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With Pinedale Output Strong, Ultra Readies for Marcellus Growth

Ultra Petroleum Corp., which focuses its natural gas exploration and development in the Pinedale Anticline of Wyoming and the Pennsylvania portion of the Marcellus Shale, on Friday reported that its 4Q2009 profits beat Wall Street estimates and output hit record levels.

Net income was $95.4 million (62 cents/share) from $65.1 million (42 cents) a year earlier. Adjusted net income was 51 cents/share. Operating revenue rose 3% to $213.4 million. Total output rose 17% in the last three months of 2009 to 47.6 Bcfe. Ultra's full-year 2009 production jumped a record 24% from 2008 to 180.1 Bcfe, which was comprised of 172.2 Bcf of gas and 1.3 million bbl of condensate.

Most of last year's output came from the Pinedale Anticline, but with strong initial production (IP) results in the Marcellus Shale, Ultra plans to expand operations in Pennsylvania this year.

"In 2009 we initiated our horizontal Marcellus activity with above expectation results," said CEO Mike Watford. "Of the horizontal wells that we have completed so far, IP rates have ranged from over 3,400 Mcf/d to 10,400 Mcf/d, including two wells that are producing over 7,500 Mcf/d after 30 days."

Last July Ultra began drilling in Pennsylvania and by year-end 13 wells were producing. Initial production (IP) rates for the producing wells averaged 7,500 Mcf/d with an average lateral length of just over 3,800 feet. Preliminary estimated ultimate recoveries "affirm Ultra's 3.75 Bcfe type-curve, with some preliminary EURs [estimated ultimate recoveries] exceeding 6.0 Bcfe," said Watford. The cost to drill and complete a horizontal Marcellus well last year was $3.5 million.

"Examining our early wells, the first six have 30-day production averaging over 3,000 Mcf/d with the next seven wells averaging over 5,700 Mcf per day. In 2010, our Marcellus development program will expand with a drilling program exceeding 110 wells," said the CEO.

In Wyoming Ultra drilled 222 gross (113.9 net) wells in 2009, and Watford said the company is continuing to make progress to improve drilling efficiencies there. Ultra averaged 20 days/well in the Pinedale Anticline last year, compared with an average 24 days in 2008. In 4Q2009 Ultra set a new Pinedale record in drilling time from spud to total depth of 13,500 feet in 11 days.

"Largely as a result of improved drilling times, pad well costs continue to decrease year-over-year" in the Wyoming play, said Watford. "For the full-year 2009, pad well costs decreased to $5 million, as compared to $5.5 million for full-year 2008."

For 2010 Ultra is forecasting production to be 209-216 Bcfe, with 1Q2010 output expected at 48-49 Bcfe.

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