Prairie Operating CFO Greg Patton spoke with Oil and Gas Investor's Deon Daugherty at Hart Energy's SUPER DUG Conference & Expo in May, where he revealed the company's next moves. Here's what he had to say.
Hi, I am Deon Daugherty, editor-in-chief of Oil and Gas Investor here in Fort Worth, Texas at SUPER DUG Conference & Expo. We've just come off a panel with Greg Patton, CFO of Prairie Operating, where he was kind of laying out the tremendous growth trajectory of this company and what's next for it. So Greg, if you would kind of walk us through how Prairie Operating came to be.
Greg Patton, CFO, Prairie Operating: Ultimately, I was lucky enough to join this team in March of 2024, but Prairie backdates that. Prairie goes back into 2023 where it originated as a shale company, ultimately, originally a crypto mining company in the Bakken and using gas to create power and crypto. Ultimately those holders of that crypto company wanted to essentially buy it, take it back private, which left a shale entity available. Our co-founders, Edward Kovalik and Gary Hanna wanted to get back into the E&P space. They were looking at multiple different basins throughout the continental United States. They came across, by mutual connection interactions, with the shale entity, which was associated with oil and gas, but not an E&P entity. Ultimately we're able to acquire, utilize the shale, reverse merge some assets, no producing assets, into it in 2023 and complete that transaction.
And then move directly into starting to look as a foundation basis with a small amount of shareholders into acquiring a producing asset. A producing asset was Nickel Road [Operating] and started conversations on that in October of 2023. [We] entered into an agreement in the first quarter of 2024. Ultimately, we ended up closing that asset in October of 2024 and immediately went into our negotiations with Bayswater Exploration and Production, which created a transformative acquisition as our co-founder Gary Hanna would tell you. That transformation was due to size, scale, productivity and the fact that we were now producing well over 25,000 net barrels per day based on an effective date of that transaction. We closed that transaction utilizing common stock, preferred stock, as well as a syndication of six banks in March of 2025. We are now the proud operator of over 50,000 net acres in the D-J (Denver-Julesburg) basin, operating north of 325 well bores and producing north of 25,000 net barrels per day.
DD: You mentioned that Bayswater was a transformative transaction. Were you all looking in the D-J specifically and fortuitously there it was, or were you looking elsewhere as well?
GP: We were being M&A minded and looking at optionality, but ultimately my experience was in the D-J. So coming on in March of 2024, having assets already in the D-J, systematically contiguous acreage blocks, scale of operation, all of those things really kind of push us into how we wanted to be an operator. So as we looked at that, the Bayswater transaction was contiguous to Nickel Road position. It allowed us to continue to grow and expand and it allowed us to use infrastructure and assets that were already in place. It just made sense. The pieces of the puzzle or the Tetris blocks, they all aligned. Bayswater, therefore, was an acquisition that we targeted. We were able to do that off market with a management team that many of us on our management team have known and interacted with over the past 10 years. And we were able to utilize those relationships to effectively get to a very realizable transaction that was beneficial for both of us.
DD: And you mentioned just sort of looking at the map of the D-J, there are chunks of acreage owned by the likes of Civitas, some of the larger public companies, but there's also more along the tooth, private companies. Are you interested in M&A? Might those small, private companies looking for in exit be contenders?
GP: Yeah, so as we just talked about on the panel, there's really two buckets. There's the public consolidation aspect where you use a company like Civitas that acquired Bonanza Creek, HighPoint [Resources], Crestone Peak, Bison I and II, and ultimately simulated this big acreage package where they had contiguous blocks that they're operating within, but it left additional acreage blocks on the outskirts. Some of those are contiguous to us. Some of those are immediately offset to us, and we're very interested in those. Bucket two, to your point, M&A in terms of totality acquisitions, but more so on the merger side, you have the Verdads, the Bisons, the Dunamis, the PEDEVCOs, et cetera, that are private, that are along the tooth in the basin. And we think that we provide an interesting vehicle on the fact that we're public.
We have a growth profile, we have a very key minded focus on cost savings, decoupling AFEs, being advantageous of technology and information and utilizing best in class practices to operate within the state that we think that those mergers might become accretive to us in the future. Mergers are hard at this type of price environment, not just on oil prices, but in terms of Prairie. We just got done with a transformative deal. We issued common stock to the public market. Our stock price has continually been supported by robust trading, but the pricing isn't necessarily where we would want it. So as we continue to release coverage, as mentioned in the panel, Piper [Sandler], Johnson, Rice, Clear Street have already released coverage on us and we're expecting the rest of our syndicated banks to release coverage on us here in the next month to two months.
We think that additional support will help bolster the stock and when we start bolstering the stock, obviously that's the time when it makes the most sense to focus on mergers where it's not fully dilutive to our shareholder basis, but it provides enough optionality and upside for a potential merger candidate to come into the stock, get a little bit of the ride with us and continue to grow. Now all that being said, implementation, integration and culture are first and foremost on our key aspects. We have a very significant robust asset with significant amount of inventory and drilling locations available to us. So we want to ensure that we're operating on our shareholders' interests the best first and providing the returns that we've already captured and put together. So as we look at these accretive additional M&A opportunities, we'll look at them very diligently. We'll have a very conservative manner that we will at them, but we will be aggressively pursuing the options that are laid forth. Predominantly because inversely to what I said about our stock, it is a buyer's market right now. Maybe not a seller's market, but it is a buyer's market. And we want to take an opportunistic view of that window of time.
DD: That's something that I've heard from several folks that right now companies that are in a certain position financially, there are opportunities out there. Now, given that there's so many potential targets, within the D-J, are you interested at all in going beyond the D-J or are you focused there, want to fully integrate your assets from Bayswater, get those going, keep shareholders happy, and then maybe look beyond the D-J? Or are these potential slots where you're going to focus for now?
GP: So I would say that the larger conglomerate is that we are Rockies focused. And that's from an operational standpoint, from a return standpoint and from an efficiency standpoint.
That Rockies focus may move as far north as the Bakken and maybe as far south as the North Permian. But I would say we're Rockies focused. First and foremost we're focused on the D-J and we're focused on, again, those three key aspects you pointed out, I pointed out, and making sure that we are operating best in class is our priority. Opportunities come and go and are we going to move out into a gas play like the Marcellus and Utica, I would tell you no. But are we going to stay on an oil focused zone within the Rockies? I would say optionality is always available to our growth strategy and how we transact on that isn't a yes or a no to that, but I would leave it as we are a Rockies focused.
DD: Okay. So let me ask you, I don’t know if you could answer it or if you will answer it, but I'm going to ask anyway. When do you suspect some of those M&A might happen by year-end or can you put a time on it yet?
GP: Obviously, we are public, our disclosures are necessary. I'll tell you that we're actively pursuing M&A as we speak. There are opportunities in the market. There are opportunities outside of the market that are privately available to us that we're actively pursuing, not aggressively pursuing because we have a lot of integration to get done. And ensuring we operate the assets we have is our key focus, but we're not going to pass up the opportunities for very accretive potential bolt-ons.
DD: Okay. And I'm curious, how are your ambitions being received by some of these private companies? Are they looking for exits? What's kind of their positioning?
GP: They would love to come in and do a merger at this point in time and be able to take the ride up with us. Ultimately that's not in the best interest of our shareholders, and we're very well aware and keyed into that. I keep coming back to this point, but quite frankly, once you become public, your number one focus is your shareholders. Whether or not it's your costs, whether or not it's your production, the things that you say in the public markets, et cetera, the perception that you provide and those things are utmost important to us. And so we're focused on that. But I would tell you that there are active opportunities and there are individuals that are interested. We just have to focus on when that interest is the right interception point for us to do something. And that's kind of a market stock-based type intersection.
DD: That makes sense. Yeah, that totally lines up with what you were saying before about once these conglomerate or other banks come on and rates you guys, you'll have better visibility into the stock. What kind of terms do you think it would be? Are you looking at all-stock sort of transaction?
GP: I think that's a little far in the future. We have a very supportive banker. We have very supportive equity holders in significant fashions. I think ultimately you'll see transactions range from everything from an all RBL (reserved-based lending) basis, depending on the producing aspects of the assets or bolt-on opportunities that fall within the planned capex budget of the year all the way into very significant transactions that may be straight stock for acquisition. I don't think that there's a real pinpoint that we can put on what that is today, because I think it varies by transaction and I think it varies by timing and instance.
DD: That makes sense. All right, Greg, super conversation. I really enjoyed your presentation on stage. Thank you so much.
GP: I appreciate it.
DD: And thanks very much to you guys here. I'm Deon Daugherty at SUPER DUG in Fort Worth. Hope you can stick around. Thanks.