Fundamentals of Ultra as of 4/10/2008 - Part 3
Growth:
§ Production CAGR from 2003 through 2010 is expected to continue at 32%
§ Ultra is the largest landowner in the Pinedale Anticline, which appears to have at least 5 times the amount of NG as Jonah, or perhaps 65+ Tcfe GIP or 55.3+ Tcfe recoverable from the currently proved/probable productive area (80 sections). An old DOE Report estimated that Pinedale has 159 Tcf of NG in place. Ultra has stated that PDA has 53 Tcfe or more of gas in place yielding a conservative 10.7 Tcfe net or more to Ultra at 5-acre spacing (this is for the presently defined productive area with haircuts and does not include deeper zones or additional expansions). This is expected to increase to at least 14T net to Ultra just from delineation drilling.
§ Approval of the SEIS will permit year round drilling, which will allow the acceleration of drilling and an increase in the PV 10 value. Drilling is accelerating now primarily due to multi well simultaneous (drilling, completion and production) pad drilling which will continue without regard to the SEIS approval.
§ Probability/possibility of east-west expansion of productive areas on the PDA as well as booking additional reserves for the “gap” in the middle of the PDA. The gap is an area in the core area surrounded by a ½ mile buffer consisting of 50 160-acre quarter sections.
§ Probability of additional, deeper pay-zones on the Pinedale. Ultra has drilled their deep well this year but has not yet completed it. Initial indications are very positive. Ultra’s 3-D seismic data indicates that you can see the deeper interval over the whole PDA.
§ Continuing improvements in completion techniques have resulted in several record-breaking NG wells exceeding expectations. Average production and reserves for new wells is increasing. The average pay area in the lance is presently 1,417 feet out of 4,364 feet. Core analysis shows the entire 4,364 feet to be gas saturated.
§ At least three wells have been drilled in PA. Further information is expected by or at the ASM.
Market for NG:
§ NG supplies in US have been increasing (from more expensive marginal sources) while Canada’s appear to be decreasing with no near term competition or alternatives and demand has been increasing while Ultra’s low cost production and reserves continuously increase. Worldwide demand for oil, NG and LNG is increasing particularly due to China, India and OPEC nations as well. China is aggressively locking up long term O & G supply agreements with various governments including Iran, Venezuela and Canada. While Canada’s NG production is forecast to decrease, demand is increasing especially due to oil sands production, which requires large amounts of NG to heat the sands to extract the oil. US LNG facilities often have not able to operate at capacity since other countries were outbidding for LNG.
§ The new REX pipeline and others being planned should ensure that all of Ultra’s NG will be able to be sent to the markets paying the highest prices (NE, Mid West and West coast).
Other:
§ 57% of net forecast production has been hedged for 2008 at an average of $7.50.
§ Ultra is changing their rig fleet to new, far more efficient, built for purpose drilling rigs, contracted for multi-years at largely spring of 2005 rig rates and has entered into multi-year fracing and completion work contracts at basically mid-year 2005 pricing. |
