This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Ultra Petroleum Management Discusses Q2 2012 Results - Earnings Call Transcript

Primarily due to dramatically reduced trailing 12-month natural gas prices, we recorded a full cost ceiling test write-down of $1.1 billion net of taxes at the carrying value of our natural gas and oil properties. Oil and gas property accounting rules do not allow us to increase the carrying value of our properties when commodity prices improve. Said in another way, it's a one-way street.

As you are probably aware, the 2 primary reserve accounting standards for E&P companies are full cost and successful effort methods. Impairment tests for the successful effort methods are subjective and differ from the full cost method in 3 primary ways. First, the successful efforts impairment test is based on expected future commodity prices as opposed to trailing 12-month average pricing for full-cost companies. Second, successful efforts impairment test are valued on 3P reserves, whereas full-cost companies are limited to proved reserves alone. Finally, future cash flows are measured on an undiscounted basis for successful efforts companies, compared to future cash flows discounted 10% for full-cost companies. As a result, successful-effort companies are less susceptible for ceiling test impairments during periods of low prices.

For the quarter, our all-in costs were $3.16 per Mcf, about the midpoint of our guidance range. Our industry-low cash costs were $1.40 per Mcf, resulting in a cash flow breakeven of an impressive $1.30 per Mcfe. Our focus on low costs allows us to defend our margins even during low points of the commodity price cycle. Our net income margin was 19% and our cash flow margin was 67% for the second quarter.

Looking at our CapEx investments for the first half of 2012, we've already invested about 2/3 of this year's $825 million budget, which as a reminder, is half of our 2011 capital program. Our activity and capital spend rate will slow further as we correctly respond to the price signals. Adjusted for the expected midstream asset sale, our net CapEx for the year is $625 million. We produced 133 Bcfe in the first 6 months of 2012 with an expected 122 Bcfe combined production plan for the third and fourth quarter of 2012. Production lags capital spending, which is why we haven't seen a volume reduction on a year-over-year basis, but it is imminent not only for all throughput for the rest of the prudent natural gas producers that have cut spending. Our recent industry production data shows flat volumes, but production declines will soon be evident.

Read the rest of this transcript for free on

3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
TSLA $162.60 0.00%
YHOO $27.97 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs