Prairie Operating Co.'s 2025 Guidance: A Path to Transformational Growth

Prairie Operating Co. (Nasdaq: PROP) has released its operational and financial guidance for 2025, outlining an ambitious growth trajectory that positions the company for significant value creation. The guidance reflects Prairie's strong performance and growth strategy as it continues to unlock value in the Denver Julesburg ("DJ") basin.



Key Highlights of Prairie's 2025 Guidance:

1. Average Daily Production: Prairie expects average daily production of 7,000-8,000 barrels of oil equivalent per day (BOEPD), representing a ~300% increase year-over-year. This aggressive production growth target aligns well with top-tier DJ Basin performance metrics, with per-well production metrics in line with the best performers in the basin.
2. Capital Expenditures (Capex): The company anticipates capital expenditures of $120 million - $130 million, focused on high-return drilling opportunities in the DJ Basin. This efficient capital deployment strategy suggests a cost per well of roughly $4.8 million.
3. Net Income and Adjusted EBITDA: Prairie projects net income between $69 million and $102 million, and Adjusted EBITDA between $100 million and $140 million. These financial projections indicate strong cash flow generation potential, though investors should note that these projections assume a >75% working interest and rely on the effectiveness of the hedging program.
4. Well Count: Prairie expects to drill and complete between 25-28 wells in 2025, demonstrating a focused drilling program that aligns with the company's operational planning and growth strategy.
5. Strategic Acquisitions: Prairie plans to actively pursue additional strategic acquisition opportunities, which could lead to updated guidance to reflect the enhanced scale and value of the company.

Valuation and Market Perspective:

Prairie's current market cap of $122.7 million implies a forward EV/EBITDA multiple of approximately 1x, significantly below the industry average of 4-6x for small-cap E&P companies. This valuation appears to significantly discount Prairie's growth potential, as comparable DJ Basin operators typically trade at 4-6x EBITDA multiples. The market's current valuation may reflect potential funding needs or strategic partnerships required to fully execute the growth plan, given the substantial capex relative to the current market cap.

Hedging Program and Working Interest:

Prairie's hedging program is crucial for providing cash flow certainty, which is essential for supporting the company's ambitious drilling schedule and growth strategy. The hedging program is based on an active hedging program and an average working interest ("WI") of 75% or greater. This high working interest indicates that Prairie is positioning itself as the primary operator, giving better operational control and economics. By securing a significant portion of its production at fixed prices, Prairie can better forecast its cash flows and make informed decisions about capital allocation and growth initiatives.

Strategic Acquisition Strategy:

Prairie's strategic acquisition strategy plays a significant role in its growth trajectory and market valuation. The company actively pursues additional strategic acquisition opportunities, as mentioned in their 2025 guidance. These acquisitions aim to enhance the company's scale and value, which would result in an update to their guidance to reflect the enhanced metrics. Prairie's acquisition of oil-weighted DJ Basin assets from Nickel Road Operating in October 2024, valued at $84.5 million, is an example of the company's strategic acquisition strategy. This acquisition added multi-year inventory of development drilling locations and expanded Prairie's presence in the DJ Basin.

Conclusion:

Prairie Operating Co.'s 2025 guidance reveals an ambitious growth trajectory with 300% projected production growth to 7,000-8,000 BOEPD and $100-140 million in Adjusted EBITDA. The company's focus on the DJ Basin, known for its favorable economics and established infrastructure, provides operational advantages. However, the substantial capex relative to the current market cap suggests potential funding needs or strategic partnerships may be required to fully execute the growth plan. The market will likely focus on quarterly execution against guidance metrics, particularly production ramp-up and cost control, as key catalysts for potential multiple expansion. Investors should closely monitor Prairie's progress and consider the company's compelling growth prospects as it executes its strategic plan.