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No. of Recommendations: 2
I have lately started buying Ultra Petroleum, UPL. This is the predominately a natural gas company with some debt on the balance sheet, but not wildly excessive amounts, IMO. Their main producing areas are conventional gas deposits (with some shale plays), which means they have the lowest all-in costs of any of the large, public gas players. Gas prices have been moving up as storage withdrawals have driven inventories way down and most of the guys who were out drilling new wells hell-for-leather have pulled back a lot on drilling activity. Since the shale wells that have driven a lot of the supply expansion have steep production curve declines over relatively short periods, I don't see a lot of new supply coming aside from gas that is incidentally produced from oil drilling activity. The gas price increase over $4 removes default risk from UPL and the company's improved prospects don't seem to be reflected in the share price. I think that in the next 5 years we will see notably higher gas prices, but at $4.XX gas UPL still looks cheap to me.
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