Form 8-K ULTRA PETROLEUM CORP For: Sep 30

HOUSTON, Oct. 30, 2014 /PRNewswire/ -- Ultra Petroleum Corp. (NYSE: UPL) today reported financial and operating performance for the third quarter of 2014. Highlights for the quarter include:

• Earnings of $82.0 million, or $0.53 per diluted share  adjusted⁽²⁾
• Generated operating cash flow⁽¹⁾ of $160.7 million, or $1.04 per diluted share
• Produced 62.5 Bcfe of natural gas and oil
• Increased oil production 212 percent year over year
• Low per unit all-in costs of $3.18 per Mcfe with cash costs of $1.96 per Mcfe
• Generated solid margins in the third quarter of 2014 (adjusted): 57 percent operating cash flow margin⁽⁴⁾ and 29 percent net income margin⁽³⁾

Third Quarter Results

Ultra Petroleum reported adjusted net income⁽²⁾ of $82.0 million, or $0.53 per diluted share for the third quarter of 2014. Operating cash flow⁽¹⁾ was $160.7 million, or $1.04 per diluted share for the quarter ended September 30, 2014. The company's reported net income was $125.4 million or $0.81 per diluted share for the three month period. Third quarter results included an unrealized, mark-to-market gain of $40.8 million on the company's commodity hedges. The unrealized gain is typically excluded by the investment community in published estimates.

For the third quarter of 2014, production of natural gas and oil was 62.5 billion cubic feet equivalent (Bcfe). The company's production for the third quarter 2014 was comprised of 57.0 billion cubic feet (Bcf) of natural gas and 927.3 thousand barrels (Mbls) of oil. Oil production increased 212 percent from the same period last year.

During the third quarter of the year, Ultra Petroleum's average realized natural gas price was $3.59 per thousand cubic feet (Mcf), including the effects of commodity hedges. Excluding realized gains and losses on commodity derivatives, the company's average realized price for natural gas was $3.72 per Mcf. The company's average realized oil price was $81.18 per barrel (Bbl), including realized gains and losses on commodity hedges. Excluding these effects, the third quarter 2014 average realized price for oil was $82.77 Bbl.

Year-to-Date Results

Ultra Petroleum reported adjusted net income⁽²⁾ of $298.6 million, or $1.93 per diluted share for the nine months ended September 30, 2014. Operating cash flow⁽¹⁾ was $506.9 million for same period ended September 30, 2014. Ultra's reported net income was $333.1 million, or $2.15 per diluted share for the nine month period. Year-to-date results included an unrealized, mark-to-market gain of $26.6 million on the company's commodity hedges. The unrealized gain is typically excluded by the investment community in published estimates.

For the nine month period ended September 30, 2014, production of natural gas and oil was 178.3 Bcfe. The company's production was comprised of 164.3 Bcf of natural gas. Oil was 2.3 million barrels (Mmbls), a 171 percent increase from the same period last year.

The company's average realized natural gas price was $4.04 per Mcf, including realized gains and losses on commodity hedges during the nine month period ended September 30, 2014. Excluding realized gains and losses on commodity derivatives, the company's average price for natural gas was $4.33 per Mcf. The company's average realized oil price was $81.96 per Bbl, including realized gains and losses on commodity hedges. Excluding realized gains and losses on commodity derivatives, the company's average price for oil in the nine months ended September 30, 2014 was $84.89 per Bbl.

"Operationally we had a great quarter as our production is back to profitable-growth mode," commented Michael D. Watford, Chairman, President and Chief Executive Officer.

Pinedale Acquisition

Ultra closed the previously announced acquisition to acquire 189 MMcfe per day of natural gas production from 515 producing net wells in the Pinedale field from Royal Dutch Shell ("Shell") in exchange for a cash payment of $925.0 million, approximately 155,000 net acres, and 100 MMcfe per day of net production. The effective date of the transaction is April 1, 2014, with closing on September 25, 2014. The transaction was financed through a combination of $850.0 million of new bonds issued at 6.125 percent, with the remainder financed under the senior revolver.

The acquisition is a strategic repositioning of natural gas assets in the company's portfolio, which the company expects will lead to improved returns, increased reserves, increased percentage of sales in higher value markets, increased operatorship and increased control of capital allocation.

"This unique transaction afforded us the opportunity to increase ownership in our core Pinedale asset. It provides additional exposure to favorable western gas prices. Currently, 94 percent of our volumes will receive western gas pricing, which is an increase from 76 percent prior to the transaction. Furthermore, it increases operatorship to 82 percent from 62 percent across our entire portfolio allowing us to better allocate capital to our highest returning projects," commented Michael D. Watford.

Wyoming - Operational Highlights

During the third quarter, Ultra Petroleum and its partners drilled 45 gross (27 net) Wyoming Lance wells and placed on production 46 gross (27 net) wells. The company's net Wyoming production averaged 489.4 million cubic feet equivalent (MMcfe) per day during the quarter.

The table below outlines the company's internal rates of return (IRR's) in Pinedale achieved for wellhead gas prices in the range of $4.00 to $5.00 per Mcf and Estimated Ultimate Recovery (EURs) ranging from 4.0 to 6.0 Bcfe.

Year to date, Ultra Petroleum and its partners drilled 120 gross (73 net) Wyoming Lance wells and placed on production 127 gross (75 net) wells. The company produced 125.6 Bcfe from Wyoming during the first nine months of 2014.

Utah - Operational Highlights

During the third quarter, Ultra Petroleum drilled 24 gross (24 net) wells and placed on production 27 gross (27 net) Uinta wells. Ultra's net production averaged 6,937 barrels of oil equivalent (Boe) per day for the quarter. This represents 25 percent sequential production growth from 5,555 Boe per day (net) in the second quarter.

Year to date in the Uinta, Ultra Petroleum drilled 59 gross (59 net) wells and placed on production 58 gross (58 net) wells.

The tables below provide average initial production (IP) data for the 58 wells turned to sales yearto-date by area. The table highlights strong and consistent well performance.

Pennsylvania - Operational Highlights

The pace of Marcellus activity slowed significantly this year as a result of strategically reducing capital at the beginning of the year culminating in the divestiture of a majority of the company's position during the third quarter. Prior to divesting, Ultra participated in drilling and initiating production from 6 gross (3 net) wells during the first nine months of the year.

The company averaged 148.9 MMcfe per day of Marcellus production for the third quarter. Cumulative Pennsylvania production for the first nine months of 2014 was 43.4 Bcfe.

Financial Strength

Ultra Petroleum exited the third quarter with 83 percent of the company's outstanding borrowings comprised of long-term, fixed-rate debt with an average remaining term of 6.7 years and a 5.8 percent weighted average coupon rate. The company has $434.0 million of liquidity available under its senior credit facility.

During the third quarter the company issued $850.0 million in aggregate principal amount of 6.125 percent senior unsecured notes due 2024 (issued by the parent company, Ultra Petroleum Corp.). The new notes were issued in conjunction with funding the purchase of the Pinedale acquisition. The operative financial covenant for the company is now effectively the interest coverage covenant of 2.25 times in the new senior notes.

"We are pleased with our latest debt offering, the timing of our execution, and the market's receptivity. The offering provided us the ability to finance the transition of our portfolio to higher returning natural gas assets in our Pinedale flagship field at an attractive interest rate," commented Garland R. Shaw, Senior Vice President and Chief Financial Officer.

Commodity Hedges

The company has in place fixed price swaps for the fourth quarter of 2014 of 20.1 Bcf of natural gas hedged at a weighted average price of $4.26 per Mcf. Looking ahead to 2015, the company has 4.3 Bcf of natural gas hedged at a weighted average price of $4.11 per Mcf for April through October.

Ultra also has in place crude oil hedges of 368 MBbls for the fourth quarter of 2014 at a weighted average price of $93.19 per Bbl. Additional details of the company's current hedge positions are available in the financial tables section of the news release. The company opportunistically hedges a portion of its forecasted production to lessen the volatility associated with swings in commodity prices and improve the certainty of cash flows in support of its capital investment program.

Fourth Quarter and Full-Year 2014 Production

Production for 2014 is expected to range between 247 - 250 Bcfe. The following table details estimated production by quarter for 2014:

The following table details estimated production by region for the fourth quarter 2014:

2014 Capital Investment Program Update

During the nine month period of 2014, Ultra invested a total of $1,339 million, including the Pinedale acquisition. The company expects to invest $1,500 million for the full year in 2014.

Fourth Quarter 2014 Price Realizations and Differentials Guidance

In the fourth quarter of 2014, the company's realized natural gas price is expected to average 4 to 6 percent below the NYMEX price due to differentials, before consideration of any hedging activity. Realized pricing for crude oil and condensate is expected to be about 18  20 percent below the average NYMEX price, before consideration of any hedging activity.

Fourth Quarter 2014 Expense Guidance

The following table presents the company's expected expenses per Mcfe in the fourth quarter of 2014 assuming a $3.84 per MMbtu Henry Hub natural gas price and a $82.00 per Bbl NYMEX crude oil price:

2014 Annual Income Tax Guidance

Ultra currently projects a zero book tax rate for 2014 and does not anticipate paying any cash taxes.

Conference Call Webcast Scheduled for October 30, 2014

Ultra Petroleum's third quarter 2014 results conference call will be available via live audio webcast at 11:00 a.m. Eastern Daylight Time (10:00 a.m. Central Daylight Time) Thursday, October 30, 2014. To listen to this webcast, log on to www.ultrapetroleum.com and follow the link to the webcast. The webcast replay and podcast will be archived on Ultra Petroleum's website through November 13, 2014.

Financial tables to follow.

About Ultra Petroleum

Ultra Petroleum Corp. is an independent energy company engaged in domestic natural gas and crude oil exploration, development and production. The company is listed on the New York Stock Exchange and trades under the ticker symbol "UPL". Additional information on the company is available at 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. Statements about future returns and commodity prices as well as other 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, the company 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 its filings with the SEC, particularly in the section entitled "Risk Factors" included in its Annual Report on Form 10-K for the most recent fiscal year and from time to time in other filings made by the company with the SEC. These risks and uncertainties include, but are not limited to, increased competition, the timing and extent of changes in prices for oil and gas, particularly in Wyoming and Pennsylvania, 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, as well as 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, 2014.

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CONTACT: Kelly L. Whitley, Director, Investor Relations, Phone: 281-582-6602, Email: [email protected]