Shares of Ultra Petroleum Corp (UPL) slumped more than 10% at 2:45 p.m. EDT on Friday after providing investors with an update on its operations and credit situation.
Ultra Petroleum produced 803 million cubic feet of natural gas equivalent per day (MMcfe/d) during the first quarter, which exceeded the midpoint of the company's 790 to 810 MMcfe/d guidance range. Further, production volumes were 13% ahead of the first quarter of 2017.
"We are very pleased to announce that we have exceeded the mid-point of our production guidance for the first quarter of 2018," said interim CEO Brad Johnson. He further noted that "the execution of our 2018 plan is off to a strong start with a production beat that should serve to increase investor confidence regarding our ability to meet or exceed guidance." However, that update didn't seem to instill confidence in investors who were apparently hoping that the company's output would hit or exceed the high end of the guidance range.
Also weighing on shares was the fact that the company asked its banks to increase its maximum leverage ratio up to 4.5 times starting in June of this year before stepping back down to 4.0 times by the end of March in 2020. Johnson said the company didn't obtain this covenant relief because it had any concerns, but proactively pursued it "in direct response to shareholders' belief that the market may have unwarranted concerns about the company's current liquidity and the flexibility of our balance sheet." However, instead of relieving that concern, it only seemed to heighten the worry.
Ultra Petroleum is working to get back on solid ground after emerging from bankruptcy last summer. While the company successfully restructured its debt, it didn't eliminate that financial burden. Because of that, the company can't grow as fast as some of its financially stronger peers, which remain the better natural gas stocks to consider buying.