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On Feb 22, Zacks Investment Research upgraded natural gas producer, Ultra Petroleum Corp. (UPL - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Ultra Petroleum reported better-than-expected fourth-quarter 2013 earnings on Feb 20, 2014. Earnings came in at 42 cents per share, which comfortably surpassed the Zacks Consensus Estimate of 37 cents. A significant decline in operating costs along with the increase in price realizations led to the beat. The recently reported quarter results mark the fourth consecutive earnings beat for the company, with an average surprise of 16.8%.

The company’s total operating expenses for fourth-quarter 2013 stood at $141.8 million, a whopping 78% decrease from $643.2 million in the year-ago period. Ultra Petroleum’s competitive cost structure enabled it to achieve a 58% adjusted operating cash flow margin and a 29% adjusted net income margin in the quarter.

Moreover, 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 these areas are replete with rich untapped natural gas reserves. The company has also amassed a large acreage in the prolific Marcellus Shale play – a key natural gas drilling area.

Lastly, the Zacks Consensus Estimate for first-quarter 2014 increased 5.5% to 58 cents per share as most of the estimates (6 out of 10 estimates) were revised higher over the last 60 days. Additionally, for full-year 2014, the estimates were raised over the same time frame, lifting the Zacks Consensus Estimate by 6.0% to $2.30 per share.

Other Stocks that Warrant a Look

In addition to Ultra Petroleum, one can also consider other better-ranked players in the exploration and production sector like Athlon Energy Inc (ATHL - Snapshot Report), Matador Resources Company (MTDR - Snapshot Report) and Warren Resources Inc (WRES - Snapshot Report). All the stocks sport a Zacks Rank #1 (Strong Buy).

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