PROP - Prairie Operating Announces Acquisition of Producing E&P Assets | Benzinga

HOUSTON, Jan. 11, 2024 (GLOBE NEWSWIRE) -- Prairie Operating Co. (NASDAQ:PROP, the "Company" or "Prairie")) today announced it has entered into a definitive agreement to acquire the assets of Nickel Road Operating LLC ("NRO") for a total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions.  The total consideration consists of $83 million in cash and $11.5 million in deferred cash payments.  The effective date of the transaction is February 1, 2024.

The acquisition is expected to be accretive to Prairie's shareholders across key financial metrics including production, reserves, and free cash flow.  Furthermore, the addition of NRO's assets strategically expands Prairie's core operating area, increases inventory of high rate-of-return drilling locations, and provides additional flexibility to the 2024 drill schedule.  The transaction adds over 5,500 net leasehold acres and 62 fully permitted proven undeveloped ("PUD") drilling locations. The 84% liquids weighted assets produce approximately 3,370 net Boepd and add third-party engineered proven reserves estimated at 22.2 MMboe and $254 million in PV10 value, according to an independent, third-party reserve report by Cawley, Gillespie & Associates, Inc. ("CG&A") using SEC pricing as of December 31, 2023.

NRO's assets and operations are located near Prairie's existing DJ Basin operations in largely rural Weld County, Colorado.  The permitted PUDs are expected to payout in approximately 1 year from the onset of production and are economic in a low commodity price environment, with operational break-evens below $30/bbl WTI. ⁽¹⁾  In addition, existing infrastructure provides takeaway capacity and opportunities to improve efficiencies.  

"This acquisition increases and strengthens our overall position within a top-tier U.S. shale basin and aligns with our strategy of creating value through accretive acquisitions," stated Ed Kovalik, Chairman and Chief Executive Officer of the Company.  "Furthermore, the transaction positions us to accelerate our development program within free cash flow, supporting the Company's stated goal of debt-free, long-term growth."

Gary Hanna, President of the Company, added, "Today's announcement underscores our commitment and ability to create value for our shareholders through accretive acquisitions.  Today's target rich environment gives us ample opportunity to continue executing our acquisition strategy.  These assets strategically enhance our existing operations, enabling us to capitalize on operational efficiencies in the DJ Basin."

Strategic Drivers & Asset Overview: ⁽¹⁾

• 3,370 net Boepd (84% liquids) flowing from 26 operated horizontal wells
• 5,500 net contiguous acres across four lateral targets
• 90% held by production ("HBP")
• 94% working interest in seven operated Drilling and Spacing Units ("DSUs") 74% net revenue interest
• Adds 62 permitted PUDs
• Free cash flow expected to support full field development program
• No exposure to federal leases
• Key infrastructure in place to support development plan

Financial Highlights: ⁽¹⁾

• Expected to be immediately accretive to key financial metrics, including production, reserves, and cash flow
• Adds 22.2 MMboe and $254 million in 1P PV10 value
• Adds 5.3 MMboe and $104 million in PDP PV10 value
• Cash flow from PDP operations expected to be ~$40 million over the next twelve months
• Average IRRs of 75% and discounted ROI of 1.9x
• Net payout after approximately 1 year of production per well
• Development Break-even below $30/bbl WTI

Transaction Metrics: ⁽¹⁾

Based on an effective date of February 1, 2024, and existing production of approximately 3,370 Boepd, the transaction metrics are as follows:

• PV15 of Proved Developed Producing ("PDP") reserves
• Implied multiple of 2.3x NTM cash flow
• $28,000 per net flowing Boe
• $17,000 per net acre
• $4.25 per Boe of 1P reserves of 22.2 MMboe, as determined by CG&A. Including approximately $182 million of net undiscounted future development capital results in a recycle ratio of approximately 3.6x times.

A summary of reserves and values as of December 31, 2023 and as determined by CG&A follows. 

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