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We expect natural gas producer, Ultra Petroleum Corporation (UPL - Analyst Report), to beat expectations when the company reports its first-quarter 2013 results tomorrow on May 3, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Ultra Petroleum is likely to beat earnings because it has the right combination of two key factors.   

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate of 29 cents and the Zacks Consensus Estimate of 28 cents, stands at +3.57%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.  

Zacks Rank #2 (Buy): The stocks with a Zacks Rank #1 (Strong buy), #2 (Buy) and #3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered while going into an earnings announcement.

The combination of Ultra Petroleum’s Zacks Rank #2 (Buy) and +3.57% ESP makes us very confident of a positive earnings beat on May 3, 2013.  

What is Driving the Better-Than-Expected Earnings?

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.

Moreover, 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.

Finally, for the last few months the price of natural gas has been on the rise mainly because of a bitter winter. As Ultra Petroleum focuses mainly on natural gas, we believe that Ultra Petroleum will beat earnings this quarter.

Other Stocks to Consider

Here are some other energy firms that are worth considering as these have the right combination to post an earnings beat this quarter:

SemGroup Corporation (SEMG - Snapshot Report) has an earnings ESP of +28.95% and a Zacks Rank #1 (Strong Buy).

Atlas Resource Partners LP (ARP - Snapshot Report) has an earnings ESP of +8.70% and a Zacks Rank #2 (Buy).

EV Energy Partners LP (EVEP - Snapshot Report) has an earnings ESP of +10.00% and a Zacks Rank #2 (Buy).

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