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Ultra Petroleum Adding Horizontals in Pinedale Anticline

After emerging from Chapter 11 bankruptcy earlier this year, Houston-based Ultra Petroleum Corp. is thinking more horizontally for its mostly vertical drilling program in the Pinedale Anticline in the Green River Basin.

During a 3Q2017 earnings conference call with analysts on Tuesday, CEO Michael Watson said production may fall short of guidance for this year to 276-278 Bcfe, but he sees that as a one-time occurrence, with production growth of 20% expected in 2018.

Limitations on drilling in southwestern Wyoming won't be a factor into 2019, he said.

During 3Q2017, production hit 71.1 Bcfe, including 66.8 Bcf of natural gas, versus year-ago output of 69.3 Bcfe, with 65.2 Bcf of gas.

"We're extremely excited about our most recent horizontal well in Pinedale that is flowing at 21 MMcf/d and is still increasing with a 10% oil cut," said Watson. "We believe this well is indicative of the horizontal potential in the field and could result in 16 new horizontal wells."

Operations chief Brad Johnson told analysts that Ultra doubled its Pinedale rig count to eight from four this year, and he expects to move rigs westerly in 2018 when both vertical and horizontal drilling are expected to boost activity.

"We will continue to be return-focused,” not initial production-focused, he said.

Watson said the growth projections for 2018 are based only on vertical drilling. Horizontal drilling could add 19-48 Bcfe of production, according to Johnson.

Eight target zones have been identified in the Pinedale for horizontal drilling, mostly from existing vertical pads, and Ultra has also identified up to 1,600 potential drilling locations.

"All of the horizontal well locations are additive to our vertical well locations," Johnson said.

Ultra holds assets scattered around the nation, but the Pinedale and Jonah fields of southwestern Wyoming are its primary focus, where it has 69,000 net acres.

The company also has 72,000 net acres in northern Pennsylvania within the Marcellus Shale, as well as an 8,000-acre oil play in the Three Rivers Field of the Uinta Basin in northeastern Utah.

The company filed for bankruptcyin 2016 claiming $3.76 billion of debt; it emerged this past spring with $2.98 billion in exit financing to move forward.

With the company's bankruptcy now resolved, Ultra is "confident" in its 20% growth projection for next year, Watson said. Pinedale production alone should increase 17% overall this year, despite some operational issues in the third quarter. Ultra "didn't get any help from our partners as we had less completions in the Pinedale and shut-ins in the Marcellus,” along with issues on the Enterprise Product Partners LP’s Pinedale gathering system.

Ultra reported a net loss of $327.7 million (minus $1.67/share) in 3Q2017, compared with net income of  $98.4 million ($1.23) in 3Q2016. On an adjusted basis, net income was $78.8 million (40 cents), compared with $102.3 million ($1.28). Revenue totaled $217.6 million versus $199.3 million a year ago. 

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