Natural gas producer Ultra Petroleum Corporation (UPL) reported weak fourth-quarter 2012 results, mainly due to very low natural gas prices.
Earnings per share, excluding special items, came in at 51 cents, falling short of the Zacks Consensus Estimate of 53 cents. Comparing year over year, Ultra Petroleum’s adjusted earnings per share declined 12.1% from 58 cents, impacted by a weak natural gas price scenario.
Total operating revenue, at $217.2 million, was well below the Zacks Consensus Estimate of $261.0 million and the year-ago level of $270.8 million.
Production during the quarter under review came down by 10.2% to 60.1 billion cubic feet equivalent (Bcfe) against the prior year’s production of 66.9 Bcfe. Natural gas volumes — accounting for approximately 97.2% of the total — were down by 9.6% to 58.4 billion cubic feet (Bcf). Oil production dropped 26.7% year over year to 281,316 barrels.
Ultra Petroleum's average realized price on natural gas fell 19.6% to $3.33 per thousand cubic feet (Mcf). Including commodity derivative gains/losses, average realized natural gas price for the quarter was $4.08 per Mcf, down 19.2% from the prior-year level. The average oil price for the reported quarter reached $81.48 per barrel, below the fourth-quarter 2011 figure of $84.09 per barrel.
Costs, Expenses & Margins
Lease operating expense rose 16.4% from the prior-year quarter to $18.5 million. During the fourth quarter of 2012, the company reported all-in costs of $2.89 per Mcfe, down 4.6% from the comparable quarter last year. Ultra Petroleum’s competitive cost structure enabled it to achieve a 57% cash flow margin and a 30% net income margin.
As of Dec 31, 2012, the company had cash and cash equivalents of $12.9 million and long-term debt of $1.8 billion.
Ultra Petroleum expects its full-year 2013 production to lie in the range of 228–238 Bcfe, and its first-quarter 2013 production to be in the band of 57.5 – 59.5 Bcfe.
Stocks to Consider
Ultra Petroleum currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at other domestic energy explorers like Cabot Oil & Gas Corp. (COG), Memorial Production Partners LP (MEMP) and Global Partners LP (GLP) as attractive investments. All these firms – sporting a Zacks Rank #1 (Strong Buy) – offer value and are worth accumulating at current levels.
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