Ultra Petroleum Misses, Net Grows - Analyst Blog

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Natural gas producer Ultra Petroleum Corporation ( UPL ) reported weaker-than-expected fourth quarter 2011 results, hurt by lower prices.

Earnings per share, excluding special items, came in at 58 cents, missing the Zacks Consensus Estimate of 61 cents.

However, compared with the year-earlier period, Ultra Petroleum's adjusted earnings per share rose 16.0% (from 50 cents to 58 cents) due to higher production.

Total operating revenues, at $270.8 million, were shy of the Zacks Consensus Estimate of $341.0 million but were up from the year-ago level of $237.5 million.

For its fiscal year ended December 31, 2011, Ultra Petroleum reported profit of $2.52 per share on revenues of $1.1 billion.

Production

Production during the quarter increased 16.9% year over year to a record 66.9 billion cubic feet equivalent (Bcfe), reflecting the company's successful drilling activities. Natural gas volumes - accounting for approximately 97% of the total - jumped 17.1% year over year to 64.6 billion cubic feet (Bcf), while oil production increased by 11.6% to 383,890 barrels.

Realized Prices

Ultra Petroleum's average realized price on natural gas fell 3.7% to $3.69 per thousand cubic feet (Mcf). Including commodity derivative gains/losses, average realized natural gas price for the quarter was $4.77 per Mcf, up 5.1% from the prior-year level. The average oil price for the quarter, at $84.09 per barrel, was up handsomely from the fourth quarter 2010 level of $75.45 per barrel.

Costs, Expenses & Margins

Lease operating expense rose 20.2% from the previous year quarter to $15.9 million. During the last three months of 2011, the company reported all-in costs of $3.03 per Mcfe, up 9.4% from the same period in 2010. Notwithstanding the rise, Ultra Petroleum's competitive cost structure enabled it to achieve a healthy 74% cash flow margin and a 26% net income margin.

Capital Investment & Balance Sheet

During the year, Ultra Petroleum spent $1.5 billion on capital investment. As of December 31, 2011, the company had cash and cash equivalents of $11.3 million and long-term debt of $1.9 billion.

Production & Capital Investment Guidance

Ultra Petroleum expects its full-year 2012 production to be in the range of approximately 250-260 Bcfe, implying an increase of up to 6% from 2011. For the first quarter, the company is looking to produce 64-66 Bcfe.

Ultra Petroleum plans to spend $925 million on capital investment in 2012, 38% lower than last year's expenditure. More importantly, the energy explorer is lowering its development drilling capital by half - from $1.3 billion in 2011 to $650 million in 2012.

Houston, Texas-based firm's spending cut is in line with similar steps taken by other gas producers like Chesapeake Energy Corporation ( CHK ) to scale back drilling in an effort to try and stop a price decline that saw gas slip to a 10-year low last month.

Proved Reserves

As of year-end 2011, Ultra Petroleum had 4.98 trillion cubic feet equivalent (Tcfe) in proved reserves, of which more than 96% was natural gas and about 41% was developed. The company's 2011 year-end proved reserves tally was 13% above the year-earlier level, while its reserve replacement of 339% was achieved organically.

Rating & Recommendation

Ultra Petroleum currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term 'Neutral' recommendation on the stock.


 
CHESAPEAKE ENGY ( CHK ): Free Stock Analysis Report
 
ULTRA PETRO CP ( UPL ): Free Stock Analysis Report
 

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CHK , UPL

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