Natural gas producer, Ultra Petroleum Corporation (UPL) reported better-than-expected third-quarter 2013 earnings, primarily on account of a significant reduction in operating expenses.
Earnings per share, excluding special items, came in at 37 cents, beating the Zacks Consensus Estimate of 34 cents.
However, Ultra Petroleum’s adjusted earnings per share declined 42.2% from 64 cents recorded in the year-ago period. This is largely attributable to a decline in natural gas production.
Total operating revenue came in at $221.2 million, surpassing the Zacks Consensus Estimate of $220.0 million and was also up 12.6% from the year-ago period. A substantial increase in realized natural gas prices aided the results.
Production during the quarter was down 8.8% to 57.5 billion cubic feet equivalent (Bcfe) against the prior-year’s production of 63.1 Bcfe. Natural gas volumes — accounting for approximately 96.9% of the total production — were down 9.0% to 55.7 billion cubic feet (Bcf). Oil production dropped 4.0% year over year to 297,329 barrels.
Ultra Petroleum's average realized price on natural gas (excluding commodity derivatives’ realized gain or loss) rose 24.2% to $3.44 per thousand cubic feet (Mcf). The average oil price for the reported quarter reached $100.06 per barrel, above the third-quarter 2012 figure of $86.51 per barrel.
Costs, Expenses & Margins
Lease operating expenses declined 3.2% from the prior-year quarter to $16.2 million. During the third quarter of 2013, Ultra Petroleum reported all-in costs of $2.80 per Mcfe, down 2.8% from the comparable quarter last year.
Total operating expenses for the quarter came in at $136.4 million, reflecting a decrease of 82.1% from the year-ago period.
Ultra Petroleum’s competitive cost structure enabled it to achieve a 54% cash flow margin and a 26% net income margin.
As of Sep 30, 2013, Ultra Petroleum had cash and cash equivalents of $4.5 million and long-term debt of $1.9 billion.
Ultra Petroleum maintains its expectation for full-year 2013 production of 230–236 Bcfe.
The company lowered its projected capital expenditure for full-year 2013 by roughly 7.2% to $385.0 million from its previous projection of $415.0 million. Reduced well expenses from its Wyoming operations, owing to improvement in operating efficiency, have allowed the company to slash its capital expenditure guidance.
Ultra Petroleum currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
Meanwhile, one can look at oil and gas exploration and production firms like Matador Resources Company (MTDR), Northern Oil and Gas Inc. (NOG) and SM Energy Company (SM) that offer better prospects. All the stocks sport a Zacks Rank #1 (Strong Buy).
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