Ultra Petroleum Announces Record Second Quarter Results

    HOUSTON, Aug. 5 /CNW/ -- Ultra Petroleum Corp. (NYSE:   UPL) today
announced record financial and operating results for the second quarter 2008.
Highlights include:
    -- Record earnings of $0.73 per diluted share or $115.2 million, an
increase of 136 percent from second quarter 2007
    -- Record operating cash flow(1) of $222.0 million, up 101 percent from
the same period a year ago
    -- Record natural gas and crude oil production of 34.3 Bcfe, up 23
percent over the same period in 2007 -- based on continuing operations
    -- Achieves superior returns in second quarter; 75 percent cash flow
margin, 39 percent net income margin, 36 percent return on capital employed,
and 47 percent return on equity
    For the second quarter ended June 30, 2008, Ultra Petroleum reported net
income of $0.73 per diluted share or $115.2 million, an increase of 136
percent from $0.31 per diluted share or $49.1 million, for the same period in
2007. Operating cash flow(1) for the second quarter 2008 increased 101 percent
to a record $222.0 million, compared to $110.6 million for the same period in
    Ultra Petroleum's production for the second quarter 2008 increased 23
percent to 34.3 billion cubic feet equivalent (Bcfe) compared to production
from continuing operations of 27.9 Bcfe in the second quarter 2007. This is
the largest quarterly production level ever achieved by Ultra Petroleum. For
the second quarter of 2008, production is comprised of 32.7 billion cubic feet
(Bcf) of natural gas and 273.9 thousand barrels (MBbls) of condensate.
    In the second quarter of 2008, Ultra Petroleum's average realized natural
gas price was, including the effects of hedging, $8.06 per thousand cubic feet
(Mcf) an increase of 84 percent from $4.38 per Mcf in second quarter 2007. The
average condensate price realized by the company in second quarter 2008 was
$112.44 per barrel (bbl) up 73 percent, as compared to $65.15 per bbl in
second quarter 2007.
    "Once again, we achieved record production, all organic, while continuing
to deliver industry leading margins and financial metrics. Our net income
margin was 39 percent, cash flow margin was 75 percent, return on capital was
36 percent, and return on equity was 47 percent. The consistency of our growth
and returns is what differentiates us," stated Michael D. Watford, Chairman
President and Chief Executive Officer.
    Earnings for the six month period ended June 30, 2008 were $1.37 per
diluted share or $216.5 million, an increase of 88 percent from $0.73 per
diluted share or $115.7 million, for the first half of 2007. Operating cash
flow(1) for the six month period increased to $423.4 million, up 74 percent
from $243.6 million, for the same period in 2007.
    Natural gas and crude oil production from continuing operations for the
six month period ended June 30, 2008 increased to 68.4 Bcfe compared to 53.9
Bcfe for the six month period ended June 30, 2007, a 27 percent increase.
Production for the first six months of 2008 is comprised of 65.2 Bcf of
natural gas and 530.2 MBbls of condensate. Including the effects of hedging,
realized natural gas prices during the six month period were $7.86 per Mcf,
compared to $5.13 per Mcf during the same period in 2007. Condensate prices
were $99.61 per Bbl compared to $57.17 per Bbl during the comparable 2007
    "Our 2008 momentum continues to build with record first-half results.
Cash flow and earnings for the six-month period effectively eclipsed any
full-year's earnings and cash flow in Ultra's history. This was accomplished
without diluting our shareholders. In fact, we've actually reduced our shares
outstanding and will continue to do so under our share repurchase program,"
stated Watford.
    Share Repurchase
    During the three months ended June 30, 2008, Ultra Petroleum purchased
451,380 of its common shares for an aggregate $38.8 million at a weighted
average price of $85.97 per share. Subsequent to the end of the quarter, the
company continued to purchase its common shares. During the month of July,
Ultra Petroleum purchased an additional 878,147 of its common shares for an
aggregate $67.8 million at a weighted average price of $77.23 per share. Since
the program's inception in May 2006 to the end of July 2008, the company has
purchased a total of 7.4 million shares of its common stock for an aggregate
$431.0 million at a weighted average price of $58.09 per share. Ultra
Petroleum's Board of Directors approved an additional $250.0 million
authorization for share repurchases increasing the total authorization to
$750.0 under the $1.0 billion plan. As of July 31, 2008, Ultra Petroleum's
shares outstanding, including stock options have been reduced by 4 percent to
158,200,337 shares, from the total at May 2006 when the repurchase plan was
    Operations Review
    During the second quarter of 2008, Ultra Petroleum continued to make
significant progress in improving drilling efficiencies. Beginning the quarter
with 14 operated rigs in Wyoming, the company drilled and cased to total depth
(TD) 44 wells, as compared to 23 wells in the second quarter 2007. For the
first six months of the year, the company drilled and cased 74 wells, an 80
percent increase as compared to the 41 wells drilled and cased for the same
time period in 2007. In fact, the 74 wells drilled and cased in the first half
of 2008, is almost as many as the 87 wells that were drilled and cased for all
of 2007.
    The average second quarter drilling days (spud to TD) was 22 days, a 37
percent improvement from 35 days for full-year 2007. The average time to drill
for the first half of 2008 is 24 days, a 40 percent improvement from 40 days
in the first half of 2007.

    As a result of improved drilling times, well costs have trended lower. In
the second quarter of 2008, well costs remained flat in spite of a significant
increase in steel costs.

                            Full Year   Full Year    1st Quarter   2nd Quarter
                              2006        2007           2008          2008

    Spud to TD (days)         61           35             27            22
    Rig release to
     rig release              79           48             37            30
    % wells drilled
     < 40 days                 0%          74%            90%           95%
    Well cost - pad ($MM)   $7.0         $6.2           $5.7          $5.7
    "The significance of continuing to decrease our days to drill provides us
with growing economic benefit. As our productivity increases, it allows us to
drill more wells while employing the same number of rigs. We expect to drill
155 operated wells during 2008," stated Watford.
    For the second half of 2008, the company is increasing the number of
delineation wells it plans to drill from 28 wells to 32 wells, a 146 percent
increase from the 13 delineation wells drilled in 2007. At the end of the
second quarter 2008, there were a total of six delineation wells drilled and
completed. All the wells have sufficient production history to provide reserve
estimates. So far, the delineation wells drilled have a 120 percent increase
in reserves as compared to pre-drill reserve estimates. 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 result of this focused
drilling is an increase in the estimate of recoverable gas net to Ultra
    The company continues to evaluate the low quality pay (LQ) in selected
wells. To date, Ultra Petroleum has completed 45 wells containing LQ pay
representing a total of 178 frac stages. Each well has averaged four LQ stages
resulting in an additional 450 feet of completed Lance/Mesa Verde section. The
incremental expense of this project is simply the cost of perforating and
fracing the additional stages. The results indicate that the LQ pay is from
uncontacted sand lenses near the wellbore that are beyond the detection range
of logging tools. The significance of continually evaluating the LQ pay is to
provide necessary data to increase the OGIP estimate of the Pinedale Field and
over time, increase Ultra Petroleum's natural gas reserves and production.
    The Final Supplemental Environmental Impact Statement (FSEIS) was issued
by the Bureau of Land Management (BLM) on June 28, 2008. It was followed by a
public comment period that ended on July 28, 2008. It is anticipated that the
BLM will issue the Record of Decision (ROD) shortly. After the ROD is issued,
Ultra Petroleum expects to gain access year-round to the Pinedale Field for
drilling and completion activities in concentrated development areas. After an
initial transition period, this additional access would lead to increased
drilling efficiencies and allow for accelerated development of the field and a
significant increase in the annual number of wells drilled.
    During the quarter, the REX - West pipeline was completed from the ANR
delivery point in Brown County, Kansas to the Panhandle Eastern Pipeline
system at Audrain County, Missouri. With the completion of this segment, the
company is able to deliver its firm capacity of 200 MMcf per day of natural
gas from Wyoming to the markets in the mid-west. On May 30, 2008, the FERC
issued a Certificate of Public Convenience and Necessity for the REX - East
project. The current schedule anticipates REX - East to be operational to
Lebanon, Ohio, by the end of 2008. Upon completion, REX - East will provide up
to 1.8 Bcf per day of natural gas transportation capacity from the Rockies to
Clarington, Ohio by mid-year 2009. The 27 percent increase in take-away
capacity from the Rockies has already had a positive effect on natural gas
prices that is expected to hold.
    "With our capacity on REX, fully 50 percent of our estimated 2008
production is sold at non-Rockies' prices. In fact, when combined with our
hedges, very little of Ultra's natural gas is being sold at current Rockies'
spot prices. There are several new pipeline projects currently being proposed
to transport natural gas from the Rockies to the East and to the West. One
recently sanctioned project is the Ruby Pipeline, a 1.4 Bcf per day pipeline
from Opal Westward with service expected by March 2011. We are confident that
additional pipelines will be announced in the next few months transporting
Rockies natural gas to the East. Soon, Rockies natural gas will have the
ability to serve both the East and West coast markets and almost every point
in between," stated Watford.
    Production Guidance
    The annual production guidance is for a 25 to 29 percent increase over
2007's annual production of 114.4 Bcfe from continuing operations. All
production growth is generated organically. Ultra Petroleum's revised natural
gas and crude oil production guidance for 2008 is listed in the table below:

    2008                Q1(A)  Q2(A)     Q3(E)         Q4(E)    Full Year 2008
    Production          34.1   34.3    34.5-36.0     40.5-43.0    143.4-147.4
    Capital Expenditures
    Due to the company's increasing rig productivity in Wyoming and its
accelerated exploration efforts in Pennsylvania, cap-ex for the second half of
2008 is estimated to be $535.9 million. This compares to first half cap-ex of
$409.1 million. Total 2008 cap-ex is estimated at $945.0 million. Gross wells
planned to be drilled in Wyoming has increased to 311 from 263 and in
Pennsylvania to 32 from 15.
    As of June 30, 2008, Ultra Petroleum 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 natural gas prices are Northwest Pipeline
Rockies based.

    Type    Remaining Contract           Volume -      Average Price per
                Period                   mmbtu/day         Mcf/mmbtu
    Swap  July 2008-Oct 2008             190,000    $7.69 Mcf/$7.19 mmbtu
    Swap    Calendar 2009                 30,000    $7.86 Mcf/$7.35 mmbtu
    In addition to derivative contracts, Ultra Petroleum also utilizes fixed
price forward physical delivery contracts at southwest Wyoming delivery points
to hedge its commodity price exposure. As of June 30, 2008, the company had
the following fixed price physical delivery contracts in place on behalf of
its interest and those of other parties.

    Type           Remaining Contract     Volume -        Average Price per
                        Period           mmbtu/day           Mcf/mmbtu
    Forward Sale    Calendar 2008         100,000     $7.31 Mcf/$6.83 mmbtu
    Forward Sale   July 2008-Oct 2008      20,000     $7.36 Mcf/$6.88 mmbtu
    Forward Sale     Calendar 2009         10,000     $8.04 Mcf/$7.51 mmbtu
    Forward Sale   Apr 2009-Oct 2009       90,000     $7.55 Mcf/$7.06 mmbtu
    "Currently, we are selling very little natural gas on a daily basis at
Opal. More importantly, looking forward to 2009 with hedged volumes of 130,000
mmbtu per day at an average price of $7.59 per Mcf in Wyoming plus the 200,000
mmbtu per day that we have as firm capacity on REX that will receive
Mid-Continent or East coast natural gas pricing, we are no longer an Opal
price taker. The growing certainty around our realized natural gas price
exposure along with our low costs provides us with more confidence regarding
our increasing cash flow and earnings," stated Watford.
    Conference Call Webcast Scheduled for August 6, 2008
    Ultra Petroleum's second quarter 2008 conference call will be available
via live audio webcast at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on
Wednesday, August 6, 2008. To listen to this webcast, log on to
http://www.ultrapetroleum.com. The webcast will be archived on Ultra
Petroleum's website through November 5, 2008.

    Financial tables to follow

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

                               For the Six Months         For the Quarter
                                    Ended                      Ended
                          30-Jun-08      30-Jun-07    30-Jun-08    30-Jun-07
      Oil liquids (Bbls)
        - Domestic          530,156        415,327      273,876       221,820
      Natural Gas (Mcf)
        - Domestic       65,181,443     51,417,039   32,661,802    26,597,603
      MCFE from
       operations        68,362,379     53,909,001   34,305,058    27,928,523

      Oil crude (Bbls) -
       China - discontinued
       operations                 -        852,154            -       434,569

      MCFE - Total       68,362,379     59,021,925   34,305,058    30,535,937

      Oil sales             $52,809        $23,743      $30,794       $14,451
      Natural Gas sales     512,449        263,705      263,327       116,421
    Total Revenues          565,258        287,448      294,121       130,872

      Production Costs       19,299         10,251        8,562         5,573
       Taxes                 66,711         32,207       35,776        14,694
      Gathering Fees         18,764         13,473        8,766         6,980
    Total Lease Operating
     Costs                  104,774         55,931       53,104        27,247

      Transportation         21,671              -       12,013             -
      DD&A                   85,030         62,221       42,780        32,591
      General and
       administrative         6,039          3,901        2,548         1,591
      Stock Compensation      2,755          2,736        1,901         1,830
    Total Expenses          220,269        124,791      112,346        63,259
    Interest and other
     income                     277            636          127           309
    Interest and debt
     expense                  9,814          6,921        4,543         4,221

    Net income before
     income taxes           335,452        156,372      177,359        63,701

    Income tax provision    119,337         55,978       62,603        23,949

    Net income from
     continuing operations  216,115        100,394      114,756        39,752
     operations, net
     of tax                     415         15,266          482         9,317
    Net Income             $216,530       $115,660     $115,238       $49,069

    Operating Cash Flows(1)
    Operating Cash Flow
     from Continuing
     Operations            $423,431       $218,720     $222,034       $97,039
    Operating Cash Flow
     from Discontinued
     Operations                   -         24,883            -        13,540
    Operating Cash Flows   $423,431       $243,603     $222,034      $110,579

    (1) (see non-GAAP reconciliation)

    Weighted Average
     Shares - Basic         152,781        151,975      153,061       152,022
    Weighted Average
     Shares - Diluted       157,905        159,056      157,818       158,992

    Basic earnings per share:
    Income from continuing
     operations, net of
     taxes                    $1.41          $0.66        $0.75         $0.26
    Income from discontinued
       Operating earnings,
        net of taxes              -          $0.10            -         $0.06
    Net Income                $1.41          $0.76        $0.75         $0.32

    Fully Diluted earnings per
    Income from continuing
     operations               $1.37          $0.63        $0.73         $0.25
    Income from discontinued
       Operating earnings,
        net of taxes              -          $0.10            -         $0.06
    Net Income                $1.37          $0.73        $0.73         $0.31

    Realized Prices
       Oil liquids (Bbls) -
        Domestic             $99.61         $57.17      $112.44        $65.15
       Oil crude (Bbls) -
        China                     -         $53.47            -        $59.72
       Natural Gas (Mcf)      $7.86          $5.13        $8.06         $4.38

    Costs Per MCFE
       Production Costs       $0.28          $0.19        $0.25         $0.20
        Taxes                 $0.98          $0.60        $1.04         $0.53
       Gathering Fees         $0.27          $0.25        $0.26         $0.25
       Transportation         $0.32              -        $0.35             -
       DD&A                   $1.24          $1.15        $1.25         $1.17
       General and
        administrative -
        total                 $0.13          $0.12        $0.13         $0.12
       Interest and debt
        expense               $0.14          $0.13        $0.13         $0.15
    Total Costs Per MCFE      $3.37          $2.43        $3.41         $2.40

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

    Margins - Continuing
       Operating Cash Flow
        Margin                   75%            76%          75%          74%
       Net Income                38%            35%          39%          30%
       Pre-tax income            59%            54%          60%          49%

    Margins - Both
       Operating Cash Flow
        Margin                   75%            73%          75%          71%
       Net Income                38%            35%          39%          31%
       Pre-tax income            59%            54%          60%          49%

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

    (1) Operating cash flow is defined as net cash provided by operating
        activities before changes in working capital and other non-cash
        items(*). Management believes that the non-GAAP measure of operating
        cash flow is useful as an indicator of an oil and natural 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 net cash provided by operating
        activities with operating cash flow as derived from the company's
        financial information.

                                 For the Six Months         For the Quarter
                                       Ended                    Ended
                               30-Jun-08    30-Jun-07   30-Jun-08    30-Jun-07

    Net cash provided by
     operating activities      $398,406     $238,640     $201,471     $95,166
       Net changes in
        working capital and
        other non-cash items
        - continuing
        operations(*)             $25,025     $(10,459)     $20,563      $6,682
       Net changes in
        working capital
        - discontinued
        operations                  $ -      $15,422          $ -      $8,731

    Operating cash flow        $423,431     $243,603     $222,034    $110,579

    (*)Other non-cash items include excess tax benefit from stock based
     compensation and other.

    These statements are unaudited and subject to adjustment.
    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 Petroleum is
listed on the New York Stock Exchange and trades under the ticker symbol
"UPL".  The company had 152,833,061 shares outstanding on July 31, 2008.
    This release can be found at http://www.ultrapetroleum.com
    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
businesses 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 oil and natural gas, particularly
in Wyoming, 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 June 30, 2008.

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

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