Ultra Petroleum Corp.
) are trading near their 52-week high of $24.52. In fact, the
Houston, TX-based natural gas producer has seen its stock price
climb some 30% since the beginning of the year.
MCMORAN EXPLOR (MMR): Free Stock Analysis
SM ENERGY CO (SM): Free Stock Analysis Report
ULTRA PETRO CP (UPL): Free Stock Analysis
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Despite this price appreciation, we remain optimistic on the
firm's near-term prospects, supported by its portfolio
repositioning initiatives, attractive fundamentals and a positive
outlook. These factors are reflected in Ultra Petroleum's Zacks
Rank #2 (Buy), implying that it is expected to outperform the
broader U.S. equity market over the next one to three months.
Why the Bullishness?
Ultra Petroleum controls substantial acreage in and around the
prolific Jonah natural gas field and the Pinedale Anticline area
in the Green River Basin. Both of these areas are endowed with
rich natural gas reserves, which have remained largely untapped
to date. Ultra Petroleum's production growth over the last few
years highlights its attractive asset base. Last year, the
company achieved record production of 257.0 billion cubic feet
equivalent (Bcfe), representing a 5% year-over-year increase.
Ultra Petroleum maintains a very competitive cost structure,
which contributes to the consistency of its growth and returns
throughout the business cycle. During 2012, the company reported
all-in operating costs of $3.00 per thousand cubic feet
equivalent (Mcfe) - one of the best in its peer group. As a
result of Ultra Petroleum's low cost base, it was able to achieve
a 64% cash flow margin and a 29% net income margin amid low
natural gas prices.
Finally, concerned by the continuing volatility in gas prices,
Ultra Petroleum's capital program now focuses on the promising
liquids-rich Niobrara Formation in Colorado in a major shift away
from dry natural gas development. The company expects exploration
and development expenditure to be around $415 million, roughly
half of that expended in 2012.
Importantly, Ultra Petroleum has surpassed earnings estimates
three times in the last four quarters. The Zacks Consensus
Estimates for both 2013 and 2014 have also risen nicely over the
last few months.
Other Stocks to Consider
In addition to Ultra Petroleum, there are certain other domestic
energy exploration/production firms like
EXCO Resources Inc.
McMoRan Exploration Co.
SM Energy Co.
) that offer value and are worth buying now. All these firms
sport a Zacks Rank #2 (Buy).