Even by the elevated standards of independent exploration and production companies, Ultra Petroleum (NYSE:UPL)
seems to more often swing between doom-and-gloom bearishness and
gleeful bullishness than the typical E&P stock. A debt-loaded
balance sheet, so-so debt-adjusted production growth, and "okay" assets
may explain some of the negativity, but Ultra's production growth hasn't
really been that bad, the cash costs are competitive, and the company
is executing in its oil-rich Uinta acreage. Like many E&Ps, Ultra
Petroleum looks undervalued on a NAV basis (though rising costs are an
issue to watch there), but the EBITDA-based approach doesn't suggest the
same level of near-term opportunity.
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Ultra Petroleum Continuing To Yo-Yo Between Gloom And Glee
Showing posts with label Ultra Petroleum. Show all posts
Showing posts with label Ultra Petroleum. Show all posts
Wednesday, August 6, 2014
Thursday, July 10, 2014
Seeking Alpha: Bill Barrett: High-Return Oil Plays, But Capital Needs Could Pinch
Oil and gas companies are definitely not all the same, and those
differences (be they adjusted production growth, well-level ROEs,
capital structures, or what have you) eventually show up in valuations. Bill Barrett (BBG), PDC Energy (PDCE), and Bonanza Creek (BCEI) are all interesting E&P companies in the $2B to $3B enterprise value range, but their performance since my October 4, 2013 piece on Bill Barrett has diverged pretty significantly - with PDCE down almost 7%, Bonanza Creek up almost 18%, and Bill Barrett up about 2%.
Looking ahead, I'm encouraged by the company's production and return potential in the DJ Basin and Uinta (or Uintah) Basin and eager to see whether initial tests in the Chalk Bluffs area will match up to the results reported by EOG (EOG) and further expand its resource potential. On the other hand, the company's capital needs are considerable and I'm concerned about the debt/balance sheet-adjusted production growth prospects.
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Bill Barrett: High-Return Oil Plays, But Capital Needs Could Pinch
Looking ahead, I'm encouraged by the company's production and return potential in the DJ Basin and Uinta (or Uintah) Basin and eager to see whether initial tests in the Chalk Bluffs area will match up to the results reported by EOG (EOG) and further expand its resource potential. On the other hand, the company's capital needs are considerable and I'm concerned about the debt/balance sheet-adjusted production growth prospects.
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Bill Barrett: High-Return Oil Plays, But Capital Needs Could Pinch
Monday, December 23, 2013
Seeking Alpha: Ultra Petroleum And Weighing The Short Versus The Long
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
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
Wednesday, June 26, 2013
Investopedia: The Wait For $5 Gas Could Be A Long One At Ultra Petroleum
Reputations, good and bad, can be surprisingly sticky. Ultra Petroleum (NYSE:UPL)
has long been lauded for its high-quality operations, its cost
leadership, and the quality of its properties/reserves. While the first
part is absolutely still true, I have bigger questions about the quality
of Ultra's properties and how the company will generate value over the
long-term. While I will certainly acknowledge that higher gas prices
will be the rising tide that lifts all boats in the natural gas space,
I'm increasingly concerned that Ultra Petroleum is a high-quality
operator with medium-quality assets and, as such, maybe not the horse to
ride for the long term.
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Wednesday, September 12, 2012
Investopedia: A Familiar Refrain For Range Resources
In many respects, investors are going to find a lot similarities between companies like Ultra Petroleum (NYSE:UPL), Cabot Oil & Gas (NYSE:COG) and Range Resources (NYSE:RRC).
Namely, that these are high-quality natural gas-oriented energy
companies with attractive acreage and drilling prospects, as well as low
operating costs. However, what is also similar between them all is the
relatively low price of natural gas and the extent to which share price
appreciation is going to be tied to improving natural gas realizations.
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Tuesday, September 4, 2012
Investopedia: Cabot Oil And Gas Looks Like A Reasonable "Buy And Wait" Story
Everybody knows the deal these days on natural gas. E&P companies like Cabot Oil & Gas (NYSE:COG)
have been incredibly successful at finding and exploiting new sources
of natural gas, but the U.S. energy infrastructure has not shifted as
radically. Consequently, inventories are high and prices are low, which
has kept a lid on many of the stocks. Although Cabot's near-term
valuation wouldn't suggest that it's a compelling buy, I think a
longer-term perspective suggests a different answer.
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Investopedia: Has Ultra Petroleum Seen The Worst?
Maybe the worst question an investor can ask about a stock or sector is
"how much worse can it get?," as the answer is often something along the
lines of "a lot." That seems like a relevant point when considering Ultra Petroleum (NYSE:UPL)
- a natural gas-focused exploration and production (E&P) company
that has long been a top-notch operator, but has suffered from
rock-bottom gas prices. It's probably true that higher natural gas
prices are inevitable as export-oriented liquefaction facilities come
online and more energy consumption is shifted to gas, but that's a
multi-year process that still leaves ample room for volatility in these
shares.
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Tuesday, August 28, 2012
Investopedia: Can Whiting Deliver More Green?
While momentum investors may not want to deal with supposedly "broken"
growth stories, I think investors more interested in value and financial
performance can still find a lot to like in Bakken name like Whiting Petroleum (NYSE:WLL).
The frenzy over these companies is largely over, but as is often the
case the market has over-corrected and these shares look interesting
even considering some of the bearish scenarios
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Friday, May 25, 2012
Investopedia: Debt Complicates The Ultra Petroleum Waiting Game
There's not much more digital ink to be spilled on the state of the
natural gas environment. Massive supply increases from basins like the
Marcellus have pushed prices down to uneconomical levels, and those
producers who can are switching over from natural gas to oil and
liquids. Unfortunately, while Ultra Petroleum (NYSE:UPL)
is one of the best-run natural gas companies, the company's reserve
base is almost completely natural gas and potential declines in
production and profits could pressure liquidity in the coming year.
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Tuesday, January 10, 2012
Investopedia: Does Penn Virginia Deserve Such A Low Multiple?
The last twelve months have not been kind to smaller gas-focused E&P companies. With strong production across the country, prices are as low as they've been in almost three years and many companies continue to drill so as to hold onto leases. Making matters worse, exploiting shale gas formations requires considerably more expensive wells and procedures, and energy service companies like Halliburton (NYSE:HAL) have not been in a hurry to cut prices. All in all, it has been an ugly set-up and an ugly market for Penn Virginia (NYSE:PVA).
In the Right Places
At first glance, it would seem that Penn Virginia has focused on the right markets. The company has a large position in the Eagle Ford region of Texas, an area that has attracted noteworthies like Apache (NYSE:APA), Exxon Mobil (NYSE:XOM) and CNOOC (NYSE:CEO). Penn Virginia also operates in well-known productive regions like the Granite Wash of Oklahoma and Pennsylvania's Marcellus, as well as holding positions in the Texas/Louisiana Haynesville shale. (For related reading, see Oil And Gas Industry Primer.)
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Wednesday, May 4, 2011
Investopedia: Chesapeake Making The Best Of A Tough Situation
Here's a question for natural gas investors to ponder: How much growth do you really want? Natural gas prices are still low and reserves are a limited asset, so does it really make sense for these companies to cash out a meaningful amount of these assets too cheaply? Certainly, these companies need to fund their operations and establish enough production to hold valuable leases, but production at below-trend prices is a mixed blessing.
Chesapeake Energy (NYSE:CHK), one of the largest independent natural gas producers, continues to walk that tightrope while remaining very highly leveraged to future rises in natural gas. (For more, see Natural Gas Industry: An Investment Guide.)
Decent Q1 Performance
Chesapeake reported over 6% sequential production growth for the first quarter, with realized prices up about 2%. Within those numbers, the company reported strong growth in its oil and liquids production - up nearly 9% on a sequential basis and up 56% from last year.
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Chesapeake Energy (NYSE:CHK), one of the largest independent natural gas producers, continues to walk that tightrope while remaining very highly leveraged to future rises in natural gas. (For more, see Natural Gas Industry: An Investment Guide.)
Decent Q1 Performance
Chesapeake reported over 6% sequential production growth for the first quarter, with realized prices up about 2%. Within those numbers, the company reported strong growth in its oil and liquids production - up nearly 9% on a sequential basis and up 56% from last year.
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Thursday, February 24, 2011
Investopedia: A Win-Win For Chesapeake and BHP?
Whenever a significant deal is announced between two companies, there is an immediate interest in figuring out which company got the best of the deal. When looking at Monday's transaction between BHP Billiton (NYSE:BHP) and Chesapeake Energy (NYSE:CHK), investors should keep an open mind with respect to the notion that maybe both parties are getting something they need out of this transaction.
The Terms of the Deal
In the deal announced Monday evening, Chesapeake achieved its stated goal of selling its 75% interest in the Fayetteville shale, a gas-rich area extending across Arkansas. Chesapeake is selling this asset base to Australian mining major BHP Billiton for $4.75 billion in cash, and the two companies will execute a service agreement to assure a smooth transition in operations.
BHP Billiton is acquiring about 2.5 trillion cubic feet (natural gas equivalent) of proven reserves, with a total potential reserve base of maybe 10 trillion cubic feet. The deal also includes related midstream assets, but the companies did not provide a breakdown of value assignment in the press release.
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The Terms of the Deal
In the deal announced Monday evening, Chesapeake achieved its stated goal of selling its 75% interest in the Fayetteville shale, a gas-rich area extending across Arkansas. Chesapeake is selling this asset base to Australian mining major BHP Billiton for $4.75 billion in cash, and the two companies will execute a service agreement to assure a smooth transition in operations.
BHP Billiton is acquiring about 2.5 trillion cubic feet (natural gas equivalent) of proven reserves, with a total potential reserve base of maybe 10 trillion cubic feet. The deal also includes related midstream assets, but the companies did not provide a breakdown of value assignment in the press release.
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Friday, February 11, 2011
Investopedia: Statoil: Bargain Or Bull Trap?
If investors want to find bargains today in the energy sector, they have to shop in the scratch-and-dent bins. Norway's Statoil (NYSE:STO) is a good example. Concerns about this company's production growth prospects have kept a lid on the stock price as more dynamic companies like Whiting (NYSE:WLL), Brigham Exploration (Nasdaq:BEXP), and Cimarex (NYSE:XEC) have raced by. The question, though, is whether Wall Street has made too much of Statoil's near-term growth woes and whether patient investors might be looking at a bargain in these shares.
A Poor Quarter amidst Sluggish Expectations
Wall Street was not expecting very much from Statoil in the fourth quarter, but they got even less than that. Of course, "not expecting very much" is a relative judgment - Statoil still produced almost 17% revenue growth and 19% operating profit growth.
Unfortunately, during that same period the company saw a 23% increase in the average price for petroleum liquids and a 17% increase in natural gas prices. What that highlights is that once again production was a significant issue. Total production in the quarter fell more than 5% to about 1.95 billion barrels of oil equivalent per day, with lifted volumes of liquids (more valuable in today's price environment) down 8%.
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A Poor Quarter amidst Sluggish Expectations
Wall Street was not expecting very much from Statoil in the fourth quarter, but they got even less than that. Of course, "not expecting very much" is a relative judgment - Statoil still produced almost 17% revenue growth and 19% operating profit growth.
Unfortunately, during that same period the company saw a 23% increase in the average price for petroleum liquids and a 17% increase in natural gas prices. What that highlights is that once again production was a significant issue. Total production in the quarter fell more than 5% to about 1.95 billion barrels of oil equivalent per day, with lifted volumes of liquids (more valuable in today's price environment) down 8%.
The full article can be found at:
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Thursday, February 3, 2011
Investopedia: Anadarko: A Balanced Player In An Imbalanced Time
It is an ironic part of commodity investing that good times usually work against the best companies. When prices are soaring, those higher realizations paper over a lot of the sins and shortcomings of inferior players and those stocks often outperform those of the companies built to list. To that end, Anadarko Petroleum (NYSE:APC) is a fine company and a very credible candidate for longer term portfolios, but probably does not have the same upside leverage to higher energy prices as other names.
The Quarter That Was
For the fourth quarter of 2010, Anadarko reported that revenue (outside of divestitures) rose about 9%. Growth was helped by both higher production (though production slipped on a sequential basis) and higher price realizations in oil.
Across the board Anadarko saw good cost control this quarter. Although EBITDA rose about 4% as reported, cash cost growth was contained to 2% on a per-barrel basis (coming in at about $7.57/boe). What makes that all the more impressive is that Anadarko operates in some expensive regions; Anadarko is the largest operator in Eagle Ford, for instance. Said differently, in an environment where companies like Schlumberger (NYSE:SLB) and Halliburton (NYSE:HAL) are seeing good results, it is no small detail that Anadarko is keeping a lid on costs. (For more, see Eagle Ford Shale Midstream Assets Coming.)
The Look Ahead
Although the company did report that it achieved 140% reserve replacement for 2010, the news was not wholly perfect. The company did report that the start of the Caesar-Tonga project is looking like a 2012 or beyond event instead of a 2011 event, and the company continues to wait for greater clarity from the federal government as it pertains to operating in the Gulf of Mexico.
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The Quarter That Was
For the fourth quarter of 2010, Anadarko reported that revenue (outside of divestitures) rose about 9%. Growth was helped by both higher production (though production slipped on a sequential basis) and higher price realizations in oil.
Across the board Anadarko saw good cost control this quarter. Although EBITDA rose about 4% as reported, cash cost growth was contained to 2% on a per-barrel basis (coming in at about $7.57/boe). What makes that all the more impressive is that Anadarko operates in some expensive regions; Anadarko is the largest operator in Eagle Ford, for instance. Said differently, in an environment where companies like Schlumberger (NYSE:SLB) and Halliburton (NYSE:HAL) are seeing good results, it is no small detail that Anadarko is keeping a lid on costs. (For more, see Eagle Ford Shale Midstream Assets Coming.)
The Look Ahead
Although the company did report that it achieved 140% reserve replacement for 2010, the news was not wholly perfect. The company did report that the start of the Caesar-Tonga project is looking like a 2012 or beyond event instead of a 2011 event, and the company continues to wait for greater clarity from the federal government as it pertains to operating in the Gulf of Mexico.
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Tuesday, January 25, 2011
Investopedia: Schlumberger Sets A Fast Pace
The world's largest energy services and equipment company Schlumberger (NYSE:SLB) has started the calendar fourth quarter earnings reporting cycle by setting a tough pace. Not only did the company report very strong revenue growth relative to expectations, but profitability was solid and guidance was rather encouraging.
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The Quarter That Was
On a reported basis, the fourth quarter was clearly a period of strong demand for Schlumberger's services. Revenue rose 32% sequentially and 58% annually and topped $9 billion. Even stripping out the acquisition of Smith, the year-on-year growth was about 15%. Profitability was likewise strong, with EBITDA growing 28% sequentially and 47% annually. Once again, even without the inclusion of Smith, the year-on-year growth in EBITDA and operating income would have been quite strong.
North America was clearly an area of strength for the company, as revenue jumped 27% sequentially - including a 24% increasing land revenue on top of 4% growth in rig counts. Operating income was likewise very strong (up 76% sequentially), even as the federal government's ban on Gulf of Mexico activity impacted earnings.
Around the rest of the world results were less scintillating. Revenue was up a bit in the Eastern Hemisphere category, while declining a bit in Latin America due largely to the Mexican market. (For more, see Oil Services Sector Powered By North America.)
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Wednesday, December 22, 2010
Can Sasol Liven Up North American Gas?
For years now, natural gas bulls have sputtered and fumed over the expanding gap between the price of oil and natural gas. From an energy-content point of view, natural gas is extremely cheap and oil is relatively quite expensive. Typically those gaps do not persist, but there is a problem in this case - natural gas just is not as useful; it does not go into car gas tanks, it does not make diesel or jet fuel, nor any of the other follow-on products that come out of a barrel of oil.
If Sasol (NYSE:SSL) has its way, though, the road to change may be in sight.
The Asset
Montney is a bit like Canada's Barnett, Haynesville or Marcellus - a geological formation that contains huge amounts of hydrocarbon resources (natural gas, mostly), but requires advanced exploitation technologies to access. According to reports, this development may contain upwards of 9.6 trillion cubic feet of natural gas - clearly a sizable reserve base. An important part of the asset, though, is the fact that it is also relatively close to established pipeline infrastructure - given the problems that companies like Ultra Petroleum (NYSE:UPL) used to have in getting full value for its gas (due to a lack of infrastructure), that is not a trivial factor.
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If Sasol (NYSE:SSL) has its way, though, the road to change may be in sight.
A Tie-Up with Talisman
Sasol, the large South African synfuel specialist, announced an agreement on Monday whereby it was acquiring a 50% operating interest in one of Talisman's (NYSE:TLM) shale gas assets. Sasol is paying a bit more than $1 billion for 50% of the Farrell Creek development in the Montney Shale. The way the deal is structured is a little unusual, though. Sasol will pay $263 million in cash upfront, and then fund three-quarters of Talisman's development costs up to the announced purchase price.
The Asset
Montney is a bit like Canada's Barnett, Haynesville or Marcellus - a geological formation that contains huge amounts of hydrocarbon resources (natural gas, mostly), but requires advanced exploitation technologies to access. According to reports, this development may contain upwards of 9.6 trillion cubic feet of natural gas - clearly a sizable reserve base. An important part of the asset, though, is the fact that it is also relatively close to established pipeline infrastructure - given the problems that companies like Ultra Petroleum (NYSE:UPL) used to have in getting full value for its gas (due to a lack of infrastructure), that is not a trivial factor.
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Stocks With Good Growth, But Poor Outcomes
Given the stock market's bottomless appetite for growth, it stands to reason that companies posting solid growth will see good performance in their stocks. In most cases, this is true. But like every good rule of thumb, this is one that has some exceptions to it. Examining a list of some of the notable "growth underperformers" this year might be a good place to start an investor's after-Christmas shopping.
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No Good News in Healthcare
If any sector is due for a rebound in 2011, healthcare might just be it. These companies already had enough problems with the recession - a poor job environment and overall economic worries have either taken away people's health insurance or made them very nervous about spending any extra money. As a result, patient visits are down, procedure counts are down, and hospitals are skittish about buying any non-essential equipment. Then the FDA decided to pick 2010 as the year to make a statement that it was prioritizing safety above all else and that new drugs and devices would have to pass a new and unpublished "double secret probation" to reach the market.
their status as one-time med-tech growth darlings come into doubt. Both have posted excellent and distinctly above-average growth (roughly 40% and 35%, respectively) and yet lagged the broader market by a meaningful amount (9% and 13%, respectively). Both stocks may be basing, but investors will need to see some assurance in the next quarterly report (or two) to feel comfortable about pushing these stocks up again. (For more, see Investing In The Healthcare Sector.)
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Monday, November 8, 2010
Weak Prices Gassing Energy Producers
The United States has still not embraced natural gas anywhere to the extent it should as part of its energy infrastructure, and yet the major gas producers keep drilling and pumping away. The exploitation of shale gas reserves has been a resounding success, but the impact on prices has been severe - from peak prices in the mid-teens in 2005 and 2008 (and talk of possible "peak gas" and gas shortages), natural gas prices for December now languish below $4. That makes it tough to make a buck in the gas business.
A Mixed Bag In Calendar Q3
At first glance, there does not seem to be much cause for worry in the gas patch. Netting out the impact of derivatives and other hedges, Ultra Petroleum (NYSE:UPL) reported revenue growth of 15%, Chesapeake (NYSE:CHK) posted 23% growth, Devon (NYSE:DVN) delivered 13% growth and EOG (NYSE:EOG) saw revenue rise about 9%. In the cases of Ultra and Chesapeake, output was likewise strong, with growth of 21% and 23%, respectively.
Profitability was also relatively solid on the whole. Ultra saw operating income more than double (up about 120%), while Chesapeake logged 11% EBITDA growth and Devon saw EBITDA grow 22%. EOG was admittedly a laggard here, though, as EBITDA fell almost 9%.
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A Mixed Bag In Calendar Q3
At first glance, there does not seem to be much cause for worry in the gas patch. Netting out the impact of derivatives and other hedges, Ultra Petroleum (NYSE:UPL) reported revenue growth of 15%, Chesapeake (NYSE:CHK) posted 23% growth, Devon (NYSE:DVN) delivered 13% growth and EOG (NYSE:EOG) saw revenue rise about 9%. In the cases of Ultra and Chesapeake, output was likewise strong, with growth of 21% and 23%, respectively.
Profitability was also relatively solid on the whole. Ultra saw operating income more than double (up about 120%), while Chesapeake logged 11% EBITDA growth and Devon saw EBITDA grow 22%. EOG was admittedly a laggard here, though, as EBITDA fell almost 9%.
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Friday, August 27, 2010
Can The U.S. Switch To Natural Gas?
There is nothing like a big oil spill (or several years of high gasoline prices) to get investors and some environmentalists talking about natural gas again. The arguments have been around for years and go something like this: Natural gas is relatively abundant in the United States, it can offer positive pollution trade-offs to oil and gasoline, and it is the only immediate option with a reasonable chance to supplant imported oil in powering vehicles.
As another summer has rolled by, however, North America really does not seem all that much closer to the sort of natural gas-fueled future that people like T. Boone Pickens would recommend. Still, for those investors who believe in the possibility, there are a few investment plays to explore while the idea is still in its extended infancy.
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As another summer has rolled by, however, North America really does not seem all that much closer to the sort of natural gas-fueled future that people like T. Boone Pickens would recommend. Still, for those investors who believe in the possibility, there are a few investment plays to explore while the idea is still in its extended infancy.
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Tuesday, August 3, 2010
Ultra Petroleum - Low-Cost, High-Quality
Sometimes the best you can hope for is to own a good house in a tough neighborhood. In what has been a tough market for natural gas, shareholders of Ultra Petroleum (NYSE:UPL) have done relatively better than most.
And why not? Ultra is a low-cost producer in the field, and couples that with significant production growth. The real question is whether or not the market will continue to value Ultra when the inevitable rally comes in natural gas prices.
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Of course it figures ... less than an hour after I post my "sorry, possibly no posts today", an Investopedia piece goes up!
And why not? Ultra is a low-cost producer in the field, and couples that with significant production growth. The real question is whether or not the market will continue to value Ultra when the inevitable rally comes in natural gas prices.
For the full piece, please go to:
http://stocks.investopedia.
Of course it figures ... less than an hour after I post my "sorry, possibly no posts today", an Investopedia piece goes up!
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