Having completed bankruptcy restructuring, Ultra Petroleum has “reached the inflection point of production” and expects 25% volume growth between 1Q2017 and 4Q2017 and 25% annual growth in 2018, according to CEO Michael Watford.
The Houston-based onshore operator completed its in-court restructuring and emerged from voluntary bankruptcy protection last month, having raised $2.98 billion in exit financing to fully reimburse its creditors and preserve some value for equity holders. Ultra also won approval for its newly issued common stock to be listed on the Nasdaq Global Select Market, added two members to its board of directors and, through restructuring, became a leaner company with only 165 employees.
“In many ways we are the same, but in other ways we are better,” Watford said during a conference call with analysts Wednesday. “We are glad to be back.”
Total production in 1Q2017 was 64.0 Bcfe, comprised of 60.0 Bcf of natural gas and 663,000 barrels of oil and condensate. After averaging two rigs for most of 2016, the company is looking to ramp up this year.
“During the entire first quarter, we ran four operated rigs in the Pinedale drilling and putting online 31 net wells,” said Brad Johnson, senior vice president, operations. “This activity level represents a 70% increase over last quarter. Our ramp up to eight operated rigs in 2017 remains on track. In April, our fifth rig arrived and spud its first well. We signed up the sixth and seventh rigs and expect both of these to move in and spud wells by the end of May. We are actively negotiating for an eight rig and expected to begin drilling later this summer.”
Ultra reported an $89.7 million ($1.12/share) net loss in 1Q2017, compared with a $21.8 million net loss in 1Q2016.
Ultra last year filed for Chapter 11 in U.S. Bankruptcy Court for the Southern District of Texas. Under the reorganization plan confirmed by the court, the company completed a $580 million equity rights offering and an $800 million senior secured term loan agreement that matures in seven years. It has $700 million in 6.875% senior notes due in 2022 and $500 million in 7.125% senior notes due in 2025. A $400 million senior secured revolving credit agreement also matures in 57 months.
“Despite the significant costs of the in-court restructuring, we were able to realize significant benefits that will have long lasting impact on the company,” said CFO Garland Shaw. “These include the elimination of $84 million per year in transportation expenses for our REX pipeline demand charges, an estimated $12 million per year in gas processing fee benefit through the renegotiation of our processing agreement and some $60 million per year of savings and cash interest charges. These benefits add up to $156 million per year…[T]his reduction provides us with a 36% improvement in our historical cost structure.”
Ultra holds more than 104,000 gross (68,000 net) acres in and around the Pinedale and Jonah fields in Sublette County, WY. It also holds 149,000 gross (74,000 net) acres in the Marcellus Shale, with core acreage in Pennsylvania’s Centre and Clinton counties, and 9,000 acres in the Uinta Basin, in Uintah County, UT.
In March, Ultra announced plans to spend $500 million on capital expenditures in 2017, a 46% increase from 2016. It also said it expects overall production to range from 290-300 Bcfe in 2017, compared to the 281.7 Bcfe produced in 2016.
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