Ultra Petroleum Announces Third Quarter 2013 Financial And Operating Results

HOUSTON, Nov. 1, 2013 /PRNewswire/ -- Ultra Petroleum Corp. UPL today reported third quarter 2013 operating and financial results. Highlights during the quarter include:

• Third quarter production volumes of 57.5 Bcfe
• Operating cash flow⁽¹⁾ of $117.9 million, or $0.76 per diluted share for the quarter 
• Reported net income of $57.9 million, or $0.37 per diluted share – adjusted⁽³⁾
• Low per unit all-in costs of $2.80 per Mcfe with cash costs of $1.77 per Mcfe
• Fourteen percent reduction in Wyoming well costs to $3.8 million per well
• Positive margins in third quarter of 2013 (adjusted): 54 percent cash flow margin⁽⁵⁾ and 26 percent net income margin⁽⁴⁾

(Logo: http://photos.prnewswire.com/prnh/20020226/DATU029LOGO)

Third Quarter Results

Ultra Petroleum produced 57.5 billion feet equivalent (Bcfe) of natural gas and crude oil during the third quarter 2013. The company's production was comprised of 55.7 billion cubic feet (Bcf) of natural gas and 297.3 thousand barrels (Mbls) of condensate. 

Ultra's average realized natural gas price for the quarter was $3.41 per thousand cubic feet (Mcf), including the effects of commodity hedges. The realized condensate price in the third quarter of 2013 was $100.06 per barrel (Bbl).

Ultra Petroleum reported operating cash flow⁽¹⁾ of $117.9 million, or $0.76 per diluted share in the third quarter. Adjusted net income⁽³⁾ for the quarter was $57.9 million, or $0.37 per diluted share.

Year-to-Date Results

The company's natural gas and crude oil production for the nine month period ended September 30, 2013, was 175.3 Bcfe. Ultra's production was comprised of 170.1 Bcf of natural gas and 864.7 Mbls of condensate.

Including the effects of commodity hedges, Ultra Petroleum's average realized natural gas price was $3.57 per Mcf. The realized condensate price for the nine months ended September 30, 2013, was $92.25 per Bbl.  

Ultra reported operating cash flow⁽¹⁾ of $375.9 million, or $2.44 per diluted share for the nine month period. Adjusted net income⁽³⁾ was $188.3 million, or $1.22 per diluted share for the same nine month period in 2013.

"Our 2013 year-to-date results reflect our planned slowing of investment in our low cost, long life natural gas assets due to commodity price signals. Nine month cash flow of $376.0 million nearly equals our downwardly revised 2013 capital expenditure budget of $385.0 million, meaning fourth quarter cash flow is free cash," stated Michael D. Watford, Chairman, President and Chief Executive Officer.

Wyoming - Operational Highlights

During the third quarter, Ultra Petroleum and its partners drilled 35 gross (17 net) Wyoming Lance wells and placed on production 39 gross (16 net) wells. The third quarter average initial production (IP) rate for new operated wells brought online was 7.7 million cubic feet equivalent (MMcfe) per day. Net production from Wyoming averaged 450 MMcfe per day in the third quarter.

Ultra Petroleum and its partners drilled 100 gross (46 net) Wyoming Lance wells and placed on production 109 gross (53 net) wells for the nine months ended September 30, 2013. The average IP rate for the wells placed on production during the nine month period was also 7.7 MMcfe per day. This compares to the year-to-date average IP rate for the Ultra operated wells brought online in its activity focus area of 9.0 MMcfe per day. The company produced 123.8 Bcfe from Wyoming during the nine months ended September 30, 2013.

During the third quarter, Ultra continued to reduce its total well costs to $3.8 million from $4.4 million during the second quarter of 2013, a fourteen percent reduction. More importantly, this represents a nineteen percent well cost reduction from the average cost to drill and complete a well in 2012 of $4.7 million. Continued completion design optimization was the primary driver of the $900,000 per well cost savings over the course of the year. These significant cost savings further enhance returns as illustrated in the table below:

Ultra achieved a new milestone during the third quarter by averaging 9.3 days spud to total depth (TD) with eighty-one percent of all operated wells being drilled in less than 10 days. Total days per well, as measured by rig-release to rig-release, averaged 11.3 days in the third quarter.

Pennsylvania - Operational Highlights

During the third quarter, Ultra participated in drilling 8 gross (4 net) horizontal Marcellus wells and initiated production from 6 gross (3 net) wells. Ultra's Marcellus program demonstrated average IP rates of 7.6 MMcfe per day for the new wells placed online during the quarter. Third quarter Pennsylvania net production averaged 175 MMcfe per day.

For the nine month period ending September 30, 2013, Ultra and its partners drilled 21 gross (10 net) horizontal Marcellus wells and initiated production from 30 gross (15 net) wells. Ultra's Marcellus average IP rate during the same nine month period was 6.4 MMcfe per day for the new wells brought online. Cumulative Marcellus production for the nine month period was 51.5 Bcfe.

A few notable completions during the quarter include a three well pad in Tioga County that came online with an average initial production (IP) rate of 9.2 MMcfe per day per well. The average 30-day production rate for the pad was 21.6 MMcfe per day. Subsequent to quarter-end, an extension well came online in Centre County at an initial constrained IP rate of 6.7 MMcfe per day. This step out well to the southwest of our development focus area in Lycoming County further validates the quality of the Marcellus resource across our acreage position.

Natural Gas Marketing

During the third quarter, basis differentials in the Northeast widened due to planned seasonal infrastructure maintenance coupled with a capacity constrained market. As a result of the temporary pricing dislocations, Ultra curtailed production by approximately 0.8 Bcfe. The company's average discount to NYMEX in the Marcellus region was ($0.54) during the quarter. In the Rockies region, which is the primary source of the company's revenue, cash flow and earnings, basis differentials averaged NYMEX less $0.18. On a combined basis, the company's average corporate-wide differential to NYMEX was 7 percent or ($0.26) for the quarter.

Commodity Hedges

Currently, Ultra has 12.1 Bcf representing approximately 22 percent of the company's remaining 2013 forecasted natural gas production hedged at a weighted-average price of $3.75 per Mcf. The company opportunistically hedges a portion of its forecasted production to lessen the volatility associated with swings in commodity prices and improve certainty of cash flows in support of the company's capital investment program.

Financial Strength

As of September 30, 2013, 84 percent of Ultra Petroleum's outstanding borrowings were comprised of long-term, fixed-rate debt with an average remaining term of 6.5 years and a 5.6 percent weighted average coupon rate. Ultra's debt to trailing twelve months EBITDA⁽²⁾ ratio registered 2.9 times with approximately $400.0 million in unused senior debt capacity. Ultra relies on total debt to EBITDA⁽²⁾ as a measure of leverage because it appropriately removes the effect of certain non-cash items, such as impairment charges.

Full-Year 2013 Capital Expenditure and Production Guidance

The company is reducing its annual capital expenditures for 2013 to $385.0 million from $415.0 million driven by operating efficiencies and lower well costs in Wyoming.  

Ultra is reaffirming its annual production guidance range of 230 – 236 Bcfe. Based on the mid-point of the company's guidance, approximately 70 percent of the company's forecasted production will come from the Rockies and 30 percent of total company production will come from Appalachia.

Fourth Quarter 2013 Price Realizations and Differentials Guidance

In the fourth quarter of 2013, the company's realized natural gas price is expected to average 5 – 7 percent below the NYMEX price due to regional differentials, before consideration of any hedging activity. Realized pricing for condensate is expected to be about $7.00 less than the average NYMEX crude oil price.

Fourth Quarter 2013 Expense Guidance

The following table presents the company's expected expenses per Mcfe in the fourth quarter of 2013 assuming a $3.62 per MMbtu Henry Hub natural gas price and a $98.00 per Bbl NYMEX crude oil price:

2013 Annual Income Tax Guidance

Ultra currently projects a 1.5 percent book tax rate for 2013. This equates to forecasted annual cash taxes of $4.0 million with approximately $1.0 million remaining for the fourth quarter 2013.

Subsequent to Quarter-End

On October 21, 2013, the company announced that it had signed a definitive purchase and sale agreement to acquire oil-producing properties located in the Uinta Basin for $650.0 million. Ultra Petroleum expects to finance the acquisition through debt. It is anticipated that the transaction will close December 2013, subject to closing adjustments and customary terms and conditions, with an effective date of October 1, 2013.

"We are maintaining exposure to 100 percent of our low cost, long life natural gas assets while adding a high-returning oil project that complements our technical skills. The project will provide exceptional returns even at realized oil prices of $60 per barrel," commented Watford.

Conference Call Webcast Scheduled for November 1, 2013

Ultra Petroleum's third quarter 2013 results conference call will be available via live audio webcast at 11:00 a.m. Eastern Daylight Time (10:00 a.m. Central Daylight Time) Friday, November 1, 2013.  To listen to this webcast, log on to www.ultrapetroleum.com and follow the link to the webcast.  The webcast replay and podcast will be archived on Ultra Petroleum's website through February 20, 2014.

Please click here to view a presentation containing supplemental information.

Financial tables to follow.

The company reports its financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"). However, management believes certain non-GAAP performance measures may provide users of this financial information with additional meaningful comparisons between current results and the results of the company's peers and of prior periods.

⁽¹⁾ Operating Cash Flow is defined as Net cash provided by operating activities before changes in operating assets and liabilities and other non-cash items. 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 has also 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⁾ EBITDA is defined as earnings before interest, taxes, DD&A and other non-cash charges.

Management presents the following measures because (i) they are consistent with the manner in which the company's performance is measured relative to the performance of its peers, (ii) these measures are more comparable to earnings estimates provided by securities analysts, and (iii) charges or amounts excluded cannot be reasonably estimated and guidance provided by the company excludes information regarding these types of items. These adjusted amounts are not a measure of financial performance under GAAP.

⁽³⁾ Adjusted Net Income is defined as Net income (loss) adjusted to exclude certain charges or amounts in order to exclude the volatility associated with the effects of non-recurring charges, non-cash mark-to-market gains and losses on commodity derivatives, non-cash ceiling test impairments and other similar items.

⁽⁴⁾ 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.

⁽⁵⁾ Adjusted 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.

*Other non-cash items include reduction in tax benefit from stock based compensation and other.

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 exploration and development stages in the Appalachian Basin of Pennsylvania. Ultra is listed on the New York Stock Exchange and trades under the ticker symbol "UPL".  The company had 152,977,633 shares outstanding on September 30, 2013.

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, the company 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 its filings with the Securities and Exchange Commission ("SEC"), particularly in the section entitled "Risk Factors" included in its Annual Report on Form 10-K for the most recent fiscal year and from time to time in other filings made by the company with the SEC. These risks and uncertainties include, but are not limited to, increased competition, the timing and extent of changes in prices for oil and gas, 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, as well as other factors listed in the reports filed by the company with the SEC. The SEC permits oil and gas companies to disclose only proved, probable and possible reserves in filings with the SEC.  Information about reserves presented in this news release, which reflects estimates prepared the Company's internal reserve engineers, may include references to certain terms that SEC does not allow oil and gas companies to include in their SEC filings such as "net risked reserves" or "resource potential." The Company encourages investors to review the reserve disclosures in the Company's filings with the SEC, which are available on the Company's website or at the SEC's website at www.sec.gov for more information about the Company's reserves.  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 September 30, 2013.

SOURCE Ultra Petroleum Corp.