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Gold/Mining/Energy : Ultra Petroleum (UPL)

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From: Bob Walsh	4/10/2008 11:27:56 AM
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Fundamentals of Ultra as of 4/10/2008 - Part 2: Financial Metrics: § Leader in Returns and Growth (2005 to 2007). Ultra’s Production per share CAGR of 43% and Cash Return on Capital Invested of 36% is far higher than any other O&G company. XTO is next closest at 17% and 24% respectively followed by BBG at 24% and 16%. The sector median is 5.7% and 16.5%. § Past 5-year revenue growth is 68.0% vs. 23.7% for the sector, 33.9% for the industry, & 15.4% for S&P 500. § Gross margin (TTM – Trailing Twelve Months) is 79.6% vs. 38.7 for the sector, 65.1% for the industry & 44.1% for S&P. § Operating margin (TTM) is 53.4% vs. 23.3 for the sector, 32.6% for the industry & 18.9% for S&P. § Net Income Margin (TTM) is 31.8% vs. 14.8% for the sector, 19.3% for the industry & 12.8% for S&P. § Cash flow margin is 71%. § Lowest (2008E) Asset intensity (% cash flow req’d to have prod. & reserves stay flat) at 23% vs. industry median of 44%. § Lowest F&D Costs in the US at $0.98/Mcfe vs. industry avg. of well over $3.50/Mcfe and a sector average of $3.22/Mcfe. § Lowest all-in costs of any O&G co. in the US at $2.29/Mcfe vs. approx. $5.00 /Mcfe avg. for the industry. § Highest return on drilling dollars at 36.25%. The next closest is DNR at 16.25% followed by XTO at 15% and everyone else under 8% (2006 data). § Payback on the costs of drilling a well is 1.46 years at $7.00/Mcf ($6.45/MMBtu) gas price yielding an ROR of 74%. Ultra has been consistently hedging at over $7.25/Mcf for 2008. § Net income break even is achieved as low as NG price of $2.29/Mcfe § Companies with higher than average EBITD margin and revenue growth are doing well. Ultra dropped in 2007 due to decreased NG prices but is above average. Ultra’s EBITD TTM margin was 77.3% and their TTM revenue growth was 11.4%, while the sector was 32.6% and 14.8% respectively. The S&P was 23.5% and 16.1% respectively. § ROCE is 27% § Return on Assets (TTM) is 11.9% vs. 8.3% for the industry, 12.6% for the sector & 8.7% for S&P. § Production CAGR is 43% (past 5 years). Reserves metrics: § Highest Reserve Replacement Ratio in the industry at 647 %. § Proved Reserve CAGR is 29% (past 5 years). 3P Reserve CAGR is 39% (past 5 years). § Ultra’s proved reserve booking policy is the most conservative in the industry, considerably understating proved reserves (1 P). If industry standards were used, Ultra’s 3 P reserves would be counted as 1 P. § Ultra has over 5,300 gross drillable sites lined up in PDA at 5 acre spacing.

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