Ultra Petroleum Earnings Call Insights: Pinedale Outlook and Future Development Timeline
Ultra Petroleum Corporation (NYSE:UPL) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.
David Tameron – Wells Fargo Securities, LLC: Mike, if – you just gave us ’13 of course may not handle if I ask you for ’14. Can you give us any color on how things look on the Pinedale, Marcellus obviously is out of your control, but in the Pinedale how things look as far as volume head into ’14 based on this CapEx plan of $415 million?
Michael D. Watford – Chairman, President and CEO: Our plan is to basically keep Wyoming production flat and that sort of 100 to 165 Bs a year level and Brad can correct me as I am just talking here. But we think that $250 million a year we can keep Wyoming production flat for long time. And given that we’ve got $16 billion of identified capital projects but I think, if we can keep it flat for well past my life time. But no right now we just at today’s gas prices that’s what we are going to do with it and in 2014 we have a plan that takes us from 2013 through ’16 where we are rebuilding the forward curve gas prices we are standing plus or minus cash flow every year and it has us dipping down production in 2013 and we start to grow again in 2014 moving forward. 2015, ’16 much pretty impressive both in terms of volumes and cash flow and what not. I think for 2014 and through 2016 there is (indiscernible) gas price about $4.25 on average which is up a nickel above where it was this morning when I walked in here.
David Tameron – Wells Fargo Securities, LLC: If I think about just a financial snapshot, looks like you are okay on the debt-to-EBITDA can you confirm those covenants it looks like 2.2, whatever look like to you guys finding that front. But for 2013 should I think about cash flow CapEx plus or minus equal to cash flow is that the right way to think about that just trying to make sure my model is right.
Michael D. Watford – Chairman, President and CEO: Our model suggest and we are using $3.50 gas price for 2013 is that we have $100 million of we spend capital $415 million and we have a cash flow about $515 million, so we have a $100 million of free cash.
Future Development Timeline
Joseph Allman – JP Morgan: Mike, in term of the $1.4 billion of future development cost, could you just give us how that spread out over time year one, year two, year four, year five?
C. Bradley (Brad) Johnson – VP, Reservoir Engineering and Development: I can comment. This is Brad. Our $1.4 billion FTC is related to the PUD capital. I think it’s important to know that only represents about a third of the capital that we have in our five year plan that’s the result of PUD locations in our plan that got demoted out into probably due to low gas price. As Mike mentioned, we have reduced capital program for 2013 with an expectation that will pick up in the out years and that trend also is translated into the FTC capital among PUD locations out in the next five years.
Michael D. Watford – Chairman, President and CEO: Most of it – more of it is backend loaded.
C. Bradley (Brad) Johnson – VP, Reservoir Engineering and Development: It is very similar to how we have a five year plan for all locations among all categories.
Joseph Allman – JP Morgan: So, for example, like out of that $1.4 billion like how much is in the reserve for year one spending?
William R. Picquet – SVP, Operations: I’ll have to get back with you on that. I don’t recall that specific number.
Michael D. Watford – Chairman, President and CEO: It’s not a big number. We can get back to you with it.
Joseph Allman – JP Morgan: Then, what was the percentage of PUDs with the year-end ’12 reserves and then with the negative revisions was it all PUDs or were there some PDP (tales) as well?
William R. Picquet – SVP, Operations: Sure, the first question on percentage, as a result of the reduction of PUDs moving to probable, our current undeveloped percentage is 39% of 1P Reserves. The previous year, we were at 60%. So, we’re from 60% to 40% as a result of the 2.3Ts getting demoted. The second question, on revisions, we’re posting some details on the revisions in the K in a week or so, but the revisions are going to be about 2.5Ts and we talked about the 2.3 transfer from PUD to probable. 97% of our revisions are related to price and price alone.
Joseph Allman – JP Morgan: Were there are some PDP (tales) that went away as well?
William R. Picquet – SVP, Operations: There are some PDP (tales) that did go away when you drop from $4 to $2.63. It’s in the out years and these are on life reserves, they have to PV impact, but there are some portion of that.