Natural gas producer, Ultra Petroleum Corporation (UPL), is set to offer senior unsecured notes worth $400.0 million. The company added that the notes, anticipated to mature by 2018, will be offered to a few selected investors.
The net proceeds from the notes offering are expected to be utilized to partly finance Ultra Petroleum’s acquisition of Uinta Basin.
On Oct 21, 2013 Ultra Petroleum entered into a definitive contract for acquiring 100% working interest in oil-producing assets, based in Uinta Basin, northeast Utah, from an undisclosed seller. The $650 million deal is expected to close by Dec 2013, dependent on customary closing conditions.
At the time of the deal, the Uinta Basin acreage consisted of 38 operating wells that generated roughly 4,000 barrels of oil each day. Management anticipates strong earnings from the assets even if oil prices drop to below $75 per barrel.
Houston, Texas-based Ultra Petroleum is engaged in the acquisition, development, exploration and production of oil and gas properties. The company’s operations are mostly concentrated in the Green River Basin of southwest Wyoming, mainly covering the Pinedale and the Jonah fields. The firm also holds impressive acreage in the north-central Pennsylvania area of the Appalachian Basin.
Moreover, Ultra Petroleum has amassed a large acreage position in the prolific Marcellus Shale play, a key natural gas drilling area located throughout Western Pennsylvania and much of the Appalachian Basin. This provides the company with a multi-year inventory of low-risk development drilling opportunities.
However, Ultra Petroleum’s high natural gas exposure raises its sensitivity to gas price fluctuations, compared to its more-diversified independent peers with higher oil production.
Ultra Petroleum holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, some better-ranked players in the oil and gas exploration and production sector include Abraxas Petroleum Corp. (AXAS), Harvest Natural Resources Inc. (HNR) and SM Energy Co. (SM). All these stocks sport a Zacks Rank #1 (Strong Buy).
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