Ultra Petroleum Reports Record 2007 Production of 121.3 Bcfe and Record
Earnings of $263.0 Million
HOUSTON, Feb. 19 /PRNewswire-FirstCall/ -- Ultra Petroleum Corp.
(NYSE: UPL) today reported record financial and operating results for both the
fourth quarter and full-year 2007.
Ultra Petroleum's total natural gas and crude oil production for the year
ended December 31, 2007, increased 32 percent to a record high of 121.3
billion cubic feet equivalent (Bcfe) compared to 91.6 Bcfe in 2006. Both
periods include production from China until the sale of Sino-American Energy.
Production for 2007 is comprised of 109.2 billion cubic feet (Bcf) of domestic
natural gas, 870.1 thousand barrels (Mbls) of domestic crude oil, and 1,153..3
Mbls of crude oil from China operations. Including the effects of hedging,
realized domestic natural gas prices for 2007 were $4.66 per thousand cubic
feet (Mcf) as compared to $6.00 per Mcf in 2006. Domestic condensate prices
realized were $66.08 per barrel (Bbl) as compared to $64.52 per Bbl in 2006..
China crude oil prices realized in 2007 were $56.21 per Bbl as compared to
$52.40 per Bbl in 2006.
Earnings for the year-ended December 31, 2007, increased 14 percent to a
record $263.0 million, or $1.66 per diluted share, as compared to $231.2
million or $1.43 per diluted share for the same period in 2006. Total
operating cash flow(1), including discontinued Sino-American operations,
increased to an all time high of $453.3 million for the year-ended December
31, 2007, versus $431.9 million for the same period in 2006.
"In 2007, Ultra Petroleum achieved record production, record earnings, and
record cash flow while receiving a $4.66 per Mcf realized natural gas price -
a 22 percent decline from 2006's realized natural gas price. Our all-in costs
of $2.61 per Mcfe are the lowest in the industry. Even with the low natural
gas prices we continue to deliver sector leading returns with a 32 percent net
income margin from continuing operations and a return on capital of 27
percent," commented Michael D. Watford, Chairman, President and Chief
Executive Officer. "Our committed team remains focused on delivering superior
financial performance while remaining true to our strategy of investing in
profitable growth," Watford added.
Total consolidated production in the fourth quarter of 2007 increased 18
percent to 33.6 Bcfe which compares to 28.4 Bcfe, including discontinued
operations from China, in the fourth quarter of 2006. The fourth quarter 2007
period does not include China production. Production for the fourth quarter
2007 is comprised of 32.0 Bcf of domestic natural gas and 255.3 MBbls of
domestic condensate. Domestic natural gas prices realized for the fourth
quarter of 2007, including the effects of hedging, were $4.42 per Mcf, a
decrease from $5.62 for the same period in 2006. Domestic condensate prices
were $79.84 per Bbl compared to $57.06 per Bbl in the fourth quarter of 2006.
Earnings for the fourth quarter ended December 31, 2007 increased
82 percent to $110.0 million, or $0.70 per diluted share, as compared to
$60.6 million, or $0.38 per diluted share for the same period in 2006. Total
consolidated operating cash flow(1), was $120.4 million for the fourth quarter
2007, versus $118.1 million for the same period in 2006.
Operational Highlights
For the year-ended December 31, 2007, Ultra drilled 212 gross (105.01 net)
wells. In Pinedale, the company averaged 35 days per well spud to total depth
(TD) as compared to its 61 days per well average for 2006. This is a 43
percent improvement over 2006. During the fourth quarter of 2007, Ultra
achieved a new record in drilling time in the Pinedale Field. Ultra drilled
the Warbonnet 4D1-9 well from spud to a TD of 13,175 feet in 17.5 days,
surpassing the previous record of 18.6 days. Encompassing all of the company's
Pinedale operations in 2007, 75 percent of the wells were drilled spud to TD
in 40 days or less. Prior to 2007, the record time was 41 days spud to TD.
These improvements in drilling times have been achieved largely due to the use
of Oil Based Mud (OBM), the implementation of new drill bit technology, and
upgrades in the rig fleet.
During the fourth quarter of 2007, Ultra brought on-line 49 gross (23.00
net) new producing wells in Wyoming. Since the first of the year, 193 gross
(89.90 net) new producing wells were placed on production. This compares to
124 gross (57.23 net) for 2006.
In 2007, the average 24-hour delivery rate of the new Pinedale wells was
8.8 million cubic feet of gas (Mmcfg) per day with a maximum of 20.8 Mmcfg per
day. The maximum was achieved on the Ultra operated Mesa 3B-34D. The average
of the Ultra operated wells was 9.6 Mmcfg per day while the average of the
Ultra interest non-operated wells was 8.2 Mmcfg per day.
At the end of 2007, in the Pinedale Field, Ultra had 11 operated rigs
drilling while its partners were running an additional 12 rigs on Ultra
interest lands. Five of the 11 Ultra rigs are skid capable at year-end. There
were 4 gross (3.02 net) wells being completed and 19 gross (9.48 net) wells
waiting on completion at the end of 2007.
The company's ongoing delineation program is in full swing with five rigs
now drilling wells as part of this project. At the present time, there are
over 100 identified quarter sections (160 acres) for delineation drilling in
and around the Pinedale Field. Current plans call for continuing the
delineation drilling effort for at least the next five years in ongoing
efforts to fully define the ultimate potential of this gigantic asset.
Thirteen of the planned seventeen delineation wells for 2007 have sufficient
production history to be able to estimate reserves. For these 13 wells,
reserves averaged 31 percent better than the year-end 2006 reserve estimates
by Netherland Sewell and Associates (NSAI). These results are expanding the
resource size and our early 2008 delineation results are continuing to show
significant success.
Included in the delineation wells, the Boulder 9B1-19 on the east side of
the Boulder area came on with a 24-hour flow rate of 11.6 Mmcfg per day and
has been given an 8.6 Bcfe Estimated Ultimate Recovery (EUR) by NSAI at
year-end 2007. Further to the south, the Boulder 10D-32 came on at a flow rate
of 11.9 Mmcfg per day and received a 6.8 Bcfe year-end 2007 EUR from NSAI. The
combination of these wells on the east side of Pinedale expands Ultra's
reserve mapping and removes the area previously known as the "Boulder Gap". An
additional delineation well on the west side of the Field, the Riverside
10C1-25, came on with a 24 hour flow rate of 9.8 Mmcfg per day, expanding the
western edge of the Field.
In 2007, Ultra initiated a program to evaluate the effectiveness of
completing the "non-sand" section of the Pinedale Field. To date, 19 wells
have been completed with additional "non-sand" stages, and production logs
have been run on 12 of these wells. These production logs indicate that the
flow rates from the 63 additional frac stages pumped in this test have
averaged over 100 Mcf of gas per day per stage. On eight of the twelve, the
company has run a second production log. These logs confirm that the
"non-sand" stages are performing similarly to typical Lance sand intervals.
Should this production performance continue like the typical Lance completion,
these zones would appear to add materially to the overall reserves and
production at only the additional cost of the extra frac jobs. It is still
early in the process and additional testing will be needed to prove the
potential value that can be added from this work. However, early results are
very encouraging.
Ultra continues to move ahead at the Mesa 10D-33 deep exploration well.
The top of the Blair was encountered at 16,204 feet. It appears this section
contains a significant thickness of potential pay-sand and has better porosity
than encountered at the Stewart Point 15-29 deep exploration well. The well is
currently at 17,878 feet in the Blair with an expected TD of 19,500 feet by
early March 2008.
The Revised Draft Supplemental Environmental Impact Study (SEIS) was
issued by the Bureau of Land Management (BLM) in late December 2007 followed
by a public comment period. The public comment period closed February 11,
2008. It is anticipated that the BLM will issue the Record of Decision mid-
year 2008. With this, Ultra Petroleum gains access year-round to the Pinedale
Field for drilling and completion activities.
"The opportunity to drill and complete wells year-round on additional
acreage in Pinedale that is currently off-limits in the winter would
significantly increase our ability to accelerate development. All of this
would be accomplished while ensuring preservation of significant undisturbed
wildlife habitat in the area," commented Watford.
Rockies Express Pipeline Update
The Rockies Express Pipeline (REX) commenced interim service in mid-
January 2008, for deliveries from Opal, Wyoming to the ANR delivery point in
Kansas. It is expected that in the next few weeks, REX will become fully
operational from Opal to the Panhandle Eastern Pipeline interconnect in
Audrian County, Missouri. REX is significant to Ultra, an anchor shipper,
because it is the first time in the company's history that it is delivering
significant portions of its natural gas east of the Rocky Mountains. In 2009,
REX will move gas from the midwest into the northeast. Since the pipeline
became operational, the significant increase in take-away capacity from the
Rockies has permitted Ultra to benefit from increasing Wyoming natural gas
prices.
Share Repurchase
During the year-ended December 31, 2007, Ultra Petroleum repurchased
1,696,492 shares of its common stock for an aggregate $96.3 million at a
weighted average price of $56.76 per share. Since the program's inception in
May 2006, the company has repurchased 5.7 million shares of its common stock
for an aggregate $294.5 million at a weighted average price of $51.73 per
share. Total shares outstanding for the company as of December 31, 2007 were
152,003,671.
Hedging
As of today, Ultra Petroleum has the following open commodity derivative
contracts in place to manage price risk on a portion of its natural gas
production whereby the company receives the fixed price and pays the variable
monthly index price. All prices are Northwest Pipeline Rockies basis.
Remaining Contract Volume - Average Price per
Type Period mmbtu/day Mcf/mmbtu
Swap Apr 2008 - Oct 2008 120,000 $7.23 Mcf/$6.76 mmbtu
Swap Jan 2009 - Dec 2009 30,000 $7.86 Mcf/$7.35 mmbtu
In addition to derivative contracts, Ultra Petroleum also utilizes fixed
price forward physical delivery contracts at southwest Wyoming delivery points
to hedge its commodity price exposure. As of today, the company has the
following fixed price physical delivery contracts in place on behalf of its
interest and those of other parties. In November 2007, the Minerals Management
Service commenced a Royalty-in-Kind program which had the effect of increasing
the company's average net interest in its physical gas sales from 80 percent
to approximately 91 percent.
Remaining Volume - Average Price per
Type Contract Period mmbtu/day Mcf/mmbtu
Forward Sale Calendar 2008 100,000 $7.31 Mcf/$6.83 mmbtu
Forward Sale Summer 2008 20,000 $7.36 Mcf/$6.88 mmbtu
Forward Sale Calendar 2009 10,000 $8.04 Mcf/$7.51 mmbtu
Forward Sale Summer 2009 70,000 $7.25 Mcf/$6.78 mmbtu
In summary, the total net volume hedged for 2008 currently is 64.25 Bcfe
at an average price of $7.08 per Mcf and in 2009, the total net volume hedged
currently is 28.6 Bcfe at an average price of $7.83 per Mcf.
Other Highlights During the Year
On September 27, 2007, the company announced the execution of a stock
purchase agreement for the sale of Sino-American Energy Corporation which
represents all of Ultra's interest in Bohai Bay, China for $223.0 million.
Proved reserves at year-end 2006 for Sino-American, as measured by Ryder Scott
Company, were approximately 4.0 MMBbls which represented 1 percent of Ultra's
total booked proved reserves at December 31, 2006. Despite having owned
Sino-American since 2001, under generally accepted accounting principles
("GAAP"), its operations have been reclassified as "Discontinued Operations" for 2007 and prior years. As a result, production, revenues and expenses
associated with Sino-American have been removed from continuing operations and
reclassified to discontinued operations. The sale closed on October 22, 2007,
with an effective date of June 30, 2007. The purchaser of Sino-American Energy
Corporation is SPC E&P (China) Pte Ltd, a wholly-owned subsidiary of Singapore
Petroleum Company Limited.
"We are pleased with the value received for the non-core asset. We are now
turning our full attention to Ultra's legacy asset, the Pinedale Field, one of
the nation's largest natural gas fields," commented Watford.
Conference Call Webcast Scheduled for February 20, 2008
Ultra Petroleum's fourth quarter and full year 2007 conference call will
be available via live audio webcast at 11:00 a.m. Eastern Standard Time
(10:00 a.m. Central Standard Time) Wednesday, February 20, 2008. To listen to
this webcast, log on to http://www.ultrapetroleum.com. The webcast will be
archived on Ultra Petroleum's website through May 4, 2008.
Financial tables to follow.
Ultra Petroleum Corp.
Consolidated Statement of Operations
(unaudited)
All amounts expressed in US$000's
For the Twelve Months For the Quarter Ended
Ended
31-Dec-07 31-Dec-06 31-Dec-07 31-Dec-06
Volumes
Oil liquids (Bbls)
- Domestic 870,123 594,128 255,332 181,655
Natural Gas (Mcf)
- Domestic 109,177,569 78,395,453 32,033,401 24,938,267
MCFE from
continuing
operations 114,398,307 81,960,221 33,565,393 26,028,197
Oil crude (Bbls) -
China -
discontinued
operations 1,153,293 1,603,360 - 396,430
MCFE - Total 121,318,065 91,580,381 33,565,393 28,406,777
Revenues
Oil sales $57,498 $38,335 $20,387 $10,364
Natural Gas sales 509,140 470,324 141,588 140,122
Total Revenues 566,638 508,659 161,975 150,486
Expenses
Production Costs 23,969 15,067 7,294 4,850
Severance/Production
Taxes 63,480 57,899 18,314 16,676
Gathering Fees 27,922 19,722 7,782 6,099
Total Lease Operating
Costs 115,371 92,688 33,390 27,625
DD&A 135,470 79,675 41,385 29,487
General and
administrative 13,261 14,885 3,152 2,793
Total Expenses 264,102 187,248 77,927 59,905
Interest and other
income 1,087 1,941 248 314
Interest and debt
expense 17,760 3,909 5,288 2,726
Net income before
income taxes 285,863 319,443 79,008 88,169
Income tax provision 105,621 122,741 31,916 30,877
Net income from
continuing operations $180,242 $196,702 $47,092 $57,292
Discontinued
operations, net of tax $82,794 $34,493 $62,885 $3,278
Net Income 263,036 231,195 109,977 60,571
Operating Cash Flow
from Continuing
Operations (1) $420,241 $384,235 $120,881 $110,706
Operating Cash Flow
from Discontinued
Operations (1) 33,091 47,695 (498) 7,442
Operating Cash Flows(1) 453,332 431,930 120,383 118,148
(1) (see non-GAAP
reconciliation)
Proceeds from Sale of
Discontinued Operations,
net of
transaction costs 208,032 - 208,032 -
Weighted Average Shares -
Basic 151,762 153,879 151,575 151,764
Weighted Average Shares -
Diluted 158,616 161,615 158,090 159,245
Basic earnings per share:
Income from continuing
operations, net of taxes $1.19 $1.28 $0.31 $0.38
Income from discontinued
operations:
Operating earnings, net
of taxes $0.13 $0.22 $0.00 $0.02
Gain on sale of
subsidiary, net of taxes $0.41 $0.00 $0.42 $0.00
Net Income $1.73 $1.50 $0.73 $0.40
Fully Diluted earnings per
share:
Income from continuing
operations $1.14 $1.22 $0.30 $0.36
Income from discontinued
operations:
Operating earnings, net
of taxes $0.12 $0.21 $0.00 $0.02
Gain on sale of
subsidiary, net of taxes $0.40 $0.00 $0.40 $0.00
Net Income $1.66 $1.43 $0.70 $0.38
Realized Prices
Oil liquids (Bbls) -
Domestic $66.08 $64.52 $79.84 $57.06
Oil crude (Bbls) -
China $56.21 $52.40 $0.00 $39.53
Natural Gas (Mcf) $4.66 $6.00 $4.42 $5.62
Costs Per MCFE - Total
Consolidated
Lease Operating Costs $1.11 $1.20 $1.02 $1.10
DD&A $1.24 $1.02 $1.23 $1.21
General and
administrative - total $0.11 $0.16 $0.08 $0.10
Interest and debt
expense $0.15 $0.04 $0.16 $0.10
$2.61 $2.43 $2.49 $2.50
Segment Costs Per MCFE
United States
Production Costs $0.21 $0.18 $0.22 $0.19
Severance/Production
Taxes $0.55 $0.71 $0.55 $0.64
Gathering Fees $0.24 $0.24 $0.23 $0.23
DD&A $1.18 $0.97 $1.23 $1.13
$2.19 $2.10 $2.23 $2.19
China
Production Costs $1.65 $0.93 $0.00 $0.89
Severance/Production
Taxes $1.17 $0.87 $0.00 $0.59
DD&A $2.16 $1.44 $0.00 $2.01
$4.99 $3.24 $0.00 $3.48
Note: Amounts on a per MCFE basis may not total due to rounding.
Margins - Continuing operations
Pre-tax income 50 % 63 % 49 % 59 %
Net Income 32 % 39 % 29 % 38 %
Margins - Both
Pre-tax income 65 % 63 % 109 % 58 %
Net Income 42 % 39 % 68 % 36 %
Operating segment margins
United States 80 % 82 % 79 % 82 %
China 70 % 79 % 0 % 78 %
Note: Certain prior period amounts have been reclassified to
conform with current period presentation.
DISCONTINUED OPERATIONS
The Company has accounted for its Sino-American Operations as discontinued
operations and has reclassified prior period financial statements to exclude
these businesses from continuing operations. A summary of information related
to the Company's discontinued operations is as follows:
For the Twelve For the Quarter
Months Ended Ended
31-Dec-07 31-Dec-06 31-Dec-07 31-Dec-06
Operating revenues 64,822 84,008 - 15,672
Lease operating expenses 11,419 8,922 838 2,105
Severance taxes 8,113 8,398 - 1,398
Depletion, depreciation and
amortization expenses 14,981 13,822 - 4,783
General and administrative
expenses 98 50 (419) 1
Operating earnings before
income tax provision 30,211 52,815 (419) 7,385
Income tax provision,
discontinued operations 10,455 18,321 (266) 4,106
Operating earnings -
discontinued operations 19,756 34,493 (153) 3,278
Gain on sale of subsidiary,
net of income tax provision 63,038 - 63,038 -
Net income, discontinued
operations 82,794 34,493 62,885 3,278
Ultra Petroleum Corp.
Reconciliation of Cash Flow from Operations Before Changes in Non-Cash
Items and Working Capital
(unaudited)
All amounts expressed in US$000's
Operating cash flow is defined as net cash provided by operating
activities before changes in non-cash items and working capital. Management
believes that the non-GAAP measure of operating cash flow is useful as an
indicator of an oil and gas exploration and production company's ability to
internally fund exploration and development activities and to service or incur
additional debt. The company also has included this information because
changes in operating assets and liabilities relate to the timing of cash
receipts and disbursements which the company may not control and may not
relate to the period in which the operating activities occurred. Operating
cash flow should not be considered in isolation or as a substitute for net
cash provided by operating activities prepared in accordance with GAAP.
The following table reconciles cash flow from operations before changes in
non-cash items and working capital with net cash provided by operating
activities as derived from the company's financial information.
TOTAL CONSOLIDATED
For the Twelve Months For the Quarter
Ended Ended
31-Dec-07 31-Dec-06 31-Dec-07 31-Dec-06
Net cash provided by operating
activities from operations $429,625 $436,151 $71,423 $106,844
Excess tax benefit from
stock based
compensation $36,692 $10,503 $23,130 $987
Other $(177) $- $(84) $-
Accounts payable and
accrued liabilities $(65,560) $(25,965) $(29,157) $5,618
Prepaid expenses and other
current assets $803 $(658) $(338) $(636)
Accounts receivable $41,844 $12,149 $41,725 $1,979
Restricted cash $1,923 $453 $441 $451
Other long-term
obligations $1,840 $(2,156) $8,957 $3,099
Taxation payable $2,150 $(2,207) $- $(5,772)
Net changes in non-cash items
and working capital -
discontinued operations $4,192 $3,660 $4,286 $5,578
Cash flow from operations before
changes in non-cash
items and working capital $453,332 $431,930 $120,383 $118,148
CONTINUING OPERATIONS
For the Twelve Months For the Quarter
Ended Ended
31-Dec-07 31-Dec-06 31-Dec-07 31-Dec-06
Net cash provided by operating
activities from operations $400,726 $392,116 $76,207 $104,980
Excess tax benefit from
stock based compensation $36,692 $10,503 $23,130 $987
Other $(177) $- $(84) $-
Accounts payable and
accrued liabilities $(65,560) $(25,965) $(29,157) $5,618
Prepaid expenses and other
current assets $803 $(658) $(338) $(636)
Accounts receivable $41,844 $12,149 $41,725 $1,979
Restricted cash $1,923 $453 $441 $451
Other long-term
obligations $1,840 $(2,156) $8,957 $3,099
Taxation payable $2,150 $(2,207) $- $(5,772)
Cash flow from operations
before changes in non-cash items
and working capital $420,241 $384,235 $120,881 $110,706
These statements are unaudited and subject to adjustment.
About Ultra Petroleum
Ultra Petroleum Corp. is an independent exploration and production company
focused on developing its long-life natural gas reserves in the Green River
Basin of Wyoming -- the Pinedale and Jonah Fields. Ultra is listed on the New
York Stock Exchange and trades under the ticker symbol "UPL". The company had
152,313,738 shares outstanding on January 31, 2008.
This release can be found at http://www.ultrapetroleum.com
This news release includes "forward-looking statements" as defined by the
Securities and Exchange Commission (SEC). These forward-looking statements
regarding this press release include, but are not limited to, opinions,
forecasts, and projections, other than statements of historical fact. Although
the company believes that these expectations are obtainable based on
reasonable assumptions, it can give no assurance that such assumptions will
prove to be correct. Important factors that may cause actual results to differ
from these forward-looking statements, include, but are not limited to,
increased competition; the timing and extent of changes in prices for crude
oil and natural gas, particularly in Wyoming; the timing and extent of its
success in discovering, developing, producing and estimating reserves; the
effects of weather and government regulation; the availability of oil field
personnel and services, drilling rigs and other equipment; and other risks
detailed in the company's SEC filings, particularly in its Annual Report on
Form 10-K available from Ultra Petroleum Corp. at 363 North Sam Houston
Parkway E., Suite 1200, Houston, TX 77060 (Attention: Investor Relations). You
can also obtain this information from the SEC by calling 1-800-SEC-0330 or
from the SEC's website at http://www.sec.gov.
"Completion of 2007 Audit." It should be noted that the company's
independent accountants' audit will not be completed, and the related audit
opinion with respect to the year-end financial statements will not be dated,
until the company completes the final 10-K report and evaluation of internal
controls over financial reporting. Accordingly, the financial results reported
in this earnings release are preliminary and are subject to adjustment. The
company expects to report full audited financial results and file a Form 10-K
with the SEC by March 1, 2008.
SOURCE Ultra Petroleum Corp.
-0- 02/19/2008
/CONTACT: Kelly L. Whitley, Manager Investor Relations of Ultra Petroleum
Corp., +1-281-876-0120, Ext. 302, info@ultrapetroleum.com/
/First Call Analyst: /
/FCMN Contact: kwhitley@ultrapetroleum.com /
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AP Archive: http://photoarchive.ap.org
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/Web site: http://www.ultrapetroleum.com /
(UPL)
