Ultra Petroluem's Long-Standing Balance Sheet Issues Lead Thalmann To Downgrade Stock

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Ultra Petroleum Corp. UPL shares have plunged 81 percent year-to-date. Ladenburg Thalmann’s Noel A. Parks downgraded the rating for the company from Buy to Neutral, while slashing the price target from $15 to $1.50. The analyst said that balance sheet woes continued and a deal favorable to shareholders seemed unlikely in the near term.

Continued Balance Sheet Issues

Analyst Noel Parks mentioned that conversations with management indicated continued negotiations between Ultra Petroleum and its debtholders, with the end approaching of the 30-day grace period after the company missed the April 1 deadline for debt payment.

“The Company’s unique, flagship Pinedale asset, which has had 2,000+ wells drilled on UPL’s acreage and has another 7,000+ left in a low-risk inventory consisting essentially of downspacing opportunities, is one of the most straightforward assets we can envision in terms of its annuity-like appeal to a financial player,” Parks wrote.

He added, however, that commodity price uncertainty was “a major overhang on potential dealmaking.”

There is lack of clarity into whether a deal that would be favorable to equity holders would be possible in the near term. Although Ultra Petroleum’s asset valuation is compelling at the current natural gas prices, the Neutral rating is warranted while waiting for more definitive news on balance sheet progress, Parks commented.

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Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsLadenburg ThalmannNoel A. Parks
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