Ultra Petroleum
Delivers 22% Organic Production Growth in the Third Quarter
and 39% YTD
�
��� HOUSTON,
Oct. 30 /PRNewswire-FirstCall/ -- Ultra Petroleum Corp.
(NYSE: UPL) today reported 22% organic production growth in the third quarter of
2007. Total production in the third quarter was 28.7 billion cubic feet
equivalent (Bcfe) which compares to 23.6 Bcfe in the third quarter of 2006.
Both quarters include China
operations. Third quarter 2007 production in Wyoming alone, at the company's core asset,
increased 26% from the same period in 2006.
��� Production
for the third quarter 2007 is comprised of 25.7 billion cubic feet (Bcf) of
domestic natural gas, 199.5 thousand barrels (MBbls) of domestic condensate,
and 301.1 MBbls of crude oil from China. Domestic natural gas prices
realized for the third quarter 2007, including the effects of hedging, were
$4.04 per thousand cubic feet (Mcf), a decrease from $5.68 per Mcf for the same
period in 2006. Domestic condensate prices were $67.02 per barrel (Bbl)
compared to $70.61 per Bbl in the third quarter of 2006. China crude oil
prices realized in the third quarter were $63.94 per Bbl, compared to
$50.14 per Bbl in the third quarter of 2006.�
��� Earnings for
the third quarter ended September 30, 2007 were
$37.4 million, or $0.24 per diluted share, compared to $52.5 million, or
$0.33 per diluted share for the same period in 2006. Earnings in the quarter
are comprised of $0.21 per diluted share from continuing operations and
$0.03 per diluted share from discontinued operations as a result of the
company's sale of Sino-American Energy. Total operating cash flow (1),
including discontinued Sino-American operations, was $90.4 million, or
$0.57 per diluted share for the third quarter 2007, versus $106.3 million, or
$0.66 per diluted share for the same period in 2006. Operating cash flow from
continuing operations (1) was $81.7 million, or $0.52 per diluted share for the
third quarter 2007, versus $92.6 million, or $0.58 per diluted share for the
same period in 2006.���
���
"Despite the confluence of events that drove Rockies
natural gas prices to unimaginable levels, we achieved margins and financial
returns equal to or above our peer group. We maintained our industry leading
cost structure even while shutting-in over 12% of our available production for
the quarter," stated Michael D. Watford, Chairman, President and Chief
Executive Officer. "Year-to-date for total operations, we achieved a net income
margin of 33% and a cash flow margin of 71%. Our all-in costs of $2.65 per Mcfe
($2.46 per Mcfe domestic only) are the lowest in the industry and combined with
our 30 year drilling inventory positions us to continue our sector leadership
in growth and returns. As to growth, we are maintaining our 27% increased
production target of 116.5 Bcfe for the year (29% on a per share basis) even
after suffering lost production due to third and fourth quarter shut-ins and
the sale of our Sino-American operations," Watford
added.
��� Natural gas
and crude oil production for the nine month period ended September 30, 2007
increased to 87.8 Bcfe compared to 63.2 Bcfe for the same nine months of 2006, a 39% increase. Both
periods include production from China.
Production for the first nine months of 2007 is comprised of 77.1 Bcf of
domestic natural gas, 614.8 MBbls of domestic condensate, and 1.153 million
barrels of crude oil from China
operations. Including the effects of hedging, realized domestic natural gas
prices during the nine month period were
$4.76 per Mcf, compared to $6.18 per Mcf during the same period in 2006.
Domestic condensate prices were $60.36 per Bbl compared to $67.81 per Bbl
during the comparable 2006 period. China crude oil prices for the nine
months ended September 30, 2007 were $56.21 per Bbl compared to $56.62 per Bbl
in 2006.�
��� Earnings for
the nine month period ended September 30, 2007 were
$153.1 million, or $0.96 per diluted share. Earnings for the nine month period
include $0.84 per diluted share from continuing operations and $0.12 per� diluted share from discontinued operations as
a result of the company's sale� of
Sino-American. Total operating cash flow (1), including discontinued
operations, was $333.0 million, or $2.10 per diluted share for the nine month
period, versus $313.8 million, or $1.93 per diluted share for the same period
in 2006. Operating cash flow from continuing operations (1) for the nine month
period increased to $299.4 million, or $1.89 per diluted share, up from
$273.5 million, or $1.68 per diluted share, for the same period in 2006.
�
��� Operational
Highlights
��� During the
third quarter of 2007 there were 54 gross (25.0 net) new producing wells in Wyoming. Since the first
of the year 144 gross (67.5 net) new producing wells were placed on production.
This compares to 90 gross (42.2 net) for the same time period in 2006.
��� The average
24-hour delivery rate of the new Pinedale wells was
8.7 million cubic feet of gas per day (Mmcfg) with a maximum of 22.1 Mmcfg per
day. The maximum was achieved on the Ultra operated Mesa 2B-34D. The average of the Ultra
operated wells was 9.8 Mmcfg per day while the average of the Ultra interest
non-operated wells was 8.0 Mmcfg per day.
��� Below is a
chart of year-to-date well statistics in Wyoming.
It is important to note that the average initial production rate of an Ultra
operated Pinedale well is 123% of the outside-operated Pinedale well.
�
�
�
���������������������������� Average����� Minimum���� Maximum
��������������������
��������Initial����� Initial���� Initial
��������������������������� Production�� Production�
Production����� Number
���
Operator�� Area�������� (Mmcf/day)�� (Mmcf/day)�
(Mmcf/day)���� of Wells
��� Ultra����� Pinedale������� 9.8��������� 3.5�������� 22.1���������� 59
��� Outside-
����
Operated� Pinedale������� 8.0��������� 2.5�������� 15.9���������� 88
�������������� Total Pinedale� 8.7���������
2.5�������� 22.1��������� 147
����
��� Ultra�����
Jonah���������� 5.2��������� 3.0�������� 11.9��������� �10
����
��� Average���
Pinedale/Jonah� 8.5��������� 2.5�������� 22.1��������� 157
�
�
�
��� At quarter end in the Pinedale
Field, Ultra had 11 operated rigs drilling while their partners were running an
additional 9 rigs on Ultra interest lands. There were 9 gross (4.4 net) wells
being completed and 23 gross
(8.4 net) wells waiting on completion.
��� Since the
beginning of the year, Ultra has drilled 65 total operated wells from spud to
total depth (TD). In Pinedale the company is averaging 38 days� per well spud to TD. This compares to 61 days
per well average for 2006. Since the end of the quarter Ultra achieved a new
record in drilling time in the Pinedale Field. Ultra drilled the Warbonnet
3A1-9D well from spud to a TD of 13,380 feet in 18.6 days surpassing the
previous record of 22.8 days.�
��� The
company's ongoing delineation program is in full swing with four of eleven rigs
now drilling wells as part of this project. At the present time there are over
100 identified quarter sections (160 acres) for delineation drilling in and
around the Pinedale Field. Current plans call for continuing the delineation
drilling effort for at least the next five years in ongoing efforts to fully
define the ultimate potential of this gigantic asset. Six of the planned 21
delineation wells for 2007 have sufficient production history to be able to
estimate reserves. All six have reserves above the year-end 2006 reserves
estimates by Netherland Sewell and Associates and on average the reserves are
167% better than these pre-drill estimates.
��� Included in
the delineation wells, the Warbonnet 5C1-11D on the east side of the Warbonnet
area came on with a 24-hour flow rate of 14.3 Mmcfg per day and the Warbonnet
4B-11D just to the north came on at a 24-hour flow rate of 10.3 Mmcfg per day.
Further to the north, the Boulder
10A-30 came on for a
24-hour flow rate of 17.7 Mmcfg per day.
��� The
evaluation of the non-pay section in Pinedale Field continues. Eight of the
test wells are now completed and initial production logs have been run. These
production logs indicate that the flow rates from the 21 frac stages pumped in
this test have averaged over 125 Mcf gas per day per stage. If this production
continues like the typical Lance completion, these zones would appear to add
materially to the overall reserves and production at only the cost of the extra
frac jobs. It is still early in the process and additional testing will be
needed to prove the potential value that can be added from this work.
��� Ultra
continues to move ahead at the Mesa
10D-33 deep exploration test. The top of the Blair was encountered at 16,204 feet. At 17,504 feet Ultra chose
to stop drilling due to the high pressures that were encountered. At that time,
the well was drilled with 17.6
pound per gallon mud and carrying a continuous gas
flare. This mud weight equates to over 16,000 pounds bottom
hole pressure at this depth. To evaluate the section drilled to date, an
extensive suite of wireline logs were run and a large number of side-wall cores
were recovered. All this data is now being evaluated to better understand what
has been found so far with some 500 feet of the Blair yet to drill. These logs
indicate a significant thickness of potential pay sand with better porosity
than was seen at the Stewart
Point 15-29 deep test.
After logging the drilling liner was run to protect this part of the hole while
it is still planned to drill ahead to the planned 19,500 foot total depth
to test the balance of the Blair and the Hilliard. After setting the liner, the
tools became stuck in cement inside the casing. Currently the company is
washing over the drill string to recover the fish and hopes to be back drilling
soon and finish the drilling operation during 2007.
�
��� Rockies Express Pipeline Update�
��� The Federal
Energy Regulatory Commission (FERC) has approved the� construction of all seven segments of the
Rockies Express Pipeline (REX). REX is expected to be in service on January 1,
2008, with a probable likelihood of interim service starting in December 2007,
according to Kinder Morgan, the REX operator. At this time, over 75% of the REX
pipeline has been welded, with 65% of the pipeline having been lowered and
back-filled, while good progress continues with the compressor station
construction. Once operational, REX will move natural gas from the Rockies to
the Midwest and eventually the Northeast and is expected to significantly
increase the take-away capacity for natural gas in the Rockies
by approximately 27%, allowing Ultra to diversify away from West Coast markets.
Ultra, an anchor shipper on REX, has committed to firm capacity of 200 Mmcf per
day of natural gas. The increased capacity represented by REX to the Midwest
and eventually Northeast, will have a positive impact on Wyoming natural gas prices as evidenced by
current forward price quotes.
�
��� Share
Repurchase Activity�
��� During the nine months ended
September 30, 2007, Ultra repurchased 1,513,967 shares of its common stock for
an aggregate $83.8 million dollars at a weighted average price of $55.36 per
share. Since the program's inception in May 2006, the company has repurchased
5.5 million shares of its common stock for an aggregate $282.1 million at a
weighted average price of $51.18 per share. Total shares outstanding as of
September 30, 2007 for Ultra were 152,279,226.
�
��� Hedging��
��� At September
30, 2007, Ultra had the following open commodity derivative contracts in place
to manage price risk on a portion of its natural gas production whereby the
company receives the fixed price and pays the variable monthly index price. All
prices are Northwest Pipeline Rockies basis.
�
�
�
������������������
Remaining Contract������ Volume -
��� Type��������������� Period������������� mmbtu/day� �Average Price/mmbtu
��� Swap��������� Nov 2007 - Dec 2007������� 10,000����������� $4.59
��� Swap��������� Apr 2008 - Oct 2008������� 60,000����������� $6.82
��� Swap��������� Jan 2009 - Dec 2009������� 30,000����������� $7.35
�
�
�
��� At this
time, Ultra has the following fixed price physical delivery contracts in place
on behalf of its interest and those of other parties. All fixed price contracts
are at the Opal, Wyoming hub.
�
������������������������ Remaining������� Volumes����� ���Average Price
��������
Type�������� Contract Period��� mmbtu/day������� per Mcf/mmbtu
���� Forward
Sale�� Jan 2008 - Dec 2008�� 100,000����
$7.41 Mcf/$6.83 mmbtu
���� Forward
Sale�� Jan 2009 - Dec 2009��� 10,000����
$8.15 Mcf/$7.51 mmbtu
�
�
�
��� Other
Highlights during the Quarter��
��� On September
27, 2007, the company announced the execution of a stock purchase agreement for
the sale of Sino-American Energy Corporation which represents all of Ultra's
interest in Bohai Bay, China for $223 million. Proved reserves at year-end 2006
for Sino-American were approximately 4 MMBbls which represented 1% of Ultra's
total booked proved reserves. Despite having owned Sino-American in the third
quarter of 2007, under generally accepted accounting principles ("GAAP"),
its operations have been reclassified as "Discontinued Operations"
for the entire quarter and for the prior-year period. As a result, production,
revenues and expenses associated with
Sino-American have been removed from continuing operations and reclassified to
discontinued operations. The sale closed on October 22, 2007, with an effective
date of June 30, 2007. The purchaser of Sino-American Energy Corporation is SPC
E&P (China) Pte Ltd, a wholly-owned subsidiary of Singapore Petroleum Company
Limited.
���
��� Conference
Call Webcast Scheduled for October 31, 2007
��� Ultra
Petroleum's third quarter 2007 conference call will be available via live audio
webcast at 10:00 a.m. Central Daylight Time (11:00 a.m. Eastern Daylight Time)
on Wednesday, October 31, 2007. All interested parties are invited to listen to
this webcast by logging on to http://www.ultrapetroleum.com. The webcast will
be archived on Ultra Petroleum's website through February 20,� 2008.
��� About
Ultra��
��� 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. Ultra is listed on the New York Stock
Exchange and trades under the ticker symbol "UPL". The Company had
152,279,226 shares outstanding on September 30, 2007.
�
�
�
��� Ultra
Petroleum Corp.
��� Consolidated
Statement of Operations����������
���
(unaudited)����������
��� All amounts
expressed in US$000's
�������������� �
�����������������������
For the Nine Months Ended�� For
the Quarter Ended
������������������������ 30-Sep-07��� 30-Sep-06���
30-Sep-07��� 30-Sep-06
��� Volumes����������������������������������
����� Oil
liquids (Bbls)
������ -
Domestic��������� 614,791����� 412,473����� 199,464����� 158,163
����� Natural
Gas (Mcf)�
������ -
Domestic������ 77,144,168�� 53,457,186��
25,727,129�� 20,494,570
��� MCFE from
continuing
����
operations�������� 80,832,914�� 55,932,024��
26,923,913�� 21,443,548
����
����� Oil crude
(Bbls)�
������ - China
-�
������
discontinued
������
operations������� 1,153,293��� 1,206,930����� 301,139����� 355,674
��� MCFE -
Total������� 87,752,672�� 63,173,604��
28,730,747�� 23,577,592
����
���
Revenues����������������������
������ Oil
sales���������� $37,111����� $27,971����� $13,368����� $11,168�
������ Natural
Gas sales�� 367,552����� 330,202����� 103,847����� 116,365
��� Total
Revenues�������� 404,663����� 358,173����� 117,215����� 127,533
����
���
Expenses���������� ������������
����� Production
Costs����� 16,675������ 10,218������� 6,424������� 5,411
�����
Severance/Production
������
Taxes��������������� 45,166������ 41,223������ 12,960������ 14,549
����� Gathering
Fees������� 20,141������ 13,621������� 6,667���� ���5,509
��� Total Lease
Operating
���� Costs����������������� 81,982������ 65,062������ 26,051������ 25,469
����
�����
DD&A�����������������
94,084������ 50,189������ 31,864������ 19,556
����� General
and
������
administrative������ 10,109������ 12,093������� 3,470������� 4,225
��� Total
Expenses�������� 186,175����� 127,344������ 61,385������ 49,250
��� Interest and
other
���� income������������������� 839������� 1,629��������� 203��������� 285
��� Interest and
debt
����
expense������������ ���12,471�������
1,183������� 5,550��������� 872
����
��� Net income
before
���� income
taxes��������� 206,856����� 231,275������ 50,483������ 77,696
����
��� Income tax
provision
���� -
current�������������� 3,718������� 8,957������� 1,110������� 5,159
��� Income tax
provision
���� -
deferred������������ 69,987������ 82,908������ 16,617������ 30,781
����
��� Net income
from
���� continuing
����
operations���������� $133,151���� $139,410����� $32,756����� $41,756�
���
Discontinued�
��� operations,
net
���� of tax��������������� $19,909����� $31,215������ $4,644����� $10,719�
��� Net
Income������������ 153,060����� 170,625������ 37,400������ 52,475
����
��� Operating
Cash Flow
���� from
Continuing
���� Operations
(1)������ $299,360���� $273,529����� $81,727����� $92,590�
��� Operating
Cash Flow
���� from
Discontinued
���� Operations
(1)������� $33,592����� $40,255������ $8,709����� $13,704�
��� Operating
Cash
���� Flows
(1)����������� $332,952���� $313,784����� $90,436���� $106,294 �
����
���� (1) (see
non-GAAP reconciliation)����������
����
��� Weighted
Average
���� Shares -
Basic������� 151,825����� 154,591����� 151,530����� 153,351
��� Weighted
Average
���� Shares -
Diluted����� 158,768����� 162,447����� 158,224����� 160,920
����
����� Earnings
per Share
������ from
continuing
������
operations - Basic��� $0.88������� $0.90������� $0.22������� $0.27�
����� Earnings
per Share
������ from
continuing
������
operations - Diluted� $0.84������� $0.86������� $0.21������� $0.26�
������
����� Earnings
per Share
������ from
discontinued
������
operations - Basic��� $0.13������� $0.20������� $0.03������� $0.07�
����� Earnings
per Share
������ from
discontinued
������
operations - Diluted� $0.12������� $0.19������� $0.03���
����$0.07�
����
��� Realized
Prices���������������
����� Oil
liquids (Bbls)
������ -
Domestic���������� $60.36������ $67.81������ $67.02������ $70.61�
����� Oil crude
(Bbls) -
������ China
(discontinued
������
operations)��������� $56.21������ $56.62������ $63.94������ $50.14�
����� Natural
Gas (Mcf)����� $4.76������� $6.18������� $4.04������� $5.68�
����
��� Costs Per
MCFE����������������
��� United
States -
���� continuing
operations��������
����� Production
Costs������ $0.21������� $0.18������� $0.24������� $0.25�
�����
Severance/Production
������
Taxes���������������� $0.56������� $0.74������� $0.48������� $0.68�
����� Gathering
Fees�������� $0.25������� $0.24������� $0.25������� $0.26�
�����
DD&A������������������
$1.16������� $0.90������� $1.18������� $0.91�
����� General
and
������
administrative������� $0.13������� $0.22������� $0.13������� $0.20�
����� Interest
and debt
������
expense�������������� $0.15������� $0.02������� $0.21������� $0.04�
���������������������������� $2.46������� $2.30������� $2.49������� $2.34�
��� China -
discontinued
����
operations�������������������
����� Production
Costs������ $1.53������� $0.94������� $2.75������� $0.99�
�����
Severance/Production
������
Taxes���������������� $1.17������� $0.97������� $1.65������� $0.77�
�����
DD&A������������������
$2.16������� $1.25������� $2.18������� $1.40�
����� General
and
������
administrative������� $0.07������� $0.01������� $0.12������� $0.00�
���������������������������� $4.93������� $3.17����� ��$6.70�������
$3.16�
����������������������������������
��� Note:
Amounts on a per MCFE basis may not total due to rounding.�������
����������������������������������
��� Margins�����������������������
����� Pre-tax
income -
������
continuing operations�� 51%��������� 65%��������� 43%��������� 61%
����� Net Income
- continuing
������
operations������������� 33%��������� 39%��������� 28%��������� 33%
����������������������������������
����� Pre-tax
income���������� 51%��������� 65%��������� 42%��
�������61%
����� Net
Income�������������� 33%��������� 40%��������� 27%��������� 36%
����������������������������������
��� Operating
margins
����� United
States -
������
continuing operations�� 80%��������� 82%��������� 78%��������� 80%
������������ �����������������������
��� Note:
Certain prior period amounts have been reclassified to conform with current
period presentation.
�
����������������������������������������
��� Ultra
Petroleum Corp.����������������������������������������
��� Reconciliation
of Cash Flow from Operations Before Changes in Non-Cash�
��� Working
Capital
���� (unaudited)
��� All amounts
expressed in US$000's
�
���� (1)
Operating cash flow is defined as net cash provided by operating
�������� activities,
including continuing and discontinued operations, before
�������� changes
in non-cash 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.
�
�
��� The
following table reconciles cash flow from operations before changes in non-cash
items and working capital with net cash provided by operating activities as
derived from the company's financial information.
������������������������������
����������
�����������������������
For the Nine Months Ended�� For
the Quarter Ended
������������������������ 30-Sep-07��� 30-Sep-06���
30-Sep-07��� 30-Sep-06
��� Net cash
provided by
���� operating
activities $358,202���� $328,889���� $118,844����� $91,177
����
��� Excess tax
benefit
���� from stock
based�������
����
compensation��������� $13,561������ $9,516������ $2,013����� �$1,458�������
����� Other������������������ $(92)��������� $-�������� $(51)��������� $-�
����� Accounts
payable and
������ accrued
������
liabilities������� $(36,403)��� $(31,583)����� $8,134����� $(6,225)
����� Prepaid
expenses
������ and other
��� ���current assets������ $1,142�������� $(22)������� $135�������� $(7)
����� Accounts
receivable���� $119����� $10,170���� $(14,535)���� $18,672�
����� Restricted
cash������ $1,482���������� $2�������� $275���������� $1�
����� Other
long-term�
������ obligations�������� $(7,117)���� $(5,255)���� $(8,864)���� $(4,163)
����� Taxation
payable����� $2,150������ $3,565���������� $-���������� $-�
����� Net
changes in
������ non-cash
working
������ capital -
discontinued
������
operations������������ $(92)���� $(1,498)���
$(15,515)������ $5,381
��� Cash flow
from
���� operations
before
���� changes in
non-cash
���� working
capital���� $ 332,952��� $ 313,784����� $90,436���
$ 106,294
��������������������
��� These
statements are unaudited and subject to adjustment.
�����
��� Note:
Certain prior period amounts have been reclassified to conform with current
period presentation.
�
�
��� 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 business 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 crude oil and natural gas,
particularly in Wyoming, risks inherent in operations in China, 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 September 30, 2007.
�
��� This release
can be found at http://www.ultrapetroleum.com
SOURCE� Ultra
Petroleum Corp.
��� -0-���������������������������� 10/30/2007
���
/CONTACT:� Kelly L. Whitley,
Manager Investor Relations of Ultra Petroleum Corp., +1-281-876-0120, ext. 302,
info@ultrapetroleum.com/
��� /Photo:�
http://www.newscom.com/cgi-bin/prnh/20020226/DATU029LOGO
������������ AP
Archive:� http://photoarchive.ap.org
������������ PRN
Photo Desk, photodesk@prnewswire.com/
��� /Web
site:� http://www.ultrapetroleum.com /
��� (UPL)