Prairie Operating Targets Free Cash Flow as Production Growth Accelerates

Key Points

• Prairie Operating plans to shift toward free-cash-flow generation and balance-sheet improvement after elevated capital spending in the second and third quarters, with fourth-quarter spending expected to slow. Its annual guidance includes $180 million–$190 million of EBITDA and $185 million–$195 million of capital expenditures.
• The company expects to drill about 40 wells this year, up from 27 completed so far, while operating more than 550 producing wells and approximately 70,000 net acres in Colorado’s DJ Basin. Prairie is maintaining one drilling rig and one frac crew until it has sufficient permits to support expansion.
• Prairie sees roughly 10 years of drilling inventory, with potential to expand from about 600 locations to 600–800 through leasing and acquisitions. Its strategy emphasizes contiguous acreage, infrastructure access, capital efficiency, leverage reduction and returning free cash flow to shareholders.

Prairie Operating NASDAQ: PROP outlined its production growth, drilling plans and capital priorities following its second-quarter results, with Chief Executive Officer Greg Patton saying the company is shifting from rapid asset accumulation toward refining its development strategy and strengthening its balance sheet.

Patton said Prairie was incorporated as a public company in 2023 and was initially formed as a cryptocurrency business before its crypto assets were sold. The company’s founders contributed unencumbered oil-and-gas lands and leases, and Prairie transitioned through the Securities and Exchange Commission process into an oil-and-gas-focused company during 2023 and 2024.

Patton joined Prairie in 2024 as the company began identifying producing assets it could operate and develop. He said Prairie has assembled its current position through nine asset additions and acquisitions, including the Nickel Road, Bayswater, Edge and Crown transactions.

Production and Drilling Outlook

Prairie has drilled and completed 27 wells so far this year and expects to reach approximately 40 wells for the full year, Patton said. The company operates more than 550 producing wells in rural Weld County, Colorado, within the DJ Basin.

The company reported approximate net production of 27,000 barrels per day at the time of the presentation, while its updated full-year production guidance is 23,000 to 25,000 net barrels per day. Prairie also guided for annual EBITDA of $180 million to $190 million and capital expenditures of $185 million to $195 million.

Patton said the company expects capital deployment to be elevated in the second and third quarters, followed by a slower fourth quarter intended to support free-cash-flow generation and year-end balance-sheet improvement. He described Prairie’s priorities as reducing leverage, improving capital efficiency and establishing a clearer development plan.

“There will be periods where we outspend cash flow and then periods where cash flow return,” Patton said, adding that the company expects the fourth quarter to help return free cash flow to the balance sheet.

• Approximately 70,000 net acres
• About 118 million barrels of oil equivalent of proved reserves
• Proved reserves composed of 73% liquids, including 50% oil
• Roughly 600 drilling locations in its reserve report

Prairie’s current inventory represents about 10 years of drilling potential on a one-rig basis, assuming 60 wells drilled annually, according to Patton. The company is operating one drilling rig and one frac crew and intends to maintain that conservative approach until it has more than two years of permits available to support a potential second rig.

Asset Development and Acquisitions

Prairie’s operations are concentrated in the oil rim of the Wattenberg Basin, along with smaller positions in the Northeast Extension and Hereford areas. Patton said the company has sought to assemble contiguous acreage blocks near existing production, infrastructure and midstream takeaway capacity.

The company’s development program targets the Niobrara and Codell formations. While Prairie showed an example of a 16-well development configuration, consisting of 12 Niobrara wells and four Codell wells, Patton said the company’s target density varies by area and is generally expected to range from six to 12 wells per drilling spacing unit. Average lateral length is about two miles, although the portfolio also includes three-mile laterals.

Patton said the Bayswater acquisition was a significant step for the company, increasing production from roughly 3,000 barrels per day to approximately 26,000 barrels per day. The transaction was signed in December 2024, closed in March 2025, and Prairie assumed operations in May 2025, according to the presentation.

Looking forward, Prairie sees opportunities to expand its inventory through organic leasing, acquisitions, divestiture opportunities and acreage carve-outs. Patton said the company believes there may be roughly 150 additional locations within and around its acreage position, potentially bringing its inventory to 600 to 800 locations.

Hedging, Infrastructure and Regulatory Focus

Prairie put a rolling 24-month hedge portfolio in place after acquiring producing assets, with hedges generally in the $60 to $64 range, Patton said. He described the hedge book as having provided support when oil prices were lower, though he said it is currently a “deficit” to the company.

Patton said the company is focused on ensuring sufficient infrastructure and marketing capacity as it grows. Prairie works with midstream partners including NGL, Williams, Elevation, Black Diamond, Summit, Taproot and Phillips DCP, he said.

The company also emphasized its approach to Colorado’s regulatory requirements and its engagement with Weld County, state agencies, landowners and local communities. Patton said Prairie is using electrified rigs where accessible, hybrid and electric completion fleets, natural-gas generation where grid power is unavailable, and production practices intended to reduce on-site hydrocarbon storage and emissions.

Prairie has grown from 12 employees at its start to 72 employees today, Patton said. He also highlighted changes to the board and management team, including the recent addition of Michael Shelly as executive vice president and chief financial officer. Shelly joined from Citi and has more than 20 years of experience, Patton said. Bryan Freeman serves as executive vice president of operations, while Dan Sweeney is executive vice president and corporate general counsel.

Patton said the company’s focus is to sustain production, grow incrementally and return free cash flow to shareholders while continuing to improve operating costs, safety and capital discipline.

About Prairie Operating (NASDAQ:PROP)

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