Ultra Petroleum's
Last quarter, I told you why this gas producer wins. The company, with interests in the Rockies, sports an unbelievably slim cost profile. Three months ago, the company was reporting all-in costs below $3 per thousand cubic feet of gas produced. This time around, the number was $2.43 per mcf. That is less than half the price at which Ultra sold its gas into the market this quarter (after the impact of hedging).
Ultra thus reported a 73% cash flow margin and a 34% net income margin amid a dreary backdrop for natural gas. This level of profitability, achieved during the industry's "worst cyclical downturn since 1981" (according to Helmerich & Payne
In addition to rock-bottom costs, Ultra has delivered some of the most explosive debt-adjusted, per-share production growth of any of its peers. The company, edging out PetroQuest
To round out its long-term reserve growth profile, Ultra is looking beyond its treasured Pinedale play to the marvelous Marcellus shale. This is the same Appalachian play entrancing Chesapeake Energy
Ultra has amassed a decent foothold here (not the most difficult task -- the play is huge), and after a few promising early horizontal well completions, the company is now talking about drilling more than 100 Marcellus wells next year. At several million dollars a pop (Range Resources models its well costs at $3.5 million), that is a pretty serious drilling campaign.
The combination of a world-class established play in the Pinedale, and a strong position in one of the most promising new shale plays, makes Ultra a very attractive way to gain exposure to the emerging Marcellus monster.
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