Ultra Petroleum Announces Increase in Proved Crude Oil and Natural Gas Reserves by 13%

Ultra Petroleum Corp. (NYSE: UPL) today reported 4.4 trillion cubic feet equivalent of total proved crude oil and natural gas reserves for the year-ended December 31, 2010.

This represents a 13 percent increase from 3.9 Tcfe as reported at year-end 2009. The 2010 reserve replacement ratio of 324 percent was achieved all organically.

In 2010, as in 2009, Ultra's proved reserves do not include any material additions attributable to the new Securities and Exchange Commission (SEC) rules. Consistent with prior years, the proved undeveloped reserves are limited to a three year development period at planned annual capital expenditures. Additionally, the company elected not to book any 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 approximately 60 percent. This results in a proved undeveloped to proved developed location ratio of 0.64 to 1, which further emphasizes the company's conservative approach to reserve bookings.

The proved reserves were prepared in accordance with the current SEC pricing guidelines. The SEC rules require reserve evaluations to be calculated using a twelve month average of the first day of each calendar month price. Proved reserves were calculated using an SEC price of $4.05 per Mcf for natural gas. Using SEC prices, the pre-tax estimated future net cash flows discounted at ten percent (PV-10) of the year-end 2010 proved reserves is $5.0 billion. To better reflect Ultra's view of long-term natural gas prices, the company performed a sensitivity analysis using a $6.00 gas price, which yields a PV-10 of $8.6 billion for proved reserves.

On February 8, 2011 Ultra applied for and received regulatory approval for additional 5-acre density development from the Wyoming Oil and Gas Conservation Commission (WOGCC).  This ruling provides for 5-acre density drilling on essentially all of the lands that Ultra owns interests in Pinedale.  As a result, an additional nearly 1,500 5-acre locations equating to over 2.5 Tcfe of net reserves are now eligible for booking to proved reserves.

"By removing the three year limit and incorporating the recent down spacing order in Wyoming, our proved reserves would increase to approximately 8.9 Tcfe. The PV-10 value is $11.4 billion using a $6.00 per Mcf natural gas price," stated Michael D. Watford, Chairman, President and Chief Executive Officer.

Drilling-only capital investments during 2010 were $1.02 billion, resulting in a $1.48 per Mcfe finding and development (F&D) costs. Combining drilling-only capital investments with $76.7 million of midstream gathering investments, the 2010 capital investments amounted to $1.10 billion, yielding a $1.59 per Mcfe F&D cost. Inclusive of all drillbit, midstream gathering, and land capital investments, total corporate capital investments were $1.58 billion, which resulted in an F&D cost of $2.28 per Mcfe. Ultra's 2010 capital program exceeded the plan established early in 2010 by approximately eight percent primarily due to additional focused land acquisitions in Pennsylvania combined with increased productivity of the company's Wyoming drilling fleet, which resulted in more wells drilled and completed than originally forecasted.

The total proved, probable and possible (3P) reserves increased nine percent to 15.9 Tcfe at year-end 2010 from 14.6 Tcfe during the prior year. Using a $6.00 per Mcf long-term natural gas price assumption, the pre-tax PV-10 of the 3P reserves is $17.1 billion in comparison to $16.5 billion at year-end 2009.

During 2010, Ultra Petroleum increased its large inventory of low-risk, high rate-of-return natural gas drilling locations. Ultra began the year with 7,222 undrilled locations and participated in 363 wells throughout 2010. The company added 1,286 new locations, ending the year with an undrilled inventory of 8,145 locations, an increase of 13 percent from 2009.

Source: Ultra Petroleum Corp.

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