Photo credit: Flickr/Derrick Coetzee 

In 2012, low natural gas prices forced Ultra Petroleum (UPL) to write down more than $2.9 billion in proved oil and gas properties. The company in total needed to remove 1.9 trillion cubic feet of natural gas from its proved reserves. This caused value of the company's proved reserves, or PV-10, to slump to $2.3 billion. Ultra was also forced to slash its growth plans, cutting about $1 billion from capital spending so that it spent only $415 million. That pain, however, turned into a gain in 2013.

What a difference a year makes
Ultra Petroleum saw quite a reversal of fortune in 2013 thanks to surging natural gas prices. Its drilling program, along with the 33% price increase in natural gas from $2.63 per million cubic feet to $3.51 per Mcf, enabled Ultra to increase its proved reserves from 3.1 trillion cubic feet to 3.6 trillion cubic feet. That also boosted its PV-10 value by 83% to $4.1 billion. That's a huge increase in value for the company, but it's just the tip of the iceberg.

Ultra knows it is sitting on a whole lot more gas than just its proved reserves at last year's prices. The company ran two scenarios in which it tested the sensitivity of its reserves based on a natural gas price of $4.50 per Mcf.The company's current investment scenario puts its PV-10 value at $5.7 billion. However, at that price Ultra can afford to increase its investments to grow natural gas production. Under an increased investment scenario, the company's PV-10 value jumps to $8.5 billion.

Those numbers, though, still don't tell the whole story. Ultra sees as much as 19.3 trillion cubic feet of resource potential within its current portfolio of opportunities if gas prices keep moving higher. For example, at a natural gas price of $5 per Mcf it is looking at $16.6 billion in value. For a company with a current enterprise value of $6.2 billion, that's a compelling upside potential.

Photo credit: Flickr/USFWS 

Big upside elsewhere, too
Ultra Petroleum isn't the only natural gas stock seeing a big boost in reserves thanks to rising prices. Cabot Oil & Gas (CTRA 0.64%), for example, saw its proved reserves jump 42% last year. That, along with better prices, enabled Cabot to realize a 100% jump in its PV-10 value to $6.25 billion. The company's acreage in the Marcellus shale is among the best in the industry. Because of this it can earn triple-digit returns at natural gas prices of just $3 per MMBtu. As prices move higher, so does the upside for Cabot Oil & Gas.  

Range Resources (RRC 2.36%) is another stock that has big upside to natural gas. Last year its proved reserves jumped by 26% to a total of 8.2 trillion cubic feet equivalent. That put the pre-tax value of Range Resources' proved reserves at $7.9 billion, or nearly double the value of the prior year. Looking ahead, Range sees unproved resource potential of up to 85 trillion cubic feet equivalent. That's stunning resource potential.

Investor takeaway
Rising natural gas prices really boosted the value of natural gas producers in 2013. These three companies saw a huge boost to proved reserves while enjoying an even greater jump in the PV-10 value of those reserves. Given where gas prices have gone this year, these companies could see even bigger boosts next year, as all three are sitting on remarkable resource potential that each can realize as gas prices rise.