Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Thousands | Dec. 31, 2008
| Dec. 31, 2007
|
Cash and Cash Equivalents, at Carrying Value [Abstract] | ||
Cash and cash equivalents | $14,157 | $10,632 |
Restricted Cash and Investments, Current [Abstract] | ||
Restricted cash | 2,727 | 2,590 |
Accounts Receivable, Net, Current [Abstract] | ||
Accounts receivable | 126,710 | 135,849 |
Derivative Instruments and Hedges [Abstract] | ||
Derivative assets | 39,939 | 5,625 |
Inventory, Net [Abstract] | ||
Inventory | 8,522 | 13,333 |
Prepaid expenses and other current assets | 6,163 | 424 |
Total current assets | 198,218 | 168,453 |
Property, Plant and Equipment, Net [Abstract] | ||
Oil and gas properties, using the full cost method of accounting, proved | 2,294,982 | 1,537,751 |
Oil and gas properties, using the full cost method of accounting, unproved | 55,544 | 36,778 |
Property, plant and equipment | 5,770 | 4,739 |
Deferred financing costs, derivative assets and other | 3,648 | 3,861 |
Total assets | 2,558,162 | 1,751,582 |
Accounts Payable and Accrued Liabilities [Abstract] | ||
Accounts payable and accrued liabilities | 163,902 | 102,405 |
Production taxes payable | 61,416 | 34,269 |
Derivative liabilities | 1,712 | |
Current taxes payable | 10,839 | |
Capital cost accrual | 120,543 | 88,445 |
Total current liabilities | 347,573 | 235,958 |
Long-term Debt, Noncurrent [Abstract] | ||
Long-term debt | 570,000 | 290,000 |
Deferred income tax liability | 503,597 | 341,406 |
Other long-term obligations | 46,206 | 26,672 |
Stockholders' Equity [Abstract] | ||
Common stock - no par value, authorized - unlimited, issued and outstanding - 151,232,545 and 152,003,671 at December 31, 2008 and 2007, respectively | 346,832 | 256,889 |
Treasury stock | (45,740) | (59,245) |
Retained Earnings (Accumulated Deficit) [Abstract] | ||
Retained earnings | 774,117 | 654,948 |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Accumulated other comprehensive income | 15,577 | 4,954 |
Total shareholders' equity | 1,090,786 | 857,546 |
Total liabilities and shareholders' equity | $2,558,162 | $1,751,582 |
See accompanying notes to consolidated financial statements. |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | ||
Dec. 31, 2008
| Dec. 31, 2007
| |
Balance Sheets Parenthetical Information | ||
Common stock, shares authorized | unlimited | unlimited |
Common stock, shares issued and outstanding (actual number) | 151,232,545 | 152,003,671 |
Consolidated Statements of Oper
Consolidated Statements of Operations (USD $) | |||
In Thousands, except Per Share data | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 | 12 Months Ended
Dec. 31, 2006 |
Oil and Gas Revenue [Abstract] | |||
Natural gas sales | $986,374 | $509,140 | $470,324 |
Oil sales | 98,026 | 57,498 | 38,335 |
Total revenues | 1,084,400 | 566,638 | 508,659 |
Operating Costs and Expenses [Abstract] | |||
Lease operating expenses | 36,997 | 23,968 | 15,068 |
Taxes Other than Income, Excise, Production and Property Taxes [Abstract] | |||
Production taxes | 119,502 | 63,480 | 57,899 |
Gathering fees | 37,744 | 27,923 | 19,721 |
Transportation charges | 46,310 | ||
Depreciation and Amortization [Abstract] | |||
Depletion, depreciation and amortization | 184,795 | 135,470 | 79,675 |
General and Administrative Expense [Abstract] | |||
General and administrative, excluding depreciation and amortization | 17,046 | 13,261 | 14,885 |
Total expenses | 442,394 | 264,102 | 187,248 |
Operating income | 642,006 | 302,536 | 321,411 |
Investment Income, Interest and Dividend [Abstract] | |||
Interest income | 418 | 1,087 | 1,941 |
Interest and Debt Expense [Abstract] | |||
Gain on commodity derivatives | 33,216 | ||
Interest Expense [Abstract] | |||
Interest expense | (21,276) | (17,760) | (3,909) |
Other Nonoperating Income (Expense) [Abstract] | |||
Total other income (expense) | 12,358 | (16,673) | (1,968) |
Income before income tax provision | 654,364 | 285,863 | 319,443 |
Income Tax Expense (Benefit) [Abstract] | |||
Income tax provision | 240,504 | 105,621 | 122,741 |
Net income from continuing operations | 413,860 | 180,242 | 196,702 |
Income (Loss) from Discontinued Operations, Net of Tax [Abstract] | |||
Income from discontinued operations (including pre-tax gain on sale in 2007 of $98,066) | 415 | 82,794 | 34,493 |
Net earnings | $414,275 | $263,036 | $231,195 |
Income (Loss) before Extraordinary Items and Cumulative Effect of Change in Accounting Principle, Per Basic Share [Abstract] | |||
Basic earnings per share, income per common share from continuing operations | 2.72 | 1.19 | 1.28 |
Basic earnings per share, income per common share from discontinued operations | 0.54 | 0.22 | |
Basic earnings per Share, net income per common share | 2.72 | 1.73 | 1.5 |
Income (Loss) before Extraordinary Items and Cumulative Effect of Change in Accounting Principle, Per Diluted Share [Abstract] | |||
Fully diluted earnings per share, income per common share from continuing operations | 2.65 | 1.14 | 1.22 |
Fully diluted earnings per share, income per common share from discontinued operations | 0.52 | 0.21 | |
Fully diluted earnings per share, net income per common share | 2.65 | 1.66 | 1.43 |
Earnings Per Share, Basic, Other Disclosures [Abstract] | |||
Weighted average common shares outstanding - basic | 152,075 | 151,762 | 153,879 |
Earnings Per Share, Diluted, Other Disclosures [Abstract] | |||
Weighted average common shares outstanding - diluted | 156,531 | 158,616 | 161,615 |
1_Consolidated Statements of Op
Consolidated Statements of Operations (Parenthetical) (USD $) | |
In Thousands | 12 Months Ended
Dec. 31, 2007 |
Income Statements Parenthetical Information | |
Pre-tax gain on sale included in income from discontinued operations | $98,066 |
Statement of Shareholders' Equi
Statement of Shareholders' Equity and Other Comprehensive Income (USD $) | |||||
In Thousands | Common Stock
| Treasury Stock
| Retained Earnings
| Accumulated Other Comprehensive Income (Loss)
| Total
|
Beginning Balance at Dec. 31, 2005 | $180,511 | $392,399 | $572,910 | ||
Shares, Beginning Balance at Dec. 31, 2005 | 155,076 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock options exercised | 9,203 | 9,203 | |||
Stock options exercised, shares | 656 | ||||
Employee stock plan grants | 2,141 | 2,141 | |||
Employee stock plan grants, shares | 34 | ||||
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures [Abstract] | |||||
Shares repurchased and retired | (3,302) | (194,249) | (197,551) | ||
Shares repurchased and retired, shares | (3,970) | ||||
Fair value of employee stock plan grants | 2,857 | 2,857 | |||
Adjustments to Additional Paid in Capital [Abstract] | |||||
Tax benefit of stock options exercised | 10,503 | 10,503 | |||
Net earnings | 231,195 | 231,195 | |||
Other Comprehensive Income, Derivatives Qualifying as Hedges, Net of Tax, Period Increase (Decrease) [Abstract] | |||||
Ending Balance at Dec. 31, 2006 | 201,913 | 429,345 | 631,258 | ||
Shares, Ending Balance at Dec. 31, 2006 | 151,796 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock options exercised | 11,686 | 11,686 | |||
Stock options exercised, shares | 1,849 | ||||
Employee stock plan grants | 877 | 877 | |||
Employee stock plan grants, shares | 56 | ||||
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures [Abstract] | |||||
Shares repurchased and retired | (317) | (19,326) | (19,643) | ||
Shares repurchased and retired, shares | (364) | ||||
Shares repurchased | (59,245) | (59,245) | |||
Shares repurchased, shares | (1,068) | ||||
Net share settlements | (18,107) | (18,107) | |||
Net share settlements, shares | (265) | ||||
Fair value of employee stock plan grants | 6,038 | 6,038 | |||
Adjustments to Additional Paid in Capital [Abstract] | |||||
Tax benefit of stock options exercised | 36,692 | 36,692 | |||
Net earnings | 263,036 | 263,036 | |||
Other Comprehensive Income, Derivatives Qualifying as Hedges, Net of Tax, Period Increase (Decrease) [Abstract] | |||||
Change in derivative instruments fair value, net of taxes | 4,954 | 4,954 | |||
Ending Balance at Dec. 31, 2007 | 256,889 | (59,245) | 654,948 | 4,954 | 857,546 |
Shares, Ending Balance at Dec. 31, 2007 | 152,004 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock options exercised | 19,086 | 19,086 | |||
Stock options exercised, shares | 3,595 | ||||
Employee stock plan grants | 997 | 997 | |||
Employee stock plan grants, shares | 151 | ||||
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures [Abstract] | |||||
Shares repurchased and retired | (1,669) | 110,410 | (108,741) | ||
Shares reissued from treasury | (14,885) | 150,466 | (135,581) | ||
Shares repurchased | (247,371) | (247,371) | |||
Shares repurchased, shares | (3,661) | ||||
Net share settlements | (152) | (50,784) | (50,936) | ||
Net share settlements, shares | (856) | ||||
Fair value of employee stock plan grants | 7,726 | 7,726 | |||
Adjustments to Additional Paid in Capital [Abstract] | |||||
Tax benefit of stock options exercised | 78,840 | 78,840 | |||
Net earnings | 414,275 | 414,275 | |||
Other Comprehensive Income, Derivatives Qualifying as Hedges, Net of Tax, Period Increase (Decrease) [Abstract] | |||||
Change in derivative instruments fair value, net of taxes | 14,273 | 14,273 | |||
Reclassification of derivative fair value into, net of taxes | (3,650) | (3,650) | |||
Ending Balance at Dec. 31, 2008 | $346,832 | ($45,740) | $774,117 | $15,577 | $1,090,786 |
Shares, Ending Balance at Dec. 31, 2008 | 151,233 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flow (USD $) | |||
In Thousands | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 | 12 Months Ended
Dec. 31, 2006 |
Income (Loss) from Continuing Operations [Abstract] | |||
Net income | $414,275 | $263,036 | $231,195 |
Income (Loss) from Discontinued Operations, Net of Tax [Abstract] | |||
Income from discontinued operations (including pre-tax gain on sale in 2007 of $98,066) | (415) | (82,794) | (34,493) |
Depreciation and Amortization [Abstract] | |||
Depletion, depreciation and amortization | 184,795 | 135,470 | 79,675 |
Deferred Income Taxes and Tax Credits [Abstract] | |||
Deferred and current non-cash income taxes | 235,031 | 127,802 | 105,681 |
Share-based Compensation [Abstract] | |||
Stock compensation | 5,816 | 5,718 | 2,626 |
Excess tax benefit from stock based compensation | (78,840) | (36,692) | (10,503) |
Unrealized (gain) on commodity derivatives | (14,225) | ||
Other | 426 | 177 | |
Increase (Decrease) in Operating Assets [Abstract] | |||
Restricted cash | (137) | (1,923) | (453) |
Increase (Decrease) in Receivables [Abstract] | |||
Accounts receivable | 9,139 | (48,044) | (12,149) |
Increase (Decrease) in Prepaid, Deferred Expense and Other Assets [Abstract] | |||
Prepaid expenses and other current assets | (5,543) | (273) | 128 |
Increase (Decrease) in Accounts Payable and Accrued Liabilities [Abstract] | |||
Accounts payable and accrued liabilities | 86,487 | 58,019 | 28,635 |
Other long-term obligations | 14,833 | 413 | 129 |
Taxation payable | (10,839) | 8,632 | 2,207 |
Net cash provided by operating activities from continuing operations | 840,803 | 429,541 | 392,678 |
Net cash provided by operating activities from discontinued operations | (1,592) | 44,655 | |
Net cash provided by operating activities | 840,803 | 427,949 | 437,333 |
Payments to Acquire Oil and Gas Property and Equipment [Abstract] | |||
Oil and gas property expenditures | (949,650) | (696,124) | (480,432) |
Change in capital cost accrual | 32,097 | (6,422) | 47,987 |
Proceeds from Sale and Maturity of Available-for-sale Securities [Abstract] | |||
Post closing adjustments on sale of subsidiary | 640 | ||
Proceeds on sale of subsidiary, net of transaction costs | 208,032 | ||
Inventory | 4,811 | 5,596 | 1,677 |
Purchase of capital assets | (1,356) | (3,702) | (623) |
Other | (1,861) | ||
Investing activities from discontinued operations | (14,450) | (22,491) | |
Net cash (used in) investing activities | (915,319) | (507,070) | (453,882) |
Proceeds from Issuance of Long-term Debt [Abstract] | |||
Borrowings of long-term debt, gross | 662,000 | 396,000 | 180,000 |
Repayments of Long-term Debt [Abstract] | |||
Payments on long-term debt, gross | (682,000) | (271,000) | (15,000) |
Proceeds from issuance of Senior Notes | 300,000 | ||
Payments for Repurchase of Equity [Abstract] | |||
Repurchased shares | (298,307) | (96,995) | (197,551) |
Proceeds from Issuance or Sale of Equity [Abstract] | |||
Proceeds from issuance of common stock | 19,086 | 11,686 | 9,203 |
Excess tax benefit from stock based compensation | 78,840 | 36,692 | 10,503 |
Deferred financing costs | (1,578) | (1,204) | |
Net cash provided by (used in) financing activities | 78,041 | 75,179 | (12,845) |
Net (decrease)/increase in cash and cash equivalents | 3,525 | (3,942) | (29,394) |
Cash and cash equivalents, beginning of year | 10,632 | 14,574 | 43,968 |
Cash and cash equivalents, end of year | 14,157 | 10,632 | 14,574 |
Cash paid for interest | 16,092 | 16,218 | 1,913 |
Cash paid for income taxes | $16,322 | $21,513 | $21,380 |
2_Consolidated Statements of Ca
Consolidated Statements of Cash Flow (Parenthetical) (USD $) | |
In Thousands | 12 Months Ended
Dec. 31, 2007 |
Cash Flows Parenthetical Information | |
Pre-tax gain on sale included in income from discontinued operations | $98,066 |
Notes to Consolidated Financial
Notes to Consolidated Financial Statements | |
12 Months Ended
Dec. 31, 2008 USD / shares | |
Financial Notes | |
SIGNIFICANT ACCOUNTING POLICIES | 1. SIGNIFICANT ACCOUNTING POLICIES: (a)Basis of presentation and principles of consolidation:The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries UP Energy Corporation, Ultra Resources, Inc. and Sino-American Energy through the date of the sale of the China operations. The Company presents its financial statements in accordance with U.S.Generally Accepted Accounting Principles (GAAP). All inter-company transactions and balances have been eliminated upon consolidation. (b)Cash and cash equivalents:We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. (c)Restricted cash:Restricted cash represents cash received by the Company from production sold where the final division of ownership of the production is unknown or in dispute. Wyoming law requires that these funds be held in a federally insured bank in Wyoming. (d)Capital assets:Capital assets are recorded at cost and depreciated using the declining-balance method based on a seven-year useful life. (e)Oil and natural gas properties:The Company uses the full cost method of accounting for exploration and development activities as defined by the Securities and Exchange Commission (SEC). Separate cost centers are maintained for each country in which the Company incurs costs. Under this method of accounting, the costs of unsuccessful, as well as successful, exploration and development activities are capitalized as properties and equipment. This includes any internal costs that are directly related to exploration and development activities but does not include any costs related to production, general corporate overhead or similar activities. The carrying amount of oil and natural gas properties also includes estimated asset retirement costs recorded based on the fair value of the asset retirement obligation when incurred. Gain or loss on the sale or other disposition of oil and natural gas properties is not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to a country. The sum of net capitalized costs and estimated future development costs of oil and natural gas properties are amortized using the units-of-production method based on the proven reserves as determined by independent petroleum engineers. Oil and natural gas reserves and production are converted into equivalent units based on relative energy content. Asset retirement obligations are included in the base costs for calculating depletion. Oil and natural gas properties include costs that are excluded from capitalized costs being amortized. These amounts represent investments in unproved properties and major development projects. The Company excludes these costs until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed, at least quarterly, to determine if impairment has occurred. The amount of any impairment is transferred to the capitalized costs being amortized (the depreciation, depletion and amortization (DDA) |
ASSET RETIREMENT OBLIGATIONS | 2. ASSET RETIREMENT OBLIGATIONS: The Company is required to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. As of December31, 2008 and 2007, the Company recorded a liability of $14.1million and $8.3million, respectively, to account for future obligations associated with its assets. The following table summarizes the activities for the Companys asset retirement obligations for the year ended: December31, December31, 2008 2007 Asset retirement obligations at beginning of period $ 8,298 $ 6,131 Accretion expense 686 493 Liabilities incurred 3,140 2,674 Liabilities settled (220 ) (66 ) Revisions of estimated liabilities 2,175 (934 ) Asset retirement obligations at end of period 14,079 8,298 Less: current asset retirement obligations Long-term asset retirement obligations $ 14,079 $ 8,298 |
OIL AND GAS PROPERTIES | 3. OIL AND GAS PROPERTIES: December31, December31, 2008 2007 Developed Properties: Acquisition, equipment, exploration, drilling and environmental costs $ 2,809,082 $ 1,868,564 Less accumulated depletion, depreciation and amortization (514,100 ) (330,813 ) 2,294,982 1,537,751 Unproven Properties: Acquisition and exploration costs 55,544 36,778 $ 2,350,526 $ 1,574,529 The Company holds interests in projects in which leasehold costs and seismic costs related to these interests of $55.5million ($15.2million in Wyoming and $40.3million in Pennsylvania) are not being depleted pending determination of existence of estimated proved reserves. The Company will continue to assess and allocate the unproven properties over the next several years as proved reserves are established and as exploration dictates whether or not future areas will be developed. On a unit basis, DDA from continuing operations was $1.27 per Mcfe for the year ended December31, 2008 and $1.18 per Mcfe for the same period in 2007. Total 2008 2007 2006 Prior United States: Acquisition costs $ 54,459 $ 17,650 $ 5,423 $ 12,780 $ 18,606 Exploration costs 13,261 2,284 3,348 151 7,478 Less transfers to proved (12,176 ) (1,168 ) (991 ) (1,580 ) (8,437 ) Total $ 55,544 $ 18,766 $ 7,780 $ 11,351 $ 17,647 |
CAPITAL ASSETS | 4. CAPITAL ASSETS: December31, December31, 2008 December31, December31, 2008 Accumulated 2008 2007 Cost Depreciation Net Book Value Net Book Value Computer equipment $ 1,475 $ (738 ) $ 737 $ 508 Office equipment 384 (245 ) 139 163 Leasehold improvements 380 (232 ) 148 210 Land 2,437 2,437 2,437 Other 4,171 (1,862 ) 2,309 1,421 $ 8,847 $ (3,077 ) $ 5,770 $ 4,739 |
LONG TERM LIABILITIES | 5. LONG TERM LIABILITIES: December31, December31, 2008 2007 Bank indebtedness $ 270,000 $ 290,000 Senior notes 300,000 Other long-term obligations 46,206 26,672 $ 616,206 $ 316,672 Bank indebtedness:The Company (through its subsidiary) is a party to a revolving credit facility with a syndicate of banks led by JP Morgan Chase Bank, N.A. which matures in April 2012. This agreement provides an initial loan commitment of $500.0million and may be increased to a maximum aggregate amount of $750.0million at the request of the Company. Each bank has the right, but not the obligation, to increase the amount of its commitment as requested by the Company. In the event the existing banks increase their commitment to an amount less than the requested commitment amount, then it would be necessary to add new financial institutions to the credit facility. Loans under the credit facility are unsecured and bear interest, at our option, based on (A)a rate per annum equal to the higher of the prime rate or the weighted average fed funds rate on overnight transactions during the preceding business day plus 50basis points, or (B)a base Eurodollar rate, substantially equal to the LIBOR rate, plus a margin based on a grid of our consolidated leverage ratio (87.5basis points per annum as of December31, 2008). At December31, 2008, we had $270.0million in outstanding borrowings and $230.0million of available borrowing capacity under our credit facility. The facility has restrictive covenants that include the maintenance of a ratio of consolidated funded debt to EBITDAX (earnings before interest, taxes, DDA and exploration expense) not to exceed 31/2 times; and as long as our debt rating is below investment grade, the maintenance of an annual ratio of the net present value of our oil and gas properties to total funded debt of at least 1.75 to 1.00. At December31, 2008, we were in compliance with all of our debt covenants under our credit facility. The Companys commitment fees were $0.7million, $0.4million and $0.4million for the years ended December31, 2008, 2007 and 2006, respectively. Senior Notes, due 2015 and 2018:On March6, 2008, our wholly-owned subsidiary, Ultra Resources, Inc. issued $300.0million Senior Notes (the Notes) pursuant to a Master Note Purchase Agreement between the Company and the purchasers of the Notes. The Notes rank pari passu with the Companys bank credit facility. Payment of the Notes is guaranteed by Ultra Petroleum Corp. and UP Energy Corporation. Of the Notes, $200.0million are 5.92%Senior Notes due 2018 and $100.0million are 5.45%Senior Notes due 2015. Proceeds from the sale of the Notes were used to repay bank debt, but did not reduce the borrowings available to us under the revolving credit facility. The Notes are pre-payable in whole or in part at any time. The Notes are subject to representations, warranties, covenants and events of default customary for a senior note financing. If payment default occurs |
SHARE BASED COMPENSATION | 6. SHARE BASED COMPENSATION: The Company sponsors three share based compensation plans: the 2005 Stock Incentive Plan (the 2005 Plan the 2000 Stock Incentive Plan (the 2000 Plan and the 1998 Stock Option Plan (the 1998 Plan). Each of the plans is administered by the Compensation Committee of the Board of Directors (the Committee). The share based compensation plans are an important component of the total compensation package offered to the Companys key service providers, and they reflect the importance that the Company places on motivating and rewarding superior results. The 2005 Plan was adopted by the Companys Board of Directors on January1, 2005 and approved by the Companys shareholders on April29, 2005. The purpose of the 2005 Plan is to foster and promote the long-term financial success of the Company and to increase shareholder value by attracting, motivating and retaining key employees, consultants, and outside directors, and providing such participants with a program for obtaining an ownership interest in the Company that links and aligns their personal interests with those of the Companys shareholders, and thus, enabling such participants to share in the long-term growth and success of the Company. To accomplish these goals, the 2005 Plan permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, and other stock-based awards, some of which may require the satisfaction of performance-based criteria in order to be payable to participants. Under the 2005 Plan, the aggregate number of common shares issuable to any one person pursuant to an award cannot exceed 5% of the number of common shares outstanding at the time of the award. In addition, no participant may receive during any calendar year, awards covering an aggregate of more than 2.0million common shares, or a cash payout with respect to any awards in excess of $5.0million. The Committee determines the terms and conditions of the awards, including, any vesting requirements and vesting restrictions or forfeitures that may occur. The Committee may grant awards under the 2005 Plan until December31, 2014, unless terminated sooner by the Board of Directors. The 2000 Plan was adopted by the Companys Board of Directors on May1, 2000 and approved by the Companys shareholders on June6, 2000. The 2000 Plan was established for the purposes of associating the interests of the management of the Company and its subsidiaries and affiliates closely with the Companys shareholders to generate an increased incentive to contribute to the Companys future success and prosperity; maintaining competitive compensation levels thereby attracting and retaining highly competent and talented outside directors, employees, and consultants; and providing an incentive to such management for continuous employment with the Company. The 2000 Plan operates in a very similar manner to the 2005 Plan and permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, and restricted stock. Under the 2000 Plan, the aggregate number of common shares issuable to any one person pursuant to such awa |
DERIVATIVE FINANCIAL INSTRUMENTS | 7. DERIVATIVE FINANCIAL INSTRUMENTS: The Companys major market risk exposure is in the pricing applicable to its natural gas and oil production. Realized pricing is currently driven primarily by the prevailing price for the Companys Wyoming natural gas production. Historically, prices received for natural gas production have been volatile and unpredictable, ranging from $4.24 per Mcf to a monthly high of $8.81 per Mcf during 2008. Pricing volatility is expected to continue. Realized natural gas prices are derived from the financial statements which include the effects of realized hedging gains and losses and natural gas balancing. The Company primarily relies on fixed price forward natural gas sales to manage its commodity price exposure. These fixed price forward natural gas sales are considered normal sales. The Company, from time to time, also uses derivative instruments to manage its exposure to commodity prices. The Company has periodically entered into fixed price to index price swap agreements in order to hedge a portion of its natural gas production. The natural gas reference prices of these commodity derivative contracts are typically referenced to natural gas index prices as reported by such publications as Inside FERC Gas Market Report. Under SFASNo.133, all derivative instruments are recorded on the balance sheet at fair value. Changes in the derivatives fair value are recognized currently in earnings unless specific hedge accounting criteria are met. For qualifying cash flow hedges, the unrealized gain or loss on the derivative is deferred in accumulated other comprehensive income (loss) to the extent the hedge is effective. Gains and losses on hedging instruments included in accumulated other comprehensive income (loss) are reclassified to oil and natural gas sales revenue in the period that the related production is delivered. Derivative contracts that do not qualify for hedge accounting treatment are recorded as derivative assets and liabilities at market value in the Consolidated Balance Sheets, and the associated unrealized gains and losses are recorded as current expense or income in the Consolidated Statements of Operations. Based on managements current estimates, future production is expected to be sufficient to meet delivery requirements associated with the Companys derivative contracts and fixed price forward physical delivery contracts. On October31, 2008, in connection with the preparation of our quarterly report for the third quarter 2008, management of Company and the Audit Committee of the Board of Directors determined that the contemporaneous formal documentation we had prepared in the first quarter of 2008 to support our initial natural gas hedge designations for production sold on REX did not meet the technical requirements to qualify for hedge accounting treatment in accordance with SFASNo.133. In order to cause the hedge contracts to qualify for hedge accounting treatment under SFASNo.133, the Company was required to predict and document the future relationship between prices at REX sales points and the sales prices at the Northwest Pipeline Rockies (the basis of the contracts) a |
SHARE REPURCHASE PROGRAM | 8. SHARE REPURCHASE PROGRAM: On May17, 2006, the Company announced that its Board of Directors authorized a share repurchase program for up to an aggregate $1billion of the Companys outstanding common stock which has been and will be funded by cash on hand and the Companys senior credit facility. Pursuant to this authorization, the Company has commenced a program to purchase up to $750.0million of the Companys outstanding shares through open market transactions or privately negotiated transactions. Ultra Petroleum Corp. (Ultra Petroleum) owns 100% of UP Energy Corporation (UP Energy), which in turn owns 100% of Ultra Resources, Inc. (Ultra Resources). Ultra Resources may, from time to time, repurchase Ultra Petroleum publicly traded stock. Subsequent to settlement, the repurchased stock will be transferred to Ultra Petroleum or held as treasury stock by Ultra Resources, subject to a limit of 1% of current outstanding shares. The following tables summarize the Companys share repurchases in total (open market repurchases plus net share settlements) as of December31, 2008: Shares Weighted Average Total Purchased Price per Share $ Value 1st Quarter 2008 397 $ 75.25 $ 29,829 2nd Quarter 2008 452 $ 85.97 $ 38,807 3rd Quarter 2008 3,266 $ 66.27 $ 216,461 4thQuarter 2008 402 $ 32.83 $ 13,210 Prior 5,694 $ 51.73 $ 294,549 May 2006 December31, 2008 10,211 $ 58.06 $ 592,856 Shares Weighted Average Open Market Purchased Price per Share $ Value 1st Quarter 2008 214 $ 75.53 $ 16,139 2nd Quarter 2008 210 $ 84.13 $ 17,643 3rd Quarter 2008 3,237 $ 65.97 $ 213,589 4thQuarter 2008 $ $ Prior 5,401 $ 51.19 $ 276,442 May 2006 December31, 2008 9,062 $ 57.81 $ 523,813 Shares Weighted Average Net Share Settlements Purchased Price per Share $ Value 1st Quarter 2008 183 $ 74.92 $ 13,690 2nd Quarter 2008 242 $ 87.57 $ 21,164 3rd Quarter 2008 29 $ 98.88 $ 2,872 4thQuarter 2008 402 $ 32.83 $ 13,210 Prior 293 $ 61.73 $ 18,107 May 2006 December31, 2008 1,149 $ 60.08 $ 69,043 |
INCOME TAXES | 9. INCOME TAXES: Income from continuing operations before income taxes is as follows: Year Ended December31, 2008 2007 2006 United States $ 654,465 $ 286,045 $ 320,033 Foreign (100 ) (182 ) (590 ) Total $ 654,365 $ 285,863 $ 319,443 The consolidated income tax provision is comprised of the following: Year Ended December31, 2008 2007 2006 Current: U.S. federal state $ 84,313 $ 14,511 $ 27,563 Foreign Deferred: U.S. federal state 156,191 91,110 95,178 Foreign Total income tax provision $ 240,504 $ 105,621 $ 122,741 During 2008, 2007 and 2006, the Company realized tax benefits of $78.8million $36.7million, and $10.5million, respectively, attributable to tax deductions associated with the exercise of stock options. These benefits reduce the amount of the Companys U.S.federal and state cash tax payments and are recorded as a reduction of current taxes payable and as an increase in shareholders equity. The income tax provision for continuing operations differs from the amount that would be computed by applying the U.S.federal income tax rate of 35% to pretax income as a result of the following: Year Ended December31, 2008 2007 2006 Income tax provision computed at the U.S. statutory rate $ 229,028 $ 100,052 $ 111,805 State income tax provision net of federal benefit 650 423 150 Withholding tax on share repurchase transactions 5,409 1,068 10,401 Foreign tax credit valuation allowance 1,692 Other, net 3,725 4,078 385 $ 240,504 $ 105,621 $ 122,741 During 2008, 2007, and 2006, the Company incurred U.S.withholding taxes totaling $5.4million, $1.1million, and $10.4million, respectively, in connection with the repurchase of shares of its common stock. (See Note8). The tax effects of temporary differences that give rise to significant components of the Companys deferred tax assets and liabilities for continuing operations are as follows: Year Ended December31, 2008 2007 Deferred tax assets: U.S. federal tax credit carryforwards $ 21,263 $ 20,101 Canadian net operating loss carryforwards 497 1,808 Incentive compensation / Other, net 7,866 4,517 |
EMPLOYEE BENEFITS | 10. EMPLOYEE BENEFITS: The Company sponsors a qualified, tax-deferred savings plan in accordance with provisions of Section401(k) of the Internal Revenue Code for its employees. Employees may defer up to 15% of their compensation, subject to certain limitations. The Company matches the employee contributions up to 5% of employee compensation along with a profit sharing contribution of 8%. The expense associated with the Companys contribution was $0.9million, $0.9million and $0.7million for the years ended December31, 2008, 2007 and 2006, respectively. |
DISCONTINUED OPERATIONS | 11. DISCONTINUED OPERATIONS: During the third quarter of 2007, we made the decision to dispose of Sino-American Energy Corporation (Sino-American), which owned our Bohai Bay assets in China, in order to focus on our legacy asset in the Pinedale Field in southwest Wyoming. The reserve volumes sold represent all of Ultras international assets and, previously, were the only results included in our foreign operating segment. On September26, 2007, Ultra Petroleum Corp.s wholly-owned subsidiary, UP Energy Corporation, a Nevadacorporation, entered into a definitive share purchase agreement with an effective date of June30, 2007 and a closing date of October22, 2007 in order to sell all of the outstanding shares of Sino-American, a Texas corporation, for a total purchase price of US$223.0million, subject to adjustments. The Company recorded results of operations for the China properties through the close date of October22, 2007. The purchaser was SPC EP (China) Pte. Ltd., a wholly-owned subsidiary of Singapore Petroleum Company. For tax purposes, this transaction was treated as an asset sale as the Company agreed to make a 338(h)(10) election in the stock purchase agreement. The Company accounted for its Sino-American operations as discontinued operations and reclassified prior period financial statements to exclude these businesses from continuing operations. A summary of financial information related to the Companys discontinued operations is as follows: For the Year Ended December31, 2008 2007 2006 Operating revenues $ $ 64,822 $ 84,008 Gain on sale of subsidiary 640 98,066 Lease operating expenses 11,419 8,922 Severance taxes 8,113 8,398 Depletion, depreciation and amortization expenses 14,981 13,822 General and administrative expenses 99 52 Income before income tax provision 640 128,276 52,814 Income tax provision 225 45,482 18,321 Income from discontinued operations, net of tax $ 415 $ 82,794 $ 34,493 |
COMMITMENTS AND CONTINGENCIES | 12. COMMITMENTS AND CONTINGENCIES: Office space lease.In May 2007, the Company amended its office leases in Englewood, Colorado and Houston, Texas, both of which it has committed through 2012. The Companys total remaining commitment for office leases is $2.3million at December31, 2008 ($0.8million in 2009, $0.7million in 2010 and 2011, and $0.1million in 2012). During the years ended December31, 2008, 2007 and 2006, the Company recognized expense associated with its office leases in the amount of $0.7million, $0.6million, and $0.4million, respectively. Drilling contracts.As of December31, 2008, the Company had committed to drilling obligations with certain rig contractors totaling $203.1million ($61.7million due in 2009, $114.7million due in one to three years, and the remaining $26.7million due in three to five years). The commitments expire in 2012 and were entered into to fulfill the Companys 2009-2012 drilling program initiatives in Wyoming. Transportation contract.In December 2005, the Company agreed to become an anchor shipper on REX, thereby securing pipeline infrastructure to provide sufficient capacity for the Company to transport a portion of its natural gas production away from southwest Wyoming, as well as to provide for reasonable basis differentials for the Companys natural gas in the future. The Companys commitment involves capacity of 200MMBtu per day of natural gas for a term of 10years (beginning in the first quarter of 2008), and the Company is obligated to pay REX certain demand charges related to its rights to hold this firm transportation capacity as an anchor shipper. The pipeline will be completed in two phases: REX-West (Wyoming to Missouri in service) and REX-East (Missouri to Ohio under construction). Based on current assumptions, including current projections regarding the cost of the expansion and the participation of other shippers in the expansion, the Company currently projects that demand charges related to the remaining term of the contract will total approximately $562.1million. There have been and will continue to be, numerous other proposed pipeline projects to transport growing Rockies and Wyoming natural gas production to a variety of geographically diverse markets in different parts of North America. Many such proposals have been presented to the Company in recent months, which, if constructed, would provide the Company with additional outlets and market access for its natural gas production from southwest Wyoming. The Company continuously evaluates such proposals and may make additional commitments to one or more such pipeline projects in the future. Other.The Company is currently involved in various routine disputes and allegations incidental to its business operations. While it is not possible to determine the ultimate disposition of these matters, management, after consultation with legal counsel, is of the opinion that the final resolution of all such currently pending or threatened litigation is not likely to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. |
FAIR VALUE MEASUREMENTS | 13. FAIR VALUE MEASUREMENTS: On September15, 2006, the FASB issued SFASNo.157, Fair Value Measurement. We adopted SFASNo.157 effective January1, 2008. SFASNo.157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three level hierarchy for measuring fair value. The statement requires fair value measurements be classified and disclosed in one of the following categories: Level1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that we have the ability to access at the measurement date. Level2:Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level2 include non-exchange traded derivatives such as over-the-counter forwards and swaps. Level3:Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability. The valuation assumptions utilized to measure the fair value of the Companys commodity derivatives were observable inputs based on market data obtained from independent sources and are considered Level2 inputs (quoted prices for similar assets, liabilities (adjusted) and market-corroborated inputs). The following table presents for each hierarchy level our assets and liabilities, including both current and non-current portions, measured at fair value on a recurring basis, as of December31, 2008: Level 1 Level 2 Level 3 Total Assets Current: Derivatives $ $ 39,939 $ $ 39,939 Liabilities Current: Derivatives $ $ 1,712 $ $ 1,712 In consideration of counterparty credit risk, the Company assessed the possibility of whether each counterparty to the derivative would default by failing to make any contractually required payments as scheduled in the derivative instrument in determining the fair value. Additionally, the Company considers that it is of substantial credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions. Fair Market Value of Financial Instruments The estimated fair value of financial instruments is the amount at which the instrument could be exchanged currently between willing parties. The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the immediate or short-te |
SIGNIFICANT CUSTOMERS | 14. SIGNIFICANT CUSTOMERS: The Companys revenues are derived principally from uncollateralized sales to customers in the natural gas and oil industry. The concentration of credit risk in a single industry affects the Companys overall exposure to credit risk because customers may be similarly affected by changes in economic and other conditions. The Company performs a credit analysis of customers prior to making any sales to new customers or increasing credit for existing customers. Based upon this credit analysis, the Company may require a standby letter of credit or a financial guarantee. A significant customer is defined as one that individually accounts for 10% or more of the Companys total revenues during 2008. In 2008, sales to Nicor Enerchange were $115.7million and sales to Tenaska were $117.9million, which accounted for 10.7% and 10.9% of the Companys total 2008 revenues, respectively. At December31, 2008, the Company had outstanding receivables (which were all paid in full in January 2009)from these two significant customers totaling $15.9million. |
SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) | 15. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED): 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total 2008 Revenues from continuing operations $ 271,137 $ 308,240 $ 297,627 $ 207,396 $ 1,084,400 Gain (loss) on commodity derivatives (27,673 ) (11,596 ) 58,117 14,368 33,216 Expenses from continuing operations 107,922 112,346 110,308 111,818 442,394 Interest expense, net 5,122 4,416 5,091 6,229 20,858 Income before income tax provision 130,420 179,882 240,345 103,717 654,364 Income tax provision 47,021 63,489 91,370 38,624 240,504 Income from continuing operations 83,399 116,393 148,975 65,093 413,860 Revenues from discontinued operations (103 ) 743 640 Expenses from discontinued operations Income tax (benefit) provision discontinued operations (36 ) 261 225 Net income 83,332 $ 116,875 $ 148,975 $ 65,093 $ 414,275 Basic Earnings per Share: Income per common share from continuing operations $ 0.55 $ 0.76 $ 0.98 $ 0.43 $ 2.72 Income per common share from discontinued operations $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Net income per common share $ 0.55 $ 0.76 $ 0.98 $ 0.43 $ 2.72 Fully Diluted Earnings per Share: Income per common share from continuing operations $ 0.53 $ 0.74 $ 0.95 $ 0.42 $ 2.65 Income per common share from discontinued operations $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Net income per common share $ 0.53 $ 0.74 $ 0.95 $ 0.42 $ 2.65 1st Quarter 2nd Quarter 3rd Quarter 4th Qu |
DISCLOSURE ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) | 16. DISCLOSURE ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED): The following information about the Companys oil and natural gas producing activities is presented in accordance with Financial Accounting Standards Board Statement No.69, Disclosure About Oil and Gas Producing Activities: A. OIL AND GAS RESERVES: The determination of oil and natural gas reserves is complex and highly interpretive. Assumptions used to estimate reserve information may significantly increase or decrease such reserves in future periods. The estimates of reserves are subject to continuing changes and, therefore, an accurate determination of reserves may not be possible for many years because of the time needed for development, drilling, testing, and studies of reservoirs. The following unaudited tables as of December31, 2008, 2007, 2006 and 2005 are based upon estimates prepared by Netherland, Sewell Associates, Inc. and estimates provided by Ryder Scott Company as of December31, 2006 and 2005. The estimates for properties in the United States were prepared by Netherland, Sewell Associates, Inc. in reports dated February6, 2009, February4, 2008, January30, 2007 and January27, 2006, respectively. These are estimated quantities of proved oil and natural gas reserves for the Company and the changes in total proved reserves as of December31, 2008, 2007 and 2006. All such reserves are located in the Green River Basin, Wyoming, Pennsylvania and Bohai Bay in China. Since January1, 2008, no crude oil or natural gas reserve information has been filed with, or included in any report to, any federal authority or agency other than the SEC and the Energy Information Administration (EIA) of the U.S. Department of Energy. We file Form23, including reserve and other information, with the EIA. B. ANALYSES OF CHANGES IN PROVEN RESERVES: United States China Total Natural Gas Natural Natural Gas Oil (Bbls) (Mcf) Oil (Bbls) Gas (Mcf) Oil (Bbls) (Mcf) Reserves, December31, 2005 15,204,700 1,900,222,800 5,060,900 20,265,600 1,900,222,800 Extensions, discoveries and additions 3,962,000 505,773,000 3,962,000 505,773,000 Production (594,100 ) (78,395,500 ) (1,603,400 ) (2,197,500 ) (78,395,500 ) Revisions (730,000 ) (69,499,600 ) 529,200 (200,800 ) (69,499,600 ) Reserves, December31, 2006 17,842,600 2,258,100,700 3,986,700 21,829,300 2,258,100,700 Extensions, discoveries and additions 6,091,000 747,914,000 6,091,000 747,914,000 |
Document and Entity Information
Document and Entity Information (USD $) | |
12 Months Ended
Dec. 31, 2008 | |
Document and Entity Information | |
Entity Registrant Name | Ultra Petroleum Corp. |
Entity Central Index Key | 0001022646 |
Document Type | 10-K |
Document Period End Date | 2008-12-31 |
Amendment Flag | false |
Amendment Description | n/a |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Public Float | $15,086,678,210 |
Entity Common Stock, Shares Outstanding | 151,232,545 |