Prairie Operating Co. (PROP Quick QuotePROP - Free Report) has been on a rough ride, shedding 39% over the past six months and hitting a 52-week low of $4.50 earlier this week. Despite this setback, we believe the company’s long-term growth story remains intact. With aggressive production expansion, a game-changing acquisition and improving financials, Prairie Operating appears well-positioned for a major rebound.

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Prairie Operating Company Profile

Houston-based PROP is an independent oil and gas company dedicated to acquiring and developing assets in the DJ Basin, with a focus on the Niobrara and Codell formations. Its operations benefit from a prime location near major industry players Chevron (CVX Quick QuoteCVX - Free Report) and Occidental Petroleum (OXY Quick QuoteOXY - Free Report) . Situated in a rural, low-density area with minimal development, Prairie Operating faces fewer regulatory challenges. This strategic positioning enables a more efficient permitting and drilling process, allowing for faster production growth.

Game-Changing Bayswater Acquisition to Boost Prairie Operating

The company’s $602.75 million acquisition of Bayswater’s DJ Basin assets marks a major milestone in its growth strategy. This deal significantly expands Prairie Operating’s production footprint, adding 24,000 net acres and 26,000 barrels of oil equivalent per day (BOE/d) in production. Additionally, it provides the company with 600 new drilling locations, ensuring a strong development pipeline for years to come. The estimated future cash flow from these assets, discounted to today’s value, is around $1.1 billion, highlighting their strong long-term potential. With built-in efficiencies and immediate free cash flow generation, this move enhances PROP’s operational leverage and financial stability.

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Prairie Operating’s Aggressive Production Growth Targets

Prairie is targeting an explosive increase in production, projecting 7,000-8,000 BOE/d in 2025—a 300% surge from the prior year. Once the Bayswater acquisition is fully integrated, production is expected to skyrocket to 29,000-31,000 BOE/d. This rapid expansion will not only drive revenue higher but also establish Prairie Operating as a major player in the Denver-Julesburg (DJ) Basin, one of the most productive oil regions in the United States.

While oil production in the DJ Basin began in the 1970s, activity has accelerated significantly in recent years. This growth is driven by the presence of major operators such as Chevron and Occidental Petroleum.

Massive Earnings Growth Expectations for PROP

Wall Street is taking note of Prairie’s growth potential. The Zacks Consensus Estimate for the company’s 2025 earnings suggests a jaw-dropping 327.6% increase. Even more impressively, over the past 60 days, analysts have nearly doubled their 2025 earnings forecast from $2.44 per share to $4.78. These revisions reflect growing confidence in Prairie Operating’s ability to capitalize on its expanded asset base and operational efficiencies.

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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Strong Financial Outlook & Liquidity

Prairie Operating is projecting net income between $69 million and $102 million for 2025. Before the Bayswater acquisition, adjusted EBITDA was expected to range from $100 million to $140 million. However, post-acquisition, this figure is expected to jump significantly to $350-$370 million. The company has also expanded its credit facility to $475 million, providing ample liquidity to fund its aggressive expansion while keeping its leverage at a manageable 1.0x.

Prairie Operating’s  Operational Efficiencies & Infrastructure Advantage

By leveraging existing midstream infrastructure and utilizing multi-well pad drilling strategies, Prairie Operating is set to optimize costs and enhance production efficiency. The company’s focus on high-return oil formations in the Niobrara and Codell zones ensures strong margins and rapid payback periods, with some wells expected to recover costs in less than a year.

PROP: Challenges to Consider

While Prairie Operating’s growth prospects are compelling, there are some risks investors should keep in mind. The company’s capital expenditures are set to rise significantly, with planned spending between $300 million and $320 million in 2025. Given that Prairie is still operating with negative cash flow, any delays in execution or declines in oil prices could strain its finances. Additionally, frequent equity issuances to fund growth could dilute shareholder value.

Conclusion: Prairie Operating is a Strong Buy

Despite its recent stock price weakness, Prairie remains an exciting growth story. The company’s assets are surrounded by large operators such as Chevron and Occidental Petroleum, while the aggressive production targets, transformative acquisition and strong financial projections position it for a significant turnaround. Given the massive earnings growth expectations and the company’s improving financial health, we believe Prairie Operating stock is currently a Zacks Rank #1 (Strong Buy) for investors looking to capitalize on its upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.