The firm adjusted price target on roll-forward debt/cash balances, according to the analyst note.
"We do not believe the capex raise is prudent, given Ultra Petroleum's high leverage and a $1 billion revolver that has only $330 million of remaining liquidity," Jefferies analysts said.
Moreover, analysts are concerned about Ultra Petroleum's ability to fund future capex while reducing leverage.
Ultra Petroleum, based in Houston, is an independent oil and gas company that is engaged in the development, production, operation, exploration and acquisition of oil and natural gas properties
Shares of Ultra Petroleum are up 0.80% to $7.56 in early afternoon trading Friday.
Separately, TheStreet Ratings team rates ULTRA PETROLEUM CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ULTRA PETROLEUM CORP (UPL) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, revenue growth and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ULTRA PETROLEUM CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The revenue growth greatly exceeded the industry average of 34.8%. Since the same quarter one year prior, revenues slightly increased by 0.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for ULTRA PETROLEUM CORP is rather high; currently it is at 64.05%. Regardless of UPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, UPL's net profit margin of -9.46% significantly underperformed when compared to the industry average.
- The debt-to-equity ratio is very high at 16.00 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has decreased to $121.53 million or 28.96% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ULTRA PETROLEUM CORP has marginally lower results.
- You can view the full analysis from the report here: UPL Ratings Report