Ultra Petroleum Corp. (UPL) generates positive cash flow despite low natural gas prices, even at a price average of $3.65 per Mcf in 2013, and the company would double EBITDA with a price increase in the $4.50 level, says Edward A. Crawford, Partner and Co-Portfolio Manager at Roumell Asset Management, LLC.
“Ultra is the lowest-cost natural gas producer in the country. If you look at the most recent 12-month financials to September 30, 2013, natural gas averaged $3.65 per Mcf, and Ultra generated positive free cash flow. Very few natural gas producers can say that. Ultra is very leveraged to higher gas prices as well,” Crawford said.
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UPL stock plummeted along with natural gas prices a few years ago, and Crawford sees opportunities for patient investors in the stock. He sees value in the stock and a disciplined balance sheet with some downside protection with the selling of reserves, as well as some time, as debt is not due for next five years.
“In terms of management, CEO Michael Watford, with whom we met last year, has managed with great discipline. He has limited capex in times of lower gas prices so as not to take on too much debt. Watford owns about $75 million worth of stock, and he has been CEO for 15 years, so there’s a lot of continuity there, and we have a high degree of confidence in him,” Crawford said.
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