On Jun 8, 2013, Zacks Investment Research downgraded natural gas
producer - Ultra Petroleum Corporation ( UPL ) - to a Zacks Rank
#3 (Hold).ANADARKO PETROL (APC): Free Stock Analysis
ReportENCANA CORP (ECA): Free Stock Analysis ReportEOG RES INC (EOG): Free Stock Analysis ReportULTRA PETRO CP (UPL): Free Stock Analysis
ReportTo read this article on Zacks.com click here.Zacks Investment
Why the Downgrade?
Ultra Petroleum is generating its revenues, earnings and cash flow
largely from the production and sale of natural gas and oil from
its Pinedale and Jonah fields in Wyoming. Consequently, any
significant downtime related to pipelines or processing plants in
the region could adversely affect the company's results.
Moreover, Ultra Petroleum's high natural gas exposure raises its
sensitivity to gas price fluctuations, compared to its
more-diversified independent peers with higher oil production. The
company, which derives more than 95% of its reserves/production
from natural gas, has seen its sales and income fall drastically in
the recent quarters due to a sharp drop in gas prices.
Besides that, a significant portion of Ultra Petroleum's
production growth in the last few years has come from asset
acquisitions, exposing it to acquisition-related risks. The company
may find it difficult to complete accretive transactions in the
future, which may negatively impact its growth rate.
Additionally, Ultra Petroleum's operations are conducted primarily
in the Rocky Mountain region of the U.S (specifically southwest
Wyoming). The weather in this area can be extreme and can interrupt
the company's exploration and production operations.
Stocks to Consider
Three exploration and production companies in the energy sector,
that are expected to outperform the broader U.S. equity market over
the next one to three months are Encana
Corporation ( ECA ), Anadarko
Petroleum Corporation ( APC ) and EOG
Resources Inc. ( EOG ). All three firms
currently retain a Zacks Rank #2 (Buy).