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Ultra Petroleum Will Burn Brighter in 2012

With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at Ultra Petroleum (NYSE: UPL  ) . As I discussed last month, Ultra Petroleum had a horrific 2011, as natural gas prices remained weak due to huge supply overruns from new shale plays. But eventually, with high oil prices, equilibrium has to reassert itself. Will 2012 be the year for higher gas prices? Below, I'll take a closer look at what people expect from Ultra Petroleum and its rivals.

Forecasts on Ultra Petroleum

Median Target Stock Price $46.50
2011 EPS Estimate                           $2.58
2012 EPS Estimate $2.47
Expected Annual Earnings Growth, Next 5 Years 19%
Forward P/E 12
CAPS Rating (out of 5) *****

Sources: Yahoo! Finance, Motley Fool CAPS.

Will Ultra Petroleum win in 2012?
The picture for Ultra Petroleum looks mixed. Over the long run, investors and analysts alike see big things for the natural gas giant. But at least for 2012, a small earnings decline could dampen excitement about the stock -- even though the current price target rests more than 50% above current levels.

The disconnect stems from Ultra's dominant position in natural gas. With higher costs, SandRidge Energy (NYSE: SD  ) and Chesapeake Energy (NYSE: CHK  ) have moved strongly toward oil and liquids production, where higher prices are available. So far, that hasn't created a vacuum in the natural gas market, but eventually, lower interest in production should help boost prices -- supporting Ultra's low-cost model. The company's activity in the Marcellus shale, where it's working with EOG Resources (NYSE: EOG  ) and EXCO Resources, follows in the footsteps of other economically attractive production opportunities for Ultra.

The other end of the equation comes from demand. Clean Energy Fuels (Nasdaq: CLNE  ) is trying to tap into the nascent market for liquefied natural gas with a network of fueling stations. If LNG can become a viable fuel source for transportation, demand will blossom -- and prices will inevitably rise, helping Ultra.

Concerns about fracking and shale gas generally could be potential speed bumps down the road. But at least for now, Ultra is the low-cost provider in an increasingly important industry -- one that has huge potential in 2012 and beyond.

Ultra Petroleum could win big from a natural gas boom, but we have another stock we think is even more exciting. Join the thousands who've already found out its name and more about the company in The Motley Fool's special free report on natural gas, but don't wait -- get it today.

Click here to add Ultra Petroleum to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Ultra Petroleum. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy and Ultra Petroleum. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

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Related Tickers

10/21/2016 3:59 PM
UPLMQ $6.94 Up +0.29 +4.29%
Ultra Petroleum CAPS Rating: **
CHK $6.68 Down -0.23 -3.33%
Chesapeake Energy CAPS Rating: ***
CLNE $4.35 Up +0.07 +1.64%
Clean Energy Fuels CAPS Rating: ****
EOG $93.88 Down -1.03 -1.09%
EOG Resources CAPS Rating: ****
SD.DL $0.00 Down +0.00 +0.00%
SandRidge Energy CAPS Rating: ***