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Natural gas producer Ultra Petroleum Corporation (UPL - Analyst Report) reported better-than-expected first-quarter 2013 results, mainly due to increased natural gas prices. This was partially offset by lower production level. Earnings per share, excluding special items, came in at 38 cents, breezing past the Zacks Consensus Estimate of 28 cents.

However, comparing year over year, Ultra Petroleum’s adjusted earnings per share declined 22.4% from 49 cents, impacted by low oil price realization.

Total operating revenue, at $225.6 million, was above the Zacks Consensus Estimate of $219.0 million and was almost flat year over year.


Production during the quarter under review came down by 13.7% to 59.3 billion cubic feet equivalent (Bcfe) against the prior year’s production of 68.8 Bcfe. Natural gas volumes — accounting for approximately 97.3% of the total — were down by 13.4% to 57.7 billion cubic feet (Bcf). Oil production dropped 25.3% year over year to 268,256 barrels.

Realized Prices

Ultra Petroleum's average realized price on natural gas rose 22.0% to $3.50 per thousand cubic feet (Mcf). Including commodity derivative gains/losses, average realized natural gas price for the quarter was also $3.50 per Mcf, down 8.1% from the prior-year level. The average oil price for the reported quarter reached $87.33 per barrel, below the first-quarter 2012 figure of $97.77 per barrel.

Costs, Expenses & Margins

Lease operating expense rose 10.7% from the prior-year quarter to $18.8 million. During the first quarter of 2013, Ultra Petroleum reported all-in costs of $2.79 per Mcfe, down 9.4% from the comparable quarter last year. Ultra Petroleum’s competitive cost structure enabled it to achieve a 55% cash flow margin and a 26% net income margin.

Balance Sheet

As of Mar 31, 2013, Ultra Petroleum had cash and cash equivalents of $14.4 million and long-term debt of $1.9 billion.

Production Guidance

Ultra Petroleum expects its full-year 2013 production to lie in the range of 228–238 Bcfe, and its second-quarter 2013 production to be in the band of 57–59 Bcfe.

Zacks Rank

Ultra Petroleum currently retains a Zacks Rank #2 (Buy).

In addition to Ultra Petroleum, there are other exploration and production firms that are expected to perform well in the coming 1 to 3 months. These include EPL Oil & Gas Inc. with a Zacks Rank #1 (Strong Buy), and McMoRan Exploration Co. and Hyperdynamics Corporation with a Zacks Rank #2 (Buy).

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