The recently announced Uinta acquisition by Ultra Petroleum (UPL) (detailed analysis available here: link) is notable for two metrics: exceptionally high projected drilling returns and stratospheric price paid per undeveloped acre. As a reminder, Ultra is acquiring a small oil-producing acreage block (~8,200 operated acres with 100% working interest) for $650 million. The PV-10 value allocated to proved developed reserves is $265 million, which implies $50,000+ paid per undeveloped acre. Driving the high valuation are the economics of vertical drilling in a stack of high-quality oil-bearing tight sands. Ultra estimates that its future wells in the primary target zone will generate returns in the 130%-600% range and has provided extensive data to support its projections.
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