Ultra Petroleum Corp. Michael D. Watford Chairman, President and CEO

Transcription

1 Ultra Petroleum Corp. Michael D. Watford Chairman, President and CEO May 2013 Ultra Petroleum Corp. is an independent exploration and production company focused on 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 stage in the Appalachian Basin of Pennsylvania. Ultra Petroleum Corp. NYSE: UPL

2 A Unique Energy Company Focused on Profitable Growth Production growth: 1,911% 1P Reserve growth: 1,019% ROE: 36% average ROCE: 24% average 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 2012 Disciplined Capital Allocation Strategy Reduce capital investments in declining price environment Monetize liquids gathering system Focus on returns Ultra Petroleum Corp. NYSE: UPL 2

3 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 Total Reserves 17.0 Tcfe 4,600 future net wells $24,900MM future capital $1.46/Mcfe F&D cost Ultra Petroleum Corp. NYSE: UPL 3

4 Long-Life, Low-Cost, Lance Tight Gas Pinedale Field 53,440 acres UPL: 40,160 gross (21,375 net) 2,200 wells / ~ 1.5 Bcfd Field OGIP = 58.7 Tcf Recoverable = 38.2 Tcf HBP Status: 100% Jonah Field 21,000 acres UPL: 2,150 gross (1,350 net) 1,760 wells / ~ 0.7 Bcfd Field OGIP = 15.0 Tcf Recoverable = 10.5 Tcf HBP Status: 100% Ultra Petroleum Corp. NYSE: UPL 4

5 Pinedale s Profitable Well Economics 160% 140% 120% 4.00 Bcfe 5.00 Bcfe 6.00 Bcfe 100% Vertical Depth 13,500 13,500 13,500 IRR 80% 60% Well Cost ($MM): $4.4 $4.4 $4.4 IRR*: 26% 44% 65% F&D Cost/Mcfe: $1.35 $1.08 $ % 20% 0% $3 $4 $5 $6 Wellhead Gas Price Payout, months: Reserve Life, yrs: * Economics at $4.00/Mcf wellhead price 6.0 Bcfe 5.0 Bcfe 4.0 Bcfe Ultra Petroleum Corp. NYSE: UPL 5

6 Improving Operating Efficiencies Spud to TD (Days) Spud to TD Reduced by 67% Pinedale Field Rig Release to Rig Release (Days) Q12013 RR-RR Reduced by 71% Pinedale Field Q12013 Ultra Petroleum Corp. NYSE: UPL 6

7 Leads to Further Cost Reductions $8.0 $7.0 $6.0 Pinedale Field Total Well Costs Reduced by 29% $5.0 Total Well Cost ($MM) $4.0 $3.0 $2.0 $1.0 $ Q12013 Ultra Petroleum Corp. NYSE: UPL 7

8 Extensive Future Wyoming Development 5,000+ remaining gross locations <25% field developed 1,850 producing wells YE2012 Ultra Petroleum Corp. NYSE: UPL 8

9 Abundant Marcellus Shale Ultra-Interest Lands Potter-Tioga Area 170,000 net acres HBP Status: 70% 202 producing horizontal wells Year-end 2012 Clinton-Lycoming Area 90,000 net acres HBP Status: 85% 120 producing horizontal wells Year-end 2012 Ultra Petroleum Corp. NYSE: UPL 9

10 Consistent Marcellus Performance Wellsboro Area 85 wells Avg. IP = 7.2 MMcf/d Wellsboro Krause Krause Area 58 wells Avg. IP = 7.0 MMcf/d Potter Marshlands Tioga Texas Creek Sproul Area 17 wells Avg. IP = 4.8 MMcf/d Clinton Grugan Bull Run Lycoming Texas Creek Area 30 wells Avg. IP = 6.9 MMcf/d Sproul Grugan & Bull Run Areas 114 wells Avg. IP = 6.7 MMcf/d Ultra Petroleum Corp. NYSE: UPL 10

11 Strong Marcellus Well Economics 200% 180% 160% 140% 120% 100% IRR 80% 60% 40% 5.0 Bcfe 7.0 Bcfe 9.0 Bcfe Vertical Depth 5,600 8, ' 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: Reserve Life, yrs: * Economics at $4.00/Mcf wellhead price 20% 0% $3 $4 $5 $6 Wellhead Gas Price $7.2MM & 5.0 Bcfe $6.2MM & 7.0 Bcfe $6.2MM & 9.0 Bcfe Ultra Petroleum Corp. NYSE: UPL 11

12 Early Stages of Marcellus Development 204 producing wells YE producing wells YE2012 3,340 future locations <10% field developed Ultra Petroleum Corp. NYSE: UPL 12

13 Geneseo Resource Upside Geneseo Tully Hamilton Geneseo Area Ultra has dominant position ~900 Geneseo Horizontal Activity UPL Participation Wells 3 rd Party Wells 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 Marcellus Upper Marcellus Ultra Petroleum Corp. NYSE: UPL 13

14 Restoring 2012 Reserves YE 12 Proved $2.63/Mcf 3.1 Tcfe YE 12 Restored Proved Reserves 5.0 Tcfe 1.89 Tcfe Restore YE 11 PUD capital & gas price PUD 1.19 Tcfe PD 1.88 Tcfe PUD 1.19 Tcfe PD 1.88 Tcfe Ultra Petroleum Corp. NYSE: UPL 14

15 Restoring 2012 Reserve Values YE 12 Proved Reserves $2.63/Mcf $2,263MM YE 12 Restored Proved Reserves PV-10 $4.04/Mcf $5,250MM $2,986MM Restore YE 11 PUD capital & gas price PUD $288MM PD $1,976MM PUD $288MM PD $1,976MM Ultra Petroleum Corp. NYSE: UPL 15

16 Growing Resource Base Tcfe 3P Reserves 17.1 Tcfe Reserve Category Reserves (Bcfe) Year-End 2012 $6/Mcf PV-10 ($MM) $5/Mcf PV-10 ($MM) Proved 3,202 $6,900 $5, P Probable 8,022 6,763 4,373 2P: (PV + PR) 11,224 13,664 9,893 Possible 5,841 5,198 3,453 0 YE11 YE12 3P: (PV + PR + PS) 17,065 $18,862 $13,346 Ultra Petroleum Corp. NYSE: UPL 16

17 Economic Fundamentals 2012 Cash flow Per Mcfe F&D Cost Full Cycle Returns Reserve Replacement Ratio $2.78 Per Mcfe $0.83 Per Mcfe 335% 332% Ultra Petroleum Corp. NYSE: UPL 17

18 Industry s Low-Cost Producer $ All-In Costs per Mcfe $12.00 All-in Costs per Mcfe $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Mean - $7.31/Mcfe Q12013 Costs Per Mcfe LOE $0.40 Production Tax 0.28 Gathering Fees 0.20 Transportation 0.34 DD&A 1.04 G&A 0.10 Int. & Debt 0.43 $2.79 Source: Wells Fargo Ultra Petroleum Corp. NYSE: UPL 18

19 Strong & Stable Margins Cash Flow Margin Net Income Margin 100% 90% Cash Flow Breakeven ($/Mcfe) 50% 45% Net Income Breakeven ($/Mcfe) 80% $1.20 $1.20 $1.18 $1.15 $ % $2.69 $2.54 $2.53 $2.82 $ % 35% 60% 30% 50% 25% 40% 30% 75% 70% 70% 73% 64% 20% 15% 37% 31% 31% 30% 29% 20% 10% 10% 5% 0% % Ultra Petroleum Corp. NYSE: UPL 19

20 Disciplined Capital Allocation Historical Capital Investment Programs $1,560MM 2011 $835MM Realized Natural Gas Prices ($/Mcf) 2011: $ : $ : $3.50-estimate 2012 $415MM 2013 Ultra Petroleum Corp. NYSE: UPL 20

21 Prudently Investing Within Cash Flow $350,000 $300,000 $250,000 Cash flow positive Q312 $200,000 $150,000 $100,000 $50,000 $0 Q Q Q Q Q Q2 2013E Q3 2013E Q4 2013E Capex (000's) Cash Flow (000's) Ultra Petroleum Corp. NYSE: UPL 21

22 Enhancing Financial Flexibility Total Debt Capacity $2.7B $2,400,000 March 31, 2013 $2,200,000 $2,000,000 Net Debt $1,919MM Short-term Liquidity $627MM Debt/EBITDA 2.5X EBITDA/Interest 8.0X $1,800,000 Debt Balance $1,600,000 $1,400,000 $1,200,000 $1,000,000 Ultra Petroleum Corp. NYSE: UPL 22

23 Decreasing Natural Gas Production Lower 48 Pipeline Data Lower 48 production peak of 65.7 Bcf/d on 11/5/12 Current Bcf/d 62 Bcf/Day Source: Genscape Ultra Petroleum Corp. NYSE: UPL 23

24 Gas Price Sensitivities and Induced Coal-to-Gas Switching NYMEX Natural Gas ($/MMbtu) $6.00 $5.50 $5.00 $4.50 $4.00 $3.50 Goldman Sachs new 2013 (balance) price forecast of $4.40/MMbtu Old forecast: $3.75/MMbtu = 2.4 Bcf/d of coal-to-gas switching 2013 Coal Prices: CAPP: $60/ton PRB: $10/ton $3.00 $2.50 $2.00 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 $ : 2.0 Bcf/d 4.9 Bcf/d $ Cumulative Coal-to-Gas Substitution (Bcf/Day) Source: Goldman Sachs Ultra Petroleum Corp. NYSE: UPL 24

25 West/Rockies Marketing Update Rockies basis narrowing with additional pipeline capacity Average basis 07 09: 68%HH Average basis 10 12: 93%HH Winter 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 25

26 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 adding 1+Bcf/d New market access for Marcellus will displace Canadian imports to the northeast region Improve regional basis differentials Nexus Gas Transmission ANR Lebanon Lateral Reversal Marcellus Facilities Expansion TGP NE Upgrade Constitution A.I.M. Leidy Southeast NE Supply Link TETCO NJ/NY Exp. Source: PIRA Ultra Petroleum Corp. NYSE: UPL 26

27 Outlook for 2013 $ Capital Investment Program $415MM $5 $35 $10 Rockies Appalachia Land Gathering and Facilities Corporate $260 Target drilling program 114 gross (51 net) Wyoming wells 28 gross (14 net) Pennsylvania wells Production goal Bcfe 135 gross (60 net) Wyoming wells online 40 gross (20 net) Pennsylvania wells online Budgeted capex $415MM Ultra Petroleum Corp. NYSE: UPL 27

28 Growth Ahead Operations 2013E 2014E 2015E 2016E Realized price ($/Mcf) $ 3.50 $ 4.00 $ 4.25 $ 4.50 Capex ($MM) $ 415 $ 675 $ 890 $ 995 Production (Bcfe) Income Statement ($MM) EBITDA $ 600 $ 755 $ 965 $ 1,200 Balance Sheet ($MM) 42% 100% Ending debt balance $ 1,890 $ 1,840 $ 1,810 $ 1,660 Ultra Petroleum Corp. NYSE: UPL 28

29 The Ultra Petroleum Story High asset quality Highly concentrated asset Domestic, onshore natural gas Low all-in and F&D costs Robust investment portfolio 4,600 future net drilling locations $24.9B future development capital 20+ years inventory Disciplined capital allocation strategy Invest within cash flow No growth for growth s sake Allocate capital >20% IRR Ultra Petroleum Corp. NYSE: UPL 29

30 Appendix Ultra Petroleum Corp. NYSE: UPL 30

31 Production and Financial Guidance Q Guidance Q estimated production Bcfe Q realized pricing Natural gas: 2-4% discount to NYMEX Condensate: $7.00 discount to NYMEX Q expense guidance Assumes $4.11 per Mmbtu and $91.00 per Bbl Total operating costs per Mcfe $ $3.01 Ultra Petroleum Corp. NYSE: UPL 31

32 Providing Certainty to Cash Flow Hedging Summary NYMEX Q Q Q Total 2013 Volume (Bcf) $/Mmbtu $3.51 $3.54 $3.54 $3.53 $/Mcf $3.72 $3.75 $3.75 $3.74 Note: Amounts may not total due to rounding Ultra Petroleum Corp. NYSE: UPL 32

33 Profitable Reinvestment Opportunities Reserve Size - Pinedale Wells 4 Bcfe 5 Bcfe 6 Bcfe 7 Bcfe $3/Mcf 13% 24% 37% 52% Gas Price $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% Based on $4.4MM/ Pinedale well cost Ultra Petroleum Corp. NYSE: UPL 33

34 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 Ultra Petroleum Corp. NYSE: UPL 34

35 Conservative Type Curve Estimates Clinton-Lycoming Area Potter-Tioga Area 6.0 Gross Production (MMcfe/D) Bcfe 7 Bcfe Days Ultra Petroleum Corp. NYSE: UPL 35

36 Marcellus Well Economics Reserve Size - Marcellus Wells 4 Bcfe 5 Bcfe 6 Bcfe 7 Bcfe 8 Bcfe 9 Bcfe $5.5MM 12% 24% 44% 62% 82% 107% Well Cost $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% * Economics at $4.00/Mcf wellhead price Ultra Petroleum Corp. NYSE: UPL 36

37 Production Lags Capital Spend $450 Capital Budget vs. Production 90 $ $350 $300 Cap-Ex ($MM) Production (Bcfe) Capex ($MM) $250 $ Production (Bcfe) $ $ $50 10 $0 0 Ultra Petroleum Corp. NYSE: UPL 37

38 Expanding Rockies Capacity Excess takeaway capacity ~4.3 Bcf/d 8.0 Average Daily Volume (Bcf/D) Actual Forecast Pipeline Capacity Source: Bentek Energy Ultra Petroleum Corp. NYSE: UPL 38

39 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 Ultra Petroleum Corp. NYSE: UPL 39

40 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 Ultra Petroleum Corp. NYSE: UPL 40

41 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 Ultra Petroleum Corp. NYSE: UPL 41

42 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. NYSE: UPL 42

43 Ultra Petroleum Corp. Market Data as of March 31, 2013 Shares of Common Stock Outstanding: 152.9MM Market Capitalization: $3.1B Enterprise Value: $5.0B 52 Week Price Range: $15.26 (2/15/13) - $21.55 (9/14/12) Investor Contacts Kelly Whitley Julie Danvers Director, Investor Relations Manager, Investor Relations (281) (281) kwhitley@ultrapetroleum.com jdanvers@ultrapetroleum.com This presentation contains or incorporates by reference forward looking statements within the meaning of the federal securities laws. All statements other than 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 current views about future events and financial performance. No assurances can be given that such events or performance will occur as projected, and actual results 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; the timing and extent of changes in prices for crude oil and natural gas; the timing and extent of discovery, development, production and estimation of oil and natural gas reserves; the effects of weather and government regulation; the availability of oil field personnel and services and equipment; and other risks detailed in the company s SEC filings, particularly in its Annual Report on Form 10-K available from Ultra Petroleum Corp. at 400 North Sam Houston Parkway E., Suite 1200, Houston, TX (Attention: Investor Relations). You can also obtain this information from the SEC by calling SEC-0330 or from the SEC s website at This presentation contains certain non-gaap financial measures. Reconciliation and calculation schedules for the non-gaap financial measures can be found on our website at SEC guidelines prohibit descriptions of potential reserves in filings with the SEC. We use the terms reserve potential or upside or other descriptions of volumes of reserves or resource that are potentially recoverable through additional drilling or recovery techniques that the SEC s guidelines may prohibit us from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the Company..