Independent gas and oil producer Ultra Petroleum (AMEX:UPL) continues to live the good life as energy prices stay up and it keeps increasing its production of natural gas and oil.

For the first quarter, net income climbed 89% on an 83% increase in revenue. This growth was fueled by a 61% increase in production (on a gas-equivalent basis), with natural gas making up about 85% of the mix. Pricing was also favorable: The company realized a 13% higher price for gas and a 34% higher price for oil in Wyoming.

Although costs crept up a bit for the quarter, management generally controlled them well. Total U.S. segment costs rose 12% based on per MCFE, or thousand-cubic-feet equivalent, though production and gathering costs were actually down slightly. Overall corporate costs rose 8.6% per MCFE, with much of that coming from depletion and depreciation.

As good as things are going for Ultra Petroleum, they could get better still. Management expects to increase production through the year, and the company has a very high reserve life.

What's more, given that EnCana (NYSE:ECA) recently got approval to increase its drilling density in Wyoming by spacing the wells 10 acres apart instead of 20 or 40 acres, it seems probable that Ultra Petroleum could get a similar approval. Such a decision could lead to a prodigious increase in both proven reserves and gas production over the next decade or so.

Valuing Ultra Petroleum shares is a more or less unrewarding endeavor. The company's high rate of growth and stellar operating characteristics make backward-looking valuations futile, while the obvious importance of future energy prices, and the difficulty of predicting those, makes forward estimates even more of a guess than normal.

Nevertheless, a few points present themselves. Ultra Petroleum has had excellent drilling success and has high margins and reserves relative to its peers, so it's fair to say that the stock should probably trade at a premium to its group. What's more, Ultra Petroleum is in a position to significantly increase production, so even if pricing falls off, growth shouldn't collapse entirely.

If investors aren't rewarded by the stock market, a buyout could also do the trick. Now, I'd never recommend buying a stock solely on the basis of the possibility of a buyout. But it is a demonstrated fact that many large energy producers are having trouble finding new energy fields that are capable of making any meaningful impression on their reserve or production numbers.

As a result, it would not be a tremendous surprise to see major and mid-major energy companies turn to buyouts of proven independents as a means of adding to their reserve and production base. After all, while buyouts may not be cheap, at least the buyers have some idea of the payoff they're going to get -- something that can't always be said when exploring new fields and sites.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).