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REX Cancels Transportation Agreement With Ultra Due to Missed Payment

Rockies Express Pipeline LLC (REX) has terminated its firm transportation service agreement with Ultra Resources Inc. due to a missed payment and failure to provide adequate credit support, the pipeline told FERC Monday.

According to documents provided to the Federal Energy Regulatory Commission, Ultra Resources, a subsidiary of Houston, TX-based Ultra Petroleum Corp., failed to pay a nearly $8.58 million invoice that was due Feb. 16. Ultra also failed to provide adequate credit support, including “adequate assurance of future performance covering three full months of advance service” in the amount of $19.6 million.

After receiving an advance notice of termination on Feb. 25, the exploration and production company “failed to cure either default within the 30-day notice period,” according to REX.

On March 18, Ultra Petroleum revealed that it had received a delisting notice from the New York Stock Exchange after its stock dipped below an average closing price of $1/share over a consecutive 30-day trading period.

On March 1, Ultra Petroleum said Ultra Resources had entered into waiver and amendment agreements with its lenders that would “provide the Company with an opportunity to continue discussions with its creditors about restructuring all of its debt burdens, including the senior notes issued by the company.”

According to Ultra Petroleum’s most recent 10-K filing with the Securities and Exchange Commission, Ultra Resources had entered into a $999 million credit agreement with JPMorgan Chase Bank and had issued $1.46 billion in unsecured senior notes.

During a 4Q2015 earnings call last month, CEO Michael Watford said the company had been negotiating with creditors in an attempt to ease some of the $3.76 billion in debt held by Ultra and its subsidiaries (see Shale Daily, Feb. 19).

Watford said at the time that Ultra had borrowed the remaining $266 million from its $1 billion revolver and that the company’s situation was “not all that pleasant, but we need some help from the creditors to get this thing across the finish line.” Ultra posted a $3.2 billion net loss (minus $20.94/share) for full-year 2015.

Ultra’s stock (UPL) was trading under 50 cents/share Tuesday.

Ultra’s holdings include 74,000 net acres in the Marcellus Shale in Pennsylvania, 68,000 net acres in the Pinedale and Jonah fields in Wyoming and 8,600 net acres in the Uinta Basin in Utah.

REX, a 1,679-mile, 1.8 Bcf/d pipeline system stretching from Rio Blanco County, CO, to Monroe County, OH, is owned by Tallgrass Development, Sempra US Gas & Power and Phillips 66.

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