Image Source: Prairie Operating Co.
 

Prairie Operating Co. (Nasdaq: PROP) is shifting its focus from cryptocurrency to oil and gas exploration. This strategic shift is a response to the current market conditions and the company's assessment of the potential in the energy sector. The fact that pivoting from crypto assets to energy assets is now considered an audacious pivot perfectly captures the current state of retail investor sentiment.

In January 2024, Prairie Operating Company sold its cryptocurrency mining operation to focus on oil and gas exploration and production, with a strategy highly concentrated in the Denver-Julesberg (DJ) Basin, which spans Wyoming, Nebraska, Kansas, and Colorado.
 

DJ Basin Opportunity

The DJ basin is one of the most cost-effective U.S. Oil and gas plays; however, stricter environmental regulatory concerns are causing the Basin's major players, Chevron Corp (NYSE: CVX), Occidental Petroleum Corp (NYSE: OXY), and Civitas Resources Inc (NYSE: CIVI), to rethink their presence in the region. This dynamic provides an opportunity for smaller operators, such as Prairie, to gain a foothold in the Basin.
 

'Transformative' Acquisition

Prairie Operating Co. significantly expanded its footprint in the region, closing on multiple acquisitions this year.  

• March 2025: Completed a $602.75 million acquisition of assets from Bayswater, adding approximately 24,000 net acres.
• July 2025: Acquired an additional 11,000 net acres from Edge Energy for $12.5 million. 
• August 2025:  Two strategic Bolt-On acquisitions closed, adding 16,000 net acres

Prairie CEO Edward Kovalik called the Bayswater acquisition a pivotal moment for the company in its vision to "become a premier high-growth, low-cost oil producer." 

Despite making a transformative acquisition, this crypto-to-crude strategy has yet to be well-received by the market, and shares continue to make new 52-week lows. 
 

Q2 Earnings Miss

The company's aggressive acquisition strategy means investors will see significantly different earnings reports. In the second quarter earnings call in August, Prairie delivered a record 21,050 barrels of crude oil, a 540 percent increase quarter over quarter. Revenues were also up 400% to $68.1 million. 

While basic EPS came in at $1.08, diluted EPS dropped the figure by 90 cents, to $0.18, well below Wall Street's $1.28 consensus, as the company issued new shares, preferred shares, and warrants to fund the Bayswater acquisition. 
 

Projected Updates

Prairie CEO Ed Kovalik presented at the EnerCom Energy Investment Conference in August, outlining key future announcements that investors will be closely watching.

Despite delivering record production in Q2, the company lost around 2,000 Barrels of Oil Equivalent Per Day (BOEPD) due to "frac hits & additional volumes due to line pressure issues," according to an analyst note from Roth in August.  

Kovalik noted that an imminent increase from the 11-well Rusch Pad has led his company to believe that production will grow sharply until year-end 2025.

Prairie is expected to release Q3 guidance, which is anticipated to include the completion of post-closing adjustments from the Bayswater acquisition.

"It expects these adjustments to add to its cash balance and to benefit its financials. The company also expects to issue new 3Q25 production guidance at that time as well," according to Roth analyst Leo Mariani. 

At EnerCom, Kovalik stated that he believes the company can utilize its free cash flow in 2026 for M&A and Dividends, and expects the company to become free cash flow positive at some point in 2026, according to Mariani. 
 

Analyst Ratings

• Piper Sandler cut its price target from $9 to $3 and downgraded the company from "Overweight" to "Neutral," citing execution and dilution risks. 
• Roth MKM maintained a "Buy" rating with a $7 price target on September 12th. 
• KeyBanc initiated coverage on the company in July, before the Q2 earnings report, with a "Sector Weight" rating on the stock. 
   

What's Working:

• Massive production increase from the Bayswater deal
• Proven reserves in an established basin
• Record Q2 earnings to $35.7M
• Aggressive but focused development pipeline
   

Areas of Concern:

• Dilution from recent equity offerings
• Volatile oil prices' impact on margins
• Geographical concentration in a single basin
   

Future Outlook

Prairie's aggressive strategy could position it as a legitimate contender in the DJ Basin, despite the skepticism that currently persists. To put it in perspective: Civitas, the pure-play leader in the Basin, trades at a $3 billion valuation, over 30 x Prairie's. If Prairie executes, its current 3% valuation of Civitas could be a bargain. If not, it may reveal why the major operators scaled back in the first place.

The following year of operational results will clarify whether Prairie has unearthed a value opportunity or stepped into a value trap.
 

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