Ultra Petroleum Corp. - Amazon Web Services€¦ · Ultra Petroleum Corp. is an independent...

Ultra Petroleum Corp.Michael D. WatfordChairman, President and CEO

May 2013

Ultra Petroleum Corp. is an independent exploration and production company focusedon developing its long-life natural gas reserves in the Green River Basin of Wyoming –Pinedale and Jonah fields and is in the ongoing exploration and early development stagein the Appalachian Basin of Pennsylvania.

Ultra Petroleum Corp. NYSE: UPL

A Unique Energy Company

Ultra Petroleum Corp. NYSE: UPL 2

2012Disciplined Capital Allocation Strategy

• Reduce capital investments in declining price environment• Monetize liquids gathering system• Focus on returns

2001 – 2011Focused on Profitable Growth• Production growth: 1,911%• 1P Reserve growth: 1,019%• ROE: 36% average• ROCE: 24% average

2013+On the Horizon…

• Invest within cash flow• Allocate project capital >20% IRR• No growth for growth’s sake• Preserve concentrated assets• Maintain low cost leadership

Strong Reserve Base

Wyoming Lance

9.6 Tcfe• 2,900 future net

wells• $13,600MM

future capital• $1.42/Mcfe

F&D cost

Pennsylvania Marcellus

7.4 Tcfe• 1,700 future net

wells• $11,300MM

future capital• $1.52/Mcfe

F&D cost

TotalReserves17.0 Tcfe

• 4,600 future net wells

• $24,900MM future capital

• $1.46/Mcfe F&D cost


Long-Life, Low-Cost, Lance Tight Gas


Jonah Field21,000 acres

UPL: 2,150 gross (1,350 net)

1,760 wells / ~ 0.7 BcfdField OGIP = 15.0 Tcf

Recoverable = 10.5 TcfHBP Status: 100%

Pinedale Field53,440 acres

UPL: 40,160 gross (21,375 net)

2,200 wells / ~ 1.5 BcfdField OGIP = 58.7 Tcf

Recoverable = 38.2 TcfHBP Status: 100%

Pinedale’s Profitable Well Economics


4.00Bcfe

5.00 Bcfe

6.00 Bcfe

Vertical Depth 13,500’ 13,500’ 13,500’

Well Cost ($MM): $4.4 $4.4 $4.4

IRR*: 26% 44% 65%

F&D Cost/Mcfe: $1.35 $1.08 $0.90

Payout, months: 48 29 21

Reserve Life, yrs: 32 35 38

* Economics at $4.00/Mcf wellhead price0%

20%

40%

60%

80%

100%

120%

140%

160%

$3 $4 $5 $6

IRR

Wellhead Gas Price

6.0 Bcfe 5.0 Bcfe 4.0 Bcfe

0

10

20

30

40

50

60

70

2006 2007 2008 2009 2010 2011 2012 Q12013

Spud to TD (Days)

Pinedale Field

0

10

20

30

40

50

60

70

80

2006 2007 2008 2009 2010 2011 2012 Q12013

Rig Release to Rig Release

(Days)

Pinedale Field

Improving Operating Efficiencies…


RR-RRReduced by 71%

Spud to TDReduced by

67%

…Leads to Further Cost Reductions


$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

2006 2007 2008 2009 2010 2011 2012 Q12013

TotalWell Cost

($MM)

Pinedale Field

Total Well CostsReduced by 29%

Extensive Future Wyoming Development


1,850 producing wells YE2012

5,000+ remaining gross locations

<25% field developed

Abundant Marcellus Shale

Clinton-Lycoming Area90,000 net acresHBP Status: 85%

120 producing horizontal wellsYear-end 2012

Potter-Tioga Area170,000 net acresHBP Status: 70%

202 producing horizontal wellsYear-end 2012


Ultra-Interest Lands


Consistent Marcellus Performance

Sproul

Grugan

Bull Run

Marshlands

Texas Creek

WellsboroKrause

TiogaPotter

LycomingClinton

Grugan & Bull Run Areas114 wells

Avg. IP = 6.7 MMcf/d

Texas Creek Area30 wells


Wellsboro Area85 wells

Avg. IP = 7.2 MMcf/dKrause Area

58 wells Avg. IP = 7.0 MMcf/d

Sproul Area17 wells


Strong Marcellus Well Economics


* Economics at $4.00/Mcf wellhead price

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

$3 $4 $5 $6

IRR

Wellhead Gas Price$7.2MM & 5.0 Bcfe $6.2MM & 7.0 Bcfe $6.2MM & 9.0 Bcfe

Vertical Depth 5,600’ 8,400’ 8400'

Well Cost: $7.2 MM $6.2 MM $6.2 MM

IRR*: 12% 47% 82%

F&D Cost/Mcfe: $1.69 $1.01 $0.79

Payout, months: 152 25 15

Reserve Life, yrs: 39 42 42

5.0Bcfe

7.0Bcfe

9.0Bcfe

Early Stages of Marcellus Development


204 producing wells YE2011

322 producing wells YE2012

3,340 future locations

<10% field developed

Geneseo Resource Upside


Geneseo

Marcellus

Tully

Hamilton

Upper Marcellus

~900’

Geneseo Horizontal Activity

UPL Participation Wells 3rd Party Wells

Geneseo AreaUltra has

dominant position

Net Risked Resource Potential = ~3.3 Tcfe• Play area delineated by 14 horizontal wells in Ultra leasehold• Higher total organic content in the West• Can leverage existing Marcellus pads and infrastructure

Restoring 2012 Reserves

PUD 1.19 Tcfe

PD 1.88 Tcfe

YE’12 Proved Reserves@ $2.63/Mcf

3.1 Tcfe

YE’12 Restored Proved Reserves Sensitivity@$4.04/Mcf

5.0 Tcfe

1.89 Tcfe

PUD 1.19 Tcfe

PD 1.88 Tcfe


Restore YE’11 PUD capital & gas price

Restoring 2012 Reserve Values

PUD $288MM

PD $1,976MM

YE’12 Proved Reserves PV-10 @ $2.63/Mcf$2,263MM

YE’12 Restored Proved Reserves PV-10 Sensitivity @ $4.04/Mcf$5,250MM

$2,986MM

PUD$288MM

PD $1,976MM


Restore YE’11 PUD capital & gas price

Growing Resource Base

11.38 11.22

4.68 5.84

0

2

4

6

8

10

12

14

16

18

20

YE11 YE12

3P Reserves

16.0 Tcfe

17.1 TcfeYear-End 2012

Reserve CategoryReserves

(Bcfe)

$6/McfPV-10

($MM)

$5/McfPV-10

($MM)

Proved 3,202 $6,900 $5,520

Probable 8,022 6,763 4,373

2P: (PV + PR) 11,224 13,664 9,893

Possible 5,841 5,198 3,453

3P: (PV + PR + PS) 17,065 $18,862 $13,346

2P


Economic Fundamentals


F&DCost

$0.83Per

Mcfe

Full CycleReturns

335%

Reserve Replacement

Ratio

332%

Cash flow Per Mcfe

$2.78Per

Mcfe

2012

Industry’s Low-Cost Producer

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

All-in Costs per Mcfe

2012 All-In Costs per Mcfe

Source: Wells Fargo

Q12013 Costs Per McfeLOE $0.40 Production Tax 0.28 Gathering Fees 0.20 Transportation 0.34DD&A 1.04 G&A 0.10 Int. & Debt 0.43

$2.79

Mean -$7.31/Mcfe


Strong & Stable Margins


75%70% 70% 73%

64%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012

Cash Flow Margin

$1.35$1.15$1.18$1.20$1.20

Cash Flow Breakeven ($/Mcfe)

37%

31% 31% 30% 29%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2008 2009 2010 2011 2012

Net Income Margin

$2.69 $2.54 $2.53 $2.82 $3.07

Net Income Breakeven ($/Mcfe)

Disciplined Capital Allocation


$1,560MM

$835MM

$415MM

Historical Capital Investment Programs

2011

2012

2013

Realized Natural Gas Prices ($/Mcf)

2011: $5.05

2012: $4.01

2013: $3.50-estimate

Prudently Investing Within Cash Flow

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013E Q3 2013E Q4 2013E

Capex (000's) Cash Flow (000's)

Cash flow positive Q312


Total Debt Capacity $2.7B

March 31, 2013

Net Debt $1,919MM

Short-term Liquidity $627MM

Debt/EBITDA 2.5X

EBITDA/Interest 8.0X

Enhancing Financial Flexibility


$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000

$2,200,000

$2,400,000

Debt Balance

Decreasing Natural Gas Production

Source: GenscapeUltra Petroleum Corp. NYSE: UPL 23

52

54

56

58

60

62

64

66

68

Bcf/Day

Lower 48 Pipeline Data

Lower 48 production peak of 65.7 Bcf/d on 11/5/12

Current - 64.7 Bcf/d

Gas Price Sensitivities and Induced Coal-to-Gas Switching

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

0.0 1.0 2.0 3.0 4.0 5.0

NYMEX Natural Gas ($/MMbtu)

Cumulative Coal-to-Gas Substitution(Bcf/Day)

2.0 Bcf/d

Goldman estimates 2.0 Bcf/d of coal-to-gas switching is required in 2013, which translates to an average natural gas price of $4.40/MMbtu for the balance of 2013

2013 Coal Prices:CAPP: $60/tonPRB: $10/tonGoldman Sachs new

2013 (balance) price forecast of $4.40/MMbtu

2012: 4.9 Bcf/d

Old forecast: $3.75/MMbtu = 2.4 Bcf/d of coal-to-gas switching

Source: Goldman SachsUltra Petroleum Corp. NYSE: UPL 24

West/Rockies Marketing Update

Rockies basis narrowing with additional pipeline

capacity •Average basis ‘07 – ’09:

68%HH•Average basis ‘10 – ’12:

93%HH•Winter ‘12-’13 Opal has

consistently traded above Henry Hub

REX flowing ~ 50% capacity

•Lower differentials West vs. East flows

•Minimal Opal, WY supply on REX

•REX volumes sourced by Meeker/White River Hub (ECA & COP)

Rockies and Western Canadian supply down

year over year •Rockies supply

2012/2013 down ~0.9Bcf/d

•Western Canadian supply into US 2012/2013 down ~ 0.35Bcf/d

Structural change and generation load

•San Onofre nuclear plant continued outage no time table for return

•0.5Bcf/d increased gas demand due to outage


Source: Bentek, Genscape, Company estimates

Ultra Petroleum Corp. NYSE: UPL 26Source: PIRA

Marcellus Gas Entering New Markets

• Rapid pace of development has caused a pursuit of “new” markets for Marcellus gas

– Eastern Canada: export capacity of 450MMcf/d as of 4Q12 (Niagra)

– NJ/NY: 800MMcf/d of new capacity delivered to NYC by late 4Q13

– NYC/Long Island: 2 projects underway to provide 350MMcf/d new capacity by 4Q13/2Q14

– New England: 1.5+Bcf/d new capacity by 4Q15/4Q16

• Southeast and Midwest market projects targeted for 2016+ adding 1+Bcf/d

• New market access for Marcellus will displace Canadian imports to the northeast region

• Improve regional basis differentials

Leidy Southeast

Nexus Gas Transmission

ANR LebanonLateral Reversal

NE Supply Link

TGP NE Upgrade

Marcellus Facilities Expansion

TETCO NJ/NY Exp.

A.I.M.

Constitution

Outlook for 2013

• Target drilling program– 114 gross (51 net) Wyoming wells– 28 gross (14 net) Pennsylvania wells

• Production goal 228 – 238 Bcfe– 135 gross (60 net) Wyoming wells online– 40 gross (20 net) Pennsylvania wells online

• Budgeted capex $415MM$260

$105

$5 $35 $10

2013Capital Investment Program

$415MM

Rockies

Appalachia

Land

Gathering and Facilities

Corporate


Growth Ahead

2013E 2014E 2015E 2016EOperations

Realized price ($/Mcf) 3.50$ 4.00$ 4.25$ 4.50$ Capex ($MM) 415$ 675$ 890$ 995$ Production (Bcfe) 233 245 285 330

Income Statement ($MM)

EBITDA 600$ 755$ 965$ 1,200$

Balance Sheet ($MM)

Ending debt balance 1,890$ 1,840$ 1,810$ 1,660$


42%

100%

The Ultra Petroleum Story

High asset quality

Disciplined capitalallocation strategy

Robust investment portfolio


• Highly concentrated asset• Domestic, onshore natural gas• Low all-in and F&D costs

• Invest within cash flow• No growth for growth’s sake• Allocate capital >20% IRR

• 4,600 future net drilling locations• $24.9B future development capital• 20+ years inventory

Appendix


Production and Financial Guidance

Q2 2013 Guidance

• Q2 2013 estimated production– 57.0 – 59.0 Bcfe

• Q2 2013 realized pricing– Natural gas: 2 - 4% discount to NYMEX– Condensate: $7.00 discount to NYMEX

• Q2 2013 expense guidance– Assumes $4.11 per Mmbtu and $91.00 per Bbl– Total operating costs per Mcfe $2.85 - $3.01


Providing Certainty to Cash Flow

Hedging Summary

NYMEX Q2 2013 Q3 2013 Q4 2013 Total 2013

Volume (Bcf) 33.4 35.9 12.1 81.4

$/Mmbtu $3.51 $3.54 $3.54 $3.53

$/Mcf $3.72 $3.75 $3.75 $3.74Note: Amounts may not total due to rounding


Profitable Reinvestment Opportunities

Ultra Petroleum Corp. NYSE: UPL 33Based on $4.4MM/ Pinedale well cost

4 Bcfe 5 Bcfe 6 Bcfe 7 Bcfe

$3/Mcf 13% 24% 37% 52%

$4/Mcf 26% 44% 65% 92%

$5/Mcf 43% 69% 104% 147%

$6/Mcf 63% 102% 154% 221%

$7/Mcf 87% 142% 218% 320%

$8/Mcf 116% 193% 301% 451%

Gas

Pric

eReserve Size - Pinedale Wells

Marcellus Technical Review Updates

• High-grading acreage to optimize returns– Utilizing seismic attributes to delineate resource sweet spots– Sweet spot EUR’s 2.5 times better than non-sweet spot– 944 sq-mi of UPL and partner 3D data (~70% of leasehold coverage)

• Studying correct well spacing – currently 110 acres per well– 6 increased density pilots completed and online– Development plan in one area downspaced to 750’

• Ongoing completion optimization– Evaluating stage count and frac volume reduction – Achieving comparable well performance with fewer stages


Conservative Type Curve Estimates


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1 91 181 271 361 451 541 631 721

Gro

ss P

rodu

ctio

n(M

Mcf

e/D

)

Days

7 Bcfe

5 Bcfe

Clinton-Lycoming AreaPotter-Tioga Area

4 Bcfe 5 Bcfe 6 Bcfe 7 Bcfe 8 Bcfe 9 Bcfe$5.5MM 12% 24% 44% 62% 82% 107%

$6.0MM 9% 19% 36% 51% 68% 88%

$6.5MM 7% 16% 30% 43% 57% 74%

$7.0MM 5% 13% 25% 36% 48% 63%

$7.5MM 3% 10% 22% 31% 42% 54%

$8.0MM 2% 8% 19% 27% 36% 47%

Wel

l Cos

t

Reserve Size - Marcellus Wells

Marcellus Well Economics


* Economics at $4.00/Mcf wellhead price

Production Lags Capital Spend


0

10

20

30

40

50

60

70

80

90

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

Production(Bcfe)

Capex($MM)

Capital Budget vs. Production

Cap-Ex ($MM)Production (Bcfe)

Expanding Rockies Capacity

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Average Daily Volume

(Bcf/D)

Actual Forecast Pipeline CapacitySource: Bentek Energy

Excess takeaway capacity ~4.3 Bcf/d


New Ventures Strategy


• Objectives:– Identify best geologic provinces and plays in North America– Develop detailed in-house familiarity with attractive plays– Identify entry points to plays of interest

• Focus on strategic / complementary fit– Targeting plays that leverage Ultra’s operational expertise– Prioritizing high ROR resource type plays– Focused on impact to existing returns in portfolio

Benefits of Using Natural Gas

• Domestic: Greater use of this clean, abundant, made–in-America energy source will create U.S. jobs and boost local economies, while advancing our national security

• Abundant: 2,543 Tcf of natural gas reserves and technically recoverable natural gas in the U.S. will power America for generations

• Clean: Represents the only clean energy option of adequate scale available today to start meaningful air quality improvements over the 10 years

• Jobs: Supported more than 2.8 million jobs in the U.S. in all 50 states


Innovative Employees • We value the multi-faceted skills and performance our talented

employees have to offer

• We have a unique, entrepreneurial, value-driven business culture

• We operate in a highly decentralized work environment where employees can see their projects come to fruition

• Responsibility and accountability go hand-in-hand for all employees at all levels; every employee is recognized for their contribution and performance

• All employees are challenged to deliver best-in-class results as normal everyday business practice


Safety and Environmental• We are committed to safe operations, and maintain high standards of

ethical conduct by employees, contractors and service providers

• We pursue our work with integrity and respect for the environment where we conduct our business

• We have established a leadership role in the development of industry best practices which is recognized by regulatory agencies

• We are active in incident management and response planning by working with local government and first responders to identify roles and responsibilities for a robust unified management approach to unique situations

• We are dedicated to maintain a safe and secure work environment for all our employees


Ultra Petroleum Corp.

• Market Data as of March 31, 2013Shares of Common Stock Outstanding: 152.9MM

Market Capitalization: $3.1B Enterprise Value: $5.0B52 Week Price Range: $15.26 (2/15/13) - $21.55 (9/14/12)

• Investor ContactsKelly Whitley Julie DanversDirector, Investor Relations Manager, Investor Relations(281) 582-6602 (281) [email protected] [email protected] presentation contains or incorporates by reference forward looking statements within the meaning of the federal securities laws. All statements otherthan statements of historical facts included in this document and other statements that include the words "believe", "expects", "anticipates", "intends","estimates", "projects", "target", "goal", "plans", "objective", "should", or similar words are forward looking statements and reflect the Company’s currentviews about future events and financial performance. No assurances can be given that such events or performance will occur as projected, and actualresults may differ materially from those projected.

Important factors that may cause actual results to differ from the forward-looking statements in this presentation include: increased competition; thetiming and extent of changes in prices for crude oil and natural gas; the timing and extent of discovery, development, production and estimation of oil andnatural gas reserves; the effects of weather and government regulation; the availability of oil field personnel and services and equipment; and other risksdetailed in the company’s SEC filings, particularly in its Annual Report on Form 10-K available from Ultra Petroleum Corp. at 400 North Sam HoustonParkway E., Suite 1200, Houston, TX 77060 (Attention: Investor Relations). You can also obtain this information from the SEC by calling 1-800-SEC-0330 orfrom the SEC’s website at www.sec.gov.

This presentation contains certain non-GAAP financial measures. Reconciliation and calculation schedules for the non-GAAP financial measures can befound on our website at www.ultrapetroleum.com.

SEC guidelines prohibit descriptions of potential reserves in filings with the SEC. We use the terms reserve “potential” or “upside” or other descriptions ofvolumes of reserves or resource that are potentially recoverable through additional drilling or recovery techniques that the SEC’s guidelines may prohibitus from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly aresubject to substantially greater risk of being actually realized by the Company.

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