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Gold/Mining/Energy : Ultra Petroleum (UPL)

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To: Bobby Yellin who started this subject	5/9/2003 1:41:45 PM
From: Bob Walsh	Read Replies (1) of 4851

Ultra Undervalued: At a price of $10.50 I believe that Ultra is considerably undervalued for the following reasons: The SEC PV-10 for established reserves was $8.14/share using a 2002 year-end wellhead price of $2.94/Mcf. With the new pipeline in place the difference between the Opal price and the Henry Hub price has narrowed so that a more accurate year-end wellhead price would be at least $1.00 higher. Applying a more current/accurate wellhead price of $4.00 would yield $10.58/share for established reserves as of 2002 year-end. Note that China has not been included in any reserve estimates until 2004. The growth rate of reserves per share has been 87% through 2002. Per the con-call, reserves per well, based on early production from newer wells, has increased from 7 Bcfe to between 9 Bcfe and 10 Bcfe (apparently a 28% to 42% increase). Mesa Verde reserves as of year-end 2002 were based on the results of approximately 20 wells. Over 60 new wells will apparently be drilled in the Mesa Verde this year. The conservative estimate from Ultra for CAGR for reserves through 2006 is 50%. All data and estimates to date re Wyoming production are based on 40 acre spacing. I believe that there is a fair probability that 20 acre spacing could be approved within the next year or two, which I believe could result in a doubling of reserves. Production growth was 54% through 2002 and is estimated at 55% for this year and 40% through 2006. Cash flow for Q1 2003 was $0.24 per share. Well-head prices for the balance of the year should be higher than Q1. Expenses for the balance of 2003 will be flat (the costs of well drilling are not expensed but are capitalized). The number of days to bring a new well to production has dropped resulting in lower capital costs and a faster payback plus of course improved cash flow. For those looking at an estimated EPS for 2003, at an estimated average gas price of $4.30/mcf for Q2, 3 & 4 I project an EPS of $0.57 for this year. At a P/E of 30 that would price Ultra at $17.10. Bob

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