Ultra Petroleum Reports Strong Financial And Operating Results And Record Production For 2009

HOUSTON, Feb. 12 /PRNewswire-FirstCall/ -- Ultra Petroleum Corp. (NYSE: UPL) continued to deliver strong financial and operating performance for both the fourth quarter and full-year 2009. Highlights for 2009 include:

• Record natural gas and crude oil production of 180.1 Bcfe, an increase of 24 percent, or 26 percent on a per share basis, over 2008
• Operating cash flow(1) of $637.6 million
• Earnings of $282.2 million, or $1.86 per diluted share – adjusted
• Superior returns in 2009 (adjusted): 70 percent cash flow margin(3), 31 percent net income margin(2),18 percent return on capital employed, and 32 percent return on equity

Total natural gas and crude oil production for the year-ended December 31, 2009 increased 24 percent, or 26 percent on a per share basis, to a record high of 180.1 billion cubic feet equivalent (Bcfe) compared to production of 145.3 Bcfe for 2008. This is the largest annual production level ever achieved by Ultra Petroleum. For 2009, production is comprised of 172.2 billion cubic feet (Bcf) of natural gas and 1.3 million barrels of condensate.

Ultra Petroleum reported operating cash flow(1) of $637.6 million for the year-ended December 31, 2009. Adjusted net income was $282.2 million, or $1.86 per diluted share for 2009. The reported net loss of $451.1 million included a non-cash ceiling test write-down ( $673.0 million net of taxes) of the company’s carrying value of natural gas and oil properties stemming from significantly lower natural gas and condensate prices at the end of the first quarter of 2009 as well as unrealized mark-to-market losses on the company’s commodity derivative contracts ( $60.3 million net of taxes). These unrealized losses are typically excluded by the investment community in published estimates.

“Margins do matter in the oil and gas industry. Over the past four years, Ultra has sustained healthy operating cash flow margins averaging 72 percent and net income margins averaging 37 percent. These outstanding margins were achieved in a widely fluctuating commodity price environment,” commented Michael D. Watford, Chairman, President and Chief Executive Officer. “We have the dominant position in a world-class asset that we operate at a very low cost, which provides us with a competitive advantage in the consistency and sustainability of our growth and returns. We intend to replicate these superior returns as we continue to grow our position in the Marcellus,” Watford added.

For the year-ended December 31, 2009, Ultra Petroleum’s average realized natural gas price was $4.88 per thousand cubic feet (Mcf), including realized gains and losses on commodity derivatives. Excluding those realized gains and losses on commodity derivatives, the company’s average price realized for natural gas was $3.49 per Mcf. The average condensate price realized by the company in 2009 was $49.80 per barrel (Bbl).

Natural gas and crude oil production for the fourth quarter ended December 31, 2009 increased 17 percent to 47.6 Bcfe compared to 40.6 Bcfe in the fourth quarter 2008. This is the largest quarterly production level ever achieved by Ultra Petroleum. For the fourth quarter of 2009, production is comprised of 45.7 Bcf of natural gas and 329.3 thousand barrels of condensate.

Operating cash flow(1) for the fourth quarter 2009 was $172.2 million. Adjusted earnings for the period ended December 31, 2009 were $78.5 million or $0.51 per diluted share.

In the fourth quarter of 2009, Ultra Petroleum’s average realized natural gas price was $4.86 per Mcf, including realized gains and losses on commodity derivatives. Excluding those realized gains and losses on commodity derivatives, the company’s average price realized for natural gas was $4.20 per Mcf. The average condensate price realized by the company in the fourth quarter of 2009 was $65.97 per Bbl.

Wyoming - Operational Highlights

For the year-ended December 31, 2009, Ultra Petroleum drilled 222 gross (113.9 net) wells. The company continues to make significant progress in improving drilling efficiencies. In Pinedale, the company averaged 20 days per well spud to total depth (TD) as compared to its average of 24 days in 2008. This is a 17 percent improvement over 2008. Ultra’s new measure of success is the number of wells drilled in less than 20 days from spud to TD. In 2009, 73 percent of the wells were drilled in under 20 days as compared to 27 percent of the wells in 2008. During the fourth quarter of 2009, Ultra set a new Pinedale record in drilling time from spud to TD of 13,500 feet in 11 days. Largely as a result of improved drilling times, pad well costs continue to decrease year-over-year. For the full-year 2009, pad well costs decreased to $5.0 million, as compared to $5.5 million for full-year 2008.

    
    
                                 Improving Efficiencies
    -----------------------------------------------------------------------
                                        2006      2007      2008      2009 
                                        ----      ----      ----      ---- 
    Spud to TD (days)                     61        35        24        20 
    Rig release to rig release (days)     79        48        32        24 
    % wells drilled < 20 days              0%        2%       27%       73%
    Well cost – pad ($MM)               $7.0      $6.2      $5.5      $5.0 

The average estimated ultimate recovery (EUR) of the Ultra-operated wells completed in 2009 significantly exceeded those completed in 2008. All of Ultra’s-operated rigs remain in the better parts of the Pinedale field where the wells are more productive, leading to higher average per-well reserve estimates. The table below details the increase in average EUR of Ultra-operated wells completed, by quarter, since 2008.  

    
    
                           Ultra-Operated Average EUR (Bcfe)
    ----------------------------------------------------------------------
                                          Q1        Q2        Q3        Q4
                                          --        --        --        --
    2008                                 4.1       3.2       4.4       6.7
    2009                                 6.2       6.9       6.4       6.4

The company continues to expand its resource assessment in the Pinedale Anticline. In 2009, Ultra brought on-line 16 delineation wells. The EUR of these delineation wells averaged 26 percent higher than the pre-drill reserve estimates determined by the company’s independent third-party reserve engineering firm.