Nov 7, 2003 IBD Article about Ultra (Part 1):
Higher Prices Benefit Natural Gas Producer. by Marilyn Alva -
Production has never been a problem for Ultra Petroleum Corp. Since it began drilling for natural gas in the Green River Basin of Wyoming three years ago, the company has hit a bull's-eye 99% of the time. Last year, as it drilled more wells, year over year production surged more than 43% to 17.4 billion cubic feet. For all its success, however, the company's 2002 earnings still fell 58% to 10 cents a share. The reason: ng prices. As commodity prices dropped, Ultra's average realized gas price last year fell to $2.32 per thousand cubic feet from $3.41 in 2001. This year, however, Ultra is on a Rocky Mountain high. Gas prices have spiked to what will likely be an average of more than $5 for the year. In addition, added capacity in the region's Kern River pipeline cut back the typical discount smacked on gas produced in the area. Because pipeline capacity out of the Rockies is limited, Rocky Mountain gas typically trades at a discount to the prevailing rates. Analyst Ron Mills of Johnson Rice & Co., says the usual $1 to $1.50 per thousand cubic feet differential is down to 70 cents to 80 cents. Better commodity prices, coupled with more production, have fueled strong recent earnings growth for Ultra. Earlier this week the company reported third-quarter profit of 13 cents a share, up from 1 cent last year. Revenue more than tripled to $29.3 million. Production during the quarter increased 66% to 6.9 billion cubic feet, while average ng prices grew to $4.19 vs. $1.91 a year earlier. Analysts polled by First Call expect full year earnings to rise 370% to 47 cents a share, then move up 38% to 65 cents in 2004. Ultra's near-term production should get a boost from an October decision by the Wyoming Oil and Gas Conservation Commission to let the company drill more wells - from one every 40 acres to one every 20 acres.
"If the 20-acre spacing program works, you could potentially double the well count" said Irene Hass, analyst with Sanders Morris Harris. |
