Ultra Petroleum - What's Wrong, And Can It Be Fixed?

| About: Ultra Petroleum (UPLMQ)

Summary

As Ultra Petroleum has become more and more stressed, the story has become more interesting.

But interesting isn't always a good thing for shareholders. It certainly hasn't been for Ultra Petroleum shareholders so far.

Over the last 52 weeks, the shares have fallen from ~$18 to ~$2.

Still, we see no reason why the share price can't be "righted" in the coming quarters. We've provided a road map of events that would be considered productive.

We advise those holding exposure to Ultra Petroleum to use our road map as a barometer of overall model health and viability.

Ultra Petroleum (UPL) has been a name we've followed for quite some time. In fact, our broader firm of Atlas Consulting (for which CapGainr is a blog extension) knows several holders who have owned the stock, or what has become Ultra Petroleum stock we should say, for periods of ten years or longer. You could call these holders "founding members" of the modern-day company. As Ultra Petroleum has become more and more stressed - with the majority of its stress being put on its model over the last 12-15 months - the story has become more and more interesting. But interesting isn't always a good thing for shareholders. It certainly hasn't been for Ultra Petroleum shareholders so far.

Over the last 52 weeks, the shares have fallen from ~$18 to ~$2. Yes, this is primarily the result of precipitously falling natural gas (and for that matter, oil) pricing. But we believe that management could have been more proactive in providing support for the model and in providing a deleveraging event for what is now a stressed structure. We're not here to put all the blame on management, but we're certainly not forgiving of the lack of overall share price and model management provided.

Still, we see no reason why the share price can't be "righted" over the coming quarters, and in that we've provided a road map of events that would be considered productive in our assessment. We advise those holding exposure to Ultra Petroleum to use our road map as a barometer of overall model health and viability. While we're not advertising the impending doom of the E&P, we do want to be very clear that the stress on the model could become much, much greater over the next quarter or so without execution. Again, management must execute at this point.

That said, we believe the following deck is an excellent road map for risk managing a position in Ultra Petroleum. We believe that we summarize the real-time narrative as of the most recent close, and that we present both the current risk picture as well as a dynamic road map for tracking overall structural stress levels at the E&P. The hope for those still long this name is that the E&P can successfully de-stress.

Again, we've provided a comprehensive breakout of what investors should be looking for Ultra Petroleum to accomplish, and what model-stress indications any progress might negate. Tracking this changing equation of risk and long-term potential is going to be paramount in knowing when to hold a position, when to add to a position, and when to exit a position - even if at a near-catastrophic loss. Ultra Petroleum, despite our overall bullishness and our overall optimism, still has very real risk of continuation of loss.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.