Ultra Petroleum (UPL) Message Board

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Gold/Mining/Energy : Ultra Petroleum (UPL)

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From: Dennis Roth	6/29/2007 8:13:21 AM
	of 4851

Multiple positive catalysts offset temporarily low Rockies gas prices Goldman Sachs June 29, 2007 What's changed Ultra shares have sold off 12% during the last four weeks versus a 2% increase for E&Ps. We attribute most of this to the wide in Rockies differentials over the last month due to both pipeline maintenance at the Wyoming Interstate Co. (WIC) pipeline and oversupply. Ultra is the least hedged among Rockies peers and gets tagged as the most Rockies differential-exposed stock among E&Ps. Implications We believe the selloff in Ultra shares represents a buying opportunity, and we reiterate our Buy rating as we see multiple positive catalysts over the next six months, and Rockies gas realizations have improved as maintenance at WIC has come to an end. We still expect differentials to remain wider than normal relative to Henry Hub until the Rockies Express pipeline comes online in early 2008. However, with every passing day, we see less differential risk and therefore would become more aggressive in owning Ultra shares. Valuation We see 24% upside to our $67 12-month discounted cash flow based target price versus 1% upside for E&P stocks. In addition to improving Rockies differentials, we see four catalysts over the next 6-12 months: (1) strong expected near-term production, above guidance; (2) expected approval of the Supplemental Environmental Impact Statement which would allow for an acceleration in Pinedale Anticline drilling; (3) exploration results and a potential sale of assets in China; (4) expected tax-efficient switching of the companyâ€™s official domicile to the US from Canada. Key risks Commodity price and Rockies differential volatility, drilling results, regulatory pronouncements and cost pressures are key risks.

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