Prairie Operating expands portfolio with $94.5m acquisition of Nickel Road Operating assets

Prairie Operating Co. (Nasdaq: PROP) has entered into a definitive agreement to acquire the assets of Nickel Road Operating LLC (NRO) for $94.5 million. This significant move includes $83 million in cash and $11.5 million in deferred cash payments, with the effective date set for February 1, 2024.

Strategic Impact on Prairie’s Operations:

The acquisition is a strategic expansion for Prairie Operating, expected to enhance shareholders’ value by improving key financial metrics such as production, reserves, and free cash flow. It adds over 5,500 net leasehold acres and 62 fully permitted proven undeveloped drilling locations, significantly boosting Prairie Operating’s inventory and flexibility in its 2024 drilling schedule. The assets, primarily liquids weighted, are estimated to produce around 3,370 net barrels of oil equivalent per day (Boepd) and add third-party engineered proven reserves of 22.2 million barrels of oil equivalent (MMboe), valued at $254 million in present value 10 (PV10).

Location and Operational Advantages:

Located near Prairie Operating’s existing operations in the DJ Basin in Weld County, Colorado, the Nickel Road Operating assets offer several operational benefits. These include rapid payout expectations, economic viability even in low commodity price environments, and existing infrastructure that supports development plans.

Executive Statements:

Ed Kovalik, Chairman and CEO of Prairie Operating, emphasized the alignment of this acquisition with the company’s strategy to create value through accretive acquisitions. Gary Hanna, President of Prairie Operating, highlighted the deal’s role in enhancing operational efficiencies and supporting the company’s long-term, debt-free growth.

Financial and Operational Highlights:

– Immediate accretion to Prairie’s production, reserves, and cash flow

– Addition of 22.2 MMboe and $254 million in 1P PV10 value

– Expected cash flow from operations of approximately $40 million over the next year

– High average internal rates of return (IRRs) and favorable development break-even costs

Transaction Details:

The deal metrics, based on a February 1, 2024 effective date, include a PV15 of proven developed producing reserves and imply a multiple of 2.3x next twelve months (NTM) cash flow.