Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
Ultra Petroleum Corp. Announces First Quarter 2019 Results
Englewood, Colorado– May 9, 2019 – Ultra Petroleum Corp. (“Ultra Petroleum” or the “Company”) (NASDAQ: UPL) announces financial and operating results for the quarter ended March 31, 2019.
Financial and Operating Highlights:
| • | First quarter production averaged 691 million cubic feet equivalent per day (MMcfe/d), above themid-point of guidance, |
| • | Net income for the quarter was $40.7 million and adjusted EBITDA(5) was $114.7 million, both of which were favorably impacted by improved Rockies realized natural gas prices, |
| • | First quarter capital investment totaled $92.4 million, in line with timing expectations for full-year capital budget of $320 to $350 million, |
| • | The Company brought 27 gross operated vertical wells online with average24-hour initial production (IP) rates of 6.5 MMcfe/d, |
| • | Total net debt was reduced by $80.4 million in the quarter and the balance on the Credit Facility at March 31, 2019 was $38.0 million, a reduction of $66.0 million from year end, and |
| • | Additional financial and operating highlights can be found in the new investor presentation posted atwww.ultrapetroleum.com. |
“The results from the first quarter demonstrate very good progress toward our objectives outlined for 2019. Net debt was reduced by more than $80 million, including the successful execution of ourfollow-on 2nd lien debt exchanges. Production volumes exceeded ourmid-point of guidance, driven by strong base production and development activity executed ahead of schedule. In 2019, we will continue to prioritize our efforts toward strengthening the balance sheet, expanding margins through continued cycle-time and cost reductions and optimizing the value of our assets,” said Ultra Petroleum’s President and CEO Brad Johnson.
First Quarter Financial Results
During the first quarter of 2019, total revenues increased 20% to $271.5 million as compared to $225.4 million during the first quarter of 2018. This increase was driven by improved pricing, relative to last year, for Rockies natural gas sold into the Opal / Northwest Rockies delivery point. The net realized price of natural gas, excluding hedging was $4.13 per Mcf in the first quarter of 2019, compared to $2.66 per Mcf in the same period of 2018. The Company’s average realized oil and condensate price, excluding hedging was $53.70 per barrel (Bbl) for the quarter ended March 31, 2019 as compared to $60.90 per Bbl for the same period in 2018. The Company produced 62.2 billion cubic feet equivalent (Bcfe) of natural gas and oil, comprised of 59.6 billion cubic feet (Bcf) of natural gas and 437.0 thousand barrels (MBbls) of oil and condensate, a decrease from 72.3 Bcfe in the same period of 2018. The decrease in production was the result of the Company’s reduced capital investment program through the second half of 2018 and into 2019 in order to focus on cash flow and debt reduction in the face ofdecade-low regional gas pricing. Additionally, 2019 does not include any volumes from the Utah assets that were sold in September 2018.
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During the first quarter of 2019, Ultra Petroleum’s average realized price was $3.07 per Mcfe which includes the impact of derivative settlements, compared to $3.10 per Mcfe in the same period of 2018. This reflects the impact of the net losses on derivative settlements of $78.6 million in the first quarter of 2019 compared to the net gain of $1.1 million in the same period of 2018.
Ultra Petroleum’s reported net income was $40.7 million, or $0.21 per diluted share. The Company reported adjusted net income(1) of $27.2 million, or $0.14 per diluted share, for the quarter ended March 31, 2019.
Pinedale Vertical Program
During the first quarter, the Company ran athree-rig program in the Pinedale field, with vertical well costs remaining in line with historic averages at $3.15 million, including approximately $0.1 million of incremental data gathering costs. Ultra Petroleum brought online 27 gross (26.1 net) operated vertical wells in Pinedale. The average24-hour IP rate for the new operated vertical wells brought online in the quarter was 6.5 MMcfe/d.
Pinedale Horizontal Update
As previously announced, the Company completed a horizontal well in January which was drilled in 2018. The Warbonnet13-13-A-1H well was completed in approximately 6,100 feet of lateral in the Lower Lance A1 zone. This well posted a24-hour IP rate of 17.5 MMcfe/d (2.9 MMcfe/d per 1,000 feet of lateral). This completion utilized understanding from our updated petrophysical model to target high grade intervals and deliver a more effective completion.
“The productivity from the horizontal DUC we completed earlier this year is very positive. This completion utilized new understanding from our reservoir characterization project that targeted intervals using a refined model for high-grading rock quality along the lateral. At close to 3 MMcfe/d per 1,000 feet of lateral, this well ranks fourth among the 19 horizontal wells the Company has broughton-line to date. More importantly, the results affirm the potential for resource expansion and validates our ongoing technical work to enhance value in Pinedale,” said Ultra Petroleum’s SVP and COO Jay Stratton.
Hedging Activity
The Company will continue to hedge in order to provide a degree of certainty of cash flows along with being opportunistic in a strengthening natural gas and Rockies basis market. Management also works to balance the ability to provide upside exposure for the Company as the increase in future commodity prices has a meaningful impact on our cash flows on unhedged volumes given our low operating costs. During the first quarter we executed on hedging programs for the second and third quarters of 2020 utilizing a combination of costless collars and deferred premium puts. Management believes these products help provide a solid floor price and margin for the Company, while allowing Ultra Petroleum to participate in upward price movements in natural gas.
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The table below provides a summary of the hedges in place as of April 30, 2019:
| Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | |||||||||||||||||||
Natural Gas Swaps: | ||||||||||||||||||||||||
Volume (MMBtu/d) | 520,000 | 515,000 | 468,333 | 270,000 | — | — | ||||||||||||||||||
NYMEX ($/MMBtu) | $ | 2.76 | $ | 2.78 | $ | 2.78 | $ | 2.78 | $ | — | $ | — | ||||||||||||
Natural Gas Collars: | ||||||||||||||||||||||||
Volume (MMBtu/d) | — | 15,000 | 15,000 | 130,000 | 236,000 | 175,000 | ||||||||||||||||||
NYMEX Floor ($/MMBtu) | $ | — | $ | 2.80 | $ | 2.90 | $ | 2.78 | $ | 2.35 | $ | 2.41 | ||||||||||||
NYMEX Ceiling ($/MMBtu) | $ | — | $ | 3.10 | $ | 3.15 | $ | 3.23 | $ | 2.83 | $ | 2.85 | ||||||||||||
Natural Gas Puts: | ||||||||||||||||||||||||
Volume (MMBtu/d) | — | — | — | — | 114,000 | 160,000 | ||||||||||||||||||
NYMEX Strike Price ($/MMBtu) | $ | — | $ | — | $ | — | $ | — | $ | 2.35 | $ | 2.41 | ||||||||||||
Oil Swaps: | ||||||||||||||||||||||||
Volume (Bbl/d) | 4,000 | 4,000 | 3,500 | 2,500 | 1,500 | 1,000 | ||||||||||||||||||
NYMEX ($/Bbl) | $ | 58.41 | $ | 58.59 | $ | 59.88 | $ | 60.42 | $ | 60.33 | $ | 60.00 | ||||||||||||
Natural Gas Basis Swap Contracts: | ||||||||||||||||||||||||
NW Rockies Volume (MMBtu/d)(a) | 320,000 | 420,000 | 243,750 | 85,000 | — | — | ||||||||||||||||||
Price Differential ($/MMBtu) | $ | (0.62 | ) | $ | (0.59 | ) | $ | (0.56 | ) | $ | (0.15 | ) | $ | — | $ | — | ||||||||
| (a) | Represents swap contracts that fix the basis differentials for gas sold at or near Opal, Wyoming. |
Operating Costs
Beginning with the first quarter of 2019, the Company has changed the estimate for the allocation of certain administrative overhead costs between lease operating expenses (LOE) and general and administrative (G&A) expenses for overhead costs associated with the production and operations of our wells. The result is lower LOE offset by a higher G&A. This change in estimate methodology does not impact the summation of LOE and cash G&A expenses, a combination the Company refers to as controllable cash costs. In the first quarter of 2019, controllable cash costs were $0.35 per Mcfe as compared to $0.48 in the first quarter of 2018.
The table below shows the previous guidance of LOE and cash G&A for the first quarter along with actual performance:
| 1Q19 Guidance | 1Q19 Guidance (adjusted LOE and G&A) | 1Q19 Results (adjusted LOE and G&A) | ||||
LOE | $0.32 – 0.36 | $0.28 – 0.32 | $0.28 | |||
Cash G&A | $0.01 – 0.04 | $0.05 – 0.08 | $0.07 | |||
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Controllable Cash Costs | $0.33 – 0.40 | $0.33 – 0.40 | $0.35 | |||
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“The change in estimate results in are-classification of about 4 cents from LOE to G&A. For the first quarter 2019, Ultra’s controllable cash costs of $0.35 per Mcfe beat our guidance midpoint and ranks among the lowest levels among our peers,” said Ultra Petroleum’s SVP and CFO, David Honeyfield.
Production taxes are directly correlated to realized natural gas and crude oil pricing, excluding hedges. Given the benefit of higher realized prices, excluding hedges, in the first quarter of 2019, the attendant production tax expense of $0.49 per Mcfe was higher than in the prior year.
2019 Guidance
The Company reaffirms its 2019 capital investment plan of $320 to $350 million and its full-year production guidance of 240 to 250 Bcfe. The Company is currently maintaining athree-rig operated program focused on vertical development in Pinedale. In the second quarter, the average daily production rate is expected to range between 660 to 680 MMcfe/d.
The following table presents the Company’s expected per unit of production expenses for the full-year and second quarter of 2019.
| 2019 Expenses (per Mcfe) | 2Q19 Guidance | Full-Year 2019 Guidance | ||||||
Lease Operating Expense | $ | 0.28 – 0.32 | $ | 0.28 – 0.32 | ||||
Facility Lease Expense | $ | 0.10 – 0.12 | $ | 0.10 – 0.12 | ||||
Production Taxes | $ | 0.26 – 0.32 | $ | 0.34 – 0.40 | ||||
Gathering Fees, net | $ | 0.27 – 0.31 | $ | 0.27 – 0.31 | ||||
Transportation Charges | $ | 0.00 – 0.00 | $ | 0.00 – 0.01 | ||||
Cash G&A | $ | 0.05 – 0.08 | $ | 0.05 – 0.08 | ||||
DD&A | $ | 0.80 – 0.88 | $ | 0.80 – 0.88 | ||||
Cash Interest Expense | $ | 0.58 – 0.63 | $ | 0.58 – 0.63 | ||||
Production tax guidance for the second quarter assumes a $2.31 per MMBtu Henry Hub natural gas price and a $66.42 per Bbl NYMEX crude oil price, and the full-year 2019 period assumes a $2.95 per MMBtu Henry Hub natural gas price and a $63.90 per Bbl NYMEX crude oil price.
Conference Call and Webcast
The Company will host a conference call Thursday, May 9, 2019, at 10:00 a.m. Mountain Time (12:00 p.m. Eastern Daylight Time) to discuss the Company’s first quarter 2019 results. There will be prepared remarks from the Company’s management, followed by a question and answer session.
Investors and analysts are invited to participate in the call by dialing1-877-371-5742, or1-629-228-0726 for international calls, and using Conference ID: 5968079. Interested parties may also listen over the internet at www.ultrapetroleum.com. A replay of the call will be available on the Company’s website.
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Ultra Petroleum Corp.
Selected Operating and Financial Data
All amounts expressed in US$000’s, except per share data
| For the Quarter Ended | ||||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
Volumes: | ||||||||
Natural gas (Mcf) | 59,574 | 68,233 | ||||||
Oil and condensate (Bbls) | 437 | 678 | ||||||
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Mcfe - Total | 62,196 | 72,301 | ||||||
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Revenues: | ||||||||
Natural gas sales | $ | 245,989 | $ | 181,462 | ||||
Oil sales | 23,465 | 41,284 | ||||||
Other revenue | 2,007 | 2,628 | ||||||
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Total operating revenues | 271,461 | 225,374 | ||||||
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Expenses: | ||||||||
Lease operating expenses | 17,225 | 21,764 | ||||||
Facility lease expense | 6,645 | 6,156 | ||||||
Production taxes | 30,175 | 23,270 | ||||||
Gathering fees | 19,880 | 23,055 | ||||||
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Total lease operating costs | 73,925 | 74,245 | ||||||
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Depletion and depreciation | 51,653 | 50,540 | ||||||
General and administrative | 7,052 | 12,688 | ||||||
Other expenses | 684 | 213 | ||||||
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Total operating expenses | 133,314 | 137,686 | ||||||
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Other (expense) income, net | 166 | (32 | ) | |||||
Interest expense | (33,327 | ) | (35,837 | ) | ||||
Deferred gain on sale of liquids gathering system | — | 2,638 | ||||||
Realized gain (loss) on commodity derivatives | (78,631 | ) | 1,076 | |||||
Unrealized gain (loss) on commodity derivatives | 14,292 | (7,606 | ) | |||||
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Total other (expense) income, net | (97,500 | ) | (39,761 | ) | ||||
Income (loss) before income taxes | 40,647 | 47,927 | ||||||
Income tax provision | (27 | ) | 434 | |||||
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Net income (loss) | $ | 40,674 | $ | 47,493 | ||||
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Adjusted Net Income Reconciliation: | ||||||||
Net income (loss) | $ | 40,674 | $ | 47,493 | ||||
Unrealized (gain) loss on commodity derivatives | (14,292 | ) | 7,606 | |||||
Other | 684 | 213 | ||||||
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Adjusted net income(1) | $ | 27,066 | $ | 55,312 | ||||
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Operating cash flow(2)(7) | $ | 79,560 | $ | 112,024 | ||||
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(seenon-GAAP reconciliation) | ||||||||
Adjusted EBITDA(5) | $ | 114,682 | $ | 148,295 | ||||
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(seenon-GAAP reconciliation) | ||||||||
Weighted average shares (000’s) | ||||||||
Basic | 197,383 | 196,550 | ||||||
Diluted | 197,801 | 196,550 | ||||||
Earnings (loss) per share | ||||||||
Net income (loss) - basic | $ | 0.21 | $ | 0.24 | ||||
Net income (loss) - diluted | $ | 0.21 | $ | 0.24 | ||||
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Adjusted earnings per share(1) | ||||||||
Adjusted net income - basic | $ | 0.14 | $ | 0.28 | ||||
Adjusted net income - diluted | $ | 0.14 | $ | 0.28 | ||||
Realized Prices | ||||||||
Natural gas ($/Mcf), excluding realized gain on commodity derivatives | $ | 4.13 | $ | 2.66 | ||||
Natural gas ($/Mcf), including realized gain on commodity derivatives | $ | 2.77 | $ | 2.68 | ||||
Oil liquids ($/Bbl), excluding realized gain on commodity derivatives | $ | 53.70 | $ | 60.90 | ||||
Oil liquids ($/Bbl), including realized gain on commodity derivatives | $ | 59.58 | $ | 60.36 | ||||
Costs Per Mcfe | ||||||||
Lease operating expenses | $ | 0.28 | $ | 0.30 | ||||
Facility lease expense | $ | 0.11 | $ | 0.09 | ||||
Production taxes | $ | 0.49 | $ | 0.32 | ||||
Gathering fees (net) | $ | 0.29 | $ | 0.28 | ||||
Depletion and depreciation | $ | 0.83 | $ | 0.70 | ||||
General and administrative - total | $ | 0.11 | $ | 0.18 | ||||
Interest expense | $ | 0.54 | $ | 0.50 | ||||
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| $ | 2.65 | $ | 2.37 | |||||
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Adjusted Margins | ||||||||
Adjusted Net Income Margin(3) | 14 | % | 25 | % | ||||
Adjusted Operating Cash Flow Margin(4)(7) | 41 | % | 50 | % | ||||
Adjusted EBITDA Margin(6) | 59 | % | 66 | % |
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Ultra Petroleum Corp.
Supplemental Balance Sheet Data
All amounts expressed in US$000’s
| As of | ||||||||
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
Cash and cash equivalents | $ | 10,469 | $ | 17,014 | ||||
Outstanding debt | ||||||||
Credit Agreement | 38,000 | 104,000 | ||||||
Term Loan, secured due 2024 | 975,068 | 975,000 | ||||||
Second Lien Notes, secured, due 2024 | 575,149 | 545,000 | ||||||
6.875% Senior Notes, unsecured due 2022 | 150,439 | 195,035 | ||||||
7.125% Senior Notes, unsecured due 2025 | 225,000 | 225,000 | ||||||
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Outstanding debt | $ | 1,963,656 | $ | 2,044,035 | ||||
Add: Unamortized Premium | 235,941 | $ | 228,096 | |||||
Less: Deferred financing costs | (54,161 | ) | (56,650 | ) | ||||
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Total outstanding debt, net | $ | 2,145,436 | $ | 2,215,481 | ||||
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Reconciliation of Operating Cash Flow and Net Cash Provided by Operating Activities (unaudited)
All amounts expressed in US$000’s
The following table reconciles net cash provided by operating activities with operating cash flow as derived from the Company’s financial information.
| For the Quarter Ended | ||||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
Net cash provided by operating activities | $ | 150,690 | $ | 151,996 | ||||
Net changes in operating assets and liabilities and othernon-cash ornon-recurring items(7) | (71,130 | ) | (39,972 | ) | ||||
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Operating Cash Flow(2)(7) | $ | 79,560 | $ | 112,024 | ||||
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Reconciliation of Earnings before Interest, Taxes, Depletion and Amortization (unaudited)
All amounts expressed in US$000’s
The following table reconciles net income (loss) as derived from the Company’s financial information with earnings before interest, taxes, depletion, and amortization and certain othernon-recurring ornon-cash charges (Adjusted EBITDA)(5):
| For the Quarter Ended | ||||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
Net income | $ | 40,674 | $ | 47,493 | ||||
Interest expense | 33,327 | 35,837 | ||||||
Depletion and depreciation | 51,653 | 50,540 | ||||||
Unrealized (gain) loss on commodity derivatives | (14,292 | ) | 7,606 | |||||
Deferred gain on sale of liquids gathering system | — | (2,638 | ) | |||||
Stock compensation expense | 841 | 8,810 | ||||||
Debt exchange expenses | 1,822 | — | ||||||
Taxes | (27 | ) | 434 | |||||
Other expenses | 684 | 213 | ||||||
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Adjusted EBITDA(5) | $ | 114,682 | $ | 148,295 | ||||
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The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, management believes certainnon-GAAP performance measures may provide users of this financial information with additional meaningful comparisons between current results and the results of the Company’s peers and of prior periods.
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Management presents the following measures because (i) they are consistent with the manner in which the Company’s performance is measured relative to the performance of its peers, (ii) these measures are more comparable to earnings estimates provided by securities analysts, and (iii) charges or amounts excluded cannot be reasonably estimated and guidance provided by the Company excludes information regarding these types of items. These adjusted amounts are not a measure of financial performance under GAAP.
| (1) | Adjusted Net Income is defined as Net income adjusted to exclude certain income or expense amounts in order to exclude the volatility associated with the effects ofnon-recurring charges,non-cashmark-to-market gains or losses on commodity derivatives,non-cash ceiling test impairments and other similar items such as debt restructuring costs, office closure and relocation costs. |
| (2) | Operating Cash Flow is defined as Net cash provided by operating activities before changes in operating assets and liabilities and othernon-cash items. Management believes that thenon-GAAP measure of operating cash flow is useful as an indicator of an oil and gas exploration and production Company’s ability to internally fund exploration and development activities and to service or incur additional debt. The Company has also included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the Company may not control and may not relate to the period in which the operating activities occurred. Operating cash flow should not be considered in isolation or as a substitute for net cash provided by operating activities prepared in accordance with GAAP. |
| (3) | Adjusted Net Income Margin is defined as Adjusted Net Income divided by Total operating revenues plus Realized gain (loss) on commodity derivatives. |
| (4) | Adjusted Operating Cash Flow Margin is defined as Operating Cash Flow divided by Total operating revenues plus Realized gain (loss) on commodity derivatives. |
| (5) | Earnings before interest, taxes, depletion and amortization (Adjusted EBITDA) is defined as Net income (loss) adjusted to add back interest, taxes, depletion and amortization and certain othernon-recurring ornon-cash charges. Management believes that thenon-GAAP measure of Adjusted EBITDA is useful as an indicator of an oil and gas exploration and production Company’s ability to internally fund exploration and development activities and to service or incur additional debt. Adjusted EBITDA should not be considered in isolation or as a substitute for net cash provided by operating activities prepared in accordance with GAAP. |
| (6) | Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Total operating revenues plus Realized gain (loss) on commodity derivatives. |
| (7) | For the quarter ended March 31, 2019 and 2018, reorganization items, net and contract settlement expense are considerednon-recurring items and are excluded from operating cash flow. |
About Ultra Petroleum
Ultra Petroleum Corp. is an independent energy company engaged in domestic natural gas and oil exploration, development and production. The Company is listed on NASDAQ and trades under the ticker symbol “UPL”.
Additional information on the Company is available atwww.ultrapetroleum.com. In addition, our filings with the Securities and Exchange Commission (“SEC”) are available by written request to Ultra Petroleum Corp. at 116 Inverness Drive East, Suite 400, Englewood, CO 80112 (Attention: Investor Relations) or on our website (www.ultrapetroleum.com) or from the SEC on their website atwww.sec.gov or by telephone request at1-800-SEC-0330.
This news release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statement, including any opinions, forecasts, projections or other statements, other than statements of historical fact, are or may be forward-looking statements. Although the Company believes the expectations reflected in any forward-looking statements herein are reasonable, we can give no assurance that such expectations will prove to have been correct and actual results may differ materially from those projected or reflected in such statements. This news release also includes forward-looking statements about the Company’s borrowing base, which is based in part upon estimates of the Company’s proved reserves. There are numerous uncertainties inherent in estimating proved reserves, including projecting future rates of production and timing of development. In addition, certain risks and uncertainties inherent in our business as well as risks and uncertainties related to our operational and financial results are set forth in our filings with the SEC, particularly in the section entitled “Risk Factors” included in our Annual Report on Form10-K for the most recent fiscal year, our most recent Quarterly Reports on Form10-Q, and from time to time in other filings made by the Company with the SEC. Some of these risks and uncertainties include, but are not limited to, the Company’s ability to decrease its leverage or fixed costs, increased competition, the timing and extent of changes in prices for oil and gas,
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particularly in the areas where we own properties, conduct operations, and market our production, as well as the timing and extent of our success in discovering, developing, producing and estimating oil and gas reserves, our ability to successfully monetize the properties we are marketing, weather and government regulation, and the availability of oil field services, personnel and equipment.
For further information contact:
Investor Relations
303-708-9740, ext. 9898
Email:IR@ultrapetroleum.com
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