Prairie Operating (NASDAQ:PROP) held its second-quarter earnings conference call on Monday. Below is the complete transcript from the call.

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Summary

Prairie Operating reported a 45% increase in total revenue for Q2 2026 to $98.9 million, with oil revenue at $93.5 million.

The company completed a partial refinancing of Series F Preferred Stock to reduce outstanding balance and potential dilution.

Q2 production averaged 21,866 BOE per day, with a significant increase in oil production by 4% compared to the previous year.

Operational improvements included drilling 12 wells, achieving cost savings through a new smaller hole design, and completing the first three-mile lateral drill.

Prairie adjusted its guidance for 2026 with projected production between 23,000 to 25,000 BOE per day and capital expenditures of $185 million to $195 million.

Management emphasized disciplined capital allocation, liquidity preservation, and strategic development planning in response to external factors like CIG pricing and operational restrictions.

Full Transcript

OPERATOR

Good morning and welcome to Prairie Operating second quarter 2026 earnings conference call. Today's call is being recorded at this time. I would like to turn the call over to Wabi Plugsma, Vice President of Investor Relations and Capital Markets. Please go ahead.

Wabi Plugsma, Vice President of Investor Relations and Capital Markets

Thank you, operator, and good morning, everyone. Thank you for joining Prairie Operating's second quarter 2026 earnings call. Before we provide our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements which are subject to certain risks, uncertainties and assumptions. Actual results could differ materially from those in any forward-looking statements. Additionally, we may refer to non-GAAP financial measures.

For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially, as well as reconciliations of non-GAAP financial measures, please refer to the company's earnings release and public filings, including our Form 10-Q for the quarter ended June 30, 2026. These materials are available on our website along with an updated investor presentation. Joining me today are Greg Patton, Chief Executive Officer and Director, and Michael Shelley, Executive Vice President and Chief Financial Officer.

With that, I'll turn the call over to our CEO, Greg Patton.

Greg Patton, Chief Executive Officer and Director

Thanks, Wabi, and good morning, everyone. The second quarter was a transformative period for Prairie. We advanced our DJ Basin development program while also making significant changes across the company designed to strengthen our organization and position Prairie for its next phase of growth. During the quarter, we transitioned our management team, refreshed the board and welcomed new directors whose experience and perspectives enhance our oversight and strategic decision-making.

We also completed a meaningful partial refinancing of the Series F Preferred Stock, reducing the outstanding preferred balance and potential warrant-related dilution, and recently extended our anniversary warrant date to August 31, 2026. Together, these actions were focused on increasing liquidity, improving financial flexibility and further aligning management and the board around disciplined execution and long-term shareholder value creation. We remain focused on the priorities that underpin long-term value creation: safe and efficient execution, disciplined capital allocation, continued cost improvement and a strong, flexible financial position.

The progress we have made year to date reflects the quality of our assets and the commitment of our team, and we believe it provides a solid foundation for the balance of 2026 and into 2027. With a broader perspective, I'd like to turn to our second quarter operational performance and the progress our team made across production, drilling, execution and capital efficiency. During the second quarter, production totaled approximately 2 million BOE, or 21,866 BOE per day, with liquids representing approximately 72% of production, including approximately 50% oil.

Oil production increased approximately 4% compared with the second quarter of 2025. Despite the timing of new well activity and a planned pause between the Opal Coal Bank and Burnett pad while we waited for the Colorado Parks and Wildlife seasonal restrictions to end, our drilling performance also continued to demonstrate steady progress. We drilled 12 wells during the quarter, including two Codell and 10 Niobrara wells. Eight of the 12 wells were drilled in a single run and all 12 were completed below AFE.

The wells averaged approximately 19,100 ft in measured depth, an average rate of penetration of 390 ft per hour, and an average spud-to-rig-release time of 6.65 days. We also achieved several important technical milestones during the quarter. We successfully drilled our first three-mile lateral, a Niobrara B well, in a single run on the Castor pad. We completed two trials using a 7 and 7.8 inch hole design. Compared with our standard 8 1/2 inch design, the trials generated realized savings of more than $40,000 per well while utilizing the same 5 1/2 inch production casing with no change to the delivery, completion or production configuration.

Based on these results, we plan to apply the smaller hole design across a significant portion of our upcoming Niobrara development program. This is a good example of how our team is identifying repeatable efficiencies that can lower well costs without compromising well design or expected performance. Year to date, we have drilled 27 wells, including six Codell and 21 Niobrara wells, with 19 drilled in a single run. On average, the wells were delivered below AFE.

Year to date, wells averaged approximately 18,700 ft in measured depth, an average rate of penetration of 377 ft per hour, and an average spud-to-rig-release time of 6.2 days. We have completed drilling operations at the Elder, Opal Coal Bank, Burnett and Castor pads during 2026. Importantly, because the Opal Coal Bank wells began producing near the end of June, their contribution to second quarter average production was limited. With these wells now contributing more fully, our average month-to-date production for August has increased to approximately 27,000 net BOE per day.

This performance demonstrates the strength of our recently completed wells, reinforces the quality and depth of our DJ Basin asset base and provides encouraging momentum as we move through the second half of the year. These achievements reflect the quality of our assets and the continued improvement of our operating capabilities as we move through the second half of the year. Our priorities remain clear: safely execute our development plan, apply proven efficiencies across the program and allocate capital to the opportunities that generate the strongest returns.

I'll now turn the call over to Michael to review our financial results, liquidity and capital structure.

Michael Shelley, Executive Vice President and Chief Financial Officer

Thanks, Greg. Good morning, everyone. Prairie delivered solid financial performance during the second quarter and throughout the first half of 2026, supported by continued execution of our development program and the strength of our underlying asset base. During the quarter, we made important progress simplifying our capital structure through the partial refinancing of the Series F preferred stock. The transaction reduced the outstanding preferred balance and significantly lowered potential warrant-related dilution.

We remain focused on additional opportunities to address the remaining balance, enhance liquidity, and strengthen our balance sheet. For the second quarter, Prairie generated total revenue of 98.9 million, an increase of approximately 45% compared with the prior-year period. Oil revenue totaled 93.5 million. Production averaged 21,866 BOE per day and was approximately 72% liquids, including 50% oil. Average realized prices excluding the effects of derivatives were $94.21 per barrel for oil, $21.64 per barrel of NGL, and negative $1.30 per Mcf for natural gas.

The negative natural gas realization reflected lower gross sales largely associated with weaker CIG pricing. During the quarter, GAAP net income attributable to Prairie was 109 million. After preferred stock dividends and remeasurement adjustments, net income attributable to Prairie's common stockholders was 1.93.8 million, or $1.75 per basic share and $0.23 per diluted share. These results included non-cash impacts related to derivatives, income taxes, and fair value adjustments associated with our capital structure.

Adjusted EBITDA for the quarter totaled 34 million. Net cash provided by operating activities was approximately 52 million, and cash capital expenditures during the quarter were approximately 98.5 million, reflecting the concentration of development and turn-in-line activity during the period. On a per-BOE basis, lease operating expense was $6.85, transportation and processing expense was $1.22, ad valorem and production taxes were $4.01, and G&A expense was $6.01.

The improvement in G&A per BOE compared with the prior-year quarter reflects increased scale and continued cost discipline. For the first six months of 2026, Prairie generated revenue of 182.3 million, an increase of approximately 125% compared with the prior-year period, and adjusted EBITDA of 71.1 million, an increase of approximately 65%. Net cash provided by operating activities was 94.3 million and cash capital expenditures during the period totaled 132.6 million.

Total production was approximately 4.1 million BOE, or approximately 22,500 BOE per day, with approximately 72% liquids, including 49% oil. Turning to liquidity, as of June 30, our reserve-based credit facility had a borrowing base and aggregate elected commitments of 475 million, with 436 million outstanding under the facility, providing 39 million of availability at quarter end. Our risk management program remains strong. Our commodity hedge portfolio extends through the second quarter of 2029 and provides meaningful downside protection and improved visibility into our future cash flows.

For the second half of 2026, our oil swaps cover approximately 2.7 million barrels at a weighted average price of $63.09 per barrel and our natural gas swaps cover approximately 7.6 million MMBtu at a weighted average price of $4.08 per MMBtu. Our financial priorities remain centered on disciplined capital allocation, maintaining liquidity and aligning capital spending with operating performance. We believe the investments made during the first half of the year position Prairie to benefit from the contribution of recently completed wells during the remainder of 2026.

With that, I'll turn the call back to Greg for closing remarks.

Greg Patton, Chief Executive Officer and Director

Thanks, Michael. Our performance during the second quarter and first half of the year demonstrates the progress Prairie is making across the business. We are improving operational execution, advancing a repeatable and capital-efficient development program, expanding cash flow visibility through our hedging strategy and taking meaningful steps to simplify our capital structure. We are adjusting our full year 2026 guidance to average daily production of 23,000 to 25,000 BOE per day, capital expenditures of 185 million to 195 million, adjusted EBITDA of 180 million to 190 million.

We are adjusting guidance to preserve and increase liquidity while maintaining a disciplined approach to development, as well as to account for the first half 2026 results, including the impact of CIG pricing from April to June and TIL timings. The revised plan emphasizes capital efficiency, incorporates additional planning around Colorado Parks and Wildlife seasonal operating restrictions and allows us to better align the pace of investment with operating performance and available capital.

We believe this approach improves execution certainty, protects financial flexibility and positions Prairie to deliver more durable value for our shareholders. As we move into the second half of 2026, our focus remains on safe and consistent execution, disciplined capital allocation, strengthening the balance sheet and converting our high-quality DJ Basin inventory into sustainable production and cash flow. We believe this approach provides the foundation for durable growth and long-term shareholder value.

On behalf of the board and management team, I want to thank our employees for their continued dedication and execution and our shareholders for their ongoing support. With that, I'll turn the call back over to the operator for Q&A.

OPERATOR

Thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Once again, that's star one to register a question at this time.

Today's first question is coming from Leo Mariani of Roth MKM. Please go ahead.

Leo Mariani, Analyst at Roth MKM

Yeah, hi, guys. Just wanted to ask around production here. It sounds like it's been up a decent amount here in August. Is that four‑well Burnett pad online? If so, can you talk a little about how the rates looked on that initially, and would you expect production to creep higher as we get into 4Q? How do you see that kind of 27,000 BOE per day trending the rest of the quarter and the rest of the year?

Greg Patton, Chief Executive Officer and Director

Good morning, Leo. Greg Patton. Thank you for the question, and yeah, happy to answer that. So Burnett is in the flowback stages right now. It is interconnected to all the necessary infrastructure, but we have not cut hydrocarbons as of this morning. I would expect any moment we will start seeing cutting hydrocarbons, so we'll be able to talk a little bit more about that. So those wells are not factored into that approximate 27,000 net BOE per day factor.

The Castor pad as well is in the middle of completion stages, so those numbers are obviously not factored into that. So we'll see those two factors obviously relay into the second part of your question, which is what do we anticipate to see in this quarter and going into next quarter? Ultimately, you'll see some ups and downs, but in and around that 26–28 number — so the average of that 26–27 number. And so ultimately, as you see that throughout the third quarter, moving into early parts of the fourth quarter, we do expect to see a small decline exiting the year.

Leo Mariani, Analyst at Roth MKM

Okay, appreciate that. And then wanted to ask around some of the changes in the bank facility. There was a comment in one of your 8-Ks about how there's a minimum kind of production threshold around the revolver. Can you maybe just talk about that in terms of the numbers? Not something I think I've seen in the past.

Michael Shelley, Executive Vice President and Chief Financial Officer

Yeah, absolutely. So obviously we are just over the year marker into our development stage and operating status as an entity. We have developed very strongly throughout the second quarter. And so with that we have had to work with the banks in the modification of the credit facility to work with our continued development and to ensure that liquidity is available for us to continue to develop and produce the wells that we have online. That production hurdle is meant to essentially help us balance out not too much growth, but at the same point in time not just shutting down to a blowdown case. So it's a modifier to work with us to keep liquidity available and to progress forward on our development plan.

Leo Mariani, Analyst at Roth MKM

Okay, and then just on the preferred, I guess you guys have gotten another extension on your anniversary warrant date, I guess kind of the end of the month here. Can you maybe just talk about the potential to refinance that? Is that something you're kind of actively working to try to accomplish here in the near term?

Greg Patton, Chief Executive Officer and Director

Those, as we're all aware and all of our investors have seen, we had success in continuing to modify the pref to reduce its face value on the balance sheet, to have a very beneficial partner working with us to do that. We'll continue that relationship with the preferred holder as we move forward throughout the third quarter. That extension is beneficial for us to continue to pursue multiple different avenues that we have been pursuing and have been successful with to date.

So more to come there, Leo, throughout this next quarter.

Leo Mariani, Analyst at Roth MKM

Okay. And then just on your wells, you talked about some operational progress — most of the wells coming in below AFE, this recent kind of slimmer hole design saving some more money. Where does kind of well cost stand today for two‑mile laterals, putting all that kind of together?

Greg Patton, Chief Executive Officer and Director

If we're operating off of a standalone pad within that same facility, you're going to be in that 5.2 to 5.5 range, depending on the formation, depending on the frac design, the core concentration of the rock that we're developing. As we look at some of the step-outs that we're doing where we're utilizing a pad with permits to develop an offset DSU and may have some extended reach laterals that get there in that two‑mile range, we're seeing in that 5.4 to 5.6 range.

So, high level, there is an extra $100,000 to $200,000 of pipe in the ground to just get to that offsetting DSU. But those single trips and the smaller wellbore holes have really helped us kind of balance that as we're utilizing those available permits — that utilization of a permit that's available to us to help enhance time, save money on the permitting costs to develop offsetting DSUs. And so we're excited about these new technologies the team's been able to deploy and has been successful with.

Leo Mariani, Analyst at Roth MKM

Okay, thank you.

Greg Patton, Chief Executive Officer and Director

Thank you.

OPERATOR

Thank you again. That's star one if you would like to register a question. Our next question is coming from Charles Mead of Johnson Rice. Please go ahead.

Charles Mead, Analyst at Johnson Rice

Good morning, Greg, to you and your whole team there. Greg, going back to the Series F, I recognize that discussions are ongoing and so that's necessarily sensitive, but can you give us a little bit of a flavor for — are you making a little bit of progress each time, or are you kind of getting closer, or is it the kind of thing where maybe the macro environment's changing and so suddenly, like, you both want a deal, but the parameters fall apart?

And why not just push it out to year end or something like that?

Greg Patton, Chief Executive Officer and Director

Morning, Charles. Oh, great question, Charles, and good morning and thank you for that. You know, just a little bit of history in and around the pref. You know, when we closed this 18 months ago, there was $148.5 million of principal units outstanding associated with the pref, obviously valued at $1,000 a unit, or $148 million approximately. As of year end, we had moved that down to roughly $121 million outstanding. As of the end of this last quarter, 78 million outstanding.

And we continue to work with the pref alongside that conversion in strategic manners, in terms of outcomes of the quarter, continued development, as well as other avenues and arenas to refinance along that route. We have decreased the coverage of the anniversary warrant from its original inception of 1.25 to 1 to today we stand at 0.65 to 1 coverage. So with the reduction of the face of the pref, coupled with the reduction of the anniversary warrants, we continue to, quote, chip away at reducing it, redeeming it, and have done so with the help of the pref holder as we move forward.

We don't disagree that some extended period of time to the end of the year would be the easy route. However, there is also the beneficial need to do as much as possible with redeeming the pref as soon as possible. However, not setting any definitive timelines on the exact nature of when we'll get that done. We are obviously very active in entertaining multiple different solutions. We'll continue to entertain those and work with our board. Obviously with the restructure of the board, some different methodologies have been brought to our attention that we are also pursuing.

And so we'll continue all avenues of redeeming that pref in the near term and keeping some pressure on some items that we're working through.

Charles Mead, Analyst at Johnson Rice

Got it, got it. Thank you for that elaboration. And then I want to ask about the Burnett pad and what you're doing in the Hereford and Eastern Extension areas. If we go back to when you were first putting this company together, that part of the DJ was relatively — had not been de‑risked. And if you kind of fast forward to today, Bison has been really active right around your pads up there. And so I'm curious if you could calibrate us and calibrate the market for what success would look like as far as production rates from this Burnett pad.

Greg Patton, Chief Executive Officer and Director

Yeah, you know, that's a great question. You know, I think the type curves in the area — and again, just circling back to your comment — Bison's done a great job at de‑risking some areas immediately offset to us. They've been a great operator in the basin in terms of the wells that they've been able to find, the areas of prolific results that are outlying what we'd say is the core of the Wattenberg or the DJ. And so, you know, the original asset package that was put together in this area was an outlier to Bison.

Bison has since encroached very closely in and around our acreage position. And so we've been able to glean more information from that as we've worked through and drilled and completed our Burnett pad. Additionally, Oxy and Chevron have continued to work in and around our acreage position in this particular area. And again, this is the offset area in between the Hereford and the Northeast Extension, for the rest of the listeners on the phone. And this is the Burnett pad, or our OGDP1 location, which is the northeast‑western portion of that particular acreage block.

And so as we continue to develop there, you know, the type curves are direct correlations from the Critter Creek pad, from other offset Bison pads — the Jaws and others — that are offset there, in correlation with required reporting requirements for type curves that Colleen Gillespie has also signed off on. So as we work through those wells, the initial IPs, we're not exactly 100% sure on yet, Charles, but we think that the correlating offset type curves that you see out there associated with Critter Creek, Jaws and others will be similar in representation to the Burnett pad.

Charles Mead, Analyst at Johnson Rice

That is great detail. Thank you, Greg.

Greg Patton, Chief Executive Officer and Director

Thanks, Charles.

OPERATOR

Ladies and gentlemen, this brings us to the end of today's question and answer session and today's conference. We'd like to thank you for your interest in Prairie Operating. Once again, the call has now concluded. Thank you for your participation. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.