We're going to go ahead and get started. Dave Mossberger, three-partner, kicking off the day with my long-lost friend, Lou Bassanese, and his new company that you're working for, Prairie Operating Company. Excited to hear the story. With that, I'll turn it over to Lou.
Thanks, Dave. I appreciate it. And thank everyone for listening in and being here as well. I'm Lou Bassanese, EVP of Market Strategy at Prairie Operating Company, joined by my colleague and friend as well, Wobbe Ploegsma, VP of Capital Markets and Communications. Before we get started, obviously, just the normal disclosures. We will be making some forward-looking statements. Please read the wonderfully long disclaimers that are in our SEC filings, in our 10-K and most recent 10-Q. Let me tell you just an overview: why I joined the company in January, why we think it's compelling, even though oil and gas may be a little bit out of favor, but it's coming back into favor, and what makes us uniquely positioned as that transition happens. Just a look at our assets. We are entirely located in the DJ Basin in northern Colorado.
We have about 65,000 gross acres, 47,500 net. We're surrounded by operators that are well-known names, including Chevron and Occidental. If you look at the map, it was a crowded market. We have a very extensive development runway here. We have over 550 identified locations. We have about three years' worth of permitted locations. If you're not familiar with the regulatory environment, Colorado, the permits are good for about three years. We'd like to maintain that horizon. We'd want to go and get additional permits. The drill bit on about a double-digit rate, and then as well inorganically through acquisitions. In March, the end of March of this year, we completed a very transformative acquisition, just over $600 million worth of production assets, people, operations from Bayswater, roughly 25,000 barrels equivalent a day of production.
We're in the final phases of that integration that's really transformed the company because prior to Bayswater, we were at about just around 5,000 barrels a day equivalent of production. Dramatically changed the company. Biographies too as well, but include some operators that have been exclusively in the DJ Basin. That gives us some very good domain expertise here in knowing the assets that we can continue to roll up and move into production. If you look, if you're not familiar with DJ Basin versus Permian and some of the other shale formations, it really comes down to cost advantage, right? We can do drill and develop and produce here at a much more effective and lower cost. If you look here at the finding and development costs, it just gives you a comparison of where we stack up against the other major production basins.
You look in terms of, I think another important point here is not only is it more cost-effective, the declines, the production declines are not as significant as you see in other basins as well. This is the basis, no pun intended, for our competitive advantage here. We will get into what we do differently. We are already stacked with a lower operating environment advantage, but then we have done some things strategically to give us even better cost dynamics. In terms of our financial strategy, really the secret to what we are doing is not a secret. We say it openly, we are unbundling our costs. In the basin, what happened, there were two primary providers of all these services. They did them in a bundled amount and kind of.
To get those completion costs down to about just over $5 million, we think we can go sub $5 million. A lot of that is because we've taken on the entire logistics of coordinating delivery of sand and casings and every line item. We have an operator, Bryan Freeman, who's on our executive team that has drilled wells literally all over the world, understands the ins and outs and where to cut costs. So that's really helping us drive down our costs and continuously improve efficiency through technology and innovation as well. We really set ourselves apart too, trying to be very disciplined on a capital basis, maintaining a leverage ratio of right around 1x. We finished this acquisition in March and we were about 1.1x. Through the balance of the year, we'll start paying that down. Our strategy is really to stay more conservatively levered versus the industry.
You see an analysis of some of the leverage ratios of our peers here. We do have an active hedging program. Part of our strategy was to hedge at least 50% of production. What happened as a result of this big acquisition that we were able to complete, part of the agreement with Citibank and the rest of the syndicate was that we would hedge out about 80% of production. We ended up getting off our hedges this year shortly after the deal closed and about three days before the wonderful April sell-off. We hedged our production for all of 2025 at, correct me if I'm wrong, Wobbe, $68? Yeah, $68.20. Really locked in secure cash flows for this year on the production. That will be something, obviously, over time we will continue to look at opportunistically as we see the changing dynamic in the price.
As we were flirting with sub $60 and saw sub $60 oil, we were able to be in a good position knowing that we can continue with our growth plans because we had that production and that sales locked in. No near-term debt maturities. Look, we really want to be responsible allocators of our capital. We are reinvesting this year, this front year in continuing to drill and do our internal production. We will look sometime in the next year to start beginning paying a dividend. Our CEO has publicly said that. It is the front loading the first year to increase production and then after that looking to move into a much more traditional capital allocation strategy. We look at this too.
If you're not familiar, one of the things that we see as an advantage as well is we're very much, we would say, the cleanest molecule that's produced. Some of this, a lot of it, has to do with technology and then also the regulatory environment in Colorado. We cannot flare any gas. All gas has to be connected and taken away on pipe. That immediately makes us cleaner than a lot of other operations. We've also integrated other things, including an E-Fleet for completions. We've brought turbine-powered fracking rigs to the sites. We're working with multiple providers of different technology that allow us to be much more efficient, meet stringent emissions regulations and environmental regulations. We think about this as just being part of our DNA. The industry as a whole has been criticized for being polluters.
We think that we can actually be sustainable, be technology forward, be much cleaner than most people anticipate, and then educate the public about that as well and investors so they do not think that oil and gas, the facts have not really been put out there. We are being very forward with that, working with a lot of the local regulators as well to bring in new technologies to assist us in that initiative. If you do not know the DJ Basin, this kind of gives you just your bearings of where we are located, our assets in relation to the basin. We are 70% liquids, mostly oil. We are drilling in four different layers here, sections. It is the Niobrara A, B, and C, and then the Codell formations. We can, in most instances, I believe it is about up to 18 wells per section if we wanted to.
I think we're doing on average now about 8-12, depending on the pad and the location. This gives you just kind of an overview of that region here. Again, I think we showed this map before, but I think it's also important to note if you're not familiar with this region of Colorado, it is not in Denver, right? It's not in a populated area. It's very rural, open air. They actually tried to secede Weld County into Wyoming multiple times. It gives you an idea of where they are leaning in terms of their attitude towards oil and gas. It's also important to note that 82%-83% of tax receipts come from the oil and gas industry in this county.
There is a close connection and just cooperation, understanding that this is the industry that drives a lot of jobs, drives and funds a lot of the tax-supported industry. Again, we are growing twofold, right? Organically through the drill bit. We have a one-rig program, which allows us to drill about 60 wells a year, about 4.5-5 days per well on average. We are also being opportunistic. What happened, if you are unfamiliar, we talk about Chevron and Occidental being here. During the last consolidation boom, they really rolled up the middle of the market. What is left is very few. We are one of the only publicly traded small caps in the market.
You have a lot of other private equity, venture, private capital-owned pieces of production, as well as individuals, kind of just non-contiguous, just little mom-and-pop pieces that do not have a way to move this into production. For us, it creates what we believe is a great arbitrage opportunity to take what are private assets that are trading sub 2.5 x EBITDA and bring them into a public facility that the comps are anywhere from 4x-6x . We see it as a very target-rich environment. We completed this Bayswater acquisition and see we have a robust pipeline of other potential acquisitions as we integrate this successfully and can finance it in a shareholder-friendly, non-dilutive fashion. Again, just focused growth strategy. We are going to continue to make accretive acquisitions.
We have publicly stated that we see about $2 billion worth of potential opportunities. Obviously, as a small mid-cap, sub $1 billion, just under that $1 billion enterprise value, we have to be constructive about those, not overextend ourselves. We will make acquisitions as we have. This Bayswater acquisition was the fifth in our company's history, and we'll continue to be opportunistic as those present themselves. At the same time, we're going to continue to grow through the drill bit and maintain that program. We've got the protection or just the comfort of a good hedge on a majority of our production to keep that moving at a pace that makes us unique, that we'll have double-digit growth organically in the EMP space, which you're not seeing for many producers.
You're seeing a lot if you look across the industry that mostly the Permian Basin, they're pulling back rigs at this point, even at $60-$65 a barrel oil. We are going to focus, obviously, on just fiscal discipline. I mentioned before, we'll maintain that debt leverage ratio right around one. Also, look at, as we go into 2026, on starting to return capital to shareholders via a dividend. I come from a technology background largely in this space where this organization, what attracted me to them is they're very technology forward. We are continuing to look for new partnerships that will allow us to increase sustainable production, be more efficient, and then be technology forward. If you look here, this is just a number of locations.
It gives you an overview of what this acquisition, essentially because the DJ Basin is not the Permian, the preferred basin, we're able to make acquisitions and get locations, PUDs included. We're not paying for those. That helps us drive our costs down too. It's an interesting dynamic. Obviously, we look at the markets. There's always disconnects in the markets. They don't last indefinitely. We think we have a good window here of two to three years to continue to make these acquisitions that add good production and expansion capabilities for us. As I mentioned before, our management team, they've been here, done that before in a lot of different basins.
Co-founder and CEO, Ed Kovalik, really comes out over almost three decades of industry experience, comes out of Wall Street, and then also focusing primarily in the E&P space and then as an operator as well. His co-founder and partner, Gary Hanna, they would have both been here with us, but they're presenting at another conference right now. We're trying to divide and conquer. This presentation is from March, right before we completed the deal. Craig Owen is no longer our CFO. He retired. Greg Patton, who has spent his entire career in the DJ Basin coming over from Great Western, is now the CFO as well as the head of our commercial development. I mentioned before, Bryan Freeman. Bryan Freeman, I like to call him our grandfather that knows it all. He has the wisdom of drilling in probably every formation across the globe.
He's the head and spearheaded our effort to unbundle our costs and continues to drive them down on a line item by line item basis. That is our embedded advantage, the ability to keep driving down the costs and maintaining that efficiency. Then Dan Sweeney, again, you see across on the right, a lot of guys from Great Northern and throughout the industry as well. Again, just as an overview before we can open it up to a couple of questions, we have a growing basis of production in the DJ Basin that we're looking to backfill in between major producers. This is not, we like to say, it's not exploration, it's exploitation of known assets and known production. We're not drilling in areas where we are worried about it not being successful. There is very proven acreage and production in this region.
We benefit from the low-cost advantage. That's really the biggest advantage that we have and continuing to do that. As this, we see it as because there's a limited number of small-cap companies operating in this space, there's a huge gap that we can continue this accretive acquisition roll-up strategy in a way that is very disciplined, prudent, and then returns and generates significant shareholder value. We do think that we can continue to grow double digits. Obviously, there's variables that could impact that and our organic growth just depending on oil prices and what makes sense. We're not going to just aggressively overproduce and overdrill, but we do believe that we have a runway to effectively continue to grow at double digits and then make accretive acquisitions. Some of those will be smaller in nature.
You've seen in our history, there's some that are a couple million to $30 million, and then there's some that are much more ambitious. Because the opportunity is there, we'd like to do it. One of the things that's not in this presentation, if you go to our website, the investor presentations, there's a separate deck on the acquisition that we made that really drives home another advantage that we have. We, before we increased production, made strategic agreements for takeaway. We've essentially secured 100% of the capacity to take 100,000 barrels equivalent a day out of the basin, which has put us in a position now where it gives us an advantage. We become the natural buyer of anyone looking to sell now because anyone else looking to buy doesn't have the capacity to get it out of the basin.
It gives us another, we have it here as an advantaged contracted midstream portfolio. We have the ability to grow and not worry about the infrastructure to offload and to benefit from that growth. Our balance sheet, as I said, we'll continue to maintain that conservative approach to operating and be financially disciplined, which, as we all know, the last boom and bust cycle was caused because people over-levered. We want to avoid that so we do not put ourselves in that situation. With that being said, I'd like to open up to question and answer. I know I think that's usually the most fruitful time anyway. Wobbe and I, Wobbe has been in the industry for 20 plus years, can fill in any details that I have not figured out yet in the short six months of being here. Yes, sir.
[audio distortion]
Yeah, I think we would mostly be through a dividend. We would look again at the decision matrix on share buybacks depends where we're at and traded. Also, if you look at comps in the industry, our stock should be close for value to $8-$10 right now. Obviously, we're going to treat our stock as precious capital in terms of acquisition. It just depends where we're at when we go into 2026. We've estimated a CapEx budget of about $300 million, just in the $300-$325 million this year, that can be self-funded through our production.
As we roll into 2026 and that new production comes online, it puts us in a position where we have a lot more cash flow available. I think it would first come in the form of a dividend. Let's see where the stock price and the valuations are trading, and a buyback could be a possibility. Yes. It's specific to DJ, if you want to. Yeah.
[audio distortion]
That becomes an infrastructure issue here too, right? If you don't have pipe to take the gas, you're stranded. You can't do production. Yeah, there are some emergency relief provisions, but it is very minor. There's no ability to just kind of flare at will here.
Not right now that we're aware. I mean, we did a, if you go back, I believe it was February. When did we announce the takeaway?
[audio distortion] midstream and takeaway in place prior, before the acquisition. The agreement was that as you continue to grow your production, as you hit milestones, you would then unlock additional capacity. Now we continue to stair step up. When we acquired Bayswater, we immediately hit one of those high water marks, which opened up the stair step above for capacity, which would then-
We do not have any minimum volume commitments because of the deal that we struck.
There were three different providers that we kind of brought together and saying, "Hey, would you rather the pipe go unused or used? Here's how we can make this more efficient for everyone." So we're roughly, there's a cap at 100,000 barrels a day of capacity to take away. We're at about 25% of that. People can have takeaway now, but we have priority on it when we bring new production online. As we continue to expand, we look. Depends on what we acquire next, right? I mean, if I go back to this, there's a couple of larger pieces here. Civitas is a publicly traded company that was out there that tried to get something done. They have assets here in the DJ and the Permian. That would be something of that size would put us really close quickly.
That would compress that timeline from three years down. There are other ones here, Bison. You can see if you look at slide eight, there is.
[audio distortion] on the M&A front because of the midstream agreement, he is saying that people around us can put their product into the pipeline. When we come to that pipeline and we have the production we want to put on, that person will be kicked off. If there is a natural buyer other than us, a buyer -
Yeah. We have seen, I mean, we were roughly a $200 million market cap company that announced a $600 million acquisition.
There was a lot of skepticism. Could this get done? Could it get financed? We have an RBL that Citi is the lead on. Bank of America just joined the syndicate. We have blue chip banks that are on that. It is a $1 billion lending facility. We are able to get the deal done. As a result, now people are saying, "Okay. For us, we believe right now the biggest test is we have to demonstrate we can integrate something of that size." After this integration, successful integration, we have already had people coming to us because they understand we have takeaway. We have the appetite to do more accretive acquisitions. We are hopeful that capital markets will maintain at least some normalcy to facilitate that. You are seeing now oil making its way back up.
The geopolitical concerns putting us back into a position where $70 a barrel is probably where we need to settle out. If you look at Diamondback and some of the other players in the Permian, $70-$75 is where everyone can make good money, and it makes sense to continue to produce. If not, you're talking about them continuing to pull rigs down, production, losing a million, maybe two million barrels a day equivalent in U.S. production. It is that balancing act. If the numbers do not make sense, the operators adjust supply so that you get to a new equilibrium. Thankfully, here in June is better than where we were in April. Also, thankfully, we got our hedges off about three days before. There was a period where, and this is obviously, we are not asset managers, right?
Our hedge book was up about $70 million on that. If that situation continued, maybe there was a time where we could monetize that. There is a kind of cost-benefit analysis, but we are in a much better environment right now, which gives us hope about continuing to keep the production going. Thank you. You have all been generated. Did you have another question, sir? Yeah. Tend to be a little bit below trend on that. Over time.
[audio distortation] rates that, say, the Permian does, and you also do not have the drastic decline here.
Yep.
If you look at it on a cost basis of what it costs to drill a well there as opposed to DJ, you look at that on an IRR basis, they sell out.
Yeah. For comparative, for anyone who's not familiar with the industry, I mean, Permian's looking somewhere drilling completion costs. It's $9 million-$10 million per well. And we're average in the DJ $7 million, and we're pushing below sub $5 million. We're just above $5 million. We're trying to drive that down even further. It was historically the DJ Basin was at that $5 million. I mentioned that you basically had a duopoly that could bundle services and drive costs up. It's no ill will towards them. They were making smart business decisions. We've come in as an operator and realized that we can bring in Permian vendors and unbundle it and do it much more effectively.
Yeah.
All right. Yes, sir.
Yeah, it's more strategic. I don't know how I would work it into a model to quantify it.
I mean, it's essentially what's the value of production that you can't sell, right? That you can't get out of the basin down the Cushing. In terms of multiples, publicly, the multiple was right just under 2x EBITDA is what we're paying. And then comps.
[audio distortion] It's about just under 2.5x for Bayswater. So when you take a, call it sub–two-and-a-half times cash flow, you drop it from a private entity to a public entity where we're trading, we call it 3+ . There's an immediate arbitrage and uplifted value to do that. Whereas in the Permian, you're paying three times. Yeah. Is that what it is? It's kind of a question.
It is because if you look, I mean, if we look at just energy as a sector, right?
It's completely underweighted in the S&P 500. It's out of favor. It's undervalued. It's the cheapest sector in the S&P 500 right now. It's trading at about 15x earnings. The weighting in the S&P is dip below 4%. It's created this. The comps, if you go from market cap, you're at 3x EBITDA and you get into the majors and the larger players, it's 10x-11x . If we get into a more favorable energy environment, and we all know that the market's moving cycles, we get reallocation to energy, which we need, then we start to trade on the higher end of the comps, getting back to more historical norms. We see it as this window of opportunity to buy things in a depressed asset valuation basis.
Even more so because we're getting it from off the private markets into the public markets. That window will narrow, and that's why we want to be as opportunistic as we can.
Eventually, people will figure it out and start to move. Yeah.[audio distortion]
Yeah. This was the original thesis of our founders, right? About three years ago, they were sitting around saying, "Hey, the tension for solar and wind and rely on that entirely." We saw what happened with Texas and their power grid when you go too heavy on renewables. Their thesis was, eventually, the pendulum is going to swing back.
Let's put together a roll-up strategy where we can acquire assets on the cheap, even in areas where they're in the private markets and unlock that. As the pendulum swings back, we're in a better position. We've got a first mover advantage. We've got scale and size that ultimately, in these scenarios and a roll-up strategy, the exit is usually a larger major coming along, Chevron and Occidental. All that being said is, if we get to very big scale and they don't, it's okay. We're generating a tremendous amount of cash that will return to shareholders via a dividend. That's why we continue to be shareholders ourselves because you get one option or the other option. Both are very attractive from an investor basis. Right now, we have a $1 billion reserve-based lending facility with Citi that has $485 million authorized.
We can use our RBL for acquisitions if we so choose. [audio distortion]
Yeah, we won't use the equity. To give you some idea, we had about $45 million drawn on the RBL before the Bayswater acquisition. We were able to draw three, just over three and change, call it, for the acquisition because we were getting existing production. We could use that. We have a single investor that came in in a prep for $150 million, and then we did about a $50 million piece in common equity. Shares outstanding right now, I think we're at 46 million. Again, the seller did take some equity.
Again, it's going to be a combination of factors when looking at acquisitions, right? Is the seller willing to take some equity? Obviously, we don't want to give too much equity when we feel like our own stock price is depressed. We do have different ways that we can finance acquisitions. It depends on the scale, right? There are opportunities that could be, call it sub $5 million or $25 million that are much more palatable to do in any environment. These larger pieces, we'd have to be a little bit more strategic about.
Okay. See at what price it's accretive if it's offered in stock or a combination of that with your RBL. It's highly accretive to do it, say, at $5 a share.
If that equals an uplift in value to eight, yeah, you would do that all day long. .
Yeah. We will be here all day. Easiest way to get in touch with us is email, phone. If you do not meet us, we are happy to answer any other questions. Thank you for your time on an early, I think it is Thursday. I have been traveling, so I do not know what day it is, but an early morning, let us say that.