Ultra Petroleum Corp (OTCMKTS:UPLMQ) Biding Time

Ultra Petroleum Corp (OTCMKTS:UPLMQ) is looking to bide time and run out the clock on its bankruptcy process. Management is actually looking to help common shareholders by extending the August 29 deadline by which it has the exclusive right to propose its own reorganization plan. Ultra said it is “confident” one will be granted. By doing so, Ultra is banking on a recovery in oil and natural gas prices. When you consider that during the second quarter of the year, Ultra Petroleum's average realized natural gas price was $1.76 per thousand cubic feet (Mcf) and the company's average realized oil and condensate price was $40.54 per barrel (Bbl), this strategy is a no-brainer in our opinion.Ultra's second quarter report was a solid one. The company reported adjusted net income of $37.9 million, or $0.25 per diluted share, for the quarter ended June 30, 2016. Operating cash flow was $62.4 million for the quarter ended June 30, 2016. For the second quarter of 2016, production of natural gas and oil was 70.8 billion cubic feet equivalent (Bcfe). The company's production for the second quarter was comprised of 66.4 billion cubic feet (Bcf) of natural gas and 735.4 thousand barrels (Mbls) of oil and condensate.During the second quarter, Ultra and its partners drilled 25 gross (18 net) Wyoming Lance wells and placed on production 18 gross (15 net) wells. The second quarter average initial production (IP) rate for new operated wells brought online was 8.6 MMcfe/d.The company produced a total of 65.5 Bcfe in Wyoming, averaging 719 MMcfe/d. The company averaged 8.1 days to drill an operated well in the second quarter, as measured by spud to total depth (TD), a decrease of 11% compared to 9.1 days in the second quarter of 2015. Total days per well, measured by rig-release to rig-release, averaged 9.9 days in the second quarter, which compares to 11.6 days in the same quarter of 2015.The average cost to drill and complete a well was $2.6 million, which is a 16% decrease compared to $3.1 million to drill and complete a well in the second quarter of 2015. Assuming well costs of $2.6 million per well, estimated ultimate recovery of 5 Bcfe and wellhead prices of $3.00/Mcf and $42.63/bbl, the expected return for Pinedale wells is 58%.Ultra says that it is now concentrating on utilizing the bankruptcy process to maximize the value of its business enterprise for the benefit of all stakeholders. This process includes the analysis of all its executory contracts and unexpired leases and the identification of those contracts and leases for which it is advantageous to reject and replace with more economic alternatives. A particular focus is being placed on gathering, processing and transportation agreements, as well as oil sales contracts. Several of Ultra's counterparties have already made proposals to restructure existing agreements that the company is evaluating.What's unique in the Ultra bankruptcy is that there are no secured lien holders, it's all unsecured. This is one of the reasons why the stock has been running. As oil and natural has prices recover, the value of Ultra's assets increase and this allows for common stockholders to benefit from that increase. Ultra's reserves totaled 14.3 trillion cubic feet equivalent and present value discounted at 10% totals between $7.2 billion and $8.7 billion. Ultra’s total debt stood at about $3.9 billion as of March 31, according to its quarterly filing.As we said in our last update, the Ad Hoc Equity Committee is being represented by Attorney Edward Weisfelner from Brown Rudnick LLP in New York. The committee members own over 30.4% of the outstanding shares. David Tepper protege Eric Cole's Warlander Asset Management is the largest holder with 17,000,000 common shares.Currently trading with a market cap of $697 million, the latest report showed that 30,000,000 shares have been shorted and represents 20% of the float. No doubt some of the recent appreciation has been from the shorts scrambling to cover, but it also comes as Ultra has seen its core business strengthen. We believe that natural gas and oil prices are going to continue climbing, especially natural gas. With the winter months just around the corner and natural gas exports picking up, we believe there's the potential for natural gas prices to outperform over the next few months. This will greatly benefit Ultra and its shareholders. We will be updating our subscribers with the latest updates on UPLMQ. Sign up below and get on our mailing list!Disclosure: We are LONG shares of UPLMQ. We have not been compensated for this article.