Ultra Petroleum Corp. (NYSE:UPL)

CAPS Rating: 5 out of 5

An independent oil and gas company engaged in the development, production, operation, exploration and acquisition of oil and natural gas properties.

Recs

7
Player Avatar circaclown (< 20) Submitted: 5/10/2011 11:48:01 PM : Outperform Start Price: $47.99 UPL Score: -44.05

A couple of things that really jump out at me about natural gas.. I was doing some research in oil production of companies in the US and I noticed some trends that I discounted when I read them because I was doing oil research. I noticed, and this is in the annual reports, that all the big producers Chevron, Shell, Exxon ect. are dramatically increasing their natural gas holdings. I didn't look but it looked to me that they were doing it at much faster rates than oil (I would look into it right now, but I have homework to do). Especially Exxon, they have the most and buying up even more than anyone else (again not sure, just how I remember it).
Then something else happened. Today, I was reading this great article by Dan Dzombak (http://www.fool.com/investing/general/2011/05/10/the-secret-to-commodities-investing.aspx?source=ihpsitth0000001). I know that natural gas has been trading at bargain basement prices but I didn't know that it was this bad. As of today the price is $4.25/mcf, below many company's cost of production, including natural gas behemoth, Chesapeake which has a production cost of $6.78/mcfe.

I really like this because this will drive out producers and only the strong will survive. I also am comforted to know that the smart money is betting that investing in natural gas is the right thing to do now. When the price corrects, and it will, the leanest companies (like UPL, I'll get into that in a second) and the behemoths stand to profit the most. I think the quote by Bill Miller real sums it up well, "The time to own commodities is when they are down, when everybody has lost money in them, and when they trade below the cost of production."

I like Ultra Petroleum because their production costs are $2.61/mcfe, and they are making money. 90% of their revenue comes from natural gas and the management looks to be competent and prudent. If I put down money on natural gas, it will be Ultra.

Report this Post 2 Replies
Member Avatar kevday (99.08) Submitted: 7/19/2011 8:48:14 PM
Recs: 0

Everybody is investing heavily in the new shale gas finds. Debt and equity are cheap, so investment is strong, but it's hard to see exactly when or how they will make money on this. Might be better to invest in the companies selling shovels to all those hapless gold diggers!!!

Member Avatar jlre2 (65.22) Submitted: 8/5/2011 9:34:25 PM
Recs: 0

Excellent presentation if I may call it that. Need more like this one. You have comleted a lot of research on UPL.

My sad story or should say mistake. I purchased a few thousand @ $0,99. I thought I had gotten fat sold some at $5.00. The broker was calling seemed like ever day, I moved more out @15.54. Then it was @ 24.67 and I sold all but 100 shares. 2:1 split so I have all of 200 shares. Needless to say I no longer have that broker, now one of those I have to do my own DD, as you have done. No ones fault but mine. It did teach me to do my own DD, from then on. Thank you for the good work you have done in presenting your views to the members.

Thank you,
jlre2

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