Expecting continued growth in production and profits, Houston-based Ultra Petroleum Corp. is projecting that its realized natural gas prices will rise to the $5 range this year and hit that level again in 2013, Ultra CEO Mike Watford told the Jefferies Global Energy Conference Wednesday.

After a realized average price of $4.88/Mcf last year, Ultra is estimating that it will sell its gas for an average of $5.07 this year, dropping to $4.55 in 2012 and then returning to the $5 level in 2013, Watford said. He touted his company’s five-year record leading up to 2011, which produced returns on equity averaging 38%, reserves at 17% and production at 24% annually.

“In Wyoming in 2010 we had about 1,400 wells under production, but we still have 5,000 wells to go,” Watford said. “I think that works out to less than 25% [of the field] having been developed. And then we have the emerging Marcellus Shale opportunity where we are barely scratching the surface [92 producing horizontal wells in 2010] on our joint acreage, and there are about 4,500 gross wells to drill. To date, that area is only about 2% developed.”

Not counted in Ultra’s portfolio are 130,000 acres it holds but has yet to develop for oil in the Niobrara play, Watford said.

“The production goal this year is for 245-255 Bcfe,” Watford said. “We’re targeting a reserve replacement ratio of 200%, which means our 2010 reserves of 4.4 Tcf will probably go to 5 Tcf.”

Overall production, which was 214 Bcfe last year, is projected to hit 290 Bcfe next year and 330 Bcfe in 2013 when gas prices get back over the $5 level, Watford said.

“We think it is going to be hard for us to produce anything less than 290 Bcfe in 2012 so there is probably upside to that number,” Watford said. “One thing that is difficult for us is to determine is how much debt to use. Our costs of long-term debt are averaging 5%, and we’re told to go out and raise more 10-year money at less than 5%; our short-term money on our revolver is 2%. When you have returns on your asset portfolio of about 40% at $5 natural gas prices, it is hard not to leverage up a little more.”

Ultra’s capital expenditures are targeted to stay in the $1.2- 1.3 billion range, while its debt is expected to increase from this year’s $2 billion level to $2.69 billion in 2013, Watford said. “I think we are growing at a much faster rate than our peer group,” he said.

For this year, Ultra expects to complete 242 gross wells (135 net) in Wyoming’s Green River Basin in the Pinedale and Jonah fields, and 169 gross wells (77 net) in Pennsylvania’s Appalachian Basin. Wyoming currently accounts for half of Ultra’s wells and Pennsylvania about 40%. Watford said he expects those percentages to reverse starting next year with increased activity in the company’s Marcellus division.

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