Ultra Petroleum Corp. Announces Fourth Quarter and Full-Year 2019 Results, Proved Reserves as of Year-end December 31, 2019 and as of March 31, 2020, and the Issuance of a Qualified Opinion by the Company’s Independent Registered Public Accounting Firm About the Company’s Ability to Continue as a Going Concern
ENGLEWOOD, Colo., April 14, 2020 (GLOBE NEWSWIRE) — Ultra Petroleum Corp. (“Ultra” or the “Company”) (OTCQX: UPLC) announces financial and operating results for the quarter and year ended December 31, 2019. The Company is also reporting proved reserves as of year-end December 31, 2019 and as of March 31, 2020.
Highlights:Fourth quarter and full-year 2019 production were within guidance at 55.4 billion cubic feet equivalent (“Bcfe”) and 240.2 Bcfe, respectively,During 2019, Ultra turned online 71 gross (70.3 net) operated vertical wells prior to suspending its drilling program in September,The Company’s average unhedged price for natural gas was $2.78 per Mcf in the fourth quarter of 2019 and reflects that first-of-month Rockies basis was positive to Henry Hub by $0.27 per MMBtu in the fourth quarter,During the fourth quarter of 2019, the Company had cash flow from operating activities of $19.8 million and generated positive free cash flow(8) of $56.4 million.“We continue to execute on our plan of focusing on free cash flow generation and reducing our debt levels. Ultra’s low-cost, low-decline and predictable operations resulted in free cash flow generation of approximately $56 million for the fourth quarter, allowing us to continue to reduce indebtedness on the trajectory we have forecast,” said Brad Johnson, President and Chief Executive Officer of Ultra.Fourth Quarter 2019 Financial ResultsUltra’s reported net loss for the quarter ended December 31, 2019 was $1.3 million, or $0.01 per diluted share. The Company reported adjusted net income (1) of $22.6 million, or $0.11 per diluted share, for the quarter ended December 31, 2019. Net income was $39.7 million or $0.20 per diluted share in the quarter ended 2018, with adjusted net income for the same period at $27.4 million or $0.14 per diluted share.During the fourth quarter of 2019, total revenues excluding hedging settlements were $170.9 million as compared to $273.2 million during the fourth quarter of 2018. Derivative settlements during these periods were a loss of $2.2 million and of $82.4 million, respectively. The Company’s production of natural gas and oil was 55.4 Bcfe, a decrease from 64.3 Bcfe in the same period of 2018. The decrease in production was based on the Company’s decision to reduce and then suspend drilling in the third quarter of 2019 in response to weak commodity pricing. This decision allowed the Company to generate cash flow from operating activities of $19.8 million and free cash flow of $56.4 million in the fourth quarter of 2019. The Company reported Adjusted EBITDA(5) of $100.6 million for the quarter ended December 31, 2019 compared to $110.8 million for the fourth quarter of 2018. Ultra’s fourth quarter production was comprised of 53.1 billion cubic feet (“Bcf”) of natural gas and approximately 378,000 barrels (“Bbls”) of oil.During the fourth quarter of 2019, Ultra’s average realized natural gas price was $2.72 per thousand cubic feet (“Mcf”), which included derivative settlements, as compared to $2.58 per Mcf in the fourth quarter of 2018. Excluding the derivative settlements, the Company’s average price for natural gas was $2.78 per Mcf in the fourth quarter of 2019, compared to $3.95 per Mcf for the fourth quarter of 2018. Rockies natural gas basis, measured by first-of month Inside FERC Northwest Rockies (“NWROX”) compared to Henry Hub, was positive in the fourth quarter of 2019 by $0.27 per MMBtu. The Company’s average realized oil price was $60.53 per Bbl, including derivative settlements, for the quarter ended December 31, 2019, as compared to $61.74 per Bbl for the same period in 2018.Full-Year 2019 ResultsUltra’s reported net income for the year ended December 31, 2019, was $108.0 million, or $0.55 per diluted share as compared with net income of $85.2 million or $0.43 per diluted share for the same period in 2018. Adjusted net income for the year ended December 31, 2019, was $69.1 million, or $0.35 per diluted share, as compared to $149.7 million and $0.76 per diluted share in 2018.During the year ended December 31, 2019, revenues from natural gas and oil sales, including processing credits, was $742.0 million as compared to $892.5 million in the year ended December 31, 2018. During the year ended December 31, 2019, production of natural gas and oil was 240.2 Bcfe, which was comprised of 230.1 Bcf of natural gas and 1.7 million barrels of oil.During the year ended December 31, 2019, Ultra’s average realized natural gas price was $2.50 per Mcf, including derivative settlements. Excluding the derivative settlements, the Company’s average price for natural gas was $2.77 per Mcf for both 2019 and 2018, with volatility through each period. The net basis differential between NWROX and Henry Hub, using first of month pricing was negative $0.04 per MMBtu for the full year 2019 as compared to negative $0.46 in 2018. The Company’s average realized oil price, including derivative settlements, was $59.97 per Bbl for the year ended December 31, 2019, as compared to $59.44 per Bbl for the same period in 2018.For the full year 2019, total capital expenditures were $241.1 million. During this period, the Company participated in 94 gross (78.5 net) wells that were turned to sales, including operated and non-operated wells in the Pinedale field in Wyoming. Proved Reserves as of December 31, 2019Year-end 2019 proved reserves were 1,990 Bcfe, consisting entirely of Proved Developed Producing (“PDP”) reserves. Given the decision to suspend the drilling program in the third quarter, citing a need for higher natural gas prices in order to justify capital development, the Company had revisions that transferred out all 570 Bcfe of its Proved Undeveloped (“PUD”) reserves as of December 31, 2019. For the 20th consecutive year, Netherland, Sewell & Associates, Inc. (“NSAI”), prepared a full reserve report for the Company. The highlights below summarize the year-end 2019 reserve results:Year-end 2019 proved reserves were 1,990 Bcfe, all of which are in the PDP category, and by volume are comprised of 96 percent natural gas and 4 percent oil,The year-end 2019 PV10 valuation for proved reserves using pre-tax estimated future net cash flows was $1.7 billion(9), andThe PV10 valuation of Ultra’s year-end reserves was calculated based on reference prices for natural gas of $2.58 per MMBtu and oil of $55.85 per Bbl in accordance with the rules of the Securities and Exchange Commission (“SEC”). Applying regional market differentials along with appropriate adjustments for quality, our marketing contracts, energy content, transportation charges, and adjustments for basis over same historical 12-month period, the average prices for the Company’s proved reserves were $2.44 per Mcf for natural gas and $55.36 per Bbl for oil, computed in accordance with the rules of the SEC.Going Concern QualificationThe report of the Company’s independent registered public accounting firm that accompanies its audited, consolidated financial statements in our Annual Report on Form 10-K contains an explanatory paragraph regarding the substantial doubt about the Company’s ability to continue as a going concern. The failure to deliver audited, consolidated financial statements without a going concern or like qualification or explanation results in a default under each of the Credit Agreement and Term Loan Agreement as of April 14, 2020. We expect that we will be precluded from making additional draws on the Credit Agreement unless a waiver is obtained. If we do not obtain a waiver or other suitable relief from the lenders under the Credit Agreement and the Term Loan Agreement before the expiration of a 30-day grace period, an event of default under each of the Credit Agreement and Term Loan Agreement would occur, which would allow the lenders to accelerate the loans outstanding under the Credit Agreement and Term Loan Agreement. At this time, we do not expect to obtain a waiver of this requirement and we do not currently have sufficient liquidity to repay such indebtedness were it to be accelerated.Liability Management UpdateIn February and March 2020, the Company entered into confidentiality agreements and commenced discussions with certain holders of the Company’s long-term debt and their legal and financial advisors. The Company previously engaged with certain debtholders regarding a potential out-of-court restructuring, but as previously disclosed on March 5, 2020, such negotiations are no longer occurring. Negotiations and discussions with certain other debtholders and their advisors are now ongoing regarding a potential in-court restructuring, although as of the date of this filing no definitive agreements have been reached regarding any amendments, restructurings or other transactions relating to the Company’s indebtedness. There can be no assurance that our efforts will result in any agreement or what the terms of any agreement will be. If an agreement is reached and we pursue a restructuring, it may be necessary for us to file a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code or the Canadian Bankruptcy and Insolvency Act in order to implement the agreement through the confirmation and consummation of a plan of reorganization approved by the bankruptcy court in the bankruptcy proceedings. We also may conclude that it is necessary to initiate Chapter 11 proceedings to implement a restructuring of our obligations even if we are unable to reach an agreement with our creditors and other relevant parties regarding the terms of such a restructuring. We discuss these matters in further detail under, among other places, in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K.Proved Reserves as of March 31, 2020In order to fulfill its obligation to evaluate the full cost ceiling and to calculate DD&A of its oil and gas properties, the Company is required to estimate its oil and gas reserves on a quarterly basis. The estimated proven oil and gas reserves considers the estimated future production based on the most current well information available including decline rate changes causing downward revisions, and updated pricing in accordance with SEC requirements. These SEC reference prices, together with basis differentials expanding modestly since year end, decreased by 15% for natural gas and <1% for oil, as compared to the pricing utilized as of December 31, 2019. NSAI prepared a full reserve report of estimated proved reserves as of March 31, 2020 for the Company. The highlights below summarize the March 31, 2020 reserve results: Consistent with year end, the SEC reference prices utilized in the preparation of the reserves as of March 31, 2020 were based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period April 2019 through March 2020, which were $2.30 per MMBtu for Henry Hub spot and $55.96 per Bbl for WTI. Applying regional market differentials along with appropriate adjustments for quality, our marketing contracts, energy content, transportation charges, and updates to basis for the same period, the average prices for the Company’s proved reserves were $2.07 per Mcf for natural gas and $55.35 per Bbl for oil, computed in accordance with the rules of the SEC. March 31, 2020 proved reserves were 1,766 Bcfe, all of which are in the PDP category, and by volume are comprised of 96 percent natural gas and 4 percent oil,The discounted future net cash flows before income tax estimated at March 31, 2020 was $1.217(10) billion, respectively. 2020 Capital Budget and Production ForecastCost GuidanceHedging ActivityThe table below provides a summary of the hedges in place for the first quarter and as of March 31, 2020:(a) Represents swap contracts that fix the basis differentials for gas sold at or near Opal, Wyoming.Continued Exemptive Relief from Canada’s National Instrument 51-101Ultra is pleased to announce that applicable provincial securities commissions in Canada have issued a decision document (the “Decision”) which has the effect of granting Ultra continued exemptive relief from the disclosure requirements contained in Canada’s National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) in addition to other continuous disclosure obligations under applicable Canadian securities laws. Ultra had obtained similar exemptive relief in 2005 but was required to obtain this new Decision as a result of the facts underlying the original exemptive relief changing due to the delisting of Ultra’s common stock from the NYSE and Nasdaq.As a result of the Decision, and provided that certain conditions set out in the Decision are met on an on-going basis, Ultra will not be required to comply with the Canadian requirements of NI 51-101 and, accordingly, will not be required to file Form 51-101F1 Statement of Reserves Data and Other Oil and Gas Information, Form 51-101F2 Report on Reserves Data by Independent Qualified Reserves Evaluator or Auditor or Form 51-101F3 Report of Management and Directors on Oil and Gas Disclosure. In lieu of such filings, the Decision permits Ultra to provide disclosure in respect of its oil and gas activities in the form permitted by, and in accordance with, the legal requirements of the United States Securities Act of 1933, the United States Securities Exchange Act of 1934 and the rules and regulations of the SEC and the rules and obligations of any exchange upon which Ultra’s common stock is listed (collectively, “U.S. Rules”). The Decision also provides that Ultra is required to file all such oil and gas disclosure and other continuous disclosure with the appropriate Canadian securities commissions on www.sedar.com as soon as practicable after such disclosure is filed with the SEC.Ultra’s disclosure relating to its oil and gas activities therefore continue to comply with the U.S. Rules rather than NI 51-101 and the Canadian Oil and Gas Evaluation Handbook. The U.S. Rules differ in a number of respects from the disclosure otherwise required under Canada’s NI 51-101 and the Canadian Oil and Gas Evaluation Handbook and investors are urged to consider these differences when considering all future disclosures made by Ultra relating to its oil and gas activities.
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 OTCQX and trades under the ticker symbol “UPLC”.Additional information on the Company is available at www.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 at www.sec.gov or by telephone request at 1-800-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. 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 Form 10-K for the most recent fiscal year, our most recent Quarterly Reports on Form 10-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 maintain adequate liquidity following the recent default under the terms of our Credit Agreement and Term Loan Agreement resulting from the going concern qualification to our audited, consolidated financial statements in our Annual Report on Form 10-K, decrease its leverage or fixed costs, or restructure our balance sheet in a manner that allows us to continue as a going concern over the long term. Some additional risks and uncertainties include, but are not limited to, increased competition, the extreme volatility and negative pressure that oil and natural gas commodity prices have experienced recently that is attributable to decreased demand resulting from COVID and the actions of OPEC and other oil exporting nations, the timing and extent of changes in prices for oil and gas, 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
