What happened

Shares of Ultra Petroleum Corp (NASDAQ:UPL) were down more than 12% on Friday at 2:30 p.m. EDT. That's due to continued selling pressure after the company reported first-quarter results yesterday where it detailed a risky go-forward plan. That move caused shares to plunge yesterday, and are now down 28% over the past two days.

So what

Ultra Petroleum reported solid first-quarter results on Thursday, posting $47.5 million, or $0.28 per share, of adjusted net income, which came in $0.02 per share ahead of the consensus estimate. Fueling that stronger-than-expected profit was a 13% increase in production, which beat the midpoint of the company's guidance due in part to strong horizontal well results in its Pinedale gas field in Wyoming. On average, the output from these wells came in 47% ahead of expectations while spending was 4% below budget.

A drilling rig in Wyoming with a sunset in the background.

Image source: Getty Images.

Because of those strong horizontal well results, Ultra Petroleum now plans to stop drilling vertical wells and only complete horizontal ones this year. Because of that, production will decline in the second quarter before growing later in the year as the new wells come online.

That plan to shift completely over to horizontal wells after just a few tests adds risk, which is why an analyst at Capital One downgraded the stock from equal weight to underweight while setting a lower price target of $6 per share, which is down from $9.

Now what

It seems like the more investors digested Ultra's results and go-forward plan, the less they liked what they saw. There's no doubt that switching to horizontal drilling after a few high-rate test wells adds more risk, though it could pay off in the long run given that these wells can generate much higher returns at current gas prices than vertical wells can. Still, when it comes to natural gas stocks, Ultra is toward the bottom of the barrel given its concerning debt level and unclear growth prospects, which is why investors might want to consider one of these top natural gas stock instead.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.