued<br> fees payable to the certain members of the board of directors of the Company in the amount<br> of $110,250 were converted into shares of Common Stock; |
| (iv) | accrued<br> consulting fees of the Company in the amount of $318,750 payable to Bristol Capital, LLC<br> (“Bristol Capital”) were converted into shares of Common Stock; and |
| (v) | all<br> amounts payable pursuant to certain convertible promissory notes were converted into shares<br> 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.”
UnauditedPro Forma Condensed Combined Balance Sheet
asof December 31, 2023
| Nickel<br> Road <br>(Historical) | Nickel<br> Road Transaction Accounting <br>Adjustments | Cryptocurrency<br> Asset <br>Sale Adjustments | Subsequent<br> Event <br>Adjustments | Equity<br> <br>Financing | Combined<br> <br>Pro Forma | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | **** | **** | (See Note 6) | **** | (See Notes 5 and 6) | **** | (See Notes 3 and 6) | **** | (See Note 7) | **** | **** | ||||||||
| Assets | |||||||||||||||||||
| Current assets: | |||||||||||||||||||
| Cash and<br> cash equivalents | 13,036,950 | $ | 336,115 | $ | (74,000,000 | )(b) | $ | 1,000,000 | (c) | $ | (9,000,000 | )(a) | $ | 90,000,000 | $ | 21,036,950 | |||
| (336,115 | )(j) | — | |||||||||||||||||
| Accounts and other receivable | 329,750 | — | — | — | — | — | 329,750 | ||||||||||||
| Joint interest receivable | — | 897,804 | (897,804 | )(j) | — | — | — | — | |||||||||||
| Accrued oil and gas<br> 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<br> 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<br> 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<br> equipment | 4,293,422 | — | — | (4,293,422 | )(c) | — | — | — | |||||||||||
| Less:<br> Accumulated depreciation, depletion and amortization | (1,111,115 | ) | — | — | 1,111,115 | (c) | — | — | — | ||||||||||
| Total property and equipment,<br> 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<br> costs | 108,956 | — | (108,956 | )(b) | — | — | — | — | |||||||||||
| Total<br> assets | 45,683,011 | $ | 106,451,175 | $ | (95,570,370 | ) | $ | (1,182,307 | ) | $ | — | $ | 90,000,000 | $ | 145,381,509 | ||||
| Liabilities,<br> Members’ Capital and Stockholders’ Equity | |||||||||||||||||||
| Current liabilities: | |||||||||||||||||||
| Accounts payable and<br> 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<br> expenses - related parties | — | 114,346 | (114,346 | )(j) | — | — | — | — | |||||||||||
| Current maturities of<br> long-term debt | — | 3,800,000 | (3,800,000 | )(j) | — | — | — | — | |||||||||||
| Operating lease liabilities,<br> current | 41,890 | 192,384 | (192,384 | )(j) | — | — | — | 41,890 | |||||||||||
| Deferred<br> 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<br> of current portion and deferred financing costs | — | 16,660,116 | (16,660,116 | )(j) | — | — | — | — | |||||||||||
| Deferred purchase price,<br> long-term | — | — | 6,855,806 | (b) | — | — | — | 6,855,806 | |||||||||||
| Asset retirement obligations | — | 1,347,493 | (512,072 | )(b) | — | — | — | 835,421 | |||||||||||
| Operating<br> lease liabilities, long-term | 93,817 | 133,550 | (133,550 | )(j) | — | — | — | 93,817 | |||||||||||
| Total<br> 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<br> shares authorized: | |||||||||||||||||||
| Series D convertible<br> preferred stock; 0.01 par value; 20,627 shares issued and outstanding | 206 | — | — | — | — | — | 206 | ||||||||||||
| Series E convertible<br> preferred stock; 0.01 par value; 20,000 shares issued and outstanding | 200 | — | — | — | — | — | 200 | ||||||||||||
| Common stock; 0.01<br> par value; 500,000,000 shares authorized and 9,826,719 shares issued and outstanding, actual* and 19,469,921 shares issued and outstanding,<br> as adjusted | 98,267 | — | — | — | — | 96,432 | 194,699 | ||||||||||||
| Additional paid-in capital | 118,927,814 | — | — | — | — | 89,903,568 | 208,831,382 | ||||||||||||
| Accumulated<br> deficit | (78,853,677 | ) | — | — | (1,182,307 | )(c) | — | — | (80,035,984 | ) | |||||||||
| Total<br> stockholders’ equity | 40,172,810 | — | — | (1,182,307 | ) | — | 90,000,000 | 128,990,503 | |||||||||||
| Total<br> liabilities, members’ capital and stockholders’ equity | 45,683,011 | $ | 106,451,175 | $ | (95,570,370 | ) | $ | (1,182,307 | ) | $ | — | $ | 90,000,000 | $ | 145,381,509 |
All values are in US Dollars.
UnauditedPro Forma Condensed Combined Statement of Operations
YearEnded December 31, 2023
| Prairie Operating <br>Co. <br>(Historical) | Creek Road <br>Miners, Inc. <br>(As<br> Adjusted) | Nickel Road <br>(Historical) | Creek Road Miners, Inc. <br>Acquisition<br> <br>Adjustments | Nickel Road Transaction Accounting<br> Adjustments | Cryptocurrency Asset <br>Sale<br> Adjustments | Equity Financing | Combined <br>Pro Forma | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (See Note 2) | (See<br> Note 6) | (See<br> Note 6) | (See<br> Notes 5 and 6) | (See<br> 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<br> 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(k) | 4,788,412 | 428,611 | 1,646,741 | 9,643,202 | 16,506,966 | ||||||||||||||||||
| Weighted average common shares outstanding, diluted(k) | 4,788,412 | 428,611 | 1,646,741 | 9,643,202 | 16,506,966 |
Note
- 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 Analysisof Financial Condition and Results of Operations of Prairie Operating Co.” included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023, filed with the SEC on March 20, 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 RoadOperating 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 <br>March<br> 31, 2023 | For the Period from April 1, 2023<br> 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<br> 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<br> preliminary customary purchase price adjustments. | |
| --- | --- | |
| (2) | Represents<br> the Deposit paid by the Company to NRO (See Note 3). | |
| (3) | Represents<br> the estimated fair value of $11.5 million of deferred cash consideration to be paid to NRO over a period of up to 18<br> months from the date of the Closing. | |
| (4) | Represents<br> 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<br> the adjustment for the Company’s Deposit utilized to partially fund the NRO Acquisition. |
|---|---|
| (b) | Reflects<br> the adjustment to record the assets acquired and liabilities assumed, on a relative fair value basis, in the NRO Acquisition along<br> with transfer of consideration. |
| (c) | Reflects<br> the adjustment to record the Crypto Sale. |
| (d) | Reflects<br> the adjustment to depreciation expense required to reflect a decrease in the estimated useful life of acquired<br> cryptocurrency mining assets of approximately one year. |
| (e) | Reflects<br> the reclassification of stock based compensation to conform to the Company’s financial statement presentation. |
| (f) | Reflects<br> the adjustment to interest expense from the conversion of notes payable and the Original Debentures. |
| (g) | Reflect<br> the adjustment for depreciation, depletion and amortization expense associated with the assets acquired in the NRO Acquisition reflecting<br> a decrease in depreciable asset base after the purchase price allocation along with a decrease in the units of production depletion<br> rate primarily due to the depletion of the $94 million acquisition costs over total proved reserves. |
| (h) | Reflects<br> the adjustments to reflect the NRO Acquisition based on information provided by NRO with respect to assets acquired and removing<br> amounts related to assets not acquired. |
| (i) | Reflects<br> the adjustment to recognize interest expense on the deferred cash consideration recognized pursuant to the preliminary purchase<br> price allocation (see Note 4) on an effective interest method. |
| (j) | Reflects<br> the adjustment to remove the financial statement effect of amounts related to assets that were not acquired<br> and liabilities that were not assumed in the NRO Acquisition. |
| (k) | The Combined Pro Forma weighted average shares outstanding<br> include the historical shares of Creek Road Miners, Inc. and Creek Road Miners, Inc. acquisition adjustment pursuant to the requirements<br> of accounting for the Merger as a reverse asset acquisition and as required to properly reflect the Merger as consummated on January<br> 1, 2023. |
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<br> 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<br> production data associated with the assets acquired from NRO. | ||||||||||
| --- | --- | ||||||||||
| (2) | Assumes<br> 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<br> (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<br> the total amounts as reported in NRO’s consolidated financial statements as of and for the year ended December 31, 2023. | |||||||
| --- | --- |