Ultra Petroleum (UPL) Message Board

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Gold/Mining/Energy : Ultra Petroleum (UPL)

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From: Dennis Roth	10/31/2007 8:27:20 AM
	of 4851

Ultra Petroleum (UPL): Pinedale remains top play with Rockies prices expected to improve - Goldman Sachs - 10/31/07 What's changed Ultra reported EPS of $0.24 versus our $0.23 and First Call consensus of $0.26. Production was 312 MMcfe/d vs. our estimate and guidance of 315 MMcfe/d, due entirely to China. Operating cash flow was $90 million, in line with our estimate. Management slightly raised production guidance for 4Q 2007 to 313 MMcfe/d from 310 MMcfe/d, which would represent an increase of 21 MMcfe/d from 3Q 2007 adjusted for the sale of China assets. Management indicated it saw attractive pay and porosity in its Pinedale deep test with the well expected to be fully drilled by yearend. Implications We believe there was concern that Ultra would miss its production target, and we do not regard a 1% miss, all from now-sold assets, as significant, especially given industry-wide shut in production in the Rockies. We remain impressed by asset quality at the Pinedale Anticline and believe that proved reserves and unbooked resource potential could be revised higher at yearend following attractive drilling results from delineation wells. As we near the expected 1H 2008 approval of the Supplemental Environmental Impact Statement, we believe Ultra management is at a crossroads with accelerating production, pursuing a Master Limited Partnership and selling the company each representing attractive paths. Valuation Ultra shares (Buy rated versus an Attractive coverage view) have performed well over the last month despite low price realizations in the Rockies. We believe the Street will continue to look beyond the volatile 2H 2007 Rockies gas price environment and to more stable growth at better realized prices expected in 2008. We see 19% upside to an $80 12-month discounted cash flow based target price. Key risks Commodity price volatility, drilling results, cost pressures and government pronouncements are key risks.

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