Ultra Petroleum Does Bankruptcy Right, Exits with Higher Value

Ultra Petroleum, based in Houston, TX, is an independent exploration and production (E&P) company mainly focused on drilling in the Green River Basin of Wyoming. Ultra also drills for oil in the Uinta Basin/Three Rivers area in Utah. In addition, Ultra maintains a position in the Pennsylvania Marcellus shale with leases on 184,000 gross (91,000 net) acres–no small amount. They aren’t currently drilling on their Marcellus acreage, but it’s a good bet they will at some point. One year ago, in April 2016, Ultra filed for Chapter 11 bankruptcy (see Ultra Petroleum (with 184K Marcellus Acres) Files for Bankruptcy). Shareholders tried to get an official equity committee approved to protect their interest, but that effort failed when the trustee denied the motion. So equity holders (i.e. stockholders), with the aid of Ultra’s management (who happen to be stockholders themselves), adopted a new strategy: wait them out. Management asked for an extension to file their bankruptcy plan, which would put a plan filing date out to spring of this year (see Ultra Petroleum Trying to Force Debtholders to Deal re Bankruptcy). Ultra didn’t want to go the way so many other oil and gas companies have gone–by wiping out existing shareholder’s stock value and handing the keys of the company to the debtholders. Ultra’s strategy was to use time against debtholders as a tactic to force them to the table to deal. It worked. In November 2016, Ultra announced a deal supported by a full two-thirds of outstanding debtholders and plans to move forward (see Ultra Petroleum Gets 67% Debtholders to Agree to Bankruptcy Plan). Ultra announced yesterday it has emerged from bankruptcy, raising nearly $3 billion to pay back creditors and floating 195 million shares of new stock. The company is worth more today than when it entered bankruptcy. Talk about engineering a turnaround! Ultra shows other E&Ps how to do a bankruptcy “right”…

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