For those investors looking for natural gas companies with a bit more “oomph,” energy stock Ultra Petroleum (UPL) could be the prime portfolio play. As of the end of 2012, UPL’s mix of production included about 96% dry natural gas. While that seems awfully scary given just how much prices for the fuel have swayed, Ultra is a low-cost leader … just like both SWN and COG.
In fact, UPL’s finding and development costs are a little more than $1 per McfE, and it only needs natural gas to be at $2.88 to “break even” on its wells. Other natural gas companies — like kingpin Chesapeake (CHK) — need prices to be around $4 to make a profit.
Now, UPL has recently made moves to purchase more oil reserves and boost its overall product mix. The firm paid $650 million for acreage in Utah’s Uinta Basin, which features many of the same operating dynamics and low costs as UPL’s current mix of shale assets. Ultimately, those oilier acres should help smooth out earnings for the stock and help produce higher cash flows. But much of Ultra’s future production will still be tied to natural gas, making it one of the best natural gas stocks to buy if you want to play rising demand.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.