Ultra Petroleum posts $3.2 billion loss as potential bankruptcy looms

Houston-based Ultra Petroleum Corp. is trying to avoid filing for bankruptcy after reporting a net loss of $3.2 billion for the quarter on Thursday.

The natural gas producer is mired in $3.39 billion in debt after expanding its asset base in Wyoming in 2014.

Ultra Chairman, President and CEO Mike Watford said he is trying to restructure the company’s debt — “so far unsuccessfully” — in order to avoid filing in bankruptcy court, but he admitted Ultra needs external assistance.

“All of our debt is unsecured,” Watford said. “We’re in a unique position. It’s not all that pleasant. We need some help from the creditors to get across the finish line.

He said Ultra submitted a restructuring plan to its three main creditors in January, but he is still awaiting replies. “We would’ve anticipated a response weeks ago,” he said.

While a compromise is still possible, it likely would’ve occurred by now, said Michael Scialla, analyst at Stifel, Nicolaus & Company.

“I think it looks like bankruptcy is almost inevitable,” Scialla said. “It’s been a pretty long downward slide for them.”

Ultra was one of the premier energy stocks during the height of the shale gas boom in 2008 before the recession. The company traded for nearly $100 a share at the time. They stock sold for $50 a share in 2011, nearly $30 in 2014 and fell below $1 for the first time on Feb. 11. The selloff continued Thursday, driving the stock down to 39 cents a share, a decrease of 26 cents on the day.

Ultra “fell in love” with the Pinedale shale play in Wyoming, Scialla said, which remains strong, although other shale plays have surpassed it. As recently as 2014, Ultra paid $925 million and gave 155,000 acres in the Marcellus Shale to Royal Dutch Shell in exchange for Shell’s natural gas field operations in Pinedale.

“They didn’t diversify quickly, used too much debt and got backed into a corner,” Scialla said. “It’s a sad story.”

The company recently hired Kirkland & Ellis as legal advisers and Rothschild and Petrie Partners as financial advisers. Such hires are harbingers of major restructuring efforts, said Pearce Hammond, of Simmons & Company International, in an analyst note.

“This illustrates the intractable balance sheet problems the company faces,” Hammond wrote, arguing that Ultra has a “very dire outlook” overall.

Watford said Thursday that putting assets up for sale wouldn’t do enough good. He said the hope is to survive the current trough of low natural gas prices and start profiting again next winter.

This year’s relatively warm winter likely was the “last nail in the coffin” for Ultra with reduced natural gas demand, Scialla said.

Watford said Ultra is reducing its capital spending in 2016 by nearly 50 percent from $500 million down to $260 million.

Nearly all of Ultra’s $3.2 billion loss came from a $3.1 billion write down on the reduced value of its assets. While the impairment is a non-cash charge, it demonstrates the company’s reduced profitability. As such, Ultra’s adjusted net loss was $39 million.

In the final quarter of 2014, Ultra reported a $210 million profit. Ultra employed about 125 people as recently as 2014.