-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NcRc4gvApIgbjs02NPRU/sWrAit2K1T69ZeJc8wWQVg7CjcBgEEsG8RC5OlrWNBI my9OK+77ZXLSIkZsyM2vog== 0000899243-02-001605.txt : 20020515 0000899243-02-001605.hdr.sgml : 20020515 20020515112511 ACCESSION NUMBER: 0000899243-02-001605 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ULTRA PETROLEUM CORP CENTRAL INDEX KEY: 0001022646 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-29370 FILM NUMBER: 02649190 BUSINESS ADDRESS: STREET 1: 16801 GREENSPOINT PARK DR STREET 2: SUITE 370 CITY: HOUSTON STATE: TX ZIP: 77060 BUSINESS PHONE: 2818760120 MAIL ADDRESS: STREET 1: 16801 GREENSPOINT PARK DR STREET 2: SUITE 370 CITY: HOUSTON STATE: TX ZIP: 77060 10-Q 1 d10q.txt FORM 10-Q FOR QUARTER ENDED 3/31/2002 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO __________ Commission file number 0-29370 ULTRA PETROLEUM CORP. (Exact name of registrant as specified in its charter) Yukon Territory, Canada N/A (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 16801 Greenspoint Park Drive, Suite 370, Houston, Texas 77060 (Address of Principal Executive Offices) (Zip Code) (281) 876-0120 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] The number of common shares, without par value, of Ultra Petroleum Corp., outstanding as of May 1, 2002 was 73,732,043. PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ULTRA PETROLEUM CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months Ended March 31, --------------------------------- 2002 2001 -------------- -------------- Revenues Natural gas sales $ 8,399,946 $ 15,977,343 Oil sales 706,373 770,031 ------------ ------------ 9,106,319 16,747,374 Expenses Production expenses and taxes 2,488,932 2,868,625 Depletion and depreciation 2,108,297 1,610,329 General and administrative 1,219,196 1,058,839 Interest 514,061 289,547 ------------ ------------ 6,330,486 5,827,340 Operating income 2,775,833 10,920,034 Other income: Interest 6,990 58,395 Other -- 52,407 ------------ ------------ 6,990 110,802 Income for the period, before income tax provision 2,782,823 11,030,836 Income tax provision - deferred 1,071,387 1,145,661 Income for the period 1,711,436 9,885,175 Retained earnings (deficit), beginning of period 2,734,356 (15,144,472) ------------ ------------ Retained earnings (deficit), end of period $ 4,445,792 $ (5,259,297) ============ ============ Income per common share - basic $ 0.02 $ 0.14 ============ ============ Income per common share - fully diluted $ 0.02 $ 0.13 ============ ============ Weighted average common shares outstanding - basic 73,492,883 70,003,821 ============ ============ Weighted average common shares outstanding - fully diluted 77,059,031 73,234,532 ============ ============
2 ULTRA PETROLEUM CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in U.S. Dollars) Three Months Ended March 31, ------------------------------ 2002 2001 ------------- ------------- Cash provided by (used in): Operating activities: Income for the period $ 1,711,436 $ 9,885,175 Add (deduct) Items not involving cash: Depletion and depreciation 2,108,297 1,610,329 Deferred income taxes 1,071,387 1,145,661 Stock compensation 370,885 -- Net changes in non-cash working capital: Restricted cash (768) (2,258) Accounts receivable 441,251 1,213,259 Prepaid expenses and other current assets 2,080,688 4,496 Note receivable -- (683,137) Accounts payable and accrued liabilities (1,673,281) 2,573,518 Deferred revenue (25,000) (25,000) ------------ ------------ 6,084,895 15,722,043 Investing activities: Oil and gas property expenditures (16,046,135) (11,434,824) Purchase of capital assets (521,132) (95,104) Cash received from Pendaries Merger -- 312,365 ------------ ------------ (16,567,267) (11,217,563) Financing activities: Long-term debt 12,500,000 (459,762) Proceeds from exercise of options 594,693 348,388 ------------ ------------ 13,094,693 (111,374) Increase in cash during the period 2,612,321 4,393,106 Cash and cash equivalents, beginning of period 1,379,462 1,143,591 ------------ ------------ Cash and cash equivalents, end of period $ 3,991,783 $ 5,536,697 ============ ============ Supplemental statements of cash flows information Supplemental schedule of non-cash investing activities: Acquisitions Fair value of assets acquired $ -- $ 43,950,263 Less: liabilities assumed -- (4,225,978) Cash acquired -- 312,365 ----------- ------------ Fair value of stock issued -- 40,036,650 =========== ============
3 ULTRA PETROLEUM CORP. CONSOLIDATED BALANCE SHEETS (Unaudited) (Expressed in U.S. Dollars) March 31, December 31, 2002 2001 --------- ------------ Assets Current assets Cash and cash equivalents $ 3,991,783 $ 1,379,462 Restricted cash 207,947 207,179 Accounts receivable 6,917,491 7,358,742 Prepaid expenses and other current assets 742,925 2,823,613 ------------ ------------ 11,860,146 11,768,996 Oil and gas properties, using the full cost method of accounting 163,336,872 155,221,187 Capital assets 1,052,440 592,605 ------------ ------------ Total assets $176,249,458 $167,582,788 ============ ============ Liabilities and shareholders' equity Current liabilities Accounts payable and accrued liabilities $ 16,632,545 $ 21,096,348 Long-term debt 55,500,000 46,092,928 Deferred income taxes 6,045,395 4,974,008 Deferred revenue 75,000 100,000 Shareholders' equity Share capital 93,550,726 92,585,148 Retained earnings 4,445,792 2,734,356 ------------ ------------ 97,996,518 95,319,504 ------------ ------------ Total liabilities and shareholders' equity $176,249,458 $167,582,788 ============ ============ 4 ULTRA PETROLEUM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars unless otherwise noted) Three months ended March 31, 2002 and 2001 DESCRIPTION OF THE BUSINESS: Ultra Petroleum Corp. (the "Corporation") is incorporated under the laws of British Columbia, Canada. At March 1, 2000 the Corporation was continued under the laws of the Yukon Territory, Canada. Its principal business activity is the exploration and development of oil and gas properties located in the United States. The Corporation also has operations in China. 1. SIGNIFICANT ACCOUNTING POLICIES: The accompanying financial statements, other than the balance sheet data as of December 31, 2001, are unaudited and were prepared from our records. Balance sheet data as of December 31, 2001 was derived from our audited financial statements, but do not include all disclosures required by U.S. generally accepted accounting principles. Our management believes that these financial statements include all adjustments necessary for a fair presentation of our financial position and results of operations. All adjustments are of a normal and recurring nature unless specifically noted. We prepared these statements on a basis consistent with our annual audited statements and Regulation S-X. Regulation S-X allows us to omit some of the footnote and policy disclosures required by generally accepted accounting principles and normally included in annual reports on Form 10-K. You should read these interim financial statements together with the financial statements, summary of significant accounting policies and notes to our most recent annual report on Form 10-K. (a) Basis of presentation: The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries UP Energy Corporation, Ultra Resources, Inc and Sino-American Energy Corporation. All material intercompany transactions and balances have been eliminated upon consolidation. (b) Accounting principles: The consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada. (c) Income taxes: The Corporation uses the asset and liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences. Accordingly, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities, using the enacted tax rates in effect for the year in which differences are expected to reverse. (d) Earnings per share: Basic earnings per share is computed by dividing net earnings attributable to common stock by the weighted average number of common shares outstanding during each period. Diluted earnings per share is computed by adjusting the average number of common shares outstanding for the dilutive effect, if any, of stock options. The Company uses the treasury stock method to determine the dilutive effect. The following table provides a reconciliation of the components of basic and diluted net income per common share for the periods ended March 31, 2002 and 2001: March 31,2002 March 31,2001 ------------- ------------- Net income $ 1,711,436 $ 9,885,175 =========== =========== Weighted average of common shares outstanding during the period 73,492,883 70,003,821 Effect of dilutive instruments 3,566,148 3,230,711 ----------- ----------- Weighted average common shares outstanding during the period including the effects of dilutive instruments 77,059,031 73,234,532 =========== =========== Basic earnings per share $ 0.02 $ 0.14 =========== =========== Diluted earnings per share $ 0.02 $ 0.13 =========== =========== 5 (e) Foreign currency translation: The Corporation has adopted the United States dollar as its reporting currency, which is also its functional currency. The Corporation and its subsidiaries are considered to be integrated operations and accounts in Canadian dollars are translated using the temporal method. Under this method, monetary assets and liabilities are translated at the rates of exchange in effect at the balance sheet date; non-monetary assets at historical rates and revenue and expense items at the average rates for the period other than depletion and depreciation which are translated at the same rates of exchange as the related assets. The net effect of the foreign currency translation is included in current operations. (f) Use of estimates: Preparation of consolidated financial statements in accordance with generally accepted accounting principles in Canada requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (g) Reclassifications: Certain amounts in the financial statements of the prior years have been reclassified to conform to the current year financial statement presentation. 2. OIL AND GAS PROPERTIES: March 31, December 31, 2002 2001 ------------- ------------- Developed Properties: Acquisition, equipment, exploration drilling and environmental costs $ 107,981,889 $ 100,574,404 Less accumulated depletion, depreciation and amortization (15,546,605) (13,499,605) ------------- ------------- 92,435,284 87,074,799 Unproven Properties: China 58,088,409 55,894,246 Acquisition and exploration costs 12,813,179 12,252,142 ------------- ------------- $ 163,336,872 $ 155,221,187 ============= ============= 3. LONG-TERM DEBT: March 31, December 31, 2002 2001 ------------- ------------- Bank indebtedness $ 55,500,000 $ 43,000,000 Short term obligations to be refinanced -- 3,092,928 ============= ============= $ 55,500,000 $ 46,092,928 ============= ============= The Corporation (through its subsidiary) participates in a long-term credit facility with a group of banks led by Bank One N.A. The agreement specifies a maximum loan amount of $150 million and an aggregate borrowing base of $80 million at March 1, 2002. At March 31, 2002, the Corporation had $55.5 million outstanding and $24.5 million unused and available on the credit facility. The credit facility matures on March 1, 2005. The note bears interest at either the bank's prime rate plus a margin of one-half of one percent (0.50%) to one and one quarter percent (1.25%) based on the percentage of available credit drawn or at LIBOR plus a margin of one and one-half percent (1.5%) to two and one-quarter (2.25%) based on the percentage of available credit drawn. An average annual commitment fee of 0.375% is charged quarterly for any unused portion of the credit line. The borrowing base is subject to periodic (at least semi-annual) review and re-determination by the bank and may be decreased or increased depending on a number of factors including the Corporation's proved reserves and the bank's forecast of future oil and gas prices. Additionally, the Corporation is subject to quarterly reviews of compliance with the covenants under the bank facility including minimum coverage ratios relating to interest, working capital, general and administrative expenditures and advances to Sino-American Energy Corporation. In the event of a default under the covenants, the Corporation may not be able to access funds otherwise available under the facility. As of March 31, 2002, the Corporation was in compliance with the covenants and required ratios. The Corporation has secured this debt by a majority of it's proved domestic oil and gas properties. 4. DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES: The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada, ("Canadian GAAP"), which may differ in certain respects from generally accepted accounting principles in the United States, ("US GAAP"). The Corporation currently has no significant differences. 6 5. RECENT ACCOUNTING PRONOUNCEMENTS: In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 requires entities to record the fair value of liabilities for retirement obligations of acquired assets. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management is currently assessing the impact, if any, of SFAS No. 143 on the Corporation's consolidated financial statements for future periods. ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 2002 VS. QUARTER ENDED MARCH 31, 2001 OPERATING REVENUES Oil and gas revenues decreased to $9,106,379 or 46% for the quarter ended March 31, 2002 from $16,747,374 for the same period in 2001. This decrease was attributable to a decrease in prices received for that production. During this quarter, the Corporation's production increased to 3.8 Bcf of gas, and 34,000 barrels of condensate, up from 2.6 Bcf of gas and 28,000 barrels of condensate for the same period in 2001. During the quarter ended March 31, 2002 the average product prices for gas and condensate were $2.24 per Mcf and $20.58 per barrel, respectively, compared to $6.07 per Mcf and $27.06 per barrel for the same period in 2001. PRODUCTION EXPENSES AND TAXES During the quarter ended March 31, 2002 production expenses and taxes decreased 13% to $2,488,932 from $2,868,625 for the quarter ended March 31, 2001. Direct lease operating expenses increased 108% to $486,867 for the quarter ended March 31, 2002 from $234,533 for the same period in 2001. On a per unit of production basis, these costs increased to $.12 per Mcfe in March 2002, as compared to $.08 per Mcfe in March 2001. Production taxes for the first quarter 2002 were $935,587, compared to $1,879,217 in first quarter 2001 or $.24 per Mcfe in first quarter 2002, compared to $.67 per Mcfe in first quarter 2001. Production taxes are calculated based on a percentage of revenue from production, therefore lower realized prices contributed to the decrease. Gathering fees for the quarter ended March 31, 2002 increased 41% to $1,066,478 from $754,875 for the same period in 2001, attributable to higher production volumes. DEPLETION AND DEPRECIATION Depletion, depreciation and amortization expenses (DD&A) increased to $2,108,297 during the quarter ended March 31, 2002 from $1,610,329 for the same period in 2001. On a per unit basis, DD&A decreased to $.53 per Mcfe, from $.58 in 2001 primarily as a result of increases in the Corporation's proved reserves and lower estimated future development costs. GENERAL AND ADMINISTRATIVE General and administrative expenses increased 15% to $1,219,196 during the quarter ended March 31, 2002 from $1,058,839 for the same period in 2001. The increase was attributable to legal, professional and compensation expenses that coincide with the Corporation's increased activity in both Wyoming and China. INTEREST Interest expense for the period increased 78% to $514,061 in first quarter 2002 from $289,547 in first quarter 2001. This increase was attributable to the increase in borrowings under the senior credit facility. INCOME TAXES The Corporation recorded deferred income tax expense of $1,071,387 at an effective rate of 38.5% for the quarter ended March 31, 2002, compared to $1,145,661 at an effective rate of 10.3% for the quarter ended March 31, 2001. Although the Corporation is not expected to pay cash taxes in 2002, in accordance with FAS 109 and specifically, the guidance concerning intraperiod tax allocations, the Corporation is required to recognize tax expense evenly throughout the year. In the prior year, income tax expense, as calculated at the statutory rate including estimated state income tax effect, was offset by recognition of deferred tax assets for which a valuation allowance had previously been provided. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operating activities was $6,084,895 for the three months ended March 31, 2002 compared to $15,722,043 for the three months ended March 31, 2001. Operating cash flow in the three month period decreased compared to the prior year due to decreased oil and gas prices and higher operating and other expenses. Cash flow used in investing activities was $16,567,267 for the three months ended March 31, 2002 compared to $11,217,563 for the three months ended March 31, 2001. In 2002, oil and gas property and capital asset expenditures were $16,046,135 and $521,132, respectively, compared to $11,434,824 and $95,104 in the prior year. Amounts expended in the prior year were also offset by cash received from the Pendaries Merger. Net cash provided by financing activities was $13,094,693 for the three months ended March 31, 2002 compared to net cash used of $111,374 for the three months ended March 31, 2001. Cash received in 2002 represented borrowings of $12,500,000 on the credit facility and proceeds from the exercise of options of $594,693. In the prior year, net cash paid on the credit facility was $459,762, offset by proceeds from the exercise of options of $348,388. 7 In the three-month period ending March 31, 2002 the Corporation relied on its existing cash flow and availability under it's credit facility to finance its capital expenditures. The Corporation participated in continued activity from the 2001 program on the Pinedale Anticline in Wyoming. Capital costs in China were related to development plans for the drilling program in Bohai Bay. For the three-month period ending March 31, 2002 capital expenditures were $10,162,685 ($7,968,521 in Wyoming and $2,194,163 in Bohai Bay). At March 31, 2002, the Corporation reported a cash position of $3,991,783 compared to $1,379,462 at December 31, 2001. Working capital at March 31, 2002 was $(4,772,399) as compared to $(9,327,352) at December 31, 2001. Based on forecasted gas prices, production and bank availability, management believes that the Corporation's continued positive cash flow from operations and the availability under the senior credit facility will be sufficient to fund the Corporation's budgeted capital expenditures for 2002, which are estimated to be $50 million. However, future cash flows and continued availability of financing are subject to a number of uncertainties beyond the Corporation's control such as production rates, the price of gas and oil, continued favorable results of the Corporation's drilling program and the general condition of the capital markets for oil and gas companies. There can be no assurances that adequate funding will be available to execute the Corporation's planned future capital program. CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report contains "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements, including the Corporation's outlook for the remainder of 2002 with regard to plans for funding operations and capital expenditures, are based on a number of risks and uncertainties the are outside the Corporation's control. For example, future cash flows and continued availability of financing are subject to a number of uncertainties beyond the Corporation's control. There can be no assurances that adequate funding will be available to execute the Corporation's planned future capital program. Other risks and uncertainties include, but are not limited to, fluctuations in the price we receive for oil and gas production, reductions in the quantity of oil and gas sold due to increased industry-wide demand and/or curtailments in production from specific properties due to mechanical, marketing or other problems, operating and capital expenditures that are either significantly higher or lower than anticipated because the actual cost of identified projects varied from original estimates and/or from the number of exploration and development opportunities being greater or fewer than currently anticipated and increased financing costs due to a significant increase in interest rates. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Corporation's revenues are derived from the sale of its crude oil and natural gas production. The prices for oil and gas have decreased from the prices prevailing on January 1, 2001; however, they remain extremely volatile and sometimes experience large fluctuations as a result of relatively small changes in supplies, weather conditions, economic conditions and government actions. At this time the Corporation has not entered into any derivative financial instruments to hedge oil and gas price risks for the production volumes to which the hedge relates. However, the Corporation may enter into hedges in the future that would reduce the Corporation's exposure on the hedged volumes to decreases in commodity prices and limit the benefit the Corporation might otherwise receive from any increases in commodity prices on the hedged volumes. There have been no significant changes in market risks faced by the Corporation since the end of 2000. PART 2 - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a.) Exhibits 3.1 Certificate of Continuance of Ultra Petroleum Corp. (incorporated by reference to Exhibit 3.1 to the Corporation's quarterly report on form 10-Q for the period ended June 30, 2001) 3.2 By-Laws of Ultra Petroleum Corp. (incorporated by reference to Exhibit 3.2 to the Corporation's quarterly report on form 10-Q for the period ended June 30, 2001) 8 4.1 Specimen common share certificate (incorporated by reference to Exhibit 3.2 to the Corporation's quarterly report on form 10-Q for the period ended June 30, 2001) 10.1 First Amended and Restated Credit Agreement dated March 1, 2002 among Bank One N.A., Union Bank of California N.A., Guaranty Bank FSB, Hibernia National Bank, Ultra Resources, Inc. and Banc One Capital Markets, Inc. (incorporated by reference to Exhibit 10.1 to the Corporation's annual report on Form 10K for the period ended December 31, 2001) (b) Reports on Form 8-K None 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ULTRA PETROLEUM CORP. Date May 13, 2002 By: /s/ Michael D. Watford ------------------------------- Name: Michael D. Watford Title: Chief Executive Officer By: /s/ Kristen J. Marron ------------------------------- Name: Kristen J. Marron Title: Financial Reporting Manager 10 -----END PRIVACY-ENHANCED MESSAGE-----