Natural gas heavy Ultra Petroleum Corp. plans to maintain its focus on operating cash flow and high-return vertical wells within the Pinedale Anticline this year, with annual production expected to be about 11% lower, vis-à-vis 2018.

The Englewood, CO-based independent plans to spend $320-350 million on capital expenditures (capex), including $275-295 on drilling and completions. The latest capex budget would fund three operated rigs and one nonoperated rig to drill 90 net operated and nine nonoperated wells, all verticals. By comparison, Ultra spent $426.2 million on capex in 2018, during which it participated in 98.3 net wells that were turned to sales.

Ultra expects 1Q2019 production will average 675-695 MMcfe/d, while full-year production will range from 240-250 Bcfe. Although Ultra did not disclose why production would be lower in 2019, the company completed the sale of Utah assets in Utah last September, which produced about 2,000 boe/d in 2Q2018.

"We enter 2019 with positive momentum at Ultra," said CEO Brad Johnson, who was appointed on March 1 after serving as interim CEO. "The company is drilling vertical wells above recent historical averages [and] continuing the horizontal learnings...Our results in the fourth quarter reflect stabilization and improvement in the business, and we intend to build upon these successes to increase value for our shareholders."

Ultra holds the largest position in the Pinedale at 79,000 net acres, 91% of which is operated and 89% is held by production.

The company reported production of 64.3 Bcfe in 4Q2018, a 13.7% decrease year/year. Full-year production totaled 275.1 Bcfe, down 0.6% from 2017.

During the fourth quarter, Ultra brought 21 net operated wells online with an average 24-hour initial production (IP) rate of 8.3 MMcfe/d. The company turned 79 net operated vertical wells and 12 net operated horizontal wells to sales last year.

Ultra took note of a horizontal well, the Warbonnet 13-13-A-1H, completed in January with a 6,100-foot lateral targeting the A1 zone of the Lower Lance formation. The well posted a 24-hour IP rate of 17.5 MMcfe/d. The company said the completion was noteworthy because it used a new stimulation fluid during fracturing, with stages targeting high-graded intervals.

The company shifted to drilling all vertical wells by 3Q2018 as its horizontal program was undergoing changes.

"Although our 2019 capital investment program does not include horizontal drilling, we are continuing our ongoing analysis to further de-risk future horizontal drilling opportunities," management said.

Ultra reported net income of $39.7 million (20 cents/share) in 4Q2018, compared with $95.5 million (49 cents) in the year-ago quarter. For 2018, net income was $85.2 million (43 cents/share), versus $177.1 million ($1.08) in 2017. Revenues totaled $272.1 million in 4Q2018, compared with $240.6 million in the year-ago quarter. Full-year revenues were $892.5 million, versus $891.9 million in 2017.