2010-01-07-2009-12-21-2010-02-22

Acquired 80,000 net acres in PA Marcellus shale in Centre, Clinton & Lycoming counties, gaining 10 MMcfe/d, 3.5 Tcfe 3P.

Houston-based, Rockies-focused Ultra Petroleum Corp. (NYSE: UPL) has acquired approximately 80,000 net acres in the Pennsylvania Marcellus shale from an undisclosed private company for $400 million, further expanding its position into Appalachia.

The assets include a 50% nonoperated working interest in 160,000 gross acres (43.75% net revenue interest per Ultra's interest) in Centre, Clinton and Lycoming counties in north-central Pennsylvania. Ultra estimates total resource potential of 3.5 trillion cubic feet equivalent. Anadarko Petroleum Corp., Houston, (NYSE: APC) is operator.

Six horizontal wells to date have been drilled on the acreage with two in production, with each producing 5 million cubic feet per day curtailed by surface constraints.

Following the acquisition, Ultra holds approximately 250,000 net acres (480,000 gross acres) in the region concentrated around Tioga, Bradford, Lycoming, Potter, Clinton and Centre counties, with the potential for 1,800 net drilling locations.

In 2009, Ultra drilled 30 horizontal wells in the Marcellus with 13 producing. Initial production rates for the producing wells average 7.5 million cubic feet per day with preliminary estimated ultimate recoveries ranging from 3.5- to 4 billion cubic feet. Including this acquisition, it has added some 192,000 gross acres in 2009 through land acquisitions and swaps, doubling its position in the play.

Ultra financed the acquisition with debt.

Michael D. Watford, Ultra chairman, president and chief executive, says, "We are strategically increasing the scale of our Marcellus position with assets that rival the returns of our current acreage. With this acquisition, we believe that our net recovered resource in the Marcellus alone will exceed 8.5 trillion cubic feet equivalent, an increase of 3.5 Tcfe from current estimates."

The seller is a GE Capital-funded company. Jefferies & Co. represented the seller. The effective date is Oct. 1, 2009.

Ultra's core positions are in the Pinedale and Jonah fields in the Green River Basin of Wyoming with 15 trillion cubic feet of resource potential, representing 64% of its total reserves.

Analysts at Tudor, Pickering, Holt & Co. Securities Inc. estimate Ultra paid $5,000 per acre, which they calculate as full value until the acreage is derisked, which sets "a new high-water mark." This acquisition "sets the stage for rapid growth in Pennsylvania as Ultra now will invest the same capex in Pennsylvania as Wyoming."