HOUSTON Jul 31, 2015 (Thomson StreetEvents) -- Edited Transcript of Ultra Petroleum Corp earnings conference call or presentation Thursday, July 30, 2015 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Mike Watford Ultra Petroleum Corporation - Chairman, President & CEO * Garland Shaw Ultra Petroleum Corporation - SVP & CFO * Brad Johnson Ultra Petroleum Corporation - SVP of Operations * Kent Rogers Ultra Petroleum Corporation - VP of Drilling and Completions ================================================================================ Conference Call Participants ================================================================================ * Leo Mariani RBC Capital Markets - Analyst * Brian Gamble Simmons & Company - Analyst * Noel Parks Ladenburg Thalmann & Company Inc. - Analyst * Tim Rezvan Sterne, Agee & Leach, Inc. - Analyst * Ron Mills Johnson Rice & Company - Analyst * Bob Christensen Buckingham Research Group - Analyst * Marshall Carver Heikkinen Energy - Analyst * Andrew Coleman Raymond James & Associates, Inc. - Analyst * Joshua Gale GMP Securities - Analyst * Brian Singer Goldman Sachs - Analyst * Matt Carey Kornitzer Capital - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, everyone, and welcome to today's conference. (Operator Instructions) Please note this call may be recorded. At this time, I would like to turn the conference over to Mr. Mike Watford. Please go ahead. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [2] -------------------------------------------------------------------------------- Thank you, Operator. Good morning. Welcome to Ultra Petroleum's second 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 would like to point out 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 use SEC's EDGAR system. Our second quarter 2015 results pick up where first quarter left off. Our overall margins have improved while costs have been reduced. Our strategy of focusing on higher margin Western Basin gas is improving our capital efficiency and our profitability. Both our adjusted earnings per share and our cash flow per share numbers are up second quarter over first. Well costs are down and returns are improving. The average internal rate of return on wells drilled in Pinedale in our 2015 program will exceed 40% even at today's low commodity price. That's why approximately 90% of our capital budget is being deployed there. Now let me ask is Garland to share financial results. -------------------------------------------------------------------------------- Garland Shaw, Ultra Petroleum Corporation - SVP & CFO [3] -------------------------------------------------------------------------------- Thank you, Mike. This morning we reported adjusted net income for the second quarter of $32.1 million or $0.21 per share. Cash flow from operations was $122 million or $0.80 per share. EBITDA was $165 million. Despite continued depressed oil and natural gas prices during the quarter, we realized a 47% cash flow margin and 63% EBITDA margin. Capital expenditures for the quarter were $135 million. Our overall production for the quarter was 70.5 Bcfe which is a 20% improvement over the second quarter of 2014. Natural gas volumes were at 65.1 Bcf, a 21% increase over the same period last year and our fifth consecutive quarter of growth in natural gas production. This growth is attributable to our Pinedale transaction with Shell last year as well as our continued development program. Our slight increase in gas production over the first quarter of this year was in spite of 2.2 Bcf of shut-in volumes on our Pennsylvania property due to pipeline maintenance. Our oil volumes increased 19% year-over-year to 900,000 barrels with that growth attributable to Pinedale. Average realized natural gas prices of $3.33 per Mcf, including the effect of hedges, was $0.28 per Mcf lower than in the second quarter of 2014. For the quarter, we had 58 Bcf or 89% of our gas production hedged at $3.71 per Mcf. Excluding the effects of hedging, our average wellhead natural gas price was $2.52 per Mcf, $1.71 per Mcf decrease from last year. The second quarter 2015 overall corporate price differential when comparing average wellhead per Mcf prices to first of month Henry Hub prices was $0.13. That compares to a $0.45 differential in the same period last year. This $0.32 per Mcf improvement is due to the fact that only 3% of our total gas production came from the Marcellus this quarter as opposed to 24% in the second quarter of 2014. Allow me to remind you that we have fixed price natural gas swaps in place for 78 Bcf for the months of July through October at $3.71 per Mcf, with approximately 85% of the Company's natural gas production hedged in the third quarter of this year. The average realized oil price for the quarter was $48.64 per barrel which was $40.30 lower than in the same period last year. Differentials to WTI for our Uinta property averaged $12.48 for the quarter while our Wyoming differentials averaged $6.04 per barrel. We expect overall differentials to improve in the third quarter. All in costs for the second quarter came in below the midpoint of our guidance at $3.26 per Mcfe. Cash lease operating costs of $1.02 per Mcfe in the second quarter were down from $1.13 in the same period last year. Our concentration of assets away from the Marcellus continues to be beneficial to our cash margins. For the quarter in Wyoming, our field level margins were $1.86 per Mcfe while in Pennsylvania, they were $0.73 per Mcfe. Without the 2.2 Bcf of gas shut in in Pennsylvania during the quarter, we estimate that the margins would have been around $1.15. In Utah, our cash margins were $4.94 per Mcfe. Finally, in regard to the Company's leverage position, we ended the quarter with net debt of $3.4 billion which is essentially unchanged from the prior quarter. 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 debt to 12 month trailing EBITDA of 2.7 times and with $330 million of liquidity under our revolving credit facility. As you may know, we have a conservative 3.5 times debt to 12 month trailing EBITDA ratio covenant on our subsidiary operating company debt. Our unsecured credit facility is not subject to a fall redetermination. At the parent company, Ultra Petroleum Corporation, 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 second quarter, the ratio was 4.2 times. Under our current planning scenario, we will continue to remain in compliance with all of our debt covenants in 2015. In addition, we expect that our capital expenditure level for the second half of 2015 will be within cash flows. I will pass the call over to Brad now for an update on our operations. -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [4] -------------------------------------------------------------------------------- In Wyoming, Ultra drilled 54 wells in the second quarter. This includes 32 wells from our four rig operating program and another 22 wells from non-operated activity. The Company posted additional cost reductions to Pinedale wells this quarter with an average of $3.1 million per well outperforming our previous year end target of $3.3 million. Wyoming production continues to grow at a pace above forecast with average daily net production up by 4% since last quarter and up 59% since the second quarter of 2014. We plan to maintain the same activity level for the rest of the year and expect Wyoming production to grow another 3% to 5% by year end. In Utah, we suspended our drilling program in early May as planned and we are continuing the deferment of 22 completions. Our teams are prepared to resume activity on short notice but it is more likely that we will not complete wells in Utah until 2016. On May 26, we initiated injection into our waterflood pilot. As a reminder, this pilot includes a design for six injectors and 26 producers covering an area of 600 acres. And it targets several intervals within the lower Green River formation. We've been pleased to observe that injectivity of the wells is more favorable than we modeled and our surface facilities are performing better than expected in terms of both capacity and run time efficiency. Subsequent to startup of the waterflood pilot, down well traits or surveys have been run in each of the five active injectors to measure injection profiles across various intervals. This injection data, along with log and core analysis, validates our petrophysical model. Specifically, we are measuring good injection rates in zones where we have the highest resource potential further bolstering the case for waterflood potential on a fieldwide basis. On a cumulative basis, we have injected over 200,000 barrels of water to date. This represents about 13% of the 1.5 million reservoir barrels of hydrocarbon already produced from this pilot area. We project on a cumulative basis, injection will reach 40% to 50% of what has been produced in this section by year end and anticipate having an indication of reservoir response at that time. In Pennsylvania, production was curtailed significantly in May and June due to a maintenance event not previously forecasted. The curtailment lasted for 60 days causing 2.2 Bcfe of net production to be deferred. Production resumes with a phase ramped up at the beginning of the quarter, and we expect to flow at or near an average of 40 million a day net for the third quarter. With the continued reductions in cycle times in Pinedale, we now expect to drill 138 net wells in 2015. This represents a 24% increase in net well count as compared to our original budget. However, with the significant well cost reductions realized year-to-date and anticipated for the rest of this year, our annual capital is only increasing by 9% to $500 million. As we drill faster and cheaper our returns remain strong in the current price environment. In our news release, we updated Pinedale economics to reflect the lower well costs. At a $3.50 gas price of 5 Bcfe well in Pinedale drilled for $3 million realizes a return of 72%. With the strong returns on Pinedale and the PD10 breakeven price that is now below $1.50, we are planning to maintain our activity counts for the rest of the year and to continue our preparations to ramp up activity in 2016. Despite the 2.2 Bcfe of deferred production from Pennsylvania in the second quarter, we are increasing the midpoint of our production guidance for the second time this year. Our new annual production guidance is 283 to 290 Bcfe. Should curtailment be minimal in Pennsylvania for the rest of the year, we should be at the upper end of that guidance. At this time, Kent Rogers, will share more details on the continued improvements in cycle times and well costs achieved this year. -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corporation - VP of Drilling and Completions [5] -------------------------------------------------------------------------------- Thanks, Brad. Good morning, everyone. Let me begin by reminding everyone where rig activity has gone since our last conference call on April 30. At that time, the US rig count had declined by 929 rigs year-over-year. As of last Friday, the US rig count has further declined by an additional 78 rigs to a current total of 876 working rigs representing a 53.5% drop in rig activity year over year. These reductions within our industry have driven service prices down. Ultra has and will continue to pursue both pricing and productivity improvements throughout the remainder of the year. Our drilling cycle time during the quarter, has reduced by 20% year over year. We now drill Pinedale wells on average of 9.1 days compared to 11.4 days during Q2 of 2014. Once completion operations begin, we are able to simultaneously complete and bring two new wells to production in less than three days. As we indicated in the last call, our average Pinedale well costs have reduced $3.45 million in the first quarter of 2015 from a 2014 average of $3.8 million. We forecast at that time that we would end the year with an average Pinedale well cost of $3.3 million. I am pleased to report that we have exceeded this goal with an average Q2 well cost of $3.1 million representing a reduction of 19% from 2014 averages. I also want to discuss the improvements of efficiency that we have been able to achieve. Our goal at Ultra has always been continual improvements and efficiency long before this drop in commodity prices made it an absolute necessity. It is not a new concept for us only an extension of what we already do and have done for the last several years. When looking at cost reductions and efficiency improvements in all aspects of well construction, we have calculated that 67% of our reductions are the result of cost concessions and 33% are the result of improved efficiencies. We are continually looking at and implementing improvements to our well construction practices that we believe will have a positive effect on performance and ultimately reduce costs. So where do we believe we're now headed? First of all, as we indicated in our last call, we were able to achieve a 28% reduction in rig rates for one rig in our fleet. That reduction was in effect for the entire quarter. As of this week, we have also negotiated a similar reduction for a second ring our fleet which will be effective late in the third quarter. As a reminder, the remaining two rigs in our fleet come up for contract renegotiation in Q4 of this year and Q1 of 2016. Therefore, we are now predicting a year end well cost of $3 million. With that, I will turn the call back. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [6] -------------------------------------------------------------------------------- Thanks, Kent. Let me just mention a couple of other points. First on well count and CapEx. Last quarter, we talked about adding six net wells in Pinedale to our 2015 original drilling plan. We did that with the expectation of no capital budget impact. Now we're adding 21 more for a total of 27 additional net wells in the 2015 plan. That's why we have a CapEx increase, because largely because of productivity improvement. It's a good thing. Normally, we would follow that with more of a production increase in our guidance but we are concerned about possible second half Marcellus curtailments, so we are tempering our enthusiasm. Our CapEx was modestly ahead of our cash flow in the first half of the year but that will reverse in the second half with no Utah drilling and lower Wyoming well costs. Also, second quarter 2015 Wyoming natural gas price was 94% of Henry Hub while Pennsylvania was a paltry 50%. Financially, things are getting better for us. Our second quarter financial performance is better than the first quarter and our debt has actually increased -- has actually decreased. We think the trend continues in the third quarter. Our FY15 year end estimates of EBITDA, cash flow and realized natural gas prices have increased from the first quarter call to now. With the success we are seeing in lowering costs and our constructive view of 2006 natural gas prices, we actually get a chance to smile every now and then. With that, I would like to open the call to questions, Operator. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you. (Operator Instructions) We'll take our first question from Leo Mariani with RBC. Please go ahead, Sir. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [2] -------------------------------------------------------------------------------- Hey, guys. Just a question around next year's plan. You mentioned it that you still plan to ramp things up. Is that predicated upon a higher gas price or even at today's strip might you add activity in 2016? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [3] -------------------------------------------------------------------------------- We've run lots of sensitivities and we start with strip, and then we do sensitivities above and below that. But, no, at strip prices, we still ramp up next year because in every one of our financial sensitivities, increasing activity with the margins that we have causes increased EBITDA. And that's the answer for us. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [4] -------------------------------------------------------------------------------- Okay. I think in the last call you guys mentioned potential asset sales. Any update on that? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [5] -------------------------------------------------------------------------------- No, I think before we talked about we have a little more leverage than we care to have. We're getting more comfortable with that because of improving natural gas prices and our decreasing costs and our margins are improving. But if we were to address -- well so we're more comfortable with it. Although there is, there is a growing benefit if we were to do some sort of asset sale with a debt repayment and a share repurchase. Because it's clear that the asset market has higher valuation right now than the equity market. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [6] -------------------------------------------------------------------------------- Okay, that's helpful. Just in terms of Utah, are you still thinking we need probably closer to that $60 oil before we start fracking wells? -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [7] -------------------------------------------------------------------------------- This is Brad. We definitely are looking for improved pricing from where we are today. It's still a combination of absolute price, differential and cost improvement that we're looking at. Meanwhile, we've directed most of our focus towards the waterflood and implementing that to learn the most from that over the course of this year. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [8] -------------------------------------------------------------------------------- Okay. Thanks, guys. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Thank you. Next, we'll move to Brian Gamble with Simmons & Company. -------------------------------------------------------------------------------- Brian Gamble, Simmons & Company - Analyst [10] -------------------------------------------------------------------------------- Good morning, guys. Maybe to follow that first comment, Mike, ramping activity in 2016, the EBITDA that is created at the returns in Pinedale seem to justify that. What as some of your hedges start to roll off, what correlation is there between your expectation on a base level from cash flow versus spending? Are we still breakeven or creating free cash next year? Or at some activity level, are we slightly outspending over the first half to catch up in the second half? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [11] -------------------------------------------------------------------------------- Well, no. At strip pricing, we would -- CapEx would exceed cash flow in 2016. At pricing closer to 350, which is where we think we're going to be, they're more in balance. -------------------------------------------------------------------------------- Brian Gamble, Simmons & Company - Analyst [12] -------------------------------------------------------------------------------- Great. And then, when we think about curtailments that are actually in the guidance, you're saying -- let me make sure I got it right, lower curtailments than the 2.2 BEs that were in the quarter. So if we cut that in half we can get to the high end of production guidance for the back half of the year? Is that how to read that? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [13] -------------------------------------------------------------------------------- No, I don't think so. Let me try. We've started the year with a guidance range of, 270, 280. So 275 midpoint. In the first quarter, without a CapEx increase, we bump that up to 280 to 290, 285 midpoint. We're not backing away from that. We're slightly increasing it. But we had 2.2 BEs of curtailments in the second quarter. We're looking at a possible 4 to 5 BEs of curtailments in the second half of the year in Marcellus, which doesn't bother us because our cash flow and financial impact, it's kind of a rounding error. But that from a production guidance number, we're just, as opposed to increasing our production guidance for the year, which normally we would be doing again because of the benefit we're getting from higher efficiencies in our Wyoming program. We're just going to play with the bottom end of the range. Didn't increase the top end. We still intend, as Brad said, to be at the high end of the range but we're just mindful that we may have some more Pennsylvania curtailments which from a financial standpoint don't matter. But from an absolute production standpoint, which people tend to over fuss on, we may not quite get there if we bumped it up again. So we're going to be a little cautious. -------------------------------------------------------------------------------- Brian Gamble, Simmons & Company - Analyst [14] -------------------------------------------------------------------------------- Appreciate that. Last one from me, I just want to make sure I heard this correctly. There is no fall redetermination on the subsidiary debt? And if that's right, when is the next redetermination? -------------------------------------------------------------------------------- Garland Shaw, Ultra Petroleum Corporation - SVP & CFO [15] -------------------------------------------------------------------------------- That is correct, there's no fall redetermination. We have a PB9 covenant that we run that test in April typically. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [16] -------------------------------------------------------------------------------- But effectively, we have no redetermination ever on the revolver. The PB9 covenant that we have to honor and that's it. So we're in good shape. This stress about some kind of fall redetermination is for naught. -------------------------------------------------------------------------------- Brian Gamble, Simmons & Company - Analyst [17] -------------------------------------------------------------------------------- Sounds good, guys. I appreciate it. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Next, we will move to Noel Parks with Ladenburg Thalmann. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [19] -------------------------------------------------------------------------------- Good morning. With the waterflood pilot in the Uinta, there was some mention made about the response in the individual zones being about what you were looking for or better than what you were looking for. Could you just go over that again? -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [20] -------------------------------------------------------------------------------- Sure. This is Brad. The two things we wanted to emphasize today was first, we did initiate injection and what we're seeing in the injection rates and the injectivity of these wells were better than we expected, which is a good thing. The second key takeaway for us this past quarter is that when we ran tracer surveys down into these injection wells and measured the injection profiles, the results that we measured make sense. In other words, the high quality zones are getting high levels of proportionate injection. So that's also a very good thing. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [21] -------------------------------------------------------------------------------- Okay. Great. And as far as the cost improvements that you have seen in Pinedale, looking ahead into next year on the efficiency front, are there any particular goals you have or ideas you're looking to implement going forward? -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corporation - VP of Drilling and Completions [22] -------------------------------------------------------------------------------- Hey, Noel. This is Kent. We're continually -- like I said in my prepared statement, we're always continuing to look for improvements. So I personally have a goal and my goal will always be, if we're at nine days, my goal will be less than that. I promise you. So just keep an eye out for us, and you will see us, I think. We always have, we'll continue to improve. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [23] -------------------------------------------------------------------------------- Okay. Great. And just thoughts on the service cost side? Do you think we've seen about as much give back on pricing as we're going to see at this point? -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corporation - VP of Drilling and Completions [24] -------------------------------------------------------------------------------- No, we don't. We think there will be more, particularly if commodity prices stay low. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [25] -------------------------------------------------------------------------------- Okay. And relative to what -- to how you've modeled costs for the rest of the year, does the budget assume that the cost decreases you've seen to date are sustained the rest of the year? Does it assume some further softening? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [26] -------------------------------------------------------------------------------- Actually, we're using for well cost a slightly higher number than what we've achieved in the second quarter. And I don't think Kent served himself well by not sharing what he did in June as to well cost. -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corporation - VP of Drilling and Completions [27] -------------------------------------------------------------------------------- Should I go ahead and share that? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [28] -------------------------------------------------------------------------------- Sure. -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corporation - VP of Drilling and Completions [29] -------------------------------------------------------------------------------- We did well cost in June of $2.83 million. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [30] -------------------------------------------------------------------------------- So we're using a higher well cost for the capital budget numbers going forth for the remainder of the year than what we achieved in the second quarter on average. And our most recent data point at the end of the second quarter was a number less than what our average was for the quarter. So we think we're being very conservative financially with that. -------------------------------------------------------------------------------- Noel Parks, Ladenburg Thalmann & Company Inc. - Analyst [31] -------------------------------------------------------------------------------- Great. That's what I was hoping to get at. That's all for me. Thanks. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- Thank you. Next we'll move to Tim Rezvan with Sterne, Agee. -------------------------------------------------------------------------------- Tim Rezvan, Sterne, Agee & Leach, Inc. - Analyst [33] -------------------------------------------------------------------------------- I wanted to talk on leverage a bit. You break out the covenant on the subsidiary debt on that $2.13 billion. If we look at a $3 gas price or we use the strip, you can get to a scenario in early 2016 where you all are going to hit or exceed that 3.5 times limit. I was curious, is that -- what are your thoughts on that environment playing out or what options you have around that? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [34] -------------------------------------------------------------------------------- Well, Tim, we don't think that's what happens, but nonetheless, let's just kind of talk about our debt. We've got debt at the subsidiary company and the parent company of the more restrictive covenant, and frankly, the only debt we can repay is at the subsidiary company. The simplest thing for us to do to cause you not to be too concerned in the future is to move debt from the subsidiary company to the parent. If we were overall comfortable with our debt level, we just borrowed the more the parent and pay it back at the sub under the revolver, and we just move on. So there is no risk of tripping up that covenant. I just want to remove that. There's no risk. And secondly, we can either do asset sales and debt repayment and share repurchases associated with that, which is kind of a neat idea. All our sensitivities say that's how we really enhance our per share metrics going forward. Or an equity offering, which doesn't make any sense in this environment, given that asset values are way above equity values. But the simplest thing is just to move, if we were comfortable with total outstanding debt levels, is just to move some debt from the sub to the parent. Okay? Got that? -------------------------------------------------------------------------------- Tim Rezvan, Sterne, Agee & Leach, Inc. - Analyst [35] -------------------------------------------------------------------------------- I do have that, but the challenge you have out there is people do see a credit facility that's two-thirds drawn in an environment where investors are shunning leverage heavy companies. So that's kind of the rationale behind that. And if you were to make that transfer, you still have $100 million maturing later this year, is that correct? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [36] -------------------------------------------------------------------------------- No, not until next year. We've got $62 million. -------------------------------------------------------------------------------- Tim Rezvan, Sterne, Agee & Leach, Inc. - Analyst [37] -------------------------------------------------------------------------------- $62 million next year. Okay. So that in essence could be rolled up into the parent as well? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [38] -------------------------------------------------------------------------------- Sure. It can all be moved to the parent. So it's just -- I understand your point about short-term equity investors being focused on leverage companies and I get that. But the reality is, our leverage position isn't causing any harm. -------------------------------------------------------------------------------- Tim Rezvan, Sterne, Agee & Leach, Inc. - Analyst [39] -------------------------------------------------------------------------------- Sure. It's a fine line, and it sort of restricts your optionality. But I appreciate the color there. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [40] -------------------------------------------------------------------------------- We're talking about ramping up activity next year. So again, it's just a trading opportunity for folks unfortunately. And we tend to be trading on oil prices, not gas prices. And we are a natural gas company. -------------------------------------------------------------------------------- Tim Rezvan, Sterne, Agee & Leach, Inc. - Analyst [41] -------------------------------------------------------------------------------- I appreciate that color. Just to clarify your earlier comments. You're signaling you should be free cash flow positive in the back half of the year? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [42] -------------------------------------------------------------------------------- Yes, Sir. -------------------------------------------------------------------------------- Tim Rezvan, Sterne, Agee & Leach, Inc. - Analyst [43] -------------------------------------------------------------------------------- Okay. I guess that's all I had. Thank you. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [44] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- Next we will move to Ron Mills with Johnson Rice. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [46] -------------------------------------------------------------------------------- Hey, Mike, or maybe for Garland, when you look at being cash flow positive in the second half of the year, how much of your $500 million have you spent in the first half versus what's planned in the second half? Your Q is not out, so just curious. -------------------------------------------------------------------------------- Garland Shaw, Ultra Petroleum Corporation - SVP & CFO [47] -------------------------------------------------------------------------------- Our CapEx for the first half is around $268 million out of the $500 million. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [48] -------------------------------------------------------------------------------- Call it $270 million. Let's take $268 million. So more than half in the first half of the year of the $500 million. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [49] -------------------------------------------------------------------------------- Brad, thanks for giving at today's well cost the new PB10 breakeven price of less than $1.50 versus the $1.78 was at in April when you had your conference call. Is that lower breakeven price, is that purely a function of going from the $3.45 million well cost down to $3.1 million? Or is that assuming the year end target which it sounds like you're already lower than of $3 million? -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [50] -------------------------------------------------------------------------------- Yes, the breakeven for a $3 million well is $1.48. And that's what I'm referencing. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [51] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [52] -------------------------------------------------------------------------------- Last quarter was the $3.4 million well cost, $1.70. And that's a PV10 breakeven. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [53] -------------------------------------------------------------------------------- On the IRRs that you talked about, I know in April you all provided IRR sensitivity a little bit differently with different gas prices. Just to be more on par with what you all talked about three months ago, the 72% IRR you talk about for a 5 Bcf $3 million well cost, what does that look like relative to -- at $2.50 and $3 relative to the 27% and 39% IRRs you presented three months ago with a higher well cost, or do you have that handy? -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [54] -------------------------------------------------------------------------------- Sure, I can comment on that. I've got both tables here in front of me. First, I will start with the table we showed last quarter. And the purpose of the table last year of varying gas price was really to emphasize the resiliency of Pinedale investment opportunities in a falling gas price. And so, you will see we fixed the well cost at $3.4 million last quarter, and varied the well cost. And look at $2.50 gas just to see and demonstrate the resiliency of returns in Pinedale. Also the resiliency of our reserve base. This quarter with frankly, the very significant well cost reductions, two quarters in a row, we wanted to emphasize the impact of returns in a positive manner with reduced well costs. And so that's how we showed it this quarter. If you think about looking at $3 million well costs at lower prices below $3.50, you really to have kind of glance at both tables and think about extrapolating those results. But they would certainly be better than the returns we showed last quarter. For example, $2.50 gas price, $3.4 million well cost, we were showing 27% return. It would certainly be in the 30s or more at $3 million well cost. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [55] -------------------------------------------------------------------------------- We can provide that for you at different gas prices. It's not an issue. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [56] -------------------------------------------------------------------------------- Just the difference in presentation. I just wanted to make sure that that point got across, that and the lower PV10 breakeven, especially as you talk about drilling more wells, not just in the second half but ramping activity next year. And then lastly, on the revolver, I understand it's unsecured and no redetermination. But I think that the revolver matures at some point at the end of next year. Where are you in the negotiation phase of a new maturity or a new revolver? -------------------------------------------------------------------------------- Garland Shaw, Ultra Petroleum Corporation - SVP & CFO [57] -------------------------------------------------------------------------------- We're always talking to our banks, but we haven't started any formal renegotiation yet. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [58] -------------------------------------------------------------------------------- All right. Perfect. Thank you, guys. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [59] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- Thank you. Next we will move to Bob Christensen with Imperial capital. -------------------------------------------------------------------------------- Bob Christensen, Buckingham Research Group - Analyst [61] -------------------------------------------------------------------------------- Thanks. I am using -- and I don't want to force you on this -- 16, I'm using CapEx of $700 million, but with the kind of cost reductions we're seeing, I would think it would be materially underneath that. What is your response to that? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [62] -------------------------------------------------------------------------------- I think we would agree with you, Bob. -------------------------------------------------------------------------------- Bob Christensen, Buckingham Research Group - Analyst [63] -------------------------------------------------------------------------------- Okay. Thank you. The second is one is, can you dispel some of the notions out there of Appalachian gas winding back into the Rockies? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [64] -------------------------------------------------------------------------------- I could try. We have -- I guess we have about to happen the larger bidirectional flows of Rex East which allows some Appalachian gas to get to the Midwest markets. But that's as far as Appalachian gas can go, is Midwest markets. We don't see any economics for folks wanting to take Appalachian gas to the far end of the western end of Rex which would get you the Rocky Mountains, which doesn't have any demand. So then you would have to pay additional transport to go from there to the west coast or something like that. So I don't think there's any economic logic to that. The other point I want to make in terms of folks are concerned with our ability to compete with the Appalachian gas, for example. You heard Brad's comments about our low breakeven PV10 number, sub $1.50 now with our well costs, and we think our well costs are going lower yet. There was a piece put out by another firm in April of this year that was entitled 2014 Appalachian E&P pricing/costs where they had a margin calculation for nine of their covered Appalachian companies. And we just kind of took ourselves and put our numbers on that same table, and in terms of margin calculation without beneficial hedges and without any NGL uplift, based on 2014 numbers, we were number three on that list of margins. So, our costs are going down. Unfortunately for those folks their costs are going to go up with all their additional pipeline transport costs. So we don't have any issue with competing with those folks and we'll be glad to compete in the Midwest. But Western Basin gas is decreasing. I think someone had a piece out last week talking about Rockies gas was up, but Rockies gas is a small piece. They were talking about DJ basin and Niobrara essentially. Western Basin gas is down since 2012 and continues to decline. So we have ample markets for our decreasing supplies in the west. We can compete very favorably with the Appalachian players. -------------------------------------------------------------------------------- Bob Christensen, Buckingham Research Group - Analyst [65] -------------------------------------------------------------------------------- And my final question is on your comment about if there was something sold non-core, the ability to do debt pay down and share repurchase. Is this something where you say to yourself, I'll keep my leverage ratios the same, I'll do it in equal portion on one and the other and 50/50, and we come out looking the same on a leverage basis? Is that the -- I don't understand share repurchase with the amount of debt you have. I suppose it could happen. It's a cheap share price. I don't know. Help me on that. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [66] -------------------------------------------------------------------------------- Well, there you go. You start with a cheap share price and work backwards. Like last week, our stock price was down 18% and gas prices didn't move, so it doesn't make sense. We're doing a lot of work on alternative ideas and opportunities, and it's clear to us that an asset sale could be a excised to where we could pay off a big chunk of debt and have sufficient funds to buy back a bunch of stock. And that although our absolute metrics going forward in terms of absolute production, absolute EBITDA, absolute cash flow would be down, our per share metrics would be enhanced. And we're focused on per share, not on absolutes. So there's a lot of -- because there's just a misalignment between the equity values and the asset values right now, on the natural gas side, which is where we're focused. -------------------------------------------------------------------------------- Bob Christensen, Buckingham Research Group - Analyst [67] -------------------------------------------------------------------------------- Beautiful. Thank you. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [68] -------------------------------------------------------------------------------- You're welcome. -------------------------------------------------------------------------------- Operator [69] -------------------------------------------------------------------------------- Thank you. Next we'll move to Marshall Carver with Heikkinen Energy. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy - Analyst [70] -------------------------------------------------------------------------------- On the additional wells being drilled in the Pinedale, how many of those do you expect to complete this year and put on sales or do you plan on lowering some of those into 2016 and completing them then? -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [71] -------------------------------------------------------------------------------- Nearly all of them. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy - Analyst [72] -------------------------------------------------------------------------------- Nearly all of them will be completed with the sale this year? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [73] -------------------------------------------------------------------------------- Yes -- -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [74] -------------------------------------------------------------------------------- We don't anticipate significant carry over. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [75] -------------------------------------------------------------------------------- The ones drilled in December may not be completed in December, but, yes, the plan is to get them all done. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy - Analyst [76] -------------------------------------------------------------------------------- Thank you. And one more question. So service resumed on the pipeline at the end of the second quarter in Pennsylvania. Is your thoughts around potential shut-ins in the back half of this year more pricing related or just the potential for more pipeline issues? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [77] -------------------------------------------------------------------------------- Marshall, it's pricing, and it's -- we don't operate our remaining Marcellus position. Anadarko does. They own 35%, Mitsui 15%, we're 50%. It's unfortunate that the larger work interest owner doesn't operate it because clearly our cost would be less than theirs. But they have shown increased propensity to shut in there for whether it's for economic reasons or whether it's for managed volume reasons or whatever it is. And if they want to shut in again for a non pipeline gathering system issue, we have to decide if we want to go out of balance with them. And so, we're just not -- we haven't firmly decided because they're making noises like they want to shut in again. We'll see. We haven't firmly decided we want to go out of balance with them at this time in the commodity cycle. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy - Analyst [78] -------------------------------------------------------------------------------- That's helpful. Thank you. -------------------------------------------------------------------------------- Operator [79] -------------------------------------------------------------------------------- Thank you. Our next question will come from Andrew Coleman with Raymond James. -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [80] -------------------------------------------------------------------------------- Good morning. Thanks for taking my questions. Firstly, just a followup to Marshall's. Can you explain just how long can you be out of balance? And is that to be resolved in the quarter if you decide to do that or is that something that can expand over the quarterly period? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [81] -------------------------------------------------------------------------------- You can be out of balance until the depletion of the well. -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [82] -------------------------------------------------------------------------------- Okay. Fair enough. I guess three other questions. The first one was just looking at the updated cost guidance for Q3 given that the waterfloods have started up. Is that water injection cost baked into the LOE? -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [83] -------------------------------------------------------------------------------- I would say no. I do want to point out that we expect LOE to go down as we continue to inject. So there's an opportunity for the LOE to be less. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [84] -------------------------------------------------------------------------------- Let me ask your question differently, Andrew. Do we expect the benefit of the water injection to be reflected in third quarter LOE? -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [85] -------------------------------------------------------------------------------- So it's being capitalized right now. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [86] -------------------------------------------------------------------------------- No, it's not being capitalized. -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [87] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [88] -------------------------------------------------------------------------------- I think the answer is we haven't baked in the full reduction in LOE subject to water injection. We're paying to dispose of water now. We're just reinjecting it. So we have a small operating cost relative to a larger disposal cost. Actually, our LOE is coming down and I don't think that's fully baked in. -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [89] -------------------------------------------------------------------------------- I guess I'll start on -- Brad, another question for you, you are talking about the (inaudible)replacement. 20% now over the last couple of months and you said the target is to get to 50% by year end. -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [90] -------------------------------------------------------------------------------- That's right. -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [91] -------------------------------------------------------------------------------- And then, is there any reason that we wouldn't get there a bit sooner? It sounds like you've been injecting for a couple of months to get to that 20%. -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [92] -------------------------------------------------------------------------------- It's certainly possible, Andrew. We've been injecting over 4,500 barrels a day consistently. And our objective right now is we're trying to get original reservoir pressure restored. And we anticipate that at about that 40% to 50% mark, we should start seeing response in multiple wells at that time that we could share. -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [93] -------------------------------------------------------------------------------- Okay. And is that -- I haven't looked at the literature, but is it possible that you could see at a lower replacement rate? Or what are the analogs that are out there on the basin? -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [94] -------------------------------------------------------------------------------- Yes, it's certainly possible. And I would say that estimate is conservative. -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [95] -------------------------------------------------------------------------------- Thanks a lot. The last question was, as I think about the mix of the production getting into really into 2016, it is going to stay in the 90% there for gas. But as the waterflood kind of starts up and then looking potentially into 2017 when you start having NGL sales being out of Pinedale, could you give us a guess as to how that mix might change over the next couple of years? -------------------------------------------------------------------------------- Brad Johnson, Ultra Petroleum Corporation - SVP of Operations [96] -------------------------------------------------------------------------------- It won't significantly change in 2016. It will feather in in 2017 and beyond as we continue our plans to expand that waterflood. Right now, we're just flooding 600 acres. So that oil increase is still a couple of years down the road. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [97] -------------------------------------------------------------------------------- We have a pretty negative view towards oil prices. We think we're in the -- certainly sub $6 world in 2016, if not lower. So we're not -- it's a good time to do the pilot, learn what we can and probably get ourselves positioned so that we have some increasing production in 2017 and 2018, not in 2016. Not on the well side. -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [98] -------------------------------------------------------------------------------- On the NGL side, very minor of course if the NGL market's challenged here at the current time. You think it's on the order of 5%, plus or minus, or you think a little more than that if you start getting Pinedale NGL sales? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [99] -------------------------------------------------------------------------------- I don't think we've really effectively modeled that for you. So I don't think we have that number. It's a good question, though. -------------------------------------------------------------------------------- Andrew Coleman, Raymond James & Associates, Inc. - Analyst [100] -------------------------------------------------------------------------------- Fair enough. Thank you very much. -------------------------------------------------------------------------------- Operator [101] -------------------------------------------------------------------------------- Next we'll move to Joshua Gale with GMP. -------------------------------------------------------------------------------- Joshua Gale, GMP Securities - Analyst [102] -------------------------------------------------------------------------------- Good morning. I think you've answered this question a couple different ways already but just wanted to ask, the additional wells that will be drilled in the second half of the year, what contribution that made, do you expect those extra wells to make? I'm looking at like 7 or 8 BEs. Does that sound about right? -------------------------------------------------------------------------------- Kent Rogers, Ultra Petroleum Corporation - VP of Drilling and Completions [103] -------------------------------------------------------------------------------- That sounds about right. We think we're going to be at the upper end of guidance notwithstanding curtailment in PA. So when you look at a 288, 289 number back against previous guidance, the number you suggest is certainly in range. -------------------------------------------------------------------------------- Joshua Gale, GMP Securities - Analyst [104] -------------------------------------------------------------------------------- Right. Then just on thoughts about hedging into 2016. Heard loud and clear that you expect $3.50 gas prices next year. So you're obviously not doing swaps right now. But wondering with your breakevens being lower on well cost reductions, if you just consider structures like protecting the downside where you do some collars, where you have -- you are selling at $3.50, and then you have a costless collar with a floor? Just in light of the CapEx increase. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [105] -------------------------------------------------------------------------------- You're just asking us would we consider those options? Certainly we would consider them. Yes. -------------------------------------------------------------------------------- Joshua Gale, GMP Securities - Analyst [106] -------------------------------------------------------------------------------- Okay. That's all I had. Thank you. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [107] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [108] -------------------------------------------------------------------------------- Thank you. Our next question will come from Brian Singer with Goldman Sachs. -------------------------------------------------------------------------------- Brian Singer, Goldman Sachs - Analyst [109] -------------------------------------------------------------------------------- Thanks. Good morning. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [110] -------------------------------------------------------------------------------- Good morning. -------------------------------------------------------------------------------- Brian Singer, Goldman Sachs - Analyst [111] -------------------------------------------------------------------------------- Most of my questions have been answered, but on the Rockies natural gas differentials, is your bullishness in the face of more Appalachian gas heading toward Chicago a function of the demand side of the equation on the west coast or more that your peers in the Rockies as well as in Canada will be seeing declining production over the next few years? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [112] -------------------------------------------------------------------------------- I don't think we have -- we do see demand increases, Brian. We don't see those in 2016. They come subsequent to that. But we mix in demand increases like exports to Mexico that would displace some southern Western Basin gas. So we have a different view, a wider view of Rockies. And we don't move a lot of gas historically if you look out over the last four or five years into the Midwest. We did a little more so this winter, but historically, our Rex capacity has gone unused. And so the -- we're not like the folks like in the DJ and the Niobrara they're kind of limited in outlets. They have to go to CIG and some of these lower priced outlets and probably more directly compete with some of the Appalachian stuff. We don't have that limitation. So we see continued supply decrease. We've tracked it since 2012. It keeps coming down. And our probably major competition is more Canada and they're certainly not increasing supply. So we see continued supply decrease more so than demand increase. -------------------------------------------------------------------------------- Brian Singer, Goldman Sachs - Analyst [113] -------------------------------------------------------------------------------- Great, thanks. Going because to the balance sheet, just wanted to fully understand your comfort with where you are. It sounds like it's not necessarily because you see enough free cash flow to pay down substantial debt. It's more because you could keep CapEx and cash flow in balance and manage the limited debt coming due in 2016? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [114] -------------------------------------------------------------------------------- Yes, all the models we run based on strip pricing or other sensitivities, the best outcome for the equity players is that we don't pay back any debt. We just keep debt constant and let it go up a little bit as our EBITDA goes up because even the strip prices show increased gas prices over time. Lower net -- over time. So all those, they all trend towards the same answer. It's not necessarily what we'll do, but we're not uncomfortable just having debt stay where it is and growing EBITDA. -------------------------------------------------------------------------------- Brian Singer, Goldman Sachs - Analyst [115] -------------------------------------------------------------------------------- Well, I guess in that regard, the more levered you are in a rising price environment, the better. But is there some more either price neutral or target type debt to EBITDA that you would want to get to and expect to get to over the next year and a half? -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [116] -------------------------------------------------------------------------------- No. -------------------------------------------------------------------------------- Brian Singer, Goldman Sachs - Analyst [117] -------------------------------------------------------------------------------- All right. Thank you. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [118] -------------------------------------------------------------------------------- Bye. -------------------------------------------------------------------------------- Operator [119] -------------------------------------------------------------------------------- Thank you. And our next question comes from Matt Carey from Kornitzer Capital. -------------------------------------------------------------------------------- Matt Carey, Kornitzer Capital - Analyst [120] -------------------------------------------------------------------------------- Thanks for taking the question. Just wanted to ask how much your drilling this year is being done to maintain leases. Thanks. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [121] -------------------------------------------------------------------------------- Zero. -------------------------------------------------------------------------------- Matt Carey, Kornitzer Capital - Analyst [122] -------------------------------------------------------------------------------- Okay. Great. Thank you. -------------------------------------------------------------------------------- Operator [123] -------------------------------------------------------------------------------- Thank you. And it appears we have no further questions at this time. -------------------------------------------------------------------------------- Mike Watford, Ultra Petroleum Corporation - Chairman, President & CEO [124] -------------------------------------------------------------------------------- Well, thank you all for -- excuse me. Thanks to all who participated on the call. We appreciate it. If you have any additional questions, I think Sandi Kraemer will be available, either e-mail or phone call, and we still plan to file our Q later today. So thank you very much. -------------------------------------------------------------------------------- Operator [125] -------------------------------------------------------------------------------- Thank you. This does conclude today's conference. You may disconnect anytime.
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