Natural gas heavy Ultra Petroleum Corp. got a lift in the first quarter from resurgent prices in the Rockies, which helped boost revenues and deliver a profit as the company continues to focus on stabilizing operations in the Green River Basin.
First quarter revenue shot up 20% year/year to $271.5 million, driven mainly by improved prices from natural gas sold into the Opal/Northwest Rockies delivery point. Realized prices, excluding hedges, were $4.13/Mcf in 1Q2019, compared with $2.66/Mcf in the year-ago period.
The jolt came as Ultra has consistently battled weak regional pricing in the Rockies, where focuses on the Pinedale Anticline in Wyoming. Firmer prices also helped the company meet some of its objectives, including a reduction in net debt of more than $80 million during the first quarter and production that surpassed the midpoint of guidance.
“In 2019, we will continue to prioritize our efforts toward strengthening the balance sheet, expanding margins through continued cycle-time and cost reductions and optimizing the value of our assets,” CEO Brad Johnson said last week during a quarterly conference call earlier this month.
Ultra produced 62.2 Bcfe in the first quarter, including 59.6 Bcf of natural gas and 437,000 bbl of oil and condensate. As forecast, production was down from 72.3 Bcfe in the year-ago period and from 64.3 Bcfe in 4Q2018.
The company previously announced an 11% year/year decline in production for 2019 and noted that volumes fell on lower capital investment through the second half of last year and into this year. The company has cut spending “to focus on cash flow and debt reduction in the face of decade-low regional pricing” in the Rockies.
The weak gas outlook also prompted the company to scale back its horizontal drilling program last year and shift toward higher-return vertical wells. This year’s plans include no horizontal activity continues to delineate the Pinedale field and optimize its horizontal program, which had also delivered poor results.
Ultra is continuing to study how it can unlock more resources from the Pinedale through horizontal development. It again touted the Warbonnet 13-13-A-1H well it drilled last year and completed in January. The Warbonnet came online with an initial production rate of 17.5 MMcfe/d. The completion utilized more information from the company’s petrophysical model to target better intervals.
“At close to 3 MMcfe/d per 1,000 feet of lateral, this well ranks fourth among the 19 horizontal wells the company has brought online to date,” COO Jay Stratton said. “More importantly, the results affirm the potential for resource expansion and validates our ongoing technical work to enhance value in Pinedale.” More information will need to be gathered, but Stratton added that another horizontal test could come later this year.
Ultra reported first quarter net income of $40.7 million (21 cents/share), compared with $47.5 million (24 cents) in the year-ago period.