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