Ultra Petroleum files Chapter 11


Operator paid county taxes before filing

The Pinedale

Anticline – and one of Wyoming’s most

prolific natural gas producers – Ultra Petroleum

Corp., filed for a joint Chapter 11

bankruptcy on May 14 in a Texas court following

months of financial instability.

As a top taxpayer in Wyoming, the

firm’s insolvency could place the energydependent

state’s traditional revenue

streams in further jeopardy.

However, “all of our taxes were paid

early in advance of filing,” Ultra’s Kelly

Bott said in an email Friday.

“Ultra paid in excess of $50 million to

our county,” Sublette County Treasurer

Emily Paravicini said Monday of Ultra’s

2019 tax bill. “All our taxes were paid in

full and on time.”

The company hopes to erase debts of

$1.97 billion and another $500 million in

liabilities and emerge with little debt. Its

subsidiaries Ultra Resources, Keystone

Gas Gathering, Ultra Wyoming, Ultra

Wyoming LGS, UPL Pinedale, UP Energy

Corp. and UPL Three Rivers Holding are

jointly named in the filing.

First bankruptcy

In 2016, some shareholders opted for

diluted stock that on May 18 is worth 1.1

cents each.

This time around, most shareholders

will receive no recovery if Texas Judge

Marv Isgur accepts its leaner recovery

plan.

Ultra proposes its unsecured noteholders

will receive “a pro-rata share of $250,000”

if their claim group accepts the new plan.

They receive nothing if they don’t accept

this plan as laid out by Ultra.

Also, Ultra proposes its unsecured

noteholders receive “a pro-rata share of

$250,000” if their group votes to accept the

new plan. Further, they receive nothing if

they don’t accept this plan as laid out by

Ultra.

Ultra Petroleum issued statements on its

website about its current restructuring period

for the media, investors and vendors.

Ultra’s position is that managers “believe

they have sufficient liquidity to support

the business through the restructuring

process. We intend to continue working

closely with our suppliers and paying for

goods and services under normal terms and

conditions on or after the filing date.”

During the Chapter 11 bankruptcy process,

vendors will be paid for goods and

services provided during that period, it

states.

In February, Ultra Resources announced

a credit agreement that its “borrowing base

will be reduced to $1.075 billion,” with

$100-million payment paid and $120 million

due Feb. 29 and again April 1.

On April 14, Ultra reported its 2019

fourth-quarter and full-year results included

“cash flow from operating activities

of $19.8 million and generated positive

free-cash flow of $56.4 million.”

On May 14, the company reported: “The

Company has secured a commitment for financing

of up to $25 million from certain

holders of the company’s first lien term

loan, which combined with cash on hand

and its normal operating cash flow, is expected

to allow Ultra to maintain normal

operations and meet ongoing financial

commitments throughout the Chapter 11

restructuring period. Additionally, all of the

company’s existing lenders under its first

lien RBL credit facility have executed commitment

letters to provide exit financing in

the form of a revolving credit facility with

an initial borrowing base of $100 million

and total commitments of $60 million.”

“We continue to execute on our plan of

focusing on free-cash flow generation and

reducing our debt levels,” Ultra CEO Brad

Johnson said that day.

“After careful consideration, we took

this action to create a sustainable capital

structure and make us a stronger business

partner going forward. The entire petroleum

industry has been affected by the

severe and protracted downturn in oil and

natural gas prices, and general uncertainty

in the market, and Ultra is no exception.”

Ultra pulled its drilling rigs from the

Pinedale Anticline last September, as did

others there, after natural gas prices continued

to bottom out. The last time Ultra

entered the bankruptcy court in early 2016,

prices were also at all-time lows.

Legal issues arising from that process

remain unresolved including Make Whole

litigation with a May 19 hearing in the

Texas bankruptcy court.

For more about Ultra Petroleum’s proposed

reorganization, go to https://www.

ultrapetroleum.com/restructuring/.

Concerns

Ultra Petroleum arrived early in Wyoming’s

natural gas boom and began production

in November 1997, according to

Supervisor Mark Watson of the Wyoming

Oil and Gas Conservation Commission.

Among the hundreds of energy companies

with operations in Wyoming, Ultra Petroleum

made the largest tax contribution to

the state last year.

“But Ultra stopped drilling last September,

so they’re just basically living on the

production they have,” Watson explained.

“And that production is dropping. I’m sure

they won’t be the biggest energy producer

as far as tax base for the state this year.”

For months, natural gas prices have been

brutally low for producers and competition

tight amidst a glutted market, especially for

producers in Wyoming.

Henry Hub natural gas spot prices, a

U.S. benchmark for the commodity, have

hovered between $1.50 and $2.50 per million

British thermal units for months on

end. The pandemic has exacerbated already

tough market conditions for natural

gas, with Henry Hub at $1.59 per million

British thermal units on May 14. Opal Hub

hovered below 1.50 on Monday, May 18.

Natural gas production in Wyoming

has declined by 37 percent in one decade,

between 2009 and 2019, according to the

U.S. Energy Information Administration.

The agency forecasts natural gas production

falling 5 percent this year.

For Wyoming, future economic conditions

are far from certain. Several revenue

scenarios published by the Legislative

Service Office in April estimated a loss of

$40.8 million in revenue this fiscal year, if

natural gas production declines by 6 percent

and prices hover around $2.10 per million

British thermal units.

Jonah Energy

Meanwhile, Sublette County’s and Wyoming’s

other leading natural gas producer

Jonah Energy has weathered the tough market

conditions. The company made layoffs

early and production continues since the

pandemic struck Wyoming, according to

Jonah Energy’s Paul Ulrich.

“We’re still fully producing in the Jonah

field,” Ulrich said. “We obviously laid

down our last two rigs in March; however,

we’re also pleased to report that we’re

looking at bringing back a rig in July and

that is very promising for us.”

But he cautioned that without some

meaningful relief from the state, the energy

sector could be looking at a complete “economic

collapse.”

“The foundation of our entire economy

in Wyoming is natural resources – oil, gas

and coal – and we have an obligation as a

state for an ‘all hands approach,’” he added.

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