On Oct 29, Ultra Petroleum Corporation UPL reported better-than-expected third-quarter 2015 earnings owing to increased production volumes. The outperformance was offset partially by higher operating expenses and lower commodity price realizations.
The natural gas producer reported adjusted earnings of 21 cents per share, surpassing the Zacks Consensus Estimate of 18 cents. However, the bottom line was significantly lower than the year-ago quarter adjusted earnings of 53 cents.
Total operating revenue of $222.5 million not only missed the Zacks Consensus Estimate of $253 million but was also substantially below the third-quarter 2014 level of $288.6 million.
Production
Production during the reported quarter increased year over year to 75.4 billion cubic feet equivalent (Bcfe) from 62.6 Bcfe. Natural gas volumes – that accounted for approximately 93.1% of the total – increased 23.4% year over year to 70.2 Bcf. Oil production, however, declined to 863,361 barrels in the reported quarter from 927,320 barrels a year ago.
Realized Prices
Ultra Petroleum's average realized price on natural gas (excluding realized gain or loss on commodity derivatives) decreased 28% year over year to $2.68 per thousand cubic feet (Mcf). Also, the average oil price (excluding realized gain or loss on commodity derivatives) for the reported quarter was $39.43 per barrel, substantially below the third-quarter 2014 figure of $82.77 per barrel.
Costs, Expenses & Margins
Total lease operating costs increased nearly 14.2% from the prior-year quarter to approximately $76.7 million. Ultra Petroleum reported all-in costs of $3.16 per Mcfe against $3.18 in the comparable quarter last year.
Total operating expenses came in at $195.3 million. This reflects a 15% increase from $169.7 million in the year-earlier quarter.
Ultra Petroleum’s adjusted operating cash flow margin came in at 47% compared with 57% in the prior-year quarter. Adjusted net income margin was 12% compared with 30% in the year-ago quarter.
Balance Sheet
As of Sep 30, 2015, the company had cash and cash equivalents of approximately $25.6 million and long-term debt of $2.76 billion.
Guidance
For 2015, production is guided in the 288–292 Bcfe range, up from the earlier guidance of 283–290 Bcfe.
Ultra Petroleum expects total operating cost per Mcfe of $3.09–$3.26 for the fourth quarter. Moreover, the company has reaffirmed its 2015 capital spending at $500 million.
Zacks Rank
Currently, Ultra Petroleum carries a Zacks Rank #2 (Buy). Some other players in the energy sector worth considering are Sprague Resources LP SRLP, Seadrill Partners LLC SDLP and Natural Gas Services Group Inc. NGS. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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