Ultra Petroleum (UPL) Message Board

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Gold/Mining/Energy : Ultra Petroleum (UPL)

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From: Dennis Roth	5/4/2007 6:50:38 AM
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Growth, cash flow, potential sale are 3 beneficial strategic options May 02, 2007 Goldman Sachs What's changed Ultra reported 1Q 2007 EPS of $0.42, above our estimate of $0.39 and First Call consensus EPS estimate of $0.38. Operating cash flow was at $133 million versus our $116 million. Production had already been announced at 317 MMcfe/d versus our estimate of 293 MMcfe/d. The company raised production guidance to 24% growth from 20% and initiated 2008 and 2009 production guidance calling for growth of 18% and 19%, respectively. Implications We believe Ultra is on track to exceed its revised guidance. Additionally, we believe guidance for 2008 and especially 2009 is likely to prove conservative. We believe Ultra later this year will receive regulatory approval to accelerate drilling in the Pinedale Anticline. In addition to potential growth acceleration, we believe Ultra is also considering the merits of a Master Limited Partnership cash flow maximization strategy as well as a potential sale of the company, given attractive valuations. We believe each of these potential strategies would be positive for the stock. Valuation We see 6% upside to a $61 12-month discounted cash flow based target price versus 1% downside for E&Ps. We see an additional $7 in value when using assumptions we believe are consistent with recent industry acquisitions and further upside from improving Pinedale well performance. We are updating our estimates following quarterly results. Key risks Key risks include commodity prices, drilling results, Rockies gas price differentials, regulatory rulings and cost pressures. Impact on related securities The timing of when Pinedale partner Questar (Neutral rated) begins completing wells is a catalyst to Ultra’s 2007 production growth.

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