Insiders Are Buying Prairie Operating Co. - Should You Too?

Prairie Operating Co. PROP has captured investor attention in recent days, driven by a surge in insider buying and a fresh endorsement from Wall Street heavyweight Citi. Over the past two weeks, the company’s top brass — including the CEO and President — collectively acquired more than 175,000 shares. Such moves often indicate confidence in the business and signal a potential inflection point. Adding fuel to the narrative, Citi initiated coverage earlier this week with a Buy rating and an ambitious $8.00 price target, portraying the company as a high-upside opportunity in Colorado’s DJ Basin. It’s worth noting that the stock currently trades below $4, making the upside potential, at least on paper, appear compelling.

While these moves reflect growing optimism from both insiders and analysts, the question remains: Should retail investors jump in as well? To assess that, it’s important to take a closer look at the Prairie Operating Co.’s underlying fundamentals.

Scale, Strategy and the DJ Basin Advantage

PROP’s $602 million acquisition of Bayswater assets marks a game-changing move. The deal expanded its production footprint to 26,000 barrels of oil equivalent per day (BOE/d) and added 600 drilling locations across 24,000 net acres in Colorado’s DJ Basin — an area known for stability, efficiency and favorable permitting. Major names like Chevron CVX and Civitas Resources CIVI have built strong positions in the region, proving the economic viability of the Niobrara and Codell formations. Prairie’s rural, regulation-light operating zone provides a permitting edge, potentially allowing faster development timelines compared to peers.

The company is moving quickly to capitalize. Nine drilled but uncompleted wells at the Opal Coalbank site and an 11-well Rusch Pad program are already in motion. Production from these pads is expected as early as August, which may help validate management’s ambitious guidance. The hedging program is also notable, locking in a significant portion of 2025-2028 production at healthy prices, offering some insulation from commodity swings.

Balance Sheet Focus, Financial Flexibility & Production Growth

Post-acquisition, Prairie Operating Co. is targeting a conservative capital structure. The company plans to reduce debt using proceeds from preferred equity and warrant conversions — an approach that could simplify its balance sheet within 1-2 years. 

Prairie Operating Co.'s financial metrics are quickly scaling post-acquisition. Adjusted EBITDA for 2025 is forecasted between $350 million and $370 million, a massive leap from the $140 million previously projected. Net income guidance stands between $69 million and $102 million, while the company maintains a low leverage ratio of 1.0X. With $475 million in liquidity, PROP has the balance sheet strength to fund growth without diluting shareholders. On the production side, Prairie Operating Co. expects to average 29,000 to 31,000 BOE/d in 2025, representing a more than 300% increase year over year.

Dilution, Execution and Performance Concerns Weigh Heavy

Despite the positives, PROP’s fundamentals remain clouded by significant equity dilution and execution risk. The share count has nearly doubled over the past year, and millions of in-the-money warrants and preferred stock conversions loom large. Management itself anticipates using these instruments to reduce debt—putting pressure on the equity value. Such moves can limit near-term upside and depress stock performance unless supported by strong cash generation.

Execution is another big question mark. The company is attempting a production leap from roughly 7,000 BOE/d to over 30,000 BOE/d in a single year — a near 300% jump. That kind of scale-up is rare and operationally risky, even in a basin as mature as the DJ. Delays, cost overruns, or regulatory surprises could quickly derail growth targets. Add to that a still-negative operating cash flow profile and the balance sheet strength begins to erode.

Valuation and Market Perception Remain Cautious

Despite Prairie Operating Co.'s robust projections, the market remains hesitant. PROP shares are down more than 70% over the past year and hit a 52-week low of $3.35 in April. In comparison, Civitas Resources has lost around 60%, while Chevron shares decreased 12% during this timeframe.

PROP, CVX, CIVI One-Year Stock Performance

Bargain hunters may note the stock trades at just 0.29X forward sales, yet the steep discount largely mirrors investor concerns around dilution risk, oil price volatility, and the absence of a consistent earnings track record. As a matter of fact, PROP has missed the Zacks Consensus EPS estimate by an average of 228% across the last four quarters.

Consensus EPS estimates for 2025 have edged lower over the past month, moving from $6.07 to $5.94, even as the company touts nearly 383% year-over-year growth. That slight downgrade, coupled with heavy insider optimism, sends mixed signals. Furthermore, PROP’s well productivity still trails DJ Basin leaders like Chevron and Civitas Resources. Until asset performance catches up, valuation concerns are likely to persist.

Macro and Regulatory Risks Add More Complexity

Commodity price forecasts also temper the bull case. The EIA projects Brent crude will decline from $81 in 2024 to $66 in 2025 and $59 in 2026. That trajectory—if it plays out—could dent Prairie’s revenue assumptions and strain cash flow, especially given its capital-intensive drilling plans. Adding to the uncertainty is Colorado’s evolving regulatory landscape. While current protections are in place through 2028, the lack of clarity beyond that period could impact asset valuations.

Conclusion

Prairie Operating Co.’s insider buying and Citi coverage have helped shine a spotlight on a stock that’s been largely ignored after its recent selloff. And while the company’s aggressive expansion in the DJ Basin and disciplined capital plan offer long-term promise, significant hurdles remain. Execution risk, heavy dilution potential, and unproven earnings delivery cloud the near-term outlook.

The Zacks Rank #3 (Hold) on PROP reflects this mixed picture, encouraging long-term catalysts tempered by near-term uncertainty. Until the company proves it can deliver consistent results without overextending its balance sheet, the prudent stance is one of patience. PROP may yet emerge as a differentiated small-cap energy play — but for now, watching from the sidelines makes more sense.

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This article originally published on Zacks Investment Research (zacks.com).

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