UPL - Ultra Petroleum

[bargainman]

I thought there was a post for this stock already but I don't see it.  It hit a new low today.  Basic thesis is that it's one of the lowest cost Nat Gas producers, and will rebound when Nat Gas does.  The theory being that Nat gas is at unsustainable lows.  Morningstar set a Fair value estimate of $40 vs it's recent low of $15-16.

[PlanMaestro]

Have not been following it for at least a year. Sharp drop. What was the reason? How are things going with Shell in the Marcellus? How are things going with the Niobrara play?

 

 

http://farm9.staticflickr.com/8101/8475749687_d9650c0747.jpg

[kevin4u2]

Have you looked at PEY?  Canadian low cost producer.  Added 30,000 boe/d of liquids rich NG last year with $618 million.  You won't find another small/mid cap producer that can add that kind of capital.  Most small/mid caps spend a couple hundred million and are unprofitably spinning their wheels.   

 

UPL is a low cost operator in the USA but they have lost their way recently and were not profitable a couple years back if I remember correctly.  Peyto has constantly been profitable and at current low NG prices they are adding production profitably while others cannot.

 

I have owned PEY for the better part of a decade, sometimes more sometimes less, and they have returned me over 20% annually including dividends.  They have very capable management and Don Gray, a founder and Chairman of the board, is a sharp business man.  He also has been quite critical of how the capital markets and some companies continually screw over investors. 

 

Anyway, I'll look for the slide that shows profitability of PEY vs competitors including UPL and post it. 

[sethatk]

I haven't seen a thread for UPL and know that several board members have a position. The SA article below is fairly informative, but maybe a little to optimistic. I think given the volatility I will add if it dips below 20. Also believe that natural gas will be used for more applications in the  future.

 

http://seekingalpha.com/article/2081643-ultra-petroleum-how-to-run-an-oil-and-gas-company

[bizaro86]

Hard to take that seriously when the author doesn't account for well declines in his analysis. Not that his conclusions are necessarily wrong, just that it makes me doubt the other assumptions.

[sethatk]

Yea, for me this is more of a good company-contrarian play. I feel there is a margin of safety in them being a low cost producer.

[skanjete]

The supply-demand situation in the gas market is gradually changing over the last 2 years.

The hard winter did help of course.

 

The underground storage is still going lower (currently at 1000Bcf) and is about half the storage of 12 months ago.

Watford estimated a bottoming out at 1000Bcf this winter. We'll see if this can go any lower or not.