A new quarterly production record and reduced costs at Ultra Petroleum Corp. in 3Q2009 weren’t enough to overcome a noncash unrealized mark-to-market charge of $145 million on the company’s financial commodity contracts and the continued decline in natural gas prices, resulting in a loss of $8.33 million (minus 6 cents/share) compared with a profit of $116.9 million (74 cents) in 3Q2008, the Houston-based company said Friday.

Adjusted net income was $85.8 million (57 cents/share) compared with $122.4 million (78 cents) in the year-ago quarter. Operating cash flow was $172.6 million compared with $242.5 million in the year-ago quarter.

Ultra’s production in 3Q2009 — 45.9 Bcfe, up 27% from 36.3 Bcfe in 3Q2008 — and a decline in all-in costs of 22%, to $2.48/Mcfe were “remarkable,” CEO Michael Watford said during a conference call with financial analysts Friday. “While the industry continued to experience low natural gas prices during the quarter, our returns and margins remain similar to ones achieved last year in a more robust commodity price environment,” he said.

It was the second consecutive quarter that Ultra has set a company production record (see NGI, Aug. 10).

At its current production rate, Ultra expects to exceed the upper end of its previously announced production guidance for 2009 of 172-177 Bcfe. Production is expected to increase at least 22% over 2008’s record annual production of 145.3 Bcfe, the company said. Ultra’s preliminary production guidance for 2010 and 2011 is 15-20% per annum growth.

Ultra’s average realized natural gas price during 3Q2009 was $5.13/Mcf including hedging results; the average price for natural gas was $3.09/Mcf, excluding hedging results.

In Wyoming during the third quarter Ultra placed on production 67 Pinedale-Lance wells, including 31 that it operates. The average initial production (IP) rate for the 31 Ultra-operated Pinedale wells was 10,356 Mcf/d. The average of all Ultra-interest wells was 8,508 Mcf/d while the average of the Ultra nonoperated wells was 6,917 Mcf/d.

Third quarter average drilling days for Ultra-operated wells as measured by spud to total depth was 18 days. Well costs decreased to $5 million, as compared to $5.6 million in the year-ago period.

Ultra drilled and completed 12 horizontal Marcellus Shale wells in 3Q2009 and plans to drill another 15-20 during 4Q2009. During the third quarter, seven wells were brought online with IPs averaging 6,420 Mcf/d. The company has secured four pipeline interconnects with total capacity of 80 MMcf/d growing to more than 300 MMcf/d by year-end.

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