On May 1, 2014, natural gas producer, Ultra Petroleum Corporation (UPL) reported strong first-quarter 2014 results before the opening bell, courtesy of increased price realization from natural gas. The quarter’s success also came from thriving growth projects in which the company had invested substantially.
After the earnings release, Ultra Petroleum opened at $31.22 per share, reflecting 4.8% rise from the previous day’s closing price.
Earnings per share came in at 87 cents (excluding one-time items), surpassing the Zacks Consensus Estimate of 75 cents with ease. The bottom line also improved substantially from the year-ago adjusted level of 38 cents.
Total operating revenue, at $326.3 million, beat the Zacks Consensus Estimate of $295.0 million and was also up from $225.6 million in first quarter 2013.
Production during the reported quarter contracted 3.5% year over year to 57.2 billion cubic feet equivalent (Bcfe) from 59.3 Bcfe. Natural gas volumes — accounting for approximately 93.2% of the total — shrunk 7.6% to 53.3 Bcf. However, oil production increased a whopping 145.3% year over year to 658,049 barrels.
Ultra Petroleum's average realized price on natural gas (excluding commodity derivatives’ realized gain or loss) increased 45.7% to $5.10 per thousand cubic feet (Mcf). On the flip side, the average oil price for the reported quarter was $83.22 per barrel, 4.7% below the first-quarter 2013 figure of $87.33 per barrel.
Costs, Expenses & Margins
Lease operating expenses increased 11.7% from the prior-year quarter to $21.0 million. Ultra Petroleum reported all-in costs of $3.17 per Mcfe, 13.6% higher than the comparable quarter last year.
Total operating expenses came in at $154.8 million, reflecting a 10.6% increase from $140.0 million in the year-ago period.
Ultra Petroleum’s adjusted operating cash flow margin came at 63.0%, up from 55.0% in the prior-year quarter. Moreover, adjusted net income margin improved to 43.0% from 26.0% a year ago.
As of Mar 31, 2014, the company had cash and cash equivalents of $8.0 million and long-term debt of $2.4 billion.
Ultra Petroleum anticipates production of 59–61 Bcfe for the second quarter. For 2014, the guidance was reiterated in the range of 243–253 Bcfe. Ultra Petroleum also expects total operating cost per Mcfe of $3.09–$3.27 for the second quarter.
Ultra Petroleum currently carries a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.
One can also look at oil and gas exploration and production players like RSP Permian Inc. (RSPP), Clayton Williams Energy Inc. (CWEI) and Abraxas Petroleum Corp. (AXAS). RSP Permian and Clayton Williams Energy sport a Zacks Rank #1 (Strong Buy), while Abraxas Petroleum holds a Zacks Rank #2.