Ultra Petroleum Lifts Proved O&G Reserves by 11%

Ultra Petroleum's total proved oil and gas reserves for the year-ended December 31, 2009, were 3.91 trillion cubic feet of gas equivalent (Tcfe), an 11 percent increase from 3.52 Tcfe as of December 31, 2008. On a per share basis, the 2009 proved reserves increased 13 percent from 2008. The 2009 reserve replacement of 319 percent was achieved all organically. Corporate finding and development costs in 2009 were $1.29 per Mcfe, inclusive of all capital costs, as compared to $1.39 per Mcfe in 2008. Total capital costs during 2009 were $741.4 million. Drilling only capital costs amounted to $640.3 million, resulting in $1.12 per Mcfe finding and development costs. Â

In 2009, Ultra's proved reserves do not include any material additions attributable to the new SEC rules. Consistent with prior years, the proved undeveloped reserves are limited to a three year development period at flat annual capital expenditures. Additionally, the company elected not to book proved undeveloped locations in the proved reserves from its growing Marcellus position. As a result, the proved undeveloped percentage of the total proved reserves remains the same as it has over the past few years at 58 percent. This results in a proved undeveloped to proved developed location ratio of 0.65 to 1, which further emphasizes the company's conservative approach to reserve bookings. At $6.00 per Mcf natural gas price, the estimated future net cash flow discounted at 10 percent, or pre-tax PV-10, is $7.9 billion for proved reserves.

"A better measure of Ultra's proved reserves more similar to our peers where the three year limit is removed would increase the company's proved reserves to 6.77 Tcfe for a pre-tax PV-10 value of $10.4 billion. Again, this excludes contribution from the Marcellus. We are quite comfortable forecasting that Ultra's proved reserves will approximate 10 Tcfe by year-end 2012," stated Michael D. Watford, Chairman, President and Chief Executive Officer.

The total 3P reserves estimated by a third-party engineering consulting firm increased to 14.55 Tcfe at year-end 2009 an increase of 25 percent from 11.66 Tcfe at year-end 2008. As of December 31, 2009, the pre-tax PV-10 is $16.5 billion as compared to $11.1 billion at year-end 2008. Both 2008 and 2009 PV-10 values are based on $6.00 per Mcf natural gas price.

The company's inventory of low-risk, high rate-of-return natural gas drilling locations continues to grow. At year-end 2008, the number of undrilled locations in Ultra's inventory was 5,570. In 2009, the company participated in 259 wells and ended the year with an undrilled inventory of 7,222 locations, an increase of over 1,900 locations from 2008.

All reserves are independently and completely prepared by the reserve engineering firm Netherland, Sewell and Associates, Inc. (NSAI). This is the eleventh consecutive year their estimate of Ultra's reserves has increased. Again, only those proved undeveloped locations in the company's budgeted three-year drilling plan are included as proved reserves in the report. Locations that are not in the three-year budget, but would otherwise satisfy the SEC definition of proved reserves, are included in the probable category.


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