Sometimes it's just not enough to have low-cost assets when you're an exploration and production (E&P) company. Although Ultra Petroleum (UPL)
has long boasted some of the most economical natural gas assets in the
continental United States, the prolonged stretch of sub-$4/mmBtu natural
gas prices has made it difficult for the company to get ahead.
Comparing Ultra Petroleum's share price performance over the last two
years to oil-heavy E&P companies like Oasis (OAS) and Whiting (WLL) or more balanced operators like Noble (NBL) tells the tale - Ultra shares are down 33% while the worst of those three others is still up almost 30%.
Even
though gas prices have recently spiked over $4, nobody seems to be
willing to assume yet that these prices will persist. That makes
assessing the value of Ultra Petroleum an interesting time-dependent
exercise. Even with the recent addition of oil-producing Uinta acreage,
Ultra's 2014 EBITDA likely won't be high enough to justify buying today,
but if you look instead at a long-term NAV based on natural gas prices
of $3.50 or higher, a different conclusion presents itself.
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Ultra Petroleum And Weighing The Short Versus The Long
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