Ultra Petroleum: Still a Good Value - Analyst Blog

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Shares of Ultra Petroleum Corp. ( UPL ) 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.

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. ( XCO ), McMoRan Exploration Co. ( MMR ) and SM Energy Co. ( SM ) that offer value and are worth buying now. All these firms sport a Zacks Rank #2 (Buy).



MCMORAN EXPLOR (MMR): Free Stock Analysis Report

SM ENERGY CO (SM): Free Stock Analysis Report

ULTRA PETRO CP (UPL): Free Stock Analysis Report

EXCO RESOURCES (XCO): 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: MMR , SM , UPL , XCO

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