Ultra Petroleum (NASDAQ:UPL) will release its quarterly report on Friday, and investors are hoping to see a rebound in the hard-hit natural gas producer. With the company having had to endure rock-bottom natural gas prices last year, the recent bounce could send Ultra Petroleum earnings higher and bode well for its future.

Many companies in the oil and gas production space have worked hard to get rid of their natural gas exposure, focusing instead on more lucrative oil and gas-liquids production. Ultra, though, has such a low cost structure that it can produce gas profitably at much lower price levels than its competitors. Let's take an early look at what's been happening with Ultra Petroleum over the past quarter and what we're likely to see in its quarterly report.

Stats on Ultra Petroleum

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$234.98 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Are better times ahead for Ultra Petroleum earnings?
As natural-gas prices have risen, analysts have recognized the resulting positive effect on Ultra Petroleum earnings. In recent months, they've boosted their June-quarter estimates for the company by a nickel per share and increased their full-year 2013 calls by almost a dime per share. The stock has put in modest advances, gaining about 2% since late April.

Ultra Petroleum's status as a low-cost leader has been an important part of its success, and the company has remained committed toward developing and expanding on that competitive advantage. Lowering its well costs by 20% over the past five years has helped Ultra continue getting more cost-efficient, and by using some of the same techniques that Southwestern Energy (NYSE:SWN) has used to drive its own efficiency gains, Ultra has remained one of the lowest-cost nat-gas producers in the country.

Yet the biggest potential long-term driver of Ultra's success could come from export markets. Unlike oil, natural gas is very difficult to transport across long distances, requiring costly techniques like liquefaction to make export viable. Major players ExxonMobil (NYSE:XOM) and Chesapeake Energy (NYSE:CHK), which are the two largest natural gas producers in the country, stand to benefit greatly from the Energy Department's recent decision to give conditional authorization to export LNG to countries lacking a free-trade agreement with the U.S., with Exxon having led the way with the push toward boosting gas exports. With huge price disparities between the U.S. and high-growth areas like China and India, the profit potential from exports could greatly boost Ultra's earnings as well.

Unfortunately, Ultra hasn't survived the gas downturn unscathed. The company has had to slash its capital budget over the past couple of years and has amassed an additional $1 billion in debt since 2009. If gas prices keep rising, though, it should free up cash to pay down that debt and boost capital expenditures as well.

In the Ultra Petroleum earnings report, watch to see how improving conditions in the natural-gas industry have helped the company's income. If favorable trends continue, then Ultra could see further gains ahead.

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