HOUSTON, Feb. 17 /PRNewswire-FirstCall/ -- Ultra Petroleum Corp.
(NYSE: UPL) today reported record financial and operating results
for both the fourth quarter and full-year 2008. Highlights for 2008
include: -- Record earnings of $2.59 per diluted share (adjusted)
or $405.0 million (adjusted), an increase of 54 percent from 2007
-- Record operating cash flow(1) of $825.3 million, up 85 percent
from the same period a year ago -- Record natural gas production
and crude oil production of 145.3 Bcfe, an increase of 27 percent
over 2007 - based on continuing operations -- Superior returns in
2008; 75 percent cash flow margin(2), 37 percent net income margin
(adjusted), 29 percent return on capital employed, and 42 percent
return on equity Net income was $414.3 million, or $2.65 per
diluted share, for the year-ended December 31, 2008. The net income
results include a non-cash gain of $14.2 million ($9.2 million
after-tax), which represents the unrealized mark-to-market change
on the company's financial commodity contracts. Excluding the
unrealized gain on commodity derivatives, which is typically
excluded by the investment community in published estimates,
adjusted net income was a record $405.0 million, or $2.59 per
diluted share in 2008. For the same period in 2007, net income was
$263.0 million, or $1.66 per diluted share. "2008 proved to be
another record-setting year in the history of Ultra Petroleum. I'd
like to pause for a moment and savor the success we've enjoyed over
the past ten years with 2008 being the 'best ever' in terms of
operational and financial results. We established new production
records along with new records in earnings and cash flow. Our net
income margin was 37 percent, cash flow margin was 75 percent,
return on capital was 29 percent, and return on equity was 42
percent," commented Michael D. Watford, Chairman, President and
Chief Executive Officer. "We have a world-class asset operated at a
very low cost, which provides us with a competitive advantage in
the consistency of our growth and returns and its sustainability,"
Watford added. For the year-ended December 31, 2008 Ultra Petroleum
reported adjusted net income of $405.0 million, or $2.59 per
diluted share, an increase of 54 percent from $263.0 million, or
$1.66 per diluted share for the same period in 2007. Total
operating cash flow(1)increased 85 percent to a record high of
$825.3 million for the year-ended December 31, 2008, as compared to
$445.6 million for the same period in 2007. Total natural gas and
crude oil production for the year ended December 31, 2008,
increased 27 percent to a record high of 145.3 billion cubic feet
equivalent (Bcfe) compared to production from continuing operations
of 114.4 Bcfe in 2007. This is the largest annual production level
ever achieved by Ultra Petroleum. For 2008, production is comprised
of 138.6 billion cubic feet (Bcf) of natural gas and 1.1 million
barrels of condensate. For the year-ended December 31, 2008, Ultra
Petroleum's average realized natural gas price was $7.26 per
thousand cubic feet (Mcf), including realized gains and losses on
commodity derivatives, an increase of 56 percent from $4.66 per Mcf
for the same period in 2007. During 2008, the company's average
price realization for natural gas was $7.11 per Mcf, excluding
realized gains and losses on commodity derivatives. The average
condensate price realized by the company in 2008 was $87.40 per
barrel (Bbl) an increase of 32 percent, as compared to $66.08 per
Bbl in 2007. Adjusted earnings were $66.1 million or $0.43 per
diluted share, for the fourth quarter ended December 31, 2008 as
compared to $110.0 million or $0.70 per diluted share for the same
period in 2007. Total consolidated operating cash flow(1), was
$159.4 million for the fourth quarter 2008, as compared to $110.9
million for the same period in 2007. Natural gas and crude oil
production for the fourth quarter ended December 31, 2008 increased
21 percent to 40.7 Bcfe compared to total production of 33.6 Bcfe
in the fourth quarter 2007. This is the largest quarterly
production level ever achieved by Ultra Petroleum. For the fourth
quarter of 2008, production is comprised of 38.8 Bcf of natural gas
and 304.3 thousand barrels of condensate. In the fourth quarter of
2008, Ultra Petroleum's average realized natural gas price,
including realized gains and losses on commodity derivatives, was
$5.39 per Mcf, an increase of 22 percent from $4.42 per Mcf in
fourth quarter 2007. During the quarter ended December 31, 2008,
the company's average price realization for natural gas was $4.81
per Mcf, excluding realized gains and losses on commodity
derivatives. The average condensate price realized by the company
in the fourth quarter of 2008 was $46.55 per Bbl as compared to
$79.85 per Bbl in the fourth quarter of 2007. Operational
Highlights For the year-ended December 31, 2008, Ultra Petroleum
drilled 307 gross (158 net) wells. In Pinedale, the company
averaged 24 days per well spud to total depth (TD) as compared to
its average of 35 days in 2007. This is a 31 percent improvement
over 2007. During the fourth quarter of 2008, Ultra achieved a new
record in drilling time in Pinedale. The company drilled the
Riverside 5A1-2D well from spud to TD of 13,590 feet in 14.7 days.
Including all of the company's Pinedale operations in 2008, 97
percent of the wells were drilled spud to TD in 40 days or less as
compared to 74 percent in 2007. As the company continues to make
significant progress in improving drilling efficiencies, a better
measure is spud to TD in less than 30 days, which was 84 percent
for 2008 as compared to 36 percent in 2007. These improvements in
drilling times have been achieved largely due to the use of
oil-based mud, the implementation of new drilling bit technology,
upgrades in the rig fleet, and rotary steerable tools. Largely as a
result of improved drilling times, pad well costs have also trended
lower despite a significant increase in steel costs during the
year. For the year-ended 2008, pad well costs decreased to $5.5
million, as compared to $6.2 million for full-year 2007. 2006 2007
2008 ---- ---- ---- Spud to TD (days) 61 35 24 Rig release to rig
release (days) 79 48 32 % wells drilled < 40 days 0% 74% 97% %
wells drilled < 30 days 0% 36% 84% Well cost - pad ($MM) $7.0
$6.2 $5.5 In 2008, the average 24-hour delivery rate of the new
Ultra operated Pinedale wells was 8.5 million cubic feet of gas per
day (MMcf/d). The average of all Ultra interest wells was 7.7
MMcf/d while the average of the Ultra non-operated wells was 6.8
MMcf/d. The company's ongoing delineation program continued
delivering positive results in 2008. There were 31 wells drilled
during the year with 18 of these wells having sufficient production
history to provide reserve estimates. As determined by the
company's independent third-party reserve engineering firm, these
18 wells have a post-drill reserve estimate that averaged 42
percent higher than pre-drill reserve estimates. These wells also
have an average post-drill reserve estimate of over 7.3 Bcf per
well and an average initial production rate of approximately 11.7
MMcf/d. Ultra Petroleum plans to continue delineation drilling in
the under-drilled portions of the Pinedale Field. Delineation
drilling is key to the company's continued success in enlarging the
size of the Pinedale Field by increasing the Original Gas in Place
(OGIP) estimate; but more importantly, the direct results of this
focused drilling is an increase in the estimate of recoverable
natural gas reserves and production net to Ultra Petroleum and its
shareholders. Below are the pre-drill, as compared to the
post-drill, Estimated Ultimate Recovery (EUR) comparisons and
initial production rates from the 2008 delineation drilling
program. All reserve estimates are independently and completely
prepared by the reserve engineering firm Netherland, Sewell, and
Associates, Inc (NSAI). Year-End 2007 Post-Drill 2008 -------------
--------------- NSAI EUR NSAI EUR IP Rate -------- -------- -------
Well Name (BCF) (BCF) MMcf/d --------- ----- ----- ------ Riverside
3B-13D 10.5 12.7 17,732 Warbonnet 9D1-14 2.5 12.6 15,818 Warbonnet
10D1-24 4.0 11.4 12,673 Riverside 4D1-11D 10.0 9.5 11,265 Riverside
14B1-14D 8.5 8.9 18,290 Warbonnet 5B1-24 4.0 7.9 12,713 Warbonnet
2B1-14D 5.0 7.6 8,536 Riverside 9D-12D 8.0 7.7 13,605 Warbonnet
15A1-3 7.5 7.4 11,235 Warbonnet 13B1-13 0.0 10.1 13,084 Riverside
9C1-24 7.5 6.4 8,058 Riverside 12C1-1D 6.5 4.3 11,738 Boulder 6B-31
4.5 5.2 8,199 Warbonnet 2B1-11D 0.0 5.3 9,877 Warbonnet 9C1-8 0.0
2.8 8,070 Boulder 14B1-31 4.0 4.0 9,194 Riverside 4C1-23 5.5 3.3
11,532 Riverside 1A1-22D 4.0 3.8 8,429 --- --- ----- Average 5.1
7.3 11,669 The company continues to evaluate the low quality (LQ)
pay in selected wells. In 2008, Ultra Petroleum has completed 83
wells containing LQ pay representing a total of 243 frac stages.
The incremental expense of this project is simply the cost of
perforating and fracing the additional stages. The results indicate
that the LQ pay, from uncontacted sand lenses near the wellbore
that are beyond the detection range of logging tools, can add as
much as 0.5 Bcfe of reserves per well. LQ stages were completed in
approximately 80 percent of all wells that were completed during
the fourth quarter of 2008. The LQ pay will increase the OGIP
estimate of the Pinedale and over time, increase Ultra Petroleum's
natural gas reserves and production. During 2008, the company began
completing wells in the normal-pressured section of the Lance
formation. In total, there were 40 wells completed with an average
of two stages in the normal-pressured section. Production logs
confirm that these normal-pressured zones contribute production
along with the over-pressured zones. But more importantly, these
stages are additive to reserves in every Pinedale well. Share
Repurchase During the quarter ended December 31, 2008, Ultra
Petroleum repurchased 402,400 shares of its common stock for an
aggregate $13.2 million at a weighted average price of $32.83 per
share. Since the program's inception in May 2006, the company has
repurchased 10.2 million shares of its common stock for an
aggregate $592.9 million at a weighted average price of $58.06 per
share. Total shares outstanding for the company as of December 31,
2008 were 151,232,545. Hedges - Derivative Contracts The total net
volume of physical fixed price positions and commodity derivative
contracts for 2009 currently is 93.0 Bcf at an average realized
price of $5.81 per Mcf, and in 2010 the total net volume hedged
currently is 16.0 Bcf at an average realized price of $5.31 per
Mcf. As of today, Ultra Petroleum has the following positions in
place to mitigate its commodity price exposure. Average Price per
Mcf --------------------- Total Net Volume (Bcf) at Point of Sale
---------------------- ---------------- Q1 2009 13.0 $5.13 Mcf Q2
2009 31.0 $5.96 Mcf Q3 2009 31.0 $5.96 Mcf Q4 2009 18.0 $5.80 Mcf
---- Total 2009 93.0 $5.81 Mcf Q1 2010 4.0 $5.31 Mcf Q2 2010 4.0
$5.31 Mcf Q3 2010 4.0 $5.31 Mcf Q4 2010 4.0 $5.31 Mcf --- Total
2010 16.0 $5.31 Mcf Rockies Express Pipeline Update Kinder Morgan
recently reaffirmed that Ultra Petroleum will have access to
REX-East in a series of three phases. The first phase is expected
to be in service from Audrain County, Missouri to Putnam County,
Indiana in April 2009. The second phase is expected to be in
service to Lebanon, Ohio in June 2009, and the final phase to
Clarington, Ohio, is expected to be in service in November 2009. At
that time, REX - East will provide natural gas transportation
capacity of 1.8 Bcf per day from the Rockies to Clarington, Ohio,
which is an increase from the current 1.5 Bcf per day from the
Rockies to Audrain County, Missouri. REX is significant to Ultra,
an anchor shipper, as it moves pricing points to alternative higher
value markets toward the northeastern United States. Other
Highlights During the Year In September 2008, the Bureau of Land
Management (BLM) issued the Pinedale Record of Decision (ROD).
Under the ROD, Ultra Petroleum gains year-round access to the
Pinedale Field for drilling and completion activities in
concentrated development areas. After an initial transition period,
this additional access is expected to lead to increased drilling
efficiencies and allow for accelerated development of the field.
Conference Call Webcast Scheduled for February 18, 2009 Ultra
Petroleum's fourth quarter and full-year 2008 conference call will
be available via live audio webcast at 11:00 a.m. Eastern Standard
Time (10:00 a.m. Central Standard Time) Wednesday, February 18,
2009. To listen to this webcast, log on to
http://www.ultrapetroleum.com/. The webcast will be archived on
Ultra Petroleum's website through May 2, 2009. Financial tables to
follow. Ultra Petroleum Corp. Consolidated Statement of Operations
(unaudited) All amounts expressed in US$000's For the Twelve For
the Months Ended Quarter Ended 31-Dec-08 31-Dec-07 31-Dec-08
31-Dec-07 Volumes Oil liquids (Bbls) - Domestic 1,121,525 870,123
304,254 255,332 Natural gas (Mcf) - Domestic 138,563,717
109,177,569 38,823,824 32,033,401 MCFE from continuing operations
145,292,867 114,398,307 40,649,348 33,565,393 Oil crude (Bbls) -
discontinued operations - 1,153,293 - - MCFE - Total 145,292,867
121,318,065 40,649,348 33,565,393 Revenues Oil sales $98,026
$57,498 $14,162 $20,387 Natural gas sales 986,374 509,140 193,234
141,588 Total revenues 1,084,400 566,638 207,396 161,975 Expenses
Production costs 36,997 23,968 9,199 7,294 Severance/production
taxes 119,502 63,480 21,165 18,314 Gathering fees 37,744 27,923
10,123 7,782 Total lease operating costs 194,243 115,371 40,487
33,390 Transportation 46,310 - 13,209 - DD&A 184,795 135,470
54,113 41,385 General and administrative 11,230 7,543 3,053 1,352
Stock compensation 5,816 5,718 956 1,800 Total expenses 442,394
264,102 111,818 77,927 Interest and other income 418 1,087 50 248
Interest and debt expense (21,276) (17,760) (6,279) (5,288)
Realized gain (loss) on commodity derivatives 18,991 - 15,908 -
Unrealized gain (loss) on commodity derivatives 14,225 - (1,540) -
Income before income taxes 654,364 285,863 103,717 79,008 Income
tax provision 240,504 105,621 38,624 31,915 Net income from
continuing operations 413,860 180,242 65,093 47,093 Discontinued
operations, net of tax 415 82,794 - 62,884 Net income $414,275
$263,036 $65,093 $109,977 Unrealized (gain) loss on commodity
derivatives (net of tax) (9,232) - 999 - Adjusted net income
$405,043 $263,036 $66,092 $109,977 Operating cash flows (1)
Operating cash flow from continuing operations (1) $825,277
$412,541 $159,383 $111,400 Operating cash flow from discontinued
operations (1) - 33,093 - (499) Operating cash flows $825,277
$445,634 $159,383 $110,901 (1) (see non-GAAP reconciliation)
Weighted average shares - basic 152,075 151,762 150,537 151,575
Weighted average shares - diluted 156,531 158,616 153,868 158,090
Basic earnings per share: Net income from continuing operations
$2.72 $1.19 $0.43 $0.31 Net income from discontinued operations -
$0.54 - $0.42 Net income $2.72 $1.73 $0.43 $0.73 Fully diluted
earnings per share: Net income from continuing operations $2.65
$1.14 $0.42 $0.30 Net income from discontinued operations - $0.52 -
$0.40 Net income $2.65 $1.66 $0.42 $0.70 Earnings per share - net
of unrealized gain (loss) on commodity derivatives: Adjusted net
income - basic $2.66 $1.73 $0.44 $0.73 Adjusted net income - fully
diluted $2.59 $1.66 $0.43 $0.70 Realized Prices Oil liquids (Bbls)
- Domestic $87.40 $66.08 $46.55 $79.85 Oil crude (Bbls) - China
$0.00 $56.21 $0.00 $0.00 Natural Gas (Mcf), including realized gain
(loss) on commodity derivatives $7.26 $4.66 $5.39 $4.42 Natural Gas
(Mcf), excluding realized gain (loss) on commodity derivatives
$7.11 $4.65 $4.81 $4.42 Costs (All-In) Per MCFE - Continuing
Operations Production costs $0.25 $0.21 $0.23 $0.22
Severance/production taxes $0.82 $0.55 $0.52 $0.55 Gathering fees
$0.26 $0.24 $0.25 $0.23 Transportation $0.32 $0.00 $0.32 $0.00
DD&A $1.27 $1.18 $1.33 $1.23 General and administrative - total
$0.12 $0.12 $0.10 $0.09 Interest and debt expense $0.15 $0.16 $0.15
$0.16 $3.19 $2.46 $2.91 $2.48 Note: Amounts on a per MCFE basis may
not total due to rounding. Adjusted Margins - Continuing Operations
Operating Cash Flow Margin (2) 75% 73% 71% 69% Net Income 37% 32%
30% 29% Pre-tax income 58% 50% 47% 49% Ultra Petroleum Corp.
Reconciliation of Cash Flow and Cash Provided by Operating
Activities (unaudited) All amounts expressed in US$000's The
following table reconciles net cash provided by operating
activities with operating cash flow as derived from the company's
financial information. These statements are unaudited and subject
to adjustment. For the Twelve For the Months Ended Quarter Ended
31-Dec-08 31-Dec-07 31-Dec-08 31-Dec-07 Net cash provided by
operating activities $840,803 $427,949 $132,617 $70,917 Net changes
in working capital and other non-cash items - continuing
operations* $(15,526) $19,692 $26,766 $35,698 Net changes in
non-cash items and working capital - discontinued operations $-
$(2,007) $- $4,286 Cash flow from operations before changes in
non-cash items and working capital $825,277 $445,634 $159,383
$110,901 (1) Operating cash flow is defined as net cash provided by
operating activities before changes in non-cash items and working
capital. Management believes that the non-GAAP measure of operating
cash flow is useful as an indicator of an oil and gas exploration
and production company's ability to internally fund exploration and
development activities and to service or incur additional debt. The
company also has included this information because changes in
operating assets and liabilities relate to the timing of cash
receipts and disbursements which the company may not control and
may not relate to the period in which the operating activities
occurred. Operating cash flow should not be considered in isolation
or as a substitute for net cash provided by operating activities
prepared in accordance with GAAP. (2) Operating cash flow margin is
defined as Operating Cash Flow divided by the sum of Oil and
Natural Gas Sales plus Realized Gain (Loss) on Commodity
Derivatives. *Other non-cash items include excess tax benefit from
stock based compensation and other. About Ultra Petroleum Ultra
Petroleum Corp. is an independent exploration and production
company focused on developing its long-life natural gas reserves in
the Green River Basin of Wyoming - the Pinedale and Jonah Fields.
Ultra is listed on the New York Stock Exchange and trades under the
ticker symbol "UPL". The company had 151,232,545 shares outstanding
on January 31, 2009. This release can be found at
http://www.ultrapetroleum.com/ This news release includes
"forward-looking statements" as defined by the Securities and
Exchange Commission (SEC). These forward-looking statements
regarding this press release include, but are not limited to,
opinions, forecasts, and projections, other than statements of
historical fact. Although the company believes that these
expectations are obtainable based on reasonable assumptions, it can
give no assurance that such assumptions will prove to be correct.
Important factors that may cause actual results to differ from
these forward-looking statements, include, but are not limited to,
increased competition; the timing and extent of changes in prices
for crude oil and natural gas, particularly in Wyoming; the timing
and extent of its success in discovering, developing, producing and
estimating reserves; the effects of weather and government
regulation; the availability of oil field personnel and services,
drilling rigs and other equipment; and other risks detailed in the
company's SEC filings, particularly in its Annual Report on Form
10-K available from Ultra Petroleum Corp. at 363 North Sam Houston
Parkway E., Suite 1200, Houston, TX 77060 (Attention: Investor
Relations). You can also obtain this information from the SEC by
calling 1-800-SEC-0330 or from the SEC's website at
http://www.sec.gov/. "Completion of 2008 Audit." It should be noted
that the company's independent accountants' audit will not be
completed, and the related audit opinion with respect to the
year-end financial statements will not be dated, until the company
completes the final 10-K report and evaluation of internal controls
over financial reporting. Accordingly, the financial results
reported in this earnings release are preliminary and are subject
to adjustment. The company expects to report full audited financial
results and file a Form 10-K with the SEC by March 1, 2009.
http://www.newscom.com/cgi-bin/prnh/20020226/DATU029LOGO
http://photoarchive.ap.org/ DATASOURCE: Ultra Petroleum Corp.
CONTACT: Kelly L. Whitley , Manager Investor Relations of Ultra
Petroleum Corp., +1-281-876-0120, Extension 302, Web Site:
http://www.ultrapetroleum.com/
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