HOUSTON Oct 29, 2015 (Thomson StreetEvents) -- Edited Transcript of Ultra Petroleum Corp earnings conference call or presentation Thursday, October 29, 2015 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Mike Watford Ultra Petroleum Corp. - Chairman, President and CEO * Garland Shaw Ultra Petroleum Corp. - SVP & CFO * Brad Johnson Ultra Petroleum Corp. - SVP, Operations * Doug Selvius Ultra Petroleum Corp. - VP, Exploration * Kent Rogers Ultra Petroleum Corp. - VP, Drilling and Completions ================================================================================ Conference Call Participants ================================================================================ * Noel Parks Ladenburg Thalmann & Company Inc. - Analyst * Leo Mariani RBC Capital Markets - Analyst * Ron Mills Johnson Rice & Company - Analyst * Marshall Carver Heikkinen Energy Advisors - Analyst * Kashy Harrison Simmons & Company - Analyst * Sarah Desir Guggenheim Partners - Analyst * Kenneth Baer Stifel Nicolaus - Analyst * Joshua Gale GMP Securities - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, everyone, and welcome to today's Ultra Petroleum Corp. third quarter 2015 earnings conference call. (Operator Instructions) It is now my pleasure to turn the conference over to Mr. Mike Watford. Please go ahead, sir. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [2] -------------------------------------------------------------------------------- Thank you, Operator. Good morning. Welcome to Ultra Petroleum's third quarter 2015 earnings call. With me today are Garland Shaw, Senior Vice President and Chief Financial Officer; Brad Johnson, Senior Vice President, Operations; Doug Selvius, Vice President of Exploration; and Kent Rogers, Vice President of Drilling and Completions. I'd like to point out that many of the comments during this conference call are forward-looking statements that involve risks and uncertainties affecting outcomes, many of which are beyond our control and are discussed in more detail in the Risk Factors and Forward-Looking Statements sections of our annual and quarterly filings with the SEC. Although we believe these expectations expressed are based on reasonable assumptions, they are not guarantees of future performance and actual results or developments may differ materially. Also, this call may contain certain non-GAAP financial measures. Reconciliation and calculation schedules can be found on our website. We plan to file our 10-Q with the SEC later today. It will be available on our home page, or you can access it using SEC's EDGAR system. Our third quarter results showed continued progress from the second quarter. We set an all-time Company production record in the quarter and established new lows in cost of drilling complete wells. We maintained very healthy investment returns on our capital spent in new drilling during the quarter. For the 34 operated wells put online during the quarter, we estimate internal rate of returns of 39% and an FMD cost of $0.85 per Mcfe. With that start, let me ask Garland to update us on the financials. -------------------------------------------------------------------------------- Garland Shaw, Ultra Petroleum Corp. - SVP & CFO [3] -------------------------------------------------------------------------------- Thank you, Mike, and good morning. This morning, we reported adjusted net income for the third quarter of $32.6 million, or $0.21 per share. Cash flow from operations was $125 million, or $0.82 per share, and EBITDA was $168 million. We realized a 47% cash flow margin and a 63% EBITDA margin, despite continued weak oil and natural gas prices during the quarter. Our capital expenditures for the third quarter were less than our cash flows, at $123 million. Our overall production for the quarter was 75.4 Bcfe, which reflects 7% sequential growth and is a 21% improvement over the third quarter of 2014. Natural gas volumes were at 70.2 Bcf, a 23% increase over the same period last year, thanks to our continued Pinedale development program. Our oil volumes decreased 7% year-over-year to 863,000 barrels, due to the discontinuation of our Utah drilling program earlier this year. Average realized natural gas prices of $3.33 per Mcf, including the effect of hedges, was $0.26 per Mcf lower than in the third quarter of 2014. For the quarter, we had 62 Bcf, or 88% of our gas production hedged at $3.71 per Mcf. Excluding the effects of hedging, our average wellhead natural gas price was $2.68 per Mcf, a $1.03 per Mcf decrease from last year. The third quarter 2015 overall corporate price differential when comparing average wellhead per Mcf prices to first of the month Henry Hub prices was $0.11. This compares to a $0.35 differential in the same quarter last year. This $0.24 per Mcf improvement is due to the fact that only 5% of our total gas production came from the Marcellus this quarter, as opposed to 21% in the third quarter of 2014. The average realized oil price for the quarter was $39.43 per barrel, which was $43.34 lower than in the same period last year. Differentials to WTI for our Uinta property averaged $12.25 for the quarter. Our Wyoming differentials averaged $4.30 per barrel. All-in costs for the third quarter came in well below our guidance, at $3.16 per Mcfe. Cash lease operating costs of $1.02 per Mcfe for the third quarter were down from $1.07 in the same period last year. We continue to see the benefits of shifting our focus away from the Marcellus relative to our cash margins. For the quarter, in Wyoming our field level margins were $2.01 per Mcfe, while in Pennsylvania they were only $0.70 per Mcfe. Finally, regarding the Company's leverage position. We ended the quarter with net debt of $3.4 billion, virtually unchanged from last quarter and from the beginning of the year. Of this amount, we had just over $2.1 billion of debt at our subsidiary operating company, Ultra Resources, and we finished the quarter with a debt to 12-month trailing EBITDA ratio of 2.9 times and with $352 million of liquidity under our revolving credit facility. This debt is subject to a 3.5 times debt to 12-month trailing EBITDA ratio covenant. Our unsecured credit facility was not subject to a fall redetermination. At the parent company, Ultra Petroleum Corp, we have $1.3 billion of outstanding debt, which is subject to a greater than 2.25 times interest coverage ratio. At the end of the third quarter, the ratio was 3.9 times. I'll turn the call over to Brad now for an update on our operations. -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corp. - SVP, Operations [4] -------------------------------------------------------------------------------- In Wyoming, Ultra drilled 55 wells in the third quarter. This includes 34 wells from our 4-rig operated program and another 21 wells from non-operated activity. Well costs in Pinedale have continued to drop throughout the year. In the third quarter, Ultra's operated well costs averaged $2.85 million per well. This represents an 8% cost reduction from last quarter and a 25% reduction from a year ago. Yet another cycle time record was achieved in Pinedale. Our new record is 6.5 days from spud to TD. And for all the wells drilled this quarter, the average spud to TD cycle time was 18% lower year-over-year. Wyoming production continues to grow at a pace above our original forecast. In the third quarter, net production averaged 751,000,000 million cubic feet equivalent per day, up 4% from last quarter and up over 50% since the third quarter of 2014. The decline of our base production has been (Indiscernible) forecasted and the production uploads related to lower pressures in the gas gathering system has exceeded our expectations. Meanwhile, the reduce cycle times of new wells bottom line have resulted in the acceleration of those incremental volumes, another significant driver to the production increases this year. In Utah, drilling and completion operations remain suspended. Our focus this past quarter has been our waterflood pilot, where we realized some important results. Through a series of down hole surveys and packer isolations, we identified a deep zone where a disproportionately larger amount of injected water was entering (inaudible). We successfully isolated that zone and began to observe injection pressures increase within just a few days. During October, we have observed a decline in the gas to oil ratio of 25% and an oil production increase of 5%. These are all positive indicators of a successful waterflood pilot. However, we still have more to learn and optimize. Our team is now focused on learning more about aerial sweep efficiency, studying the best pattern for producers and injectors, and investigating a (Indiscernible) purpose completion design that may be better suited for secondary recovery operations. To accomplish that, we have designed two more additional pilots in our field and plan to implement these next year. In Pennsylvania, net production averaged 41 million cubic feet per day in the third quarter. In July, full production was restored following a two-month curtailment during May and June. Then in September, a smaller curtailment of about 10 million a day was implemented and we are forecasting that to continue to year end. Back in July, we increased our forecast for wells to be drilled for this year by 24%, due to reduced cycle times in Pinedale. Our forward rig program delivered 34 wells this past quarter, a pace that would have required five rigs just a year ago. However, due to significant reductions in well costs, the 24% increase in net well count only required a 9% increase in capital. We remain on track to drill 138 net wells in Pinedale this year, and our capital budget of $500 million for 2015 is unchanged from last quarter. Our production volumes continue to exceed expectations. As a result, we have increased our full-year production guidance to a new range of 288 Bcfe to 292 Bcfe. We expect fourth quarter to be essentially flat to third quarter, with modest growth in Pinedale offsetting natural declines in Pennsylvania and Utah. Mike? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [5] -------------------------------------------------------------------------------- Thanks, Brad. Our production guidance for the year continues to increase. The original guidance early in the year was a range of 275 Bcfe to 285 Bcfe, or a growth at midpoint of 12.5%. And now we are guiding to a range of 288 Bcfe to 292 Bcfe, although that's a not much of a range, but with an implied growth of 16.5%. As Garland said, our cash flow exceeded CapEx for the quarter. We're getting closer to getting even for the year in that comparison. We continue to have a deep inventory of undrilled locations that generate high returns in today's low commodity price environment. We also have too much debt and are closing in on asset sale that should provide a fair amount of relief. As to expected capital spending in 2016, we need to complete our asset sales and, given the low level of commodity prices, focus on returns. So 2016 CapEx guidance won't be available until we announce fourth quarter results. And with that, I'd like to open the call to questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Noel Parks with Ladenburg Thalmann. Please go ahead. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [2] -------------------------------------------------------------------------------- Good morning. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [3] -------------------------------------------------------------------------------- Good morning. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [4] -------------------------------------------------------------------------------- So I was interested to see you raising the guidance -- well, I should say, just nudging up the range a bit -- when we're coping with this gas environment. And I'm thinking, as you look ahead, not to the immediate winter in front of us, but say into the middle of next year, other than just looking at the strip and what you can hedge, what's your medium term thoughts about activity at Pinedale and also as far as your volumes pertaining to producing the Marcellus, which as far as I know, are not operated? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [5] -------------------------------------------------------------------------------- Well, at today's forward futures prices, there won't be any development on our Marcellus properties or any development on our Utah properties. The only asset that has attractive returns would be the Pinedale asset, long-life natural gas asset. I think at a $2.50 gas price, we have returns of about 24% or 25%, so that still meets our threshold, so that's -- so reinvesting cash there is warranted. But we're not in any -- we don't think accelerating development makes any sense in this commodity price environment, and we want to focus on returns. So I wouldn't be forecasting any significant production growth for us in 2016. I don't think that's a goal at all. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [6] -------------------------------------------------------------------------------- Okay. Got you. And I have heard bits of other products and other industry players in terms of completions in the Uinta, and I just wondered if you were aware of any activity and whether it had any applicability to Ultra's properties there? -------------------------------------------------------------------------------- Doug Selvius, Ultra Petroleum Corp. - VP, Exploration [7] -------------------------------------------------------------------------------- Yes. This is Doug Selvius. Probably what you're hearing -- and I guess all I can do is speculate on what you're hearing -- is from REP off to the east of us in Uinta. They're drilling deeper into the Mesa Verd section for the Neslund sand and actually reporting some pretty good results. We see that play as having a probability -- possibility/probability -- of extending onto our acreage, and it would have a fairly significant impact, if it were to work. The play -- there is some production from that Neslund sand within a mile of our leasehold. So we think it's very prospective. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [8] -------------------------------------------------------------------------------- Is that the legacy production> -------------------------------------------------------------------------------- Doug Selvius, Ultra Petroleum Corp. - VP, Exploration [9] -------------------------------------------------------------------------------- Excuse me? -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [10] -------------------------------------------------------------------------------- Is that legacy production from the sand? -------------------------------------------------------------------------------- Doug Selvius, Ultra Petroleum Corp. - VP, Exploration [11] -------------------------------------------------------------------------------- The sand has been producing out there for years and years, yes. I think QEP has just expanded the play. They've drilled some very impressive horizontal wells, as well as a number of vertical wells. They're testing it both ways and actually, both look economic. So they're revitalizing a play that has been around for a while. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [12] -------------------------------------------------------------------------------- Okay. And do you have any data on your own property, I don't know, log data from those sands, or has nothing that deep been done in your area? -------------------------------------------------------------------------------- Doug Selvius, Ultra Petroleum Corp. - VP, Exploration [13] -------------------------------------------------------------------------------- We are surrounded by log data. So we've got it north of us, south of us, very close to our leasehold. It's productive very close to our leasehold. If it were to work, there would be hundreds of locations on our property. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [14] -------------------------------------------------------------------------------- Okay. Okay. Great. And I just your thoughts about, would that be expensive tests to conduct under your own operations? -------------------------------------------------------------------------------- Doug Selvius, Ultra Petroleum Corp. - VP, Exploration [15] -------------------------------------------------------------------------------- We haven't actually generated our own internal well cost estimates, but I can tell you that the offset operators are $1.2 million to probably $1.8 million, in that range, for drill and complete well costs. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [16] -------------------------------------------------------------------------------- Great. Okay. Thanks. That's all I had. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [17] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- We will go next to Leo Mariani with RBC. Please go ahead. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [19] -------------------------------------------------------------------------------- Mike, in your comments, you basically said that given the current strip outlook for gas, you wouldn't be looking to accelerate any activity. Just to flip the question around a little bit, would you guys be looking to pull back at all on the full rigs, given strip? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [20] -------------------------------------------------------------------------------- I think that with the continued productivity improvements that Kent and his team are achieving, and as you heard, I think Brad mentioned, our record now, spud to TD, is 6.5 days, whereas the average in the third quarter was 8.6. So there is some possible improvement even yet on well costs. But I think we need to look at not rigs, but CapEx. Because clearly, we're going to be able to get done with four rigs what we used to be able to do with five rigs, and may be able to suggest what we can get done with three rigs what we could do this year with four rigs. So it's going to be more of a capital issue and less of a rig activity issue. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [21] -------------------------------------------------------------------------------- Got it. So I guess what that suggests that, all things being equal, at your current strip, you have a little bit of lower spending next year versus this year. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [22] -------------------------------------------------------------------------------- Yes. I don't think we'll approach the $500 million level. No, I don't think so. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [23] -------------------------------------------------------------------------------- Obviously, tremendous operational improvements here in the Pinedale. And seems like every quarter, you guys continue to drive these down. Obviously, I'm sure there's going to be some theoretical limit. But you guys think you can still keep driving these well costs down throughout 2016? -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corp. - VP, Drilling and Completions [24] -------------------------------------------------------------------------------- Leo, good morning. This is Kent. Of course we can. We're going to try. That's our goal day in and day out. So we're going to try. As Michael alluded to earlier, and Brad in his prepared comments, record 6.5, 8.6 was the average. If we can get wells closer to the record, that's two days of rig time. Two days of rig time is worth several thousands of dollars. So we've got that opportunity. Continued cost improves cost concessions. We've been to our vendors three times this year. We might go back. Two of our rigs right now are still under long-term contracts. Those fall out in November, mid-February. We've been successful negotiating much lower rig rates, when rigs come out of term contracts. So we've got some ping-pong balls in front of us that we can push back on, and we look forward to doing that. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [25] -------------------------------------------------------------------------------- Okay. That's helpful color. Thanks, guys. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [26] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- We'll go next to Ron Mills with Johnson Rice. Please go ahead. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [28] -------------------------------------------------------------------------------- Mike, I think in one of your earlier answers, you answered one of my questions. Just in terms of the returns matrix that you put in your press release, I was curious how it looked at more of a $2.50 gas price. I think you said the 24% or 25% IRR at $2.50. Is that assuming the third quarter well cost and the third quarter EURs? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [29] -------------------------------------------------------------------------------- I'll let Brad answer that. He actually has the table in front of him. -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corp. - SVP, Operations [30] -------------------------------------------------------------------------------- Yes. Correct. The 25% return would be applicable to the averages we posted for third quarter. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [31] -------------------------------------------------------------------------------- And when you look at the drilling locations or the way your rigs move through the basin, is the third quarter production rates and the EUR target expectations of the 4.2 Bs, is that representative of where your activity is going to be located, or will the rigs be moving towards areas that might be more towards the 5 Bcf? I'm just curious as to how the planned rig migration is relative to the EURs. -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corp. - VP, Drilling and Completions [32] -------------------------------------------------------------------------------- Sure. In the third quarter, our average EUR -- we anticipate will be the low average, quarterly average for the year. We had 2 of our 4 rigs on the eastern flank of the field, bringing the wells online. And so we do expect that average to improve near term. And it should range between 4.5 to 5 Be's, really over the next, I'd call it, six to eight quarters. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [33] -------------------------------------------------------------------------------- One of the uniqueness that the asset there in Wyoming is although we've been drilling wells there for 16, 17 years now, it's maybe 40% developed in the field. But because of the joint decisions on where you operate between ourselves, other operators there historically, and the regulatory agencies, in particular the BLM, we haven't been able, as you are in most areas, to drill the best first and then you kind of work your way out from the core or the tier 1 acreage. We have, from time to time over the 16, 17 years, been drilling in really good areas or in really not so good areas. So we have a fair amount of good area still remaining, as we develop the remaining 60% of the field. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [34] -------------------------------------------------------------------------------- Which was the reason for the question. Because if you're able to deliver the kind of results you did on the eastern flanks, then that seemingly bodes well as you're able to get more active off the flanks. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [35] -------------------------------------------------------------------------------- I think there's more upside. And I think we'll have Sandy post that $2.50 gas price IRR table on the webpage to make it easy for everyone to access. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [36] -------------------------------------------------------------------------------- Perfect. Great. And then one last one on the asset sales you talked about. Is there any kind of expectation in terms of timing? Is it something you think can get done by year end, or is this something between now and the time you talk about your 2016 plan? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [37] -------------------------------------------------------------------------------- Our goal is to get this done between now and year end, Ron. And we've got a couple of highly actionable and reasonable opportunities. So I think we'll go down the path and select one of those and get it done. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [38] -------------------------------------------------------------------------------- Perfect, guys. Thank you so much. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [39] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- We'll go next to Marshall Carver with Heikkinen Advisors. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy Advisors - Analyst [41] -------------------------------------------------------------------------------- Yes, good morning. Your comments around not expecting any growth in 2016, is that due to -- I guess one question would be, how much capital would it take to keep production flat? And were your comments on growth in part due to asset sale plans or how much production might be associated with the asset sales? Two separate questions. -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corp. - SVP, Operations [42] -------------------------------------------------------------------------------- Yes, this is Brad. I'll start off with the maintenance capital question. We estimate about $300 million would be required to keep our volumes flat year-over-year. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [43] -------------------------------------------------------------------------------- And we're not ready, Marshall, to provide details on how much production would go in an asset sale. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy Advisors - Analyst [44] -------------------------------------------------------------------------------- Okay. Mike, do you have more than one potential asset that might be sold, so it might be coming from a couple of different areas, is that right? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [45] -------------------------------------------------------------------------------- We have some folks making proposals on more than one asset sale, but I think we're locked in on one path. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy Advisors - Analyst [46] -------------------------------------------------------------------------------- Okay. Thank you. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [47] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- (Operator Instructions) We will go next to Kashy Harrison with Simmons and Company. -------------------------------------------------------------------------------- Kashy Harrison, Simmons & Company - Analyst [49] -------------------------------------------------------------------------------- Good morning and thank you for taking my questions. What's your current corporate base decline? -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corp. - VP, Drilling and Completions [50] -------------------------------------------------------------------------------- Corporate base decline is running about 25% year one. -------------------------------------------------------------------------------- Kashy Harrison, Simmons & Company - Analyst [51] -------------------------------------------------------------------------------- Okay, 25% year one. And on the topic of differentials, what kind of impact do you see from increased Appalachian takeaway capacity on gas realizations in the Rockies going into 2016? -------------------------------------------------------------------------------- Garland Shaw, Ultra Petroleum Corp. - SVP & CFO [52] -------------------------------------------------------------------------------- We're not seeing any -- this is Garland -- we're not seeing any impact right now. For winter, we're actually going to be selling within $0.05 of Henry Hub at OPAL. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [53] -------------------------------------------------------------------------------- In the last few days, we've been selling above Henry Hub at OPAL Wyoming. -------------------------------------------------------------------------------- Kashy Harrison, Simmons & Company - Analyst [54] -------------------------------------------------------------------------------- Okay. That's it for me. Thank you. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [55] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [56] -------------------------------------------------------------------------------- We will go next to Sarah [Desir] with Guggenheim Partners. Please go ahead. -------------------------------------------------------------------------------- Sarah Desir, Guggenheim Partners - Analyst [57] -------------------------------------------------------------------------------- Hello. Thanks for taking the question this morning. Just the first quick one I wanted to hit on was, at the new $2.85 million well cost, what would breakeven gas prices be? -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corp. - VP, Drilling and Completions [58] -------------------------------------------------------------------------------- Oh, gosh, last quarter, we were well below up $1.50. I don't have that -- -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [59] -------------------------------------------------------------------------------- I think we were down closer to $1.25 last quarter. -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corp. - VP, Drilling and Completions [60] -------------------------------------------------------------------------------- $1.25, $1.30. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [61] -------------------------------------------------------------------------------- But that was a little higher gas price. We can get that for you, but it's pretty low. -------------------------------------------------------------------------------- Sarah Desir, Guggenheim Partners - Analyst [62] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [63] -------------------------------------------------------------------------------- And we're defining breakeven as a 10% return. -------------------------------------------------------------------------------- Sarah Desir, Guggenheim Partners - Analyst [64] -------------------------------------------------------------------------------- Okay. And then just a quick clarification on the maintenance capital expenditures question. Was that $300 million on a year-over-year basis or exit rate to exit rate? -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corp. - VP, Drilling and Completions [65] -------------------------------------------------------------------------------- Should be annual to annual, year-over-year. -------------------------------------------------------------------------------- Sarah Desir, Guggenheim Partners - Analyst [66] -------------------------------------------------------------------------------- Okay. Great. Thanks. And just one more for me. If gas prices were to remain flat at current levels, how do you think about maintaining liquidity in compliance with the 3.5 times leverage covenant. Will the asset sales take care of that potential issue going forward? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [67] -------------------------------------------------------------------------------- No, our plan is that the asset sale will address that directly. -------------------------------------------------------------------------------- Sarah Desir, Guggenheim Partners - Analyst [68] -------------------------------------------------------------------------------- Okay. Great. Thank you. -------------------------------------------------------------------------------- Operator [69] -------------------------------------------------------------------------------- We will go next to Kenneth Baer with Stifel. -------------------------------------------------------------------------------- Kenneth Baer, Stifel Nicolaus - Analyst [70] -------------------------------------------------------------------------------- Sorry, are you there? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [71] -------------------------------------------------------------------------------- We're here. -------------------------------------------------------------------------------- Kenneth Baer, Stifel Nicolaus - Analyst [72] -------------------------------------------------------------------------------- This is similar to the last question. I was wondering if the asset sales plan to completely close out the balance of the revolver or what your expectations are for a borrowing base when that is matured in the second half of 2016? -------------------------------------------------------------------------------- Garland Shaw, Ultra Petroleum Corp. - SVP & CFO [73] -------------------------------------------------------------------------------- Yes, Mike said that's our expectation is to deal with covenant issue through the asset sales. As far as the borrowing base goes, we are talking to banks about renegotiating our revolver. We have an unsecured revolver now. The new revolver would be secured. Preliminary indications are, based on recent bank price decks and our reserves, that our total credit facility, which is currently $1 billion, would not change with the borrowing base. -------------------------------------------------------------------------------- Kenneth Baer, Stifel Nicolaus - Analyst [74] -------------------------------------------------------------------------------- Okay. Thank you. That's all I have. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [75] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [76] -------------------------------------------------------------------------------- (Operator Instructions) We'll go next to Joshua Gale with GMP Securities. -------------------------------------------------------------------------------- Joshua Gale, GMP Securities - Analyst [77] -------------------------------------------------------------------------------- Hello. Last two callers addressed my questions. Thank you. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [78] -------------------------------------------------------------------------------- All right. Thank you. -------------------------------------------------------------------------------- Operator [79] -------------------------------------------------------------------------------- Thank you. And gentlemen, it appears we have no further questions at this time. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corp. - Chairman, President and CEO [80] -------------------------------------------------------------------------------- Well, thank everyone for listening to us today. If you have any follow-up questions, Ms. Kraemer will be available by phone or by email. And we do plan to file the Q later today. That's it. Thank you. -------------------------------------------------------------------------------- Operator [81] -------------------------------------------------------------------------------- Thank you. This does conclude today's conference. We appreciate your participation. You may disconnect at any time and have a great day.
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