Monday, June 27, 2022

The Ups and Downs of Ultra Petroleum Corp. (OTCMKTS:UPLMQ)

Ultra Petroleum Corp. (OTCMKTS:UPLMQ) is a stock that has truly been one of the most incredible performers since joining the OTC off a Chapter 11 filing in April. The stock filed for reorganization and then boomed nearly 4000% higher once it reopened for trading around $0.15/share.

As we have noted in our prior coverage, this has so far been about the best conceivable scenario for a BK situation. The company has assets that can be actively revalued to the upside and create the potential for a full recovery. However, that’s a double-edged sword. If OPEC can’t recapture some kind of authority over the global production of Crude Oil, then the forward path for the value of UPLMQ assets is somewhat less rosy than traders may have been thinking a month ago – something that became painfully obvious when the stock dropped by 40% in two weeks beginning in late October.

Ultra Petroleum Corp. (OTCMKTS:UPLMQ) bills itself as an independent oil and gas company that engages in the acquisition, exploration, development, operation, and production of oil and natural gas properties.

The company’s principal business activities are developing its natural gas reserves in the Green River Basin of southwest Wyoming; the Pinedale and Jonah fields; its oil reserves in the Uinta Basin in northeast Utah; and its natural gas reserves in the north-central Pennsylvania area of the Appalachian Basin.

As of December 31, 2015, Ultra Petroleum Corp. owned interests in approximately 104,000 gross acres in Wyoming; and approximately 150,000 gross acres in Pennsylvania. The company also owns approximately 9,000 net acres in the Uinta Basin in Utah.

As noted above, on April 29, 2016, Ultra Petroleum Corp., along with its affiliates, filed a voluntary petition for reorganization under Chapter 11 in the US Bankruptcy Court for the Southern District of Texas.

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The reorganization process was just updated toward the end of last month in the company’s 8-K. There, it was noted that the company continued to make progress during the quarter in its in-court financial restructuring process.

As previously reported, the company stabilized its business operations through various operational, first-day motions and orders, and has continued production operations and its development program with no interruptions.

Recent key developments in the restructuring process are as follows:

“In August, the Court extended the company’s exclusive period to file a reorganization plan by six months until March 1, 2017. The deadline to file claims for the majority of entities expired on September 1, 2016 and the company is now evaluating claims to determine which of those that it will challenge in court. The company is actively negotiating with counterparties to revise the terms of contracts as part of our effort to improve the value of the business enterprise. The company and its advisors continue working with the company’s creditors and other stakeholders to develop a plan of reorganization. In October, the company updated its long-term asset development plan and five-year business outlook.”

That leaves open the potential for recovery of equity in the restructuring. But nothing is guaranteed here. The 3800% rally was based on an extrapolation of growth in asset prices. However, commodities markets are mean-reverting by definition. Controlled for inflation, commodities exhibit no growth in price over time.

Earning a current market cap value of $763.8M, UPLMQ has been through the ringer lately. The concern is a protracted resumption of bearish market activity dictating the price of oil and gas. One way that could develop is via a failure of OPEC to come to a strong agreement about cutting production in its meeting on November 30. That agreement needs to include Russia and perhaps others. The problem for companies like UPLMQ is the time spent with forward oil trading up the futures curve recently well above the $50 level. That theoretically allowed all producers to sell forward and pump later at lower prices. That type of process can work to suppress pricing over time. For now, it should be seen as a risk. We will update it again as events dictate. For continuing coverage on shares of $UPLMQ stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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