Natural gas producer, Ultra Petroleum Corporation (UPL) reported fourth-quarter 2013 earnings per share of 42 cents, surpassing the Zacks Consensus Estimate of 37 cents. A substantial decline in operating costs and an increase in price realizations led to the beat.
However, earnings decreased from the prior-year quarter level of 51 cents amid a drop in production volumes.
Following the earnings announcement, shares of the company closed down 3.5% at $24.12 on the NYSE trade yesterday.
Total operating revenue, at $225.2 million, marginally missed the Zacks Consensus Estimate of $226.0 million but was up from $217.2 million in fourth quarter 2012. An increase in sales along with higher realized prices led to the year-over-year improvement.
For 2013, Ultra Petroleum reported adjusted earnings of $1.64 per share, above the Zacks Consensus Estimate of $1.61 but significantly lower than the year earlier level of $2.15. However, operating revenues of $933.4 million improved 15.2% year over year.
Production
Production during the reported quarter was down 5.4% year over year to 56.8 billion cubic feet equivalent (Bcfe) from 60.1 Bcfe. Natural gas volumes — accounting for approximately 96.5% of the total — were down 6.1% at 54.8 Bcf. However, oil production increased 17.8% year over year to 331,263 barrels.
Realized Prices
Ultra Petroleum's average realized price on natural gas (excluding commodity derivatives’ realized gain or loss) increased 7.2% to $3.57 per thousand cubic feet (Mcf). The average oil price for the reported quarter reached $88.66 per barrel, 8.8% above the fourth-quarter 2012 figure of $81.48 per barrel.
Costs, Expenses & Margins
Lease operating expenses declined 12.8% from the prior-year quarter to $15.6 million. Ultra Petroleum reported all-in costs of $2.94 per Mcfe, up 1.7% from the comparable quarter last year.
Total operating expenses for the quarter came in at $141.8 million, a whopping 78% decrease from $643.2 million in the year-ago period.
Ultra Petroleum’s competitive cost structure enabled it to achieve a 58% adjusted operating cash flow margin and a 29% adjusted net income margin in fourth quarter 2013.
Balance Sheet
As of Dec 31, 2013, the company had cash and cash equivalents of $10.7 million and long-term debt of $2.5 billion.
Proved Reserves
In a separate release, Ultra Petroleum reported proved natural gas and crude oil reserves of 3.61 trillion cubic feet equivalent (Tcfe) as of Dec 31, 2013. This represents an increase of about 18% from the 2012 reserves of 3.1 Tcfe.
Acquisition
Ultra Petroleum closed the Uinta Basin oil properties deal on Dec 12, 2013 for $649.8 million. Ultra Petroleum expects these assets to be a key contributor to the company projected 40% EBITDA and cash flow growth in 2014.
Guidance
Ultra Petroleum expects production of 56–58 Bcfe for the first quarter and 243–253 Bcfe for full-year 2014. The company has a $560.0 million capital spending plan for 2014.
Zacks Rank
Ultra Petroleum currently retains 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, one can consider better-ranked players from the industry such as Matador Resources Company (MTDR), Range Resources Corporation (RRC) and Athlon Energy Inc. (ATHL). All these stocks sport a Zacks Rank #1 (Strong Buy).
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