Dow Jones - Natural Gas Plunge Has Bears Shooting Arrows At Producers

DJ Natural-Gas Plunge Has Bears 'Shooting Arrows' at Producers




  By Tim Puko

  Amidst the recent carnage in the natural gas market, Ultra Petroleum Corp. has been among the worst victims.

  In less than a week, shares of this Houston production company lost more than half their value. They didn't have to
fall that far, though, to post such a big loss: The stock now costs just $1.91 a share, down another 5.9% Thursday
after a six-month span in which it lost about 85%.

  It has been a tough summer and autumn for energy producers like Ultra, especially those focused on natural gas. Gas
is at its lowest inflation-adjusted price in the history of Nymex trading, down nearly 40% from its August highs. Even
relatively successful companies have seen share prices plummet as worry spreads that they could keep the market flooded
for years.

  Many U.S. oil-and-gas producers had sold themselves to investors as fast-growing companies during a historic
oil-and-gas boom. Now the boom is over, prices are plummeting and investors are no longer buying that story.

  That shakeout has left Ultra and some peers especially vulnerable. Ultra, which drills in the Rockies, is one of the
few companies still moored largely to one area far from the Appalachian fields that have become the cheapest source of
natural gas. Combined with high debt levels left over from the boom times and Ultra finds itself in the "heart" of a
troubled market, said Joshua Schachter, senior portfolio manager at Snow Capital Management LP outside of Pittsburgh.

  "Broadly speaking, anyone with a levered balance sheet is being punished more so than anyone else," he said. "And
Ultra fits that profile, a gassy-levered, independent [exploration and production company]. ... The bears, the
short-sellers are shooting arrows at these stocks."

  A company spokeswoman declined to comment for this story.

  Snow, with about $5 billion under management, is standing pat on its investments in energy producers, expecting they
can take off over the long-term, Mr. Schachter said. But for now, many see the market still mired in warm weather that
is sapping demand and potentially setting up a glut deep into next year or beyond.

  Investors are freaked out, and as gas prices fall, they are punishing former darlings like Southwestern Energy Co.
and Chesapeake Energy Corp. Some of those have land in gas fields with lower drilling costs than Ultra does, but a lot
of them are still outside the very best areas, and their high debt levels are just what energy investors are running
from right now, said Scott Hanold, managing director of energy research at RBC Capital Markets. Southwestern is down
67% and Chesapeake is down 57% in just three months.

  Halcon Resources Corp., a company with similar trouble just surpassed all of them on Thursday, a day after it said it
would push for a reverse stock split to retain its listing on the New York Stock Exchange. It traded down 35% Thursday
at just 21 cents a share, down 77% in just three months.

  "The reality is, it's not about the next best well or how well you're growing," Mr. Hanold said. "It's all about your
balance sheet."

  --Ryan Dezember contributed to this article.


  (END) Dow Jones Newswires

  December 17, 2015 12:17 ET (17:17 GMT)

  Copyright (c) 2015 Dow Jones & Company, Inc.

121715 17:17 -- GMT
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