Energy producer Ultra Petroleum (AMEX:UPL) just keeps pumping out good quarters for shareholders. Starting back in 2002, Ultra Petroleum has managed to grow revenue on an annual basis for 10 consecutive quarters, and earnings per share have climbed from $0.05 in Q4 '02 to $0.53 in the most recent quarter.

With that sort of profit growth and an overall healthy market for energy companies over the past two years, Ultra Petroleum shares have risen from $6 at the beginning of 2002 to more than $53 today. Not a bad run, to say the least.

Because of the combination of higher realized prices and greater production, Ultra posted revenue growth of 119% for the fourth quarter. Production increased by 74% to more than 17 billion cubic feet equivalent and realized prices for natural gas (the company's biggest product) were 27% higher for the quarter.

Unlike larger energy companies such as Exxon Mobil (NYSE:XOM) or ChevronTexaco (NYSE:CVX), Ultra Petroleum is rapidly increasing its rate of production. Of course, Ultra has the advantage of starting from a much smaller base. Nevertheless, proven reserves grew by 42% in 2004 (to more than 1.5 trillion bcfe), and the company expects to sink at least 100 new wells in 2005 on its Pinedale property alone.

Free cash flow for 2004 was negative as the company generated $185 million in operating cash flow, but spent $196 million on capital expenditures. For 2005, the company plans to increase its capital expenditures to $290 million, suggesting that the company won't be generating large amounts of free cash flow in 2005 either.

While free cash flow is normally a very sound metric for evaluating companies, I'm inclined to give Ultra Petroleum a pass for now. The company is working hard to sink new wells in both Wyoming and in its Chinese territories. Given the company's very successful recent record of exploration and drilling, Fools can look at the present free cash flow situation as a trade-off of short-term pain for long-term gain.

These are certainly banner days for Ultra Petroleum, and the valuations reflect that. Trading at nearly 40 times trailing earnings, the stock goes for a premium to other independent oil and gas producers. Of course, very few of these "peers" are producing 100% top-line growth or growing their proven reserves at a rate to match Ultra. Should this pace of reserve growth keep up, the company could certainly "grow into" its valuation.

In this Fool's opinion, Ultra Petroleum is one of the best small oil and gas producers around. While current valuations preclude me from getting excited about buying the shares today, I can always hope that I get another chance someday to buy at a better price.

Fool contributor Stephen Simpson, CFA, has no ownership interest in any stocks mentioned. While he owned Ultra Petroleum profitably in 2003, he sold far, far too soon.