Ultra Petroleum Pens $650M Contract - Analyst Blog


Ultra Petroleum Corporation ( UPL ), an independent energy firm, has entered into a definitive contract for acquiring 100% working interest in oil-producing assets, based in Uinta Basin, northeast Utah, from an undisclosed seller. The $650 million deal is expected to close by Dec 2013, dependent on customary closing conditions.

Ultra Petroleum is going to finance the transaction entirely with debt. The company expects to start recovering costs from the first year of operations and projects to recuperate the entire amount within five years. After the debt recovery, the properties will generate significant free cash flow for shareholders going forward.

As of now, the to-be-acquired Uinta Basin acreage consists of 38 operating wells that generate roughly 4,000 barrels of oil each day. Management anticipates strong earnings from the assets even if there is a drop in oil prices to below $75 per barrel.

Moreover, as Ultra Petroleum derives a majority of its reserves/production from natural gas, we expect the deal to reduce its dependency on natural gas to some extent.

Houston, Texas-based Ultra Petroleum is engaged in the acquisition, development, exploration and production of oil and gas properties. The company's operations are focused on the Green River Basin of southwest Wyoming, mainly covering the Pinedale and the Jonah fields. Ultra also holds impressive acreage in the north-central Pennsylvania area of the Appalachian Basin.

Ultra Petroleum currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at oil and gas exploration and production firms like Stone Energy Corp. ( SGY ), Resolute Energy Corp. ( REN ) and Bonanza Creek Energy Inc. ( BCEI ) that offer better prospects. All the stocks sport a Zacks Rank #1 (Strong Buy).

BONANZA CREEK (BCEI): Free Stock Analysis Report

RESOLUTE ENERGY (REN): Free Stock Analysis Report

STONE ENERGY CP (SGY): Free Stock Analysis Report

ULTRA PETRO CP (UPL): Free Stock Analysis Report

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Zacks Investment Research

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: BCEI , REN , SGY , UPL



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