Shares of Ultra Petroleum Corp. (UPL) hit a 52-week high of $25.34 on Feb 6. In fact, the Houston, Texas-based natural gas producer has seen its stock price climb some 30% over the past three months. This price appreciation can be attributed to the recent jump in natural gas prices.
Why the Bullishness?
Natural gas prices have been on a tear lately, in the process rising to a four-year high. The single most important contributor to this upward pressure has been a bout of powerful winter snowstorm in the U.S. and Canada that called for the heating fuels’ higher consumption.
Taking advantage of this favorable environment, firms like Ultra Petroleum have been able to drum up investor attention mainly because of their ability to boost production.
Ultra Petroleum controls substantial acreage in and around the prolific Jonah natural gas field and the Pinedale Anticline area in the Green River Basin. Both of these areas are endowed with rich natural gas reserves, which have remained largely untapped to date. Ultra Petroleum’s production growth over the last few years highlights its attractive asset base. In 2012, the company achieved record production of 257.0 billion cubic feet equivalent (Bcfe), representing a 5% year-over-year increase.
Ultra Petroleum has also amassed a large acreage position (260,000 net acres) in the prolific Marcellus Shale play, a key natural gas drilling area located throughout Western Pennsylvania and much of the Appalachian Basin. This provides the company with a multi-year inventory of low-risk development drilling opportunities.
Other positives in the Ultra Petroleum story are its competitive cost structure and impressive margins.
Zacks Rank & Stock Picks
With Ultra Petroleum shares trading at 52-week high, any upside from here may be limited, as suggested by the company's Zacks Rank #3 (Hold).
Some better-ranked stocks in the domestic upstream sector include Linn Co. LLC (LNCO), Warren Resources Inc. (WRES) and Cabot Oil & Gas Corp. (COG). All of them carry a Zacks Rank #1 (Strong Buy).