Chapter 11 Proceedings

Voluntary Reorganization Under Chapter 11

On April 29, 2016 (the “Petition Date”), the Company and its subsidiaries (collectively, the “Debtors”) filed voluntary petitions under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). Our chapter 11 cases were jointly administered under the caption In re Ultra Petroleum Corp., et al, Case No. 16-32202 (MI) (Bankr. S.D. Tex.).

On February 13, 2017, the Bankruptcy Court approved our amended Disclosure Statement (by order subsequently amended on February 21, 2017), on March 14, 2017, the Bankruptcy Court confirmed our Debtors’ Second Amended Joint Chapter 11 Plan of Reorganization (the “Plan”), and on April 12, 2017 (the “Effective Date”), we emerged from bankruptcy.

As a result of our improved financial condition and successful emergence from chapter 11 proceedings, we believe we now have sufficient liquidity to fund our future cash requirements for operations, capital expenditures and working capital purposes. As a result, substantial doubt no longer exists regarding the Company’s ability to meet its obligations as they become due within one year after the date that the financial statements are issued.

Because we emerged from bankruptcy during the nine months ended September 30, 2017 and because we continue our work to reconcile, resolve and pay certain prepetition claims asserted against us during our chapter 11 cases, certain aspects of our chapter 11 cases are described below to provide context to our financial condition and results of operations for the period presented in this Quarterly Report on Form 10-Q. Information about our chapter 11 cases is available at a website maintained by our claims agent, Epiq Systems (http://dm.epiq11.com/UPT/Docket).

In addition, because our operations and ability to execute our business remain subject to various risks and uncertainties, including risks and uncertainties related to our chapter 11 cases, readers are encouraged to review and consider the items described in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2016 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.

Plan Support Agreement, Rights Offering, Backstop Commitment Agreement and Exit Financing Commitment Letter

As previously disclosed:

•

On November 21, 2016, we entered into a Plan Support Agreement (as amended, the “PSA”) with certain holders of the Company’s prepetition indebtedness and outstanding common stock as well as a Backstop Commitment Agreement (“BCA”). Pursuant to the BCA, we agreed to conduct a rights offering for new common stock in the Company to be issued upon the effectiveness of the Plan for an aggregate purchase price of $580.0 million (the “Rights Offering”).

•

On February 8, 2017, we entered into a commitment letter with Barclays Bank PLC (“Barclays”) (as amended, the “Commitment Letter”) pursuant to which, in connection with the consummation of the Plan, Barclays agreed to provide us with secured and unsecured financings in an aggregate amount of up to $2.4 billion (the “Debt Financings”).

•

On the Effective Date, the principal obligations outstanding of $999.0 million under the Prepetition Credit Agreement and $1.46 billion under the Prepetition Senior Notes, as well as prepetition interest and other undisputed amounts, were paid in full. The Company’s obligations under the Prepetition Credit Agreement and the Prepetition Senior Notes were cancelled and extinguished as provided in the Plan.

•

On the Effective Date, the claims of $450.0 million related to the unsecured 2018 Notes and $850.0 million related to the unsecured 2024 Notes were allowed in full, each holder of a claim related to the 2018 Notes and the 2024 Notes received a distribution of common stock in the amount of the holders’ applicable claim, and the Company’s obligations under the 2018 Notes and the 2024 Notes were cancelled and extinguished as provided in the Plan.

•

On the Effective Date, we consummated the Rights Offering and the Debt Financings and, as noted above, emerged from bankruptcy.

Fresh Start Accounting

As previously disclosed, we are not required to apply fresh start accounting to our financial statements in connection with our emergence from bankruptcy because the reorganization value of our assets immediately prior to confirmation of the Plan exceeded our aggregate postpetition liabilities and allowed claims.

Liabilities Subject to Compromise

The following table reconciles the settlement of liabilities subject to compromise included in our Consolidated Balance Sheets from December 31, 2016 through the nine months ended September 30, 2017:

	September 30, 2017
Liabilities subject to compromise at December 31, 2016	$	4,038,041
Debt extinguishment - cash		(2,521,493	)
Debt extinguishment - non-cash		(1,339,740	)
Contract settlement		(169,600	)
Reclassified to accrued liabilities		(7,208	)
Liabilities subject to compromise at September 30, 2017	$	—

Bankruptcy Claims Resolution Process

The claims filed against us during our chapter 11 proceedings are voluminous. In addition, claimants may file amended or modified claims in the future, which modifications or amendments may be material. The claims resolution process is on-going, and the ultimate number and amount of prepetition claims are not presently known, nor can the ultimate recovery with respect to allowed claims be presently ascertained.

As a part of the claims resolution process, we are working to resolve differences between amounts we listed in information filed during our bankruptcy proceedings and the amounts of claims filed by our creditors. We have filed, and we will continue to file, objections with the Bankruptcy Court as necessary with respect to claims we believe should be disallowed.

Costs of Reorganization

We have incurred significant costs associated with our reorganization and the chapter 11 proceedings. We expect these costs, which are being expensed as incurred, have affected and may continue to significantly affect our results of operations. For additional information about the costs of our reorganization and chapter 11 proceedings, see “Reorganization items, net” below.

The following table summarizes the components included in Reorganization items, net in our Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Professional fees (1)	$	(3,285	)	$	(3,215	)	$	(65,289	)	$	(6,797	)
Gains (losses) (2)		—			—			431,107			—
Deferred financing costs		—			—			—			(18,742	)
Make-whole fees (3)		(223,838	)		—			(223,838	)		—
Other (4)		—			106			167			247
Total Reorganization items, net	$	(227,123	)	$	(3,109	)	$	142,147		$	(25,292	)

⁽¹⁾	The nine months ended September 30, 2017 includes $3.8 million directly related to accrued, unpaid professional fees associated with the chapter 11 filings.

⁽²⁾	Gains (losses) represent the net gain on the debt to equity exchange related to the 2018 and 2024 Notes.

⁽³⁾	Make-whole fees represent the Bankruptcy Court order denying our objection to the make-whole claims, as further described in Note 8.

⁽⁴⁾	Cash interest income earned for the period after the Petition Date on excess cash over normal invested capital.