Wyoming pure-play Ultra Petroleum Corp. announced Monday it would suspend its drilling program for the rest of the year and into 2020.
The drilling suspension is the latest in a series of cost-cutting measures from Ultra, which has struggled with financial performance in recent years.
Ultra said in June it would drop to two rigs from three in the Pinedale Anticline in Wyoming, and a few months later said it would drop to a single rig. The company also announced in August that Nasdaq had begun delisting procedures as the stock has failed to meet its standard by trading below $1.00 for 30 consecutive days, and would trade over-the-counter (OTC) going forward.
“The decision to suspend drilling demonstrates our commitment to financial discipline. In the current price environment, it is difficult to support investment in new well development in Pinedale,” said CEO Brad Johnson.
Ultra’s assets are confined to the Pinedale and Jonah Fields in southwest Wyoming’s Sublette County, which lies in the northern part of the Green River Basin.
The company is able to pause drilling because it renegotiated terms of its loan agreement, which removes financial maintenance covenants.
“This amendment provides flexibility for the company to suspend drilling in the Pinedale field while natural gas pricing remains near multi-year lows,” the company said.
The new version of the loan agreement will “conserve valuable future inventory for a more constructive natural gas price market,” said CFO David Honeyfield.
As a result of the drilling suspension, Ultra has lowered its fourth-quarter drilling and completion capital expenditure (capex) by $30 million from its previous guidance, which brings the company’s full-year capex forecast to $230-260 million.
Full-year production guidance for 2019 remains unchanged at 238-244 Bcfe.
“Base production performance continues to be strong and we expect this out-performance to offset the incremental production for the fourth quarter that would have occurred from new wells drilled,” the company said.
Ultra offered a preliminary 2020 production outlook of 180-195 Bcfe, which factors in the drilling suspension and assumes no additional drilling next year.
Production in Q42019 and in 2020 will come from proved-developed producing wells, the company said.
Ultra’s 2Q2019 net income was $57.1 million (29 cents/share), which compares with a net loss of $20.6 million (minus 10 cents) in 2Q2018.