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Ultra Petroleum Upgraded to Buy

Zacks Equity Research

On Apr 13, 2013, Zacks Investment Research upgraded natural gas producer – Ultra Petroleum Corporation (UPL) – to a Zacks Rank #2 (Buy).

Why the Upgrade?

Ultra Petroleum has amassed a large acreage position 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.

Besides that, Ultra Petroleum maintains a very competitive cost structure, which contributes to the consistency of its growth and returns throughout the business cycle.

Importantly, natural gas is set to represent an increasingly key source of energy production in the future due to its low cost, environment-friendly nature and abundant availability in the U.S. As Ultra Petroleum generates substantially all of its revenue, earnings and cash flow from the production and sale of natural gas, we expect the company’s prospect to improve in the long run, which is reflected in the impressive long-term earnings growth projection of 15.0%.   

As a result of these bullish factors, the tendency for an upward estimate revision has been more obvious in recent times. The Zacks Consensus Estimate for the first quarter of 2013 has increased by 11.5% to 29 cents per share, as most of the estimates (7 out of 11 estimates) were revised higher over the last 60 days. For 2013, the Zacks Consensus Estimate has increased 14.8% over the same timeframe to $1.24 per share.  

Stocks to Consider

Other oil and gas exploration and production companies that are expected to significantly outperform the broader U.S. equity markets in the next one to three months are EPL Oil & Gas Inc. (EPL), Midstates Petroleum Company Inc. (MPO) and Range Resources Corporation (RRC). All three stocks carry a Zacks Rank #1 (Strong Buy).   

Read the Full Research Report on UPL

Read the Full Research Report on MPO

Read the Full Research Report on RRC

Read the Full Research Report on EPL

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