Ultra-Petroleum Corp. (NASDAQ: UPL) 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. Besides, Ultra Petroleum currently has an oil development project underway in the Uinta Basin, Three Rivers area in Utah.
Over the past few quarters, the management is setting a new course for Ultra with emphasis on capital efficiency, discipline growth, visibility to cash flow and the pursuit of higher returns in order to drive long-term shareholder value. UPL is rapidly transitioning and is focused on maximizing the value of one of the largest oil and gas fields in the U.S., the Pinedale Anticline in Western Wyoming.
Recent announcement: On Oct 17th, Announces Exchange Agreement with Supporting Noteholders, Provides Third Quarter Operations Update and Closes on Utah Asset Sale.
- Exchange Agreement Reduces Long-Term Debt by ~$250 Million, Extends Maturity of ~$560 Million of Debt from 2022 to Mid-2024 and Reduces Cash Interest Expense on Notes Exchanged
- Third Quarter 2018 Production Averaged 734 MMcfe/d, Above Mid-Point of Guidance and Utah Asset Sale Closes with Proceeds Used to Pay Down Revolver
- Earlier this month, Ultra completed the relocation of its headquarters from Houston, Texas to Englewood, Colorado, a suburb of Denver. Ultra now has 71 employees based in Colorado and 84 employees in Wyoming.
- With the completion of the Utah asset sale process and the consolidation of two offices into its long-time operational hub in Denver, Ultra is even more focused on its strategy to further reduce debt and optimize the value of its assets in Pinedale.
As per management, through the Exchange Agreement, the company is proactively addressing and significantly improving its capital structure. The Exchange Agreement materially reduces the company’ near-term maturities, significantly reduces its overall debt burden, and reduces the annual cash interest expense on the notes exchanged, all of which allow the Company to execute on its long-term business plans free from any capital structure constraints.
Before that, on Aug 9th, the company announced its financial and operating results for the quarter ended June 30, 2018. During the second quarter of 2018, total revenues were $190.1 million as compared to $212.7 million during the second quarter of 2017. The Company’s production of natural gas and oil was 70.9 billion cubic feet equivalent (Bcfe), an increase of 6% over the second quarter of 2017, with 66.9 billion cubic feet (Bcf) of natural gas and 667.0 thousand barrels (MBbls) of oil and condensate.
Year to date highlights:
2018 Guidance: The Company is adjusting its capital plan for the remainder of 2018. The Company recently reduced its operated rig count from four to three. Two rigs are currently focused on vertical development, and one rig is presently focused on horizontal development.
Production: The Company is adjusting annual production guidance down to 273 to 283 Bcfe. In the third quarter, the average daily production rate is expected to range between 710-750 MMcfe/d.
Capital Investment: The Company is affirming its 2018 total capital budget of $400 million.
The Company will host a conference call on Thursday, November 8, 2018, at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss the Company’s third quarter 2018 results and business update.
Considering recent developments, analysts see promise in the company and believe it will provide a robust fundamental appeal to the investors as well as momentum players trading the stock.
About the company: Ultra Petroleum Corp. is an independent energy company engaged in domestic natural gas and oil exploration, development and production. The Company is listed on NASDAQ and trades under the ticker symbol “UPL.”
Second Quarter 2018 Financial Results:
- During the second quarter of 2018, total revenues were $190.1 million as compared to $212.7 million during the second quarter of 2017. The Company’s production of natural gas and oil was 70.9 billion cubic feet equivalent (Bcfe), an increase of 6% over the second quarter of 2017, with 66.9 billion cubic feet (Bcf) of natural gas and 667.0 thousand barrels (MBbls) of oil and condensate.
- Ultra-Petroleum’s reported net loss was $20.6 million, or $0.10 per diluted share. Ultra-reported adjusted net income of $34.0 million, or $0.17 per diluted share for the quarter ended June 30, 2018.
In 2018, the Company is focused on capital efficiency, cash flow visibility and accelerating the horizontal program, while producing free cash flow.
Key risk factors and potential stock drivers:
- The company’ business risk profile is exposed to significant industry and regulatory risk. The oil and natural gas industry are affected by many factors. Government regulations, particularly in the areas of taxation, energy, climate change, and the environment, can have a significant impact on operations and profitability.
- Global energy prices have been under pressure since their mid-2014 highs. Crude oil saw its price plummet from $99 per barrel (dated Brent) in 2014 to just $34 per barrel in January 2016. Crude oil prices are expected to move upward but remain at sub-$75/bbl in fiscal 2019, and their medium-term price outlook remains stable. Going forward, the focus will continue to be on oil and natural gas prices.
- The company’ operational risk profile is significantly dependent on prices and export of natural gas if natural gas prices outperform over the next few quarters. This will substantially benefit Ultra and its investors.
- The company has had faced financial issues and restructuring in the past. The overall leverage was uncomfortably high, leaving the company’ financial flexibility vulnerable to a downturn in oil/gas prices. Therefore, with revenue growth estimated over the medium term, the incremental capital requirements will be high and controlled management of these requirements will remain critical.
- The company’s operational and market risk profile is exposed to risk related to competitive forces. The oil and natural gas industry are intensely competitive, and UPL competes with numerous other oil and natural gas exploration and production companies. Some of these companies have substantially greater operational and financial resources than UPL.
- On Friday, October 19th, 2018, UPL closed at $1.45, on an above average volume of 2 million shares exchanging hands. Market capitalization is $285.73 million. The current RSI is at 58.38
- In the past 52 weeks, shares of UPL have traded as low as $0.82 and as high as $10.18
- At $1.45, shares of UPL are trading above its 50-day moving average (MA) at $1.23 and below its 200-day moving average (MA) at $2.99
- The present support and resistance levels for the stock are at $1.33 & $1.49 respectively.