Chesapeake Energy Corporation (CHK), And How Ultra Petroleum Corp. (UPL) Is Planning Its Turnaround

On Friday, Ultra Petroleum Corp. (NYSE:UPL) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

As one of the lowest-cost producers of natural gas, Ultra Petroleum Corp. (NYSE:UPL) benefited greatly from the energy boom in 2007 and early 2008. But when the bottom fell out of the market, even Ultra’s low costs weren’t enough to leave it unscathed. Let’s take an early look at what’s been happening with Ultra Petroleum Corp. (NYSE:UPL) over the past quarter and what we’re likely to see in its quarterly report.

Stats on Ultra Petroleum

Source: Yahoo! Finance.

Why Ultra Petroleum’s poised to pop this quarter
Analysts have gotten a lot more excited about Ultra Petroleum’s earnings prospects in recent months. A $0.04-per-share increase in first-quarter-earnings estimates is a good start, but raising full-year projections by more than $0.50 per share — an increase of more than half — shows just how much enthusiasm the company is seeing right now. The stock has also been doing very well, rising 15% since late January.

Ultra Petroleum Corp. (NYSE:UPL) has faced a huge challenge recently, as low natural gas prices have crushed its profitability. In February, CEO Michael Watford called 2012 a “train wreck,” as the company’s concentration on gas worked against it. In particular, as Motley Fool contributor Tyler Crowe noted, even a relatively small drop in nat-gas prices hits Ultra twice: once in outright revenue for gas it produces, and again in forcing the company to downgrade some of its proven reserves, leading to asset writedowns.

But now, natural gas has started to climb, and that same effect should work in reverse to boost Ultra Petroleum Corp. (NYSE:UPL)’s prospects. Moreover, Ultra has gained a lot of expertise at drilling shale gas wells cheaply, cutting drilling costs by 30% since 2006. Ultra Petroleum Corp. (NYSE:UPL) was already among the lowest-cost producers of natural gas, and further efficiency gains will only help increase profits when prices rebound.