Fundamentals
The following are the fundamentals of Ultra as of November 13, 2005 (Ultra is “Best in Class” in almost every metric):
Ultra’s principal revenue is from NG wells in the Pinedale (PDA) area of Wyoming where they hold the major portion. The wells are long life - about 40 plus years.
Ultra’s CAPEX is now funded entirely by internally generated cash flow.
Past 5-year revenue growth is 122% vs.31.5% for the industry & 9.8% for S&P 500.
Analysts 5 yr projected growth: 25.0% for Ultra, 15.6% for the industry & 5.9% for S&P
Gross margin (TTM) is 82.6% vs. 57.2% for the industry & 45.9% for S&P.
Operating margin (TTM) is 68.3% vs. 31.6% for the industry & 20.7% for S&P.
Net Income Margin (TTM) is 44.2% vs. 18.8% for the industry & 18.8% for S&P.
Cash flow margin is 81%
Asset intensity (% cash flow required to have prod. & reserves stay flat) is 14% vs. industry median of 42%
Lowest F&D Costs in the US at $0.39 /Mcfe vs. industry avg. of $1.79/Mcfe (12/31/04)
Lowest total costs of any O&G co. in the US at $1.83 /Mcfe vs. $3.15/Mcfe avg. for the industry (12/31/04)
Net income break even achieved as low as Opal NG price of $1.63/Mcfe
Highest Reserve Replacement Ratio in the industry at 1,021 %.
Reserve CAGR is 83% (past 5 years); estimated CAGR through 2007 is 54%.
Production CAGR is 60% (past 5 years); estimated CAGR through 2007 is 47%
Far less leveraged than the average for the industry (debt was $25 million as of 9/30/05 & is probably $0 now)
Return on assets (TTM) is 31.4% vs. 10.6% for the industry & 7.9% for S&P.
Companies with higher than average EBITD margin and revenue growth are doing well. Ultra ranks far better than all O&G. (Ultra’s EBITD TTM margin was 79.1% and their TTM revenue growth was 108.8%)
Companies with high ROE (UPL’s is 53%) and low total debt to capitalization (1%) are exceptional. Ultra is best.
At $6.30/Mcfd gas prices, Ultra’s payback on the costs of drilling a well is one year, yielding an ROR of over 100%.
Ultra operated gas well sites have been 98% successful.
Ultra operates over 60% of their gas producing lands.
Ultra’s average working interest in the Green River area (Jonah, Pinedale, etc.) is greater than 50%. Their average net revenue interest in all of Pinedale (PDA) is somewhere between 37.5% and 43%.
Ultra is the largest landowner in the Pinedale Anticline, which appears to have at least 5 times the amount of NG as Jonah, or 65+ Tcfe GIP or 55.3+ Tcfe recoverable from the currently proved/probable productive area (80 sections). DOE Report 16404 estimated that Pinedale has 159Tcf of NG in place (this may be understated) and which may not all be economically recoverable. Ultra has stated that PDA has 44 Tcfe or more of gas in place yielding 9Tcfe net or more to Ultra.
Ultra has over 1,262 gross drillable sites lined up in Wyoming at a combination of forty-acre and twenty-acre spacing, with perhaps 2,500 at 10 acre spacing and the possibility of over 4,000 at 5 acre spacing.
Ultra can drill year round in the southern part of PDA. Questar has received approval to drill year round with limits & Ultra has a 25 to 30 % interest in most of Questar’s PDA lands. Ultra has applied for year round drilling in the northern areas of PDA. Ultra will have over 90 new gross wells producing in PDA this year and over 165 gross wells in 2006.
Ultra’s proved reserve booking policy is the most conservative in the industry, understating 1 P reserves.
10 acre field wide spacing in PDA will occur within one to two years with the probability of 5 acres for certain/most areas. Questar & Shell have received partial approvals.
Probability/possibility of east-west expansion of productive areas on the PDA.
Probability (per DOE report) of additional, deeper pay-zones on the Pinedale. Questar is testing this. Ultra will drill their deep well in 2006.
Continuing improvements in completion techniques have resulted in several record-breaking NG wells exceeding expectations. Average production and reserves for new wells appears to be increasing.
Bohai Bay will produce at least 1.6 million Bbls net to Ultra in 2005.
A well has been drilled in PA that will be tied into a production line ASAP.
NG supplies in US and Canada are decreasing with no near term competition or alternatives and demand is increasing while Ultra’s production and reserves continuously increase. Worldwide demand for oil, NG and LNG is increasing particularly due to China and India. China is aggressively locking up long term O & G supply agreements with various governments including Venezuela and Canada. US LNG facilities can not operate at capacity since other countries are outbidding for LNG.
Additional fundamentals, which will impact 2006
- GOM shut in with some permanently damaged capacity
- Only 20% of production is hedged
- 5 year anniversary on AMEX in January
- a new pipeline from the Anticline to increase the potential markets beyond the current ones |
