Ultra Petroleum Delivers 22% Organic Production Growth in the Third Quarter and 39% YTD



    HOUSTON, Oct. 30 /CNW/ -- Ultra Petroleum Corp. (NYSE:   UPL) today
reported 22% organic production growth in the third quarter of 2007. Total
production in the third quarter was 28.7 billion cubic feet equivalent (Bcfe)
which compares to 23.6 Bcfe in the third quarter of 2006. Both quarters
include China operations. Third quarter 2007 production in Wyoming alone, at
the company's core asset, increased 26% from the same period in 2006.
    Production for the third quarter 2007 is comprised of 25.7 billion cubic
feet (Bcf) of domestic natural gas, 199.5 thousand barrels (MBbls) of domestic
condensate, and 301.1 MBbls of crude oil from China. Domestic natural gas
prices realized for the third quarter 2007, including the effects of hedging,
were $4.04 per thousand cubic feet (Mcf), a decrease from $5.68 per Mcf for
the same period in 2006. Domestic condensate prices were $67.02 per barrel
(Bbl) compared to $70.61 per Bbl in the third quarter of 2006. China crude oil
prices realized in the third quarter were $63.94 per Bbl, compared to $50.14
per Bbl in the third quarter of 2006.
    Earnings for the third quarter ended September 30, 2007 were $37.4
million, or $0.24 per diluted share, compared to $52.5 million, or $0.33 per
diluted share for the same period in 2006. Earnings in the quarter are
comprised of $0.21 per diluted share from continuing operations and $0.03 per
diluted share from discontinued operations as a result of the company's sale
of Sino-American Energy. Total operating cash flow (1), including discontinued
Sino-American operations, was $90.4 million, or $0.57 per diluted share for
the third quarter 2007, versus $106.3 million, or $0.66 per diluted share for
the same period in 2006. Operating cash flow from continuing operations (1)
was $81.7 million, or $0.52 per diluted share for the third quarter 2007,
versus $92.6 million, or $0.58 per diluted share for the same period in 2006.
    "Despite the confluence of events that drove Rockies natural gas prices
to unimaginable levels, we achieved margins and financial returns equal to or
above our peer group. We maintained our industry leading cost structure even
while shutting-in over 12% of our available production for the quarter,"
stated Michael D. Watford, Chairman, President and Chief Executive Officer.
"Year-to-date for total operations, we achieved a net income margin of 33% and
a cash flow margin of 71%. Our all-in costs of $2.65 per Mcfe ($2.46 per Mcfe
domestic only) are the lowest in the industry and combined with our 30 year
drilling inventory positions us to continue our sector leadership in growth
and returns. As to growth, we are maintaining our 27% increased production
target of 116.5 Bcfe for the year (29% on a per share basis) even after
suffering lost production due to third and fourth quarter shut-ins and the
sale of our Sino-American operations," Watford added.
    Natural gas and crude oil production for the nine month period ended
September 30, 2007 increased to 87.8 Bcfe compared to 63.2 Bcfe for the same
nine months of 2006, a 39% increase. Both periods include production from
China. Production for the first nine months of 2007 is comprised of 77.1 Bcf
of domestic natural gas, 614.8 MBbls of domestic condensate, and 1.153 million
barrels of crude oil from China operations. Including the effects of hedging,
realized domestic natural gas prices during the nine month period were $4.76
per Mcf, compared to $6.18 per Mcf during the same period in 2006. Domestic
condensate prices were $60.36 per Bbl compared to $67.81 per Bbl during the
comparable 2006 period. China crude oil prices for the nine months ended
September 30, 2007 were $56.21 per Bbl compared to $56.62 per Bbl in 2006.
    Earnings for the nine month period ended September 30, 2007 were $153.1
million, or $0.96 per diluted share. Earnings for the nine month period
include $0.84 per diluted share from continuing operations and $0.12 per
diluted share from discontinued operations as a result of the company's sale
of Sino-American. Total operating cash flow (1), including discontinued
operations, was $333.0 million, or $2.10 per diluted share for the nine month
period, versus $313.8 million, or $1.93 per diluted share for the same period
in 2006. Operating cash flow from continuing operations (1) for the nine month
period increased to $299.4 million, or $1.89 per diluted share, up from $273.5
million, or $1.68 per diluted share, for the same period in 2006.
    
    Operational Highlights
    
    During the third quarter of 2007 there were 54 gross (25.0 net) new
producing wells in Wyoming. Since the first of the year 144 gross (67.5 net)
new producing wells were placed on production. This compares to 90 gross (42.2
net) for the same time period in 2006.
    The average 24-hour delivery rate of the new Pinedale wells was 8.7
million cubic feet of gas per day (Mmcfg) with a maximum of 22.1 Mmcfg per
day. The maximum was achieved on the Ultra operated Mesa 2B-34D. The average
of the Ultra operated wells was 9.8 Mmcfg per day while the average of the
Ultra interest non-operated wells was 8.0 Mmcfg per day.
    Below is a chart of year-to-date well statistics in Wyoming. It is
important to note that the average initial production rate of an Ultra
operated Pinedale well is 123% of the outside-operated Pinedale well.



    
                             Average      Minimum     Maximum
                             Initial      Initial     Initial
                            Production   Production  Production      Number
    Operator   Area         (Mmcf/day)   (Mmcf/day)  (Mmcf/day)     of Wells
    Ultra      Pinedale        9.8          3.5         22.1           59
    Outside-
     Operated  Pinedale        8.0          2.5         15.9           88
               Total Pinedale  8.7          2.5         22.1          147
    

    Ultra      Jonah           5.2          3.0         11.9           10

    
    Average    Pinedale/Jonah  8.5          2.5         22.1          157
    
    At quarter end in the Pinedale Field, Ultra had 11 operated rigs drilling
while their partners were running an additional 9 rigs on Ultra interest
lands. There were 9 gross (4.4 net) wells being completed and 23 gross (8.4
net) wells waiting on completion.
    Since the beginning of the year, Ultra has drilled 65 total operated
wells from spud to total depth (TD). In Pinedale the company is averaging 38
days per well spud to TD. This compares to 61 days per well average for 2006.
Since the end of the quarter Ultra achieved a new record in drilling time in
the Pinedale Field. Ultra drilled the Warbonnet 3A1-9D well from spud to a TD
of 13,380 feet in 18.6 days surpassing the previous record of 22.8 days.
    The company's ongoing delineation program is in full swing with four of
eleven rigs now drilling wells as part of this project. At the present time
there are over 100 identified quarter sections (160 acres) for delineation
drilling in and around the Pinedale Field. Current plans call for continuing
the delineation drilling effort for at least the next five years in ongoing
efforts to fully define the ultimate potential of this gigantic asset. Six of
the planned 21 delineation wells for 2007 have sufficient production history
to be able to estimate reserves. All six have reserves above the year-end 2006
reserves estimates by Netherland Sewell and Associates and on average the
reserves are 167% better than these pre-drill estimates.
    Included in the delineation wells, the Warbonnet 5C1-11D on the east side
of the Warbonnet area came on with a 24-hour flow rate of 14.3 Mmcfg per day
and the Warbonnet 4B-11D just to the north came on at a 24-hour flow rate of
10.3 Mmcfg per day. Further to the north, the Boulder 10A-30 came on for a
24-hour flow rate of 17.7 Mmcfg per day.
    The evaluation of the non-pay section in Pinedale Field continues. Eight
of the test wells are now completed and initial production logs have been run.
These production logs indicate that the flow rates from the 21 frac stages
pumped in this test have averaged over 125 Mcf gas per day per stage. If this
production continues like the typical Lance completion, these zones would
appear to add materially to the overall reserves and production at only the
cost of the extra frac jobs. It is still early in the process and additional
testing will be needed to prove the potential value that can be added from
this work.
    Ultra continues to move ahead at the Mesa 10D-33 deep exploration test.
The top of the Blair was encountered at 16,204 feet. At 17,504 feet Ultra
chose to stop drilling due to the high pressures that were encountered. At
that time, the well was drilled with 17.6 pound per gallon mud and carrying a
continuous gas flare. This mud weight equates to over 16,000 pounds bottom
hole pressure at this depth. To evaluate the section drilled to date, an
extensive suite of wireline logs were run and a large number of side-wall
cores were recovered. All this data is now being evaluated to better
understand what has been found so far with some 500 feet of the Blair yet to
drill. These logs indicate a significant thickness of potential pay sand with
better porosity than was seen at the Stewart Point 15-29 deep test. After
logging the drilling liner was run to protect this part of the hole while it
is still planned to drill ahead to the planned 19,500 foot total depth to test
the balance of the Blair and the Hilliard. After setting the liner, the tools
became stuck in cement inside the casing. Currently the company is washing
over the drill string to recover the fish and hopes to be back drilling soon
and finish the drilling operation during 2007.
    
    Rockies Express Pipeline Update
    
    The Federal Energy Regulatory Commission (FERC) has approved the
construction of all seven segments of the Rockies Express Pipeline (REX). REX
is expected to be in service on January 1, 2008, with a probable likelihood of
interim service starting in December 2007, according to Kinder Morgan, the REX
operator. At this time, over 75% of the REX pipeline has been welded, with 65%
of the pipeline having been lowered and back-filled, while good progress
continues with the compressor station construction. Once operational, REX will
move natural gas from the Rockies to the Midwest and eventually the Northeast
and is expected to significantly increase the take-away capacity for natural
gas in the Rockies by approximately 27%, allowing Ultra to diversify away from
West Coast markets. Ultra, an anchor shipper on REX, has committed to firm
capacity of 200 Mmcf per day of natural gas. The increased capacity
represented by REX to the Midwest and eventually Northeast, will have a
positive impact on Wyoming natural gas prices as evidenced by current forward
price quotes.
    
    Share Repurchase Activity
    
    During the nine months ended September 30, 2007, Ultra repurchased
1,513,967 shares of its common stock for an aggregate $83.8 million dollars at
a weighted average price of $55.36 per share. Since the program's inception in
May 2006, the company has repurchased 5.5 million shares of its common stock
for an aggregate $282.1 million at a weighted average price of $51.18 per
share. Total shares outstanding as of September 30, 2007 for Ultra were
152,279,226.
    
    Hedging
    
    At September 30, 2007, Ultra had the following open commodity derivative
contracts in place to manage price risk on a portion of its natural gas
production whereby the company receives the fixed price and pays the variable
monthly index price. All prices are Northwest Pipeline Rockies basis.



    
                   Remaining Contract       Volume -
    Type                Period              mmbtu/day   Average Price/mmbtu
    Swap          Nov 2007 - Dec 2007        10,000            $4.59
    Swap          Apr 2008 - Oct 2008        60,000            $6.82
    Swap          Jan 2009 - Dec 2009        30,000            $7.35
    
    At this time, Ultra has the following fixed price physical delivery
contracts in place on behalf of its interest and those of other parties. All
fixed price contracts are at the Opal, Wyoming hub.


    
                         Remaining        Volumes         Average Price
         Type         Contract Period    mmbtu/day        per Mcf/mmbtu
     Forward Sale   Jan 2008 - Dec 2008   100,000     $7.41 Mcf/$6.83 mmbtu
     Forward Sale   Jan 2009 - Dec 2009    10,000     $8.15 Mcf/$7.51 mmbtu
    Other Highlights during the Quarter
    
    On September 27, 2007, the company announced the execution of a stock
purchase agreement for the sale of Sino-American Energy Corporation which
represents all of Ultra's interest in Bohai Bay, China for $223 million.
Proved reserves at year-end 2006 for Sino-American were approximately 4 MMBbls
which represented 1% of Ultra's total booked proved reserves. Despite having
owned Sino-American in the third quarter of 2007, under generally accepted
accounting principles ("GAAP"), its operations have been reclassified as
"Discontinued Operations" for the entire quarter and for the prior-year
period. As a result, production, revenues and expenses associated with
Sino-American have been removed from continuing operations and reclassified to
discontinued operations. The sale closed on October 22, 2007, with an
effective date of June 30, 2007. The purchaser of Sino-American Energy
Corporation is SPC E&P (China) Pte Ltd, a wholly-owned subsidiary of Singapore
Petroleum Company Limited.
    
    Conference Call Webcast Scheduled for October 31, 2007
    
    Ultra Petroleum's third quarter 2007 conference call will be available
via live audio webcast at 10:00 a.m. Central Daylight Time (11:00 a.m. Eastern
Daylight Time) on Wednesday, October 31, 2007. All interested parties are
invited to listen to this webcast by logging on to
http://www.ultrapetroleum.com. The webcast will be archived on Ultra
Petroleum's website through February 20,  2008.
    
    About Ultra
    
    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 152,279,226 shares outstanding on September 30, 2007.



    
    Ultra Petroleum Corp.
    Consolidated Statement of Operations
    (unaudited)
    All amounts expressed in US$000's
    

    
                        For the Nine Months Ended   For the Quarter Ended
                         30-Sep-07    30-Sep-06    30-Sep-07    30-Sep-06
    Volumes
      Oil liquids (Bbls)
       - Domestic          614,791      412,473      199,464      158,163
      Natural Gas (Mcf)
       - Domestic       77,144,168   53,457,186   25,727,129   20,494,570
    MCFE from continuing
     operations         80,832,914   55,932,024   26,923,913   21,443,548
    

    
      Oil crude (Bbls)
       - China -
       discontinued
       operations        1,153,293    1,206,930      301,139      355,674
    MCFE - Total        87,752,672   63,173,604   28,730,747   23,577,592
    

    
    Revenues
       Oil sales           $37,111      $27,971      $13,368      $11,168
       Natural Gas sales   367,552      330,202      103,847      116,365
    Total Revenues         404,663      358,173      117,215      127,533
    

    
    Expenses
      Production Costs      16,675       10,218        6,424        5,411
      Severance/Production
       Taxes                45,166       41,223       12,960       14,549
      Gathering Fees        20,141       13,621        6,667        5,509
    Total Lease Operating
     Costs                  81,982       65,062       26,051       25,469
    

    
      DD&A                  94,084       50,189       31,864       19,556
      General and
       administrative       10,109       12,093        3,470        4,225
    Total Expenses         186,175      127,344       61,385       49,250
    Interest and other
     income                    839        1,629          203          285
    Interest and debt
     expense                12,471        1,183        5,550          872
    

    
    Net income before
     income taxes          206,856      231,275       50,483       77,696
    

    
    Income tax provision
     - current               3,718        8,957        1,110        5,159
    Income tax provision
     - deferred             69,987       82,908       16,617       30,781
    

    
    Net income from
     continuing
     operations           $133,151     $139,410      $32,756      $41,756
    Discontinued
    operations, net
     of tax                $19,909      $31,215       $4,644      $10,719
    Net Income             153,060      170,625       37,400       52,475
    

    
    Operating Cash Flow
     from Continuing
     Operations (1)       $299,360     $273,529      $81,727      $92,590
    Operating Cash Flow
     from Discontinued
     Operations (1)        $33,592      $40,255       $8,709      $13,704
    Operating Cash
     Flows (1)            $332,952     $313,784      $90,436     $106,294
    

    (1) (see non-GAAP reconciliation)

    
    Weighted Average
     Shares - Basic        151,825      154,591      151,530      153,351
    Weighted Average
     Shares - Diluted      158,768      162,447      158,224      160,920
    

    
      Earnings per Share
       from continuing
       operations - Basic    $0.88        $0.90        $0.22        $0.27
      Earnings per Share
       from continuing
       operations - Diluted  $0.84        $0.86        $0.21        $0.26
    

    
      Earnings per Share
       from discontinued
       operations - Basic    $0.13        $0.20        $0.03        $0.07
      Earnings per Share
       from discontinued
       operations - Diluted  $0.12        $0.19        $0.03        $0.07
    

    
    Realized Prices
      Oil liquids (Bbls)
       - Domestic           $60.36       $67.81       $67.02       $70.61
      Oil crude (Bbls) -
       China (discontinued
       operations)          $56.21       $56.62       $63.94       $50.14
      Natural Gas (Mcf)      $4.76        $6.18        $4.04        $5.68
    

    
    Costs Per MCFE
    United States -
     continuing operations
      Production Costs       $0.21        $0.18        $0.24        $0.25
      Severance/Production
       Taxes                 $0.56        $0.74        $0.48        $0.68
      Gathering Fees         $0.25        $0.24        $0.25        $0.26
      DD&A                   $1.16        $0.90        $1.18        $0.91
      General and
       administrative        $0.13        $0.22        $0.13        $0.20
      Interest and debt
       expense               $0.15        $0.02        $0.21        $0.04
                             $2.46        $2.30        $2.49        $2.34
    China - discontinued
     operations
      Production Costs       $1.53        $0.94        $2.75        $0.99
      Severance/Production
       Taxes                 $1.17        $0.97        $1.65        $0.77
      DD&A                   $2.16        $1.25        $2.18        $1.40
      General and
       administrative        $0.07        $0.01        $0.12        $0.00
                             $4.93        $3.17        $6.70        $3.16
    

    Note: Amounts on a per MCFE basis may not total due to rounding.

    
    Margins
      Pre-tax income -
       continuing operations   51%          65%          43%          61%
      Net Income - continuing
       operations              33%          39%          28%          33%
    

    
      Pre-tax income           51%          65%          42%          61%
      Net Income               33%          40%          27%          36%
    

    
    Operating margins
      United States -
       continuing operations   80%          82%          78%          80%
    
    Note: Certain prior period amounts have been reclassified to conform with
current period presentation.


    
    Ultra Petroleum Corp.
    Reconciliation of Cash Flow from Operations Before Changes in Non-Cash
    Working Capital
     (unaudited)
    All amounts expressed in US$000's
    

    
     (1) Operating cash flow is defined as net cash provided by operating
         activities, including continuing and discontinued operations, before
         changes in non-cash 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.
    
    The following table reconciles cash flow from operations before changes
in non-cash items and working capital with net cash provided by operating
activities as derived from the company's financial information.


    
                        For the Nine Months Ended   For the Quarter Ended
                         30-Sep-07    30-Sep-06    30-Sep-07    30-Sep-06
    Net cash provided by
     operating activities $358,202     $328,889     $118,844      $91,177
    

    
    Excess tax benefit
     from stock based
     compensation          $13,561       $9,516       $2,013       $1,458
      Other                   $(92)          $-         $(51)          $-
      Accounts payable and
       accrued
       liabilities        $(36,403)    $(31,583)      $8,134      $(6,225)
      Prepaid expenses
       and other
       current assets       $1,142         $(22)        $135         $(7)
      Accounts receivable     $119      $10,170     $(14,535)     $18,672
      Restricted cash       $1,482           $2         $275           $1
      Other long-term
       obligations         $(7,117)     $(5,255)     $(8,864)     $(4,163)
      Taxation payable      $2,150       $3,565           $-           $-
      Net changes in
       non-cash working
       capital - discontinued
       operations             $(92)     $(1,498)    $(15,515)       $5,381
    Cash flow from
     operations before
     changes in non-cash
     working capital     $ 332,952    $ 313,784      $90,436    $ 106,294
    

    
    These statements are unaudited and subject to adjustment.
    
    Note: Certain prior period amounts have been reclassified to conform with
current period presentation.
    This news release includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The opinions,
forecasts, projections or other statements, other than statements of
historical fact, are forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to have
been correct. Certain risks and uncertainties inherent in the Company's
business are set forth in our filings with the SEC, particularly in the
section entitled "Risk Factors" included in our Annual Report on Form 10-K for
our most recent fiscal year and from time to time in other filings made by us
with the SEC. These risks and uncertainties include increased competition, the
timing and extent of changes in prices for crude oil and natural gas,
particularly in Wyoming, risks inherent in operations in China, the timing and
extent of the Company's success in discovering, developing, producing and
estimating reserves, the effects of weather and government regulation,
availability of oil field personnel, services, drilling rigs and other
equipment, and other factors listed in the reports filed by the Company with
the SEC. Full details regarding the selected financial information provided
above will be available in the Company's Report on Form 10-Q for the quarter
ended September 30, 2007.
    This release can be found at http://www.ultrapetroleum.com




For further information:

For further information: Kelly L. Whitley, Manager Investor Relations of
 Ultra Petroleum Corp., +1-281-876-0120, ext. 302, info@ultrapetroleum.com Web
Site: http://www.ultrapetroleum.com


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890