Ultra Petroleum Reports Record 2008 Financial and Operating Results



    HOUSTON, Feb. 17 /CNW/ -- 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 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 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.
    




    




For further information:

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

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Ultra Petroleum Corp.

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