HOUSTON, Aug. 4 /PRNewswire-FirstCall/ -- Ultra Petroleum Corp.
(NYSE: UPL) continued to deliver strong financial and operating
performance for the second quarter of 2009. Highlights for the
quarter include: -- Record natural gas and crude oil production of
44.5 Bcfe, an increase of 30 percent from second quarter 2008 --
Operating cash flow(1) of $168.5 million -- Earnings of $78.3
million, or $0.51 per diluted share - adjusted -- Per unit all-in
costs of $2.43 per Mcfe, down 29 percent from the same period in
2008 -- Superior returns in second quarter (adjusted): 73 percent
cash flow margin, 34 percent net income margin, 63 percent return
on equity, and 25 percent return on capital For the second quarter
of 2009, production of natural gas and crude oil increased 30
percent to a record 44.5 billion cubic feet equivalent (Bcfe) as
compared to 34.3 Bcfe during the second quarter of 2008. Ultra
Petroleum's second quarter 2009 production levels were the highest
ever achieved by the company. The company's production for the
second quarter was comprised of 42.5 billion cubic feet (Bcf) of
natural gas and 329.8 thousand barrels of condensate (MBbls). Ultra
Petroleum reported operating cash flow(1) for the second quarter of
$168.5 million. Adjusted net income was $78.3 million or $0.51 per
diluted share for the quarter. Due to a non-cash unrealized
mark-to-market charge of $159.9 million ($103.8 million after-tax)
on the company's financial commodity contracts, the company
incurred a net loss of $25.5 million, or $0.17 per diluted share.
The unrealized loss on commodity derivative contracts is typically
excluded by the investment community in published estimates. "In a
difficult period, Ultra Petroleum again overachieved. We grew our
production by 30 percent while decreasing per unit all-in costs by
29 percent to an industry low $2.43 per Mcfe. While enduring lower
commodity prices during the quarter, we were able to maintain a 34
percent net income margin. These values compare favorably with
year-ago margins earned at markedly higher commodity prices. Ultra
Petroleum provides a unique combination of top-tier growth rates at
the industry's lowest cost structure," stated Michael D. Watford,
Chairman, President and Chief Executive Officer. During the second
quarter of 2009, Ultra Petroleum's average realized natural gas
price was $5.04 per thousand cubic feet (Mcf), including realized
gains and losses on commodity derivatives. The company's average
price for natural gas was $2.71 per Mcf, excluding realized gains
and losses on commodity derivatives. The realized condensate price
in the second quarter of 2009 was $46.27 per barrel (Bbl). Natural
gas and crude oil production for the six month period ended June
30, 2009, increased to 86.6 Bcfe compared to 68.4 Bcfe for the six
month period ended June 30, 2008, a 27 percent increase. Production
for the first six months of 2009 was comprised of 82.7 Bcf of
natural gas and 649.2 MBbls of condensate. Operating cash flow(1)
for the first half of 2009 was $292.7 million. Adjusted earnings
for the six month period ended June 30, 2009, were $117.9 million
or $0.77 per diluted share. The realized natural gas price during
the six month period was $4.76 per Mcf, including realized gains
and losses on commodity derivatives. The company's average price
for natural gas was $3.31 per Mcf, excluding realized gains and
losses on commodity derivatives. The realized condensate price was
$37.56 per Bbl. Wyoming - Operational Highlights In the second
quarter of 2009, 64 Pinedale-Lance wells were placed on production,
including 23 operated by Ultra. The average initial production rate
(IP) for the 23 Ultra-operated Pinedale wells was 11,675 Mcf per
day. The average of all Ultra-interest wells was 8,529 Mcf per day
while the average of the Ultra non-operated wells was 6,720 Mcf per
day. The table below details the IP rates for Ultra's operated
wells during the second quarter of 2009. Pinedale Well Performance
- Ultra Operated ------------------------------------------ Area
Well Name IP (Mcf per day) ---- --------- ---------------- Mesa MS
10D1-28D 12,695 Mesa MS 13A1-27D 14,097 Mesa MS 13B1-27D 11,320
Mesa MS 13C1-27D 15,248 Mesa MS 14A1-27D 11,781 Mesa MS 14B1-27D
15,531 Mesa MS 14D1-27D 11,631 Mesa MS 16C1-33D 13,799 Mesa MS
9A1-28D 12,564 Mesa MS 9C1-28D 15,185 Riverside RS 3D1-11D 12,291
Riverside RS 3D2-2D 8,027 Riverside RS 4B1-11D 15,621 Riverside RS
4C1-11 12,925 Riverside RS 4C1-2D 10,747 Riverside RS 5A2-2 12,494
Riverside RS 5B1-2D 9,120 Riverside RS 6A2-2D 7,276 Riverside RS
6B2-2D 11,310 Riverside RS 8C1-4D 8,600 Rainbow RB 6C-30 9,520
Rainbow RB 7A1-30D 10,838 Warbonnet WB 11B1-23D 5,914 ----- Average
Q2 2009 IP 11,675 The average IP for an Ultra-operated well
substantially increased from 2008 as the company gained year-round
access to development areas in a larger part of the Pinedale field
where the wells are more productive, leading to larger average
per-well reserve estimates. Year-round access to these development
areas was granted in the September 2008 Record of Decision (ROD)
from the Bureau of Land Management (BLM). The company expects that
over the next decade, a majority of the wells will be drilled in
these areas of the field. The increase in IP rates during 2009, as
compared to 2008, corresponds to an increase in the average reserve
size of Pinedale wells drilled in the year. The table below details
the increase in average estimated ultimate recovery (EUR) of
Ultra-operated wells since 2008. Ultra-Operated Average EUR (Bcfe)
-------------------------------- Q1 Q2 Q3 Q4 -- -- -- -- 2008 4.1
3.2 4.4 6.7 2009 6.2 6.9 - - "Since the ROD was issued in September
2008, Ultra has been able to move and keep rigs in areas previously
not accessible year-round. This has resulted in fewer rig moves,
leading to more efficient operations while drilling in the better
parts of Pinedale. One of our best wells this year is the Riverside
4B1-11D which had an IP rate of 15,621 Mcf per day and is located
in a development area where all of our rigs are currently located,"
stated Watford. The company continues to collect and analyze data
from five-acre pilot areas. During the second quarter, Ultra
completed five wells as part of this pilot program. The five wells
are exceeding pre-drill expectations with an average IP of over
9,300 Mcf per day and an average EUR of 4.6 Bcfe per well location.
During the second quarter ended June 30, 2009, Ultra Petroleum
drilled and cased to total depth 53 wells, including outside
operated. For the first six months of 2009, the company drilled and
cased 132 wells. The second quarter 2009 average drilling days for
Ultra-operated wells as measured by spud to total depth (TD) was 21
days. Largely as a result of pad drilling and a decrease in cost of
services, well costs are also lower. In the second quarter of 2009,
well costs decreased to $5.25 million, as compared to $5.7 million
in the second quarter of 2008. 2006 2007 2008 Q1 2009 Q2 2009 ----
---- ---- ------- ------- Spud to TD (days) 61 35 24 23 21 Rig
release to rig release (days) 79 48 32 31 24 % wells drilled in
< 30 days 0% 36% 84% 78% 84% % wells drilled < 20 days 0% 2%
27% 33% 74% Well cost - pad ($MM) $7.0 $6.2 $5.5 $5.5 $5.25 "Our
costs are decreasing while our average well size is increasing and
our five-acre pilot wells are performing positively," stated
Watford. Pennsylvania - Operational Highlights During the second
quarter, Ultra drilled and completed five horizontal Marcellus
wells. All five wells tested greater than 5,300 Mcf per day. First
production began in mid-July with two wells placed on-line with
combined production over 13,000 Mcf per day. Based on favorable
results to date, Ultra continues to expand its Pennsylvania
activity and currently expects to drill over 32 horizontal
Marcellus Shale wells by year-end. The company has secured four
pipeline interconnects to major interstate pipelines with total
capacity of 80 MMcf per day growing to over 300 MMcf per day by
year-end. The company recently opened a field office in Wellsboro,
Pennsylvania to accommodate accelerating its presence in the play.
"We are pleased with the early results in our Marcellus program.
The initial assessment of our acreage is positive, and we are
moving forward with acceleration of our horizontal drilling
activity in the play. With continued success in the second half of
2009, we have the acreage, resources and logistics in place to
drill over 100 horizontal Marcellus wells in 2010," stated Watford.
Mid-Year Reserve Update Netherland, Sewell & Associates, Inc.
(NSAI) conducted a mid-year update of Ultra Petroleum's Wyoming
natural gas and crude oil reserves using the 2009 SEC reserve
reporting guidelines. Proved reserves total 6.7 trillion cubic feet
equivalent (Tcfe) unrestricted by Ultra's self-imposed three year
PUD limit. This compares to year-end 2008 proved reserves of 3.5
Tcfe restricted by the three year PUD limit and 4.8 Tcfe
unrestricted. The estimated future net cash flow (before tax)
discounted at 10 percent, or pre-tax PV-10, for proved reserves is
$6.8 billion at $5.00 per Mcf natural gas price and $9.4 billion at
$6.00 per Mcf. Both values assume $825.0 million per year of
capital expenditures in Wyoming. All reserves are engineered,
economic, and within the defined field limits in Wyoming. Hedges -
Derivative Contracts The total volume of commodity derivative
contracts for the remainder of 2009 is 51.9 Bcf at an average price
of $5.80 per Mcf. In 2010, the total is 98.3 Bcf at an average
price of $5.49 per Mcf and in 2011 the total volume is 69.4 Bcf at
an average price of $5.56 per Mcf. "Our large hedge position for
2010 and 2011 underpins our excellent economics in Wyoming. Our
hedged volumes along with our 73 Bcf of annual firm transportation
on Rockies Express, that will access Northeast markets by the end
of this year, creates a solid foundation for financial success,"
stated Watford. As of today, Ultra Petroleum has the following
positions in place to mitigate its commodity price exposure:
Average Price per Mcf Total Volume (Bcf) ---------------------
------------------ at Point of Sale ---------------- Q3 2009 33.1
$5.84 Mcf Q4 2009 18.8 $5.73 Mcf ------- ---- --------- Total 2009
51.9 $5.80 Mcf Q1 2010 21.6 $5.51 Mcf Q2 2010 26.4 $5.48 Mcf Q3
2010 26.7 $5.48 Mcf Q4 2010 23.6 $5.50 Mcf ------- ---- ---------
Total 2010 98.3 $5.49 Mcf Q1 2011 17.1 $5.56 Mcf Q2 2011 17.3 $5.56
Mcf Q3 2011 17.5 $5.56 Mcf Q4 2011 17.5 $5.56 Mcf ------- ----
--------- Total 2011 69.4 $5.56 Mcf Production Guidance Ultra
Petroleum is reaffirming its annual natural gas and crude oil
production guidance for 2009 of 172 to 177 Bcfe. Production for
2009 is an 18 to 22 percent increase over 2008's record annual
production of 145.3 Bcfe. All forecast production growth is
generated organically and does not currently include any
contribution from Marcellus Shale in Pennsylvania. Capital
Expenditures Due to Ultra's accelerated exploration efforts in
Pennsylvania, cap-ex for the second half of 2009 is estimated to be
$352.6 million. This compares to the first half of the year cap-ex
of $382.4 million. Total 2009 cap-ex is estimated at $735.0
million. In Pennsylvania, the company increased the number of wells
it expects to drill to 35 from 23. "We continue to pursue a
conservative and disciplined capital program that is consistent
with our long-term strategy of balancing growth and profitability,"
stated Watford. "Ultra's legacy Wyoming field warrants growth and
profitable re-investment throughout the energy cycle. Plus, we are
excited with the early results from our first Marcellus horizontal
wells that we have recently brought into production. We own
long-term assets and believe that long-term commodity price
assumptions drive value, not near-term commodity prices," Watford
added. Rockies Express Pipeline Update At the end of the second
quarter, the first phase of the REX-East pipeline commenced service
from Audrain County, Missouri to Lebanon, Ohio. Currently, REX
provides natural gas transportation capacity of 1.8 Bcf per day
which is an increase from the previous 1.5 Bcf per day. The company
is realizing natural gas prices that are generally referenced to
Lebanon Hub pricing. The final phase of REX from Lebanon, Ohio to
Clarington, Ohio is expected to be in service on November 1, 2009.
Natural gas delivered to the final phase in Clarington, Ohio is
expected to generally receive prices which are referenced to
Dominion South pricing. The table below provides a historical and
future perspective on basis differentials for Wyoming gas (NW
Rockies) and premium markets in the Northeast (Dominion South). The
basis differential is expressed as a percentage of Henry Hub. Basis
Differential as a Percentage (%) of Henry Hub
--------------------------------------------------- 2009 2009 2006
2007 2008 YTD Balance 2010 2011 ---- ---- ---- ----- --------- ----
---- NW Rockies 78 57 68 67 83 86 88 Dominion South 104 106 106 108
104 103 102 "The basis table highlights the changes afoot. NW
Rockies basis has been decreasing since 2005 and now is poised to
increase significantly for the balance of 2009 and more so in 2010
and 2011. Dominion South basis is forecast to moderate a bit. With
our 2010 and 2011 natural gas sales targeted at 50 percent sold
into each market, Ultra's effective basis to Henry Hub pricing will
be 94 to 95 percent," stated Watford. Subsequent to Quarter-End On
July 8, 2009, Ultra Petroleum was a recipient of the 2009 Oil, Gas,
Geophysical, and Geothermal Development Environmental Best
Management Practices (BMP) Awards from the BLM. The award is
significant to Ultra as the BLM recognizes natural gas and crude
oil operators, along with their partners, who demonstrate
leadership and creativity in reducing the impacts of developing
natural gas and crude oil on public lands. Ultra designed and is
implementing best management practices specifically designed to
reduce the amount of nitrogen oxide (NOx) and volatile organic
compounds (VOCs) stemming from everyday operations. The partnership
between Ultra and the government exemplifies the ability of
industry to collaborate in developing practices that reduce the
impacts to the health and welfare of the human environment while
still allowing for the orderly development of natural gas and crude
oil resources in Federal lands. The orderly development ensures a
reliable source of affordable energy for American consumption.
Conference Call Webcast Scheduled for August 4, 2009 Ultra
Petroleum's second quarter 2009 conference call will be available
via live audio webcast at 11:00 a.m. Eastern Daylight Time (10:00
a.m. Central Daylight Time) Tuesday, August 4, 2009. To listen to
this webcast, log on to http://www.ultrapetroleum.com/. The webcast
replay and podcast will be archived on Ultra Petroleum's website
through August 19, 2009. About Ultra Petroleum Ultra Petroleum
Corp. is an independent exploration and production company focused
on developing its long-life natural gas reserves in the Green River
Basin of Wyoming - the Pinedale and Jonah Fields; and is in the
early stages of exploration in the Appalachian Basin in
Pennsylvania. Ultra is listed on the New York Stock Exchange and
trades under the ticker symbol "UPL". The company had 151,440,114
shares outstanding on July 31, 2009. Financial tables to follow.
Ultra Petroleum Corp. Consolidated Statement of Operations
(unaudited) All amounts expressed in US$000's
------------------------ --------------------- For the Six Months
Ended For the Quarter Ended ------------------------
--------------------- 30-Jun-09 30-Jun-08 30-Jun-09 30-Jun-08
Volumes Oil liquids (Bbls) 649,243 530,156 329,835 273,876 Natural
gas (Mcf) 82,682,313 65,181,443 42,491,032 32,661,802 ----------
---------- ---------- ---------- MCFE - Total 86,577,771 68,362,379
44,470,042 34,305,058 ---------- ---------- ---------- ----------
Revenues Oil sales $24,386 $52,809 $15,262 $30,794 Natural gas
sales 273,908 526,568 115,079 277,446 ------- ------- -------
------- Total operating revenues 298,294 579,377 130,341 308,240
------- ------- ------- ------- Expenses Lease operating expenses
20,387 19,299 10,144 8,562 Production taxes 30,089 66,711 12,738
35,776 Gathering fees 22,364 18,764 11,573 8,766 ------ ------
------ ----- Total lease operating costs 72,840 104,774 34,455
53,104 ------ ------- ------ ------ Transportation charges 26,540
21,671 13,185 12,013 Depletion and depreciation 105,635 85,030
44,974 42,780 Write-down of proved oil and gas properties 1,037,000
- - - General and administrative 5,405 6,039 2,956 2,548 Stock
compensation 4,819 2,755 2,694 1,901 ----- ----- ----- ----- Total
operating expenses 1,252,239 220,269 98,264 112,346 ---------
------- ------ ------- Other (expense) income, net (3,117) 692
(505) 609 Interest and debt expense (17,195) (9,814) (9,897)
(4,543) Realized gain on commodity derivatives 119,561 (14,119)
99,205 (14,119) Unrealized gain (loss) on commodity derivatives
26,169 (25,150) (159,903) 2,523 ------ ------- -------- -----
(Loss) income before income taxes (828,527) 310,717 (39,023)
180,364 Income tax provision (benefit) - current 23 (193) - 6
Income tax (benefit) provision - deferred (290,436) 110,703
(13,497) 63,483 -------- ------- ------- ------ Net (loss) income
$(538,114) $200,207 $(25,526) $116,875 --------- -------- --------
-------- Impairment of proved oil and gas properties, net of tax
$673,013 $- $- $- Unrealized (gain) loss on commodity derivatives,
net of tax (16,984) 16,322 103,777 (1,637) ------- ------ -------
------ Adjusted net income $117,915 $216,529 $78,251 $115,238
-------- -------- ------- -------- Operating cash flows (1)
$292,735 $423,430 $168,548 $222,034 -------- -------- --------
-------- (1) (see non-GAAP reconciliation) Weighted average shares
- basic 151,285 152,781 151,331 153,061 Weighted average shares -
diluted 151,285 157,905 151,331 157,818 Earnings per share Net
income - basic ($3.56) $1.31 ($0.17) $0.76 Net income - fully
diluted ($3.56) $1.27 ($0.17) $0.74 Adjusted earnings per share
Adjusted net income - basic $0.78 $1.42 $0.52 $0.75 Adjusted net
income - fully diluted (4) $0.77 $1.37 $0.51 $0.73 Realized Prices
Oil liquids (Bbls) $37.56 $99.61 $46.27 $112.44 Natural gas (Mcf),
including realized gain (loss) on commodity derivatives $4.76 $7.86
$5.04 $8.06 Natural gas (Mcf), excluding realized gain (loss) on
commodity derivatives $3.31 $8.08 $2.71 $8.49 Costs Per MCFE Lease
operating expenses $0.24 $0.28 $0.23 $0.25 Production taxes $0.35
$0.98 $0.29 $1.04 Gathering fees $0.26 $0.27 $0.26 $0.26
Transportation charges $0.31 $0.32 $0.30 $0.35 Depletion and
depreciation $1.22 $1.24 $1.01 $1.25 General and administrative -
total $0.12 $0.13 $0.13 $0.13 Interest and debt expense $0.20 $0.14
$0.22 $0.13 ----- ----- ----- ----- $2.68 $3.37 $2.43 $3.41 -----
----- ----- ----- Note: Amounts on a per MCFE basis may not total
due to rounding. Adjusted Margins Adjusted Net Income (2) 28% 38%
34% 39% Adjusted Operating Cash Flow Margin (3) 70% 75% 73% 75%
Ultra Petroleum Corp. Supplemental Balance Sheet Data All amounts
expressed in US$000's ------------------------- As of
------------------------- 30-Jun-09 31-Dec-08 (unaudited) Cash and
cash equivalents $9,299 $14,157 Long-term debt Bank indebtedness
$229,000 $270,000 Senior Notes 535,000 300,000 ------- -------
$764,000 $570,000 -------- -------- Ultra Petroleum Corp.
Reconciliation of Cash Flow and Cash Provided by Operating
Activities (unaudited) All amounts expressed in US$000's The
following table reconciles net cash provided by operating
activities with operating cash flow as derived from the company's
financial information. These statements are unaudited and subject
to adjustment. ------------------------ --------------------- For
the Six Months Ended For the Quarter Ended ------------------------
--------------------- 30-Jun-09 30-Jun-08 30-Jun-09 30-Jun-08 Net
cash provided by operating activities $240,400 $403,340 $108,483
$205,808 Net changes in working capital and other non-cash items*
52,335 20,090 60,065 16,226 Cash flow from operations before
changes in non-cash items and working capital $292,735 $423,430
$168,548 $222,034 (1) Operating cash flow is defined as net cash
provided by operating activities before changes in non-cash items
and working capital. Management believes that the non-GAAP measure
of operating cash flow is useful as an indicator of an oil and gas
exploration and production company's ability to internally fund
exploration and development activities and to service or incur
additional debt. The company also has included this information
because changes in operating assets and liabilities relate to the
timing of cash receipts and disbursements which the company may not
control and may not relate to the period in which the operating
activities occurred. Operating cash flow should not be considered
in isolation or as a substitute for net cash provided by operating
activities prepared in accordance with GAAP. (2) Adjusted Net
Income Margin is defined as Adjusted Net Income divided by the sum
of Oil and Natural Gas Sales plus Realized Gain (Loss) on Commodity
Derivatives. (3) Operating Cash Flow Margin is defined as Operating
Cash Flow divided by the sum of Oil and Natural Gas Sales plus
Realized Gain (Loss) on Commodity Derivatives. (4) Fully diluted
shares includes 2,718,792 and 2,962,342 potentially dilutive
instruments that were anti-dilutive due to the net loss for the
year to date and quarter periods ended June 30, 2009, respectively.
*Other non-cash items include excess tax benefit from stock based
compensation and other. This release can be found at
http://www.ultrapetroleum.com/ This news release includes
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The opinions,
forecasts, projections or other statements, other than statements
of historical fact, are forward-looking statements. Although the
company believes that the expectations reflected in such
forward-looking statements are reasonable, we can give no assurance
that such expectations will prove to have been correct. Certain
risks and uncertainties inherent in the company's businesses are
set forth in our filings with the SEC, particularly in the section
entitled "Risk Factors" included in our Annual Report on Form 10-K
for our most recent fiscal year and from time to time in other
filings made by us with the SEC. These risks and uncertainties
include increased competition, the timing and extent of changes in
prices for oil and gas, particularly in Wyoming, the timing and
extent of the company's success in discovering, developing,
producing and estimating reserves, the effects of weather and
government regulation, availability of oil field personnel,
services, drilling rigs and other equipment, and other factors
listed in the reports filed by the company with the SEC. Full
details regarding the selected financial information provided above
will be available in the company's report on Form 10-Q for the
quarter ended June 30, 2009.
http://www.newscom.com/cgi-bin/prnh/20020226/DATU029LOGO
http://photoarchive.ap.org/ DATASOURCE: Ultra Petroleum Corp.
CONTACT: Kelly L. Whitley, Manager Investor Relations,
+1-281-876-0120, Ext. 302, Web Site: http://www.ultrapetroleum.com/
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