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Ultra Petroleum Announces Second Quarter And First Half 2014 Financial And Operating Results

July 31, 2014

HOUSTON, July 31, 2014 /PRNewswire/ — Ultra Petroleum Corp. (NYSE: UPL) today reported financial and operating performance for the second quarter of 2014. Highlights for the quarter include:

    --  Earnings of $81.2 million, or $0.52 per diluted share - adjusted((2))
    --  Generated operating cash flow((1)) of $145.1 million, or $0.94 per
        diluted share
    --  Produced 58.5 Bcfe of natural gas and oil
    --  Increased oil production 154 percent year over year
    --  Generated solid margins in second quarter 2014 (adjusted): 56 percent
        cash flow margin((4) )and 31 percent net income margin((3))

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Second Quarter Results

Ultra Petroleum reported adjusted net income((2)) of $81.2 million, or $0.52 per diluted share for the second quarter of 2014. Operating cash flow((1)) was $145.1 million, or $0.94 per diluted share for the quarter ended June 30, 2014. The company’s reported net income was $106.0 million or $0.68 per diluted share for the three month period. Second quarter 2014 results included an unrealized, mark-to-market gain of $22.2 million on the company’s commodity hedges. The unrealized gain is typically excluded by the investment community in published estimates.

For the second quarter of 2014, production of natural gas and oil was 58.5 billion cubic feet equivalent (Bcfe). This takes into account unforeseen pipeline disruptions resulting in 1.1 Bcfe of deferred production. The company’s production for the second quarter was comprised of 54.0 billion cubic feet (Bcf) of natural gas and 758.8 thousand barrels (Mbls) of oil. Oil production increased 154 percent from the same period last year.

During the second quarter of the year, Ultra Petroleum’s average realized natural gas price was $3.61 per thousand cubic feet (Mcf), including realized gains and losses on commodity hedges. Excluding realized gains and losses on commodity derivatives, the company’s average realized price for natural gas was $4.23 per Mcf. The company’s average realized oil price was $84.24 per barrel (Bbl), including realized gains and losses on commodity hedges. Excluding these effects, the second quarter 2014 average realized price for oil was $88.94 per Bbl.

Year-to-Date Results

Ultra Petroleum reported adjusted net income((2)) of $216.6 million, or $1.40 per diluted share for the six months ended June 30, 2014. Operating cash flow((1)) was $346.2 million for the six month period ended June 30, 2014. Ultra’s reported net income was $207.8 million, or $1.34 per diluted share for the first half of 2014. Six month results included an unrealized, mark-to-market loss of $14.1 million on the company’s commodity hedges. The unrealized loss is typically excluded by the investment community in published estimates.

For the six months ended June 30, 2014, production of natural gas and oil was 115.8 Bcfe. The company’s production for the six months ended June 30, 2014 was comprised of 107.3 Bcf of natural gas. Oil was 1.4 million barrels (Mmbls), a 150 percent increase from the same period last year.

The company’s average realized natural gas price was $4.28 per Mcf, including realized gains and losses on commodity hedges during the six months ended June 30, 2014. Excluding realized gains and losses on commodity derivatives, the company’s average price for natural gas was $4.66 per Mcf. The company’s average realized oil price was $82.47 per Bbl, including realized gains and losses on commodity hedges. Excluding realized gains and losses on commodity derivatives, the company’s average price for oil in the six months ended June 30, 2014 was $86.28 per Bbl.

Wyoming – Operational Highlights

During the second quarter, Ultra Petroleum and its partners drilled 45 gross (28 net) Wyoming Lance wells and placed on production 43 gross (26 net) wells. The company’s net Wyoming production averaged 455 million cubic feet equivalent (MMcfe) per day during the quarter.

The table below outlines the company’s internal rates of returns (IRR’s) in Pinedale achieved for wellhead gas prices in the range of $4.00 – $5.00 per Mcf and Estimated Ultimate Recovery (EURs) ranging from 4.0 – 6.0 Bcfe.


            Wellhead                  Pinedale IRR's

        Gas Price ($/Mcf)          Reserve Size (Bcfe)
        -----------------           ------------------

                                    6.0       5.0       4.0
                                    ---       ---       ---

                       $4.00        92%      60%      37%

                       $4.50       115%      77%      47%

                       $5.00       144%      95%      59%
                                    ---       ---       ---

                                  Economics at $3.8
                                  million/well cost

Year to date, Ultra Petroleum and its partners drilled 75 gross (46 net) Wyoming Lance wells and placed on production 81 gross (48 net) wells. The company produced 80.6 Bcfe from Wyoming during the first six months of 2014.

Pennsylvania – Operational Highlights

The pace of Marcellus activity during the quarter has slowed significantly as a direct result of strategically reducing capital at the beginning of the year. Ultra Petroleum participated in drilling 2 gross (1 net) well(s) neither of which were completed during the quarter. The company averaged 155 MMcfe per day of Marcellus production for the second quarter.

For the first six months of 2014, Ultra and its partners drilled 5 gross (2.5 net) horizontal Marcellus wells and initiated production from one gross (0.5 net) well. Cumulative production from the first half of 2014 was 29.7 Bcfe.

Utah – Operational Highlights

During the second quarter, Ultra Petroleum drilled 23 gross (23 net) wells and placed on production 19 gross (19 net) Uinta wells. Ultra’s net production averaged 5,555 barrels of oil equivalent (Boe) per day for the quarter. This represents 23 percent sequential production growth from 4,524 Boe per day (net) in the first quarter.

Year to date in the Uinta, Ultra Petroleum drilled 35 gross (35 net) wells and placed on production 31 gross (31 net) wells.

The tables below provide updated initial production (IP) data for the 12 wells turned to sales during the first quarter, plus IP data for the 19 wells Ultra brought online during the second quarter. The tables highlight strong well performance and flat production profiles.



    First Quarter 2014 Utah Well Performance (Bbl/d)
    ------------------------------------------------

              Well
             Number                     IP Date          IP30     IP60     IP90     IP120     IP 180
             ------                     -------          ----     ----     ----     -----     ------

               1                                1/4/2014      126      172      170       161        141
              ---                               --------      ---      ---      ---       ---        ---

               2                                1/4/2014      147      194      185       172        172
              ---                               --------      ---      ---      ---       ---        ---

               3                               1/24/2014      135      153      142       122        122
              ---                              ---------      ---      ---      ---       ---        ---

               4                               1/24/2014      231      194      171       143        143
              ---                              ---------      ---      ---      ---       ---        ---

               5                                2/7/2014      156      149      142       123
              ---                               --------      ---      ---      ---       ---

               6                               2/20/2014      166      167      153       137
              ---                              ---------      ---      ---      ---       ---

               7                               2/28/2014      176      193      195       185
              ---                              ---------      ---      ---      ---       ---

               8                               2/28/2014      151      165      162       156
              ---                              ---------      ---      ---      ---       ---

               9                                3/7/2014      183      194      183       164
              ---                               --------      ---      ---      ---       ---

              10                                3/7/2014      143      157      142       128
              ---                               --------      ---      ---      ---       ---

              11                               3/21/2014       98      119      124       116
              ---                              ---------      ---      ---      ---       ---

              12                               3/22/2014      159      165      143       127
              ---                              ---------      ---      ---      ---       ---


    Second Quarter 2014 Utah Well Performance (Bbl/d)

          Well Number                   IP Date          IP30     IP60     IP90
          -----------                   -------          ----     ----     ----

               1                                4/4/2014       86       86       84
              ---                               --------      ---      ---      ---

               2                                4/4/2014       62       63       63
              ---                               --------      ---      ---      ---

               3                               4/10/2014      143      133      114
              ---                              ---------      ---      ---      ---

               4                               4/10/2014       74       75       74
              ---                              ---------      ---      ---      ---

               5                                5/3/2014      120      120
              ---                               --------      ---      ---

               6                                5/3/2014      109      108
              ---                               --------      ---      ---

               7                               5/15/2014      103      107
              ---                              ---------      ---      ---

               8                               5/15/2014       90       87
              ---                              ---------      ---      ---

               9                               5/26/2014      151      143
              ---                              ---------      ---      ---

              10                               5/26/2014      130      131
              ---                              ---------      ---      ---

              11                                6/8/2014      128
              ---                               --------      ---

              12                                6/8/2014      158
              ---                               --------      ---

              13                                6/8/2014      178
              ---                               --------      ---

              14                               6/14/2014      149
              ---                              ---------      ---

              15                               6/14/2014      196
              ---                              ---------      ---

              16                               6/18/2014      233
              ---                              ---------      ---

              17                               6/27/2014      177
              ---                              ---------      ---

              18                               6/27/2014      162
              ---                              ---------      ---

              19                               6/27/2014      206
              ---                              ---------      ---

“Our strong well performance in the Uinta allows us to achieve payout within months. Currently, one third of the wells brought online in the first quarter have paid out. With regard to the second quarter wells, we expect over half to achieve payout by the end of this year,” stated Michael D. Watford, Chairman, President and Chief Executive Officer. “Our growth in Uinta production is ongoing as evidenced by the 28 percent sequential growth we’re forecasting for the third quarter.”

Product Marketing

In the Rockies region, which accounts for approximately 73 percent of Ultra’s current natural gas volumes, differentials were somewhat wider than the company previously forecasted, averaging a negative ($0.26) per million British thermal unit (Mmbtu) during the quarter. Also, there were severe pipeline bottlenecks and extended seasonal pipeline maintenance in the Northeast resulting in the company’s average discount to NYMEX for the remaining natural gas volumes in the Marcellus region, registering a negative ($1.80) per Mmbtu. On a combined basis, Ultra’s average natural gas corporate-wide differential to NYMEX was a negative ($0.66) per Mmbtu for the quarter. For oil pricing in the Uinta Basin during the quarter, the company realized an average discount to NYMEX of a negative ($18.87) per Bbl.

Financial Strength

As of June 30, 2014, 82 percent of Ultra Petroleum’s outstanding borrowings were comprised of fixed-rate debt with an average remaining term of 5.5 years and a 5.6 percent weighted average coupon rate. The company had $573.0 million of liquidity under its senior credit facility.

Commodity Hedges

The company entered into fixed price swaps for 2014 including 64.3 Bcf of natural gas hedges at a weighted average price of $4.15 per Mcf. Ultra also has oil hedges of 736.0 MMBbls at a weighted average price of $93.19 per Bbl. Additional details of the company’s current hedge positions are available in the financial tables section of this news release. The company opportunistically hedges a portion of its forecasted production to lessen the volatility associated with swings in commodity prices and improve the certainty of cash flows in support of its capital investment program.

Third Quarter 2014 Production Guidance

The company’s third quarter production is expected to range between 60 – 62 Bcfe. The company is tightening its guidance range to 243 – 250 Bcfe, establishing mid-point guidance of 246.5 Bcfe. The following table details estimated production by quarter for 2014:


                 2014 Estimated Total Production (Bcfe)

     1st Quarter    2nd Quarter (A)         3rd Quarter (E)    Full-Year 2014
          (A)                                                        (E)
     -----------        --------------          --------------  --------------

         57.2                     58.5           60 - 62           243 - 250

Third Quarter 2014 Price Realizations and Differentials Guidance

In the third quarter of 2014, the company’s realized natural gas price is expected to average 8 to 10 percent below NYMEX, prior to hedging adjustments. This takes into account a negative ($0.12) differential for Wyoming volumes and a negative ($1.90) differential for northeastern Pennsylvania volumes. Realized pricing for oil is expected to be about 15 – 18 percent below the average NYMEX price, before consideration of any hedging activity.

Third Quarter 2014 Expense Guidance

The following table presents the company’s expected expenses per Mcfe in the third quarter of 2014 assuming a $4.01 per Mmbtu Henry Hub natural gas price and a $102.80 per Bbl NYMEX oil price:


    Costs Per Mcfe                                         Q3 2014
    --------------                                         -------

      Lease operating expenses                           $ 0.47 - 0.50

      Production taxes                                   $ 0.38 - 0.40

      Gathering fees                                     $ 0.22 - 0.25
                                                         -------------

    Total lease operating costs                          $ 1.07 - 1.15

      Transportation charges                             $ 0.33 - 0.35

      Depletion and depreciation                         $ 1.13 - 1.17

      General and administrative - total                 $ 0.09 - 0.11

      Interest and debt expense                          $ 0.45 - 0.47
                                                         -------------

    Total operating costs per Mcfe                       $ 3.07 - 3.25
                                                         -------------

2014 Annual Income Tax Guidance

Ultra currently projects a zero book tax rate for 2014 and does not anticipate paying any cash taxes.

Conference Call Webcast Scheduled for July 31, 2014

Ultra Petroleum’s second quarter 2014 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) Thursday, July 31, 2014. 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 August 14, 2014.

Financial tables to follow.




    Ultra Petroleum Corp.

    Consolidated Statements of Income (unaudited)

    All amounts expressed in US$000's,

    Except per unit data

                                                                                                  For the Six Months Ended                     For the Quarter Ended

                                                                                                          June 30,                                    June 30,
                                                                                                          --------                                    --------

                                                                                                           2014                          2013                            2014                 2013
                                                                                                           ----                          ----                            ----                 ----

    Volumes

         Natural gas (Mcf)                                                                          107,285,281                   114,351,403                      53,993,106           56,624,054

         Crude oil and condensate (Bbls)                                                              1,416,893                       567,381                         758,844              299,125
                                                                                                      ---------                       -------                         -------              -------

         Mcfe - Total                                                                               115,786,639                   117,755,689                      58,546,170           58,418,804
                                                                                                    -----------                   -----------                      ----------           ----------

    Revenues

         Natural gas sales                                                                               $500,111                      $436,985                        $228,573             $234,785

         Oil sales                                                                                      122,250                        50,018                          67,490               26,591
                                                                                                        -------                        ------                          ------               ------

    Total operating revenues                                                                            622,361                       487,003                         296,063              261,376
                                                                                                        -------                       -------                         -------              -------

    Expenses

         Lease operating expenses                                                                        43,972                        36,331                          22,959               17,514

         LGS operating lease expense                                                                     10,153                        10,000                           5,076                5,000

         Production taxes                                                                                50,525                        36,561                          24,594               20,006

         Gathering fees                                                                                  26,157                        25,718                          13,449               13,834
                                                                                                         ------                        ------                          ------               ------

    Total lease operating costs                                                                         130,807                       108,610                          66,078               56,354
                                                                                                        -------                       -------                          ------               ------

         Transportation charges                                                                          37,848                        40,958                          17,273               20,649

         Depletion and depreciation                                                                     128,522                       121,591                          65,341               60,123

         General and administrative                                                                       7,474                         5,775                           3,634                2,823

         Stock compensation                                                                               1,029                         6,062                         (1,476)               3,053
                                                                                                          -----                         -----                          ------                -----

    Total operating expenses                                                                            305,680                       282,996                         150,850              143,002
                                                                                                        -------                       -------                         -------              -------

    Other income (expense), net                                                                               2                            13                              50                    5

    Interest and debt expense, net                                                                     (54,362)                     (51,002)                       (27,294)            (25,238)

    Deferred gain on sale of liquids gathering system                                                     5,276                         5,276                           2,638                2,636

    Realized (loss) on commodity derivatives                                                           (46,245)                     (19,764)                       (37,291)            (19,764)

    Unrealized (loss) on commodity derivatives                                                         (14,130)                      (2,860)                         22,189               41,855
                                                                                                        -------                        ------                          ------               ------

    Income before income taxes                                                                          207,222                       135,670                         105,505              117,868

    Income tax (benefit) provision - current                                                              (541)                        2,859                           (544)               1,491

    Net income                                                                                           $207,763                      $132,811                        $106,049             $116,377

    Deferred gain on sale of liquids gathering system                                                   (5,276)                      (5,276)                        (2,638)             (2,636)

    Unrealized loss on commodity derivatives                                                             14,130                         2,860                        (22,189)            (41,855)
                                                                                                         ------                         -----                         -------              -------

    Adjusted net income (2)                                                                              $216,617                      $130,395                         $81,222              $71,886

    Operating cash flow (1)                                                                              $346,168                      $258,048                        $145,086             $135,064

    (see non-GAAP reconciliation)

    Weighted average shares (000's)

    Basic                                                                                               153,110                       152,947                         153,179              152,948

    Fully diluted                                                                                       154,915                       154,397                         155,007              154,513

    Earnings per share

    Net income - basic                                                                                    $1.36                         $0.87                           $0.69                $0.76

    Net income - fully diluted                                                                            $1.34                         $0.86                           $0.68                $0.75

    Adjusted earnings per share(2)

    Adjusted net income - basic                                                                           $1.41                         $0.85                           $0.53                $0.47

    Adjusted net income - fully diluted                                                                   $1.40                         $0.84                           $0.52                $0.47

    Cash flow per share(1)

    Cash flow per share - basic                                                                           $2.26                         $1.69                           $0.95                $0.88

    Cash flow per share - fully diluted                                                                   $2.23                         $1.67                           $0.94                $0.87

    Realized Prices

         Natural gas (Mcf), including realized gain (loss) on commodity derivatives

                                                                                            $4.28                           $3.65                         $3.61                  $3.80

         Natural gas (Mcf), excluding realized gain (loss) on commodity derivatives

                                                                                     $4.66  $3.82                           $4.23                         $4.15

         Oil liquids (Bbls), including realized gain (loss) on commodity derivatives

                                                                                           $82.47                          $88.16                        $84.24                 $88.90

         Oil liquids (Bbls), excluding realized gain (loss) on commodity derivatives

                                                                                           $86.28                          $88.16                        $88.94                 $88.90

    Costs Per Mcfe

         Lease operating expenses                                                                         $0.47                         $0.39                           $0.48                $0.39

         Production taxes                                                                                 $0.44                         $0.31                           $0.42                $0.34

         Gathering fees                                                                                   $0.23                         $0.22                           $0.23                $0.24

         Transportation charges                                                                           $0.33                         $0.35                           $0.30                $0.35

         Depletion and depreciation                                                                       $1.11                         $1.03                           $1.12                $1.03

         General and administrative - total                                                               $0.07                         $0.10                           $0.04                $0.10

         Interest and debt expense                                                                        $0.47                         $0.43                           $0.47                $0.43
                                                                                                          -----                         -----                           -----                -----

                                                                                                          $3.12                         $2.83                           $3.06                $2.88
                                                                                                          -----                         -----                           -----                -----

    Note: Amounts on a per Mcfe basis may not total due to rounding.

    Adjusted Margins

         Adjusted Net Income Margin(3)                                                                      38%                          28%                            31%                 30%

         Adjusted Operating Cash Flow Margin(4)                                                             60%                          55%                            56%                 56%

    Ultra Petroleum Corp.

    Supplemental Balance Sheet Data

    All amounts expressed in
     US$000's

                                                        As of
                                                       -----

                                     June 30,                 December 31,

                                                     2014                       2013
                                                     ----                       ----

                                    (Unaudited)

    Cash and cash
     equivalents                                     $5,092                    $10,664

    Outstanding debt

       Bank indebtedness                          427,000                    460,000

       Senior notes                             2,010,000                  2,010,000
                                                ---------                  ---------

                                                 $2,437,000                 $2,470,000

    Reconciliation of Operating Cash Flow and Net 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.

                                                        For the Six Months
                                                              Ended                      For the Quarter Ended

                                                          June 30,                           June 30,
                                                          --------                           --------

                                                         2014                      2013                      2014                      2013
                                                         ----                      ----                      ----                      ----

    Net cash
     provided by
     operating
     activities                                        $346,651                  $209,134                  $171,076                  $141,274

        Net changes in operating
         assets and liabilities and
         other non-cash items

                                              (483)                   48,914                  (25,990)                  (6,210)
                                               ----                    ------                   -------                    ------

    Net cash provided by
     operating activities
     before changes in
     operating assets and
     liabilities

                                           $346,168                  $258,048                  $145,086                  $135,064
                                           --------                  --------                  --------                  --------

    Ultra Petroleum Corp.

    Hedging Summary

    July 31, 2014

    The company  has the following hedge positions in place to mitigate its commodity price exposure:

    NYMEX                                                                         Q3 2014             Q4 2014        Balance 2014

    Natural Gas Swaps:
    ------------------

    Volume (Bcf)                                                                             44.2               20.1                64.3

                                                     $/Mmbtu                                $3.90              $4.01               $3.92

                                                       $/Mcf                                $4.13              $4.26               $4.15

    Crude Oil Swaps:
    ----------------

    Volume (MBbls)                                                                          368.0              368.0               736.0

                                                       $/Bbl                               $93.19             $93.19              $93.19

    Note:  Amounts may not total due to rounding.

    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.

    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.

    (2) 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 losses on commodity
     derivatives, non-cash ceiling test
     impairments and other similar
     items.

    (3) 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.

    (4) 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.

About Ultra Petroleum

Ultra Petroleum Corp. is an independent energy company engaged in domestic natural gas and crude oil exploration, development and production. The company is listed on the New York Stock Exchange and trades under the ticker symbol “UPL”. Additional information on the company is available at 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 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. 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, 2014.

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SOURCE Ultra Petroleum Corp.


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