ULTRA PETROLEUM CORP - 10-Q Quarterly Report

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SECURITIES AND UNITED STATES EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO
________________

Commission file number 0-29370

ULTRA PETROLEUM CORP.
(Exact Name of Registrant as Specified in Its Charter)

Yukon Territory, Canada N/A
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)

363 North Sam Houston Parkway E., 77060
Suite 1200, Houston, Texas (Zip Code)
(Address of Principal Executive Offices)

(281) 876-0120
(Registrant's Telephone Number,
Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) YES X NO
----- -----

The number of common shares, without par value, of Ultra Petroleum Corp.,
outstanding as of May 5, 2003 was 74,113,918.

PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

ULTRA PETROLEUM CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

(Expressed in U.S. Dollars) For the Three Months Ended
March 31,
------------------------------
2003 2002
------------ ------------

Revenues:
Natural gas sales $ 23,122,589 $ 8,399,946
Oil sales 1,548,506 706,373
------------ ------------
24,671,095 9,106,319

Expenses:
Production expenses and taxes 5,201,744 2,488,932
Depletion and depreciation 3,605,846 2,108,297
General and administrative 1,237,703 848,311
Stock compensation 612,500 370,885
------------ ------------
10,657,793 5,816,425

Operating income 14,013,302 3,289,894

Other income (expense):
Interest expense (653,600) (514,061)
Interest income 8,578 6,990
------------ ------------
(645,022) (507,071)

Income for the period, before income taxes 13,368,280 2,782,823

Income tax provision - deferred 5,146,788 1,071,387

Income for the period 8,221,492 1,711,436
Retained earnings, beginning of period 10,815,877 2,734,356
------------ ------------
Retained earnings, end of period $ 19,037,369 $ 4,445,792
============ ============

Net income per common share - basic $ 0.11 $ 0.02
============ ============
Net income per common share - diluted $ 0.11 $ 0.02
============ ============
Weighted average common shares outstanding - basic 74,056,840 73,496,196
============ ============
Weighted average common shares outstanding - diluted 77,950,668 77,353,927
============ ============

2

ULTRA PETROLEUM CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(Expressed in U.S. Dollars) Three Months Ended
March 31,
------------------------------
2003 2002
------------ ------------

Cash flows from operating activities

Income for the period $ 8,221,492 $ 1,711,436

Adjustments to reconcile income to net cash provided by operating activities:
Depletion and depreciation 3,605,846 2,108,297
Deferred income taxes 5,146,788 1,071,387
Stock compensation 612,500 370,885

Net changes in non-cash working capital:
Restricted cash (362) (768)
Accounts receivable (2,568,487) 441,251
Prepaid expenses and other current assets (344,307) 2,080,688
Accounts payable and accrued liabilities (1,389,233) (1,673,281)
Other long-term obligations 132,122 (25,000)
------------ ------------
Net cash provided by operating activities 13,416,359 6,084,895

Cash flows from investing activities:
Oil and gas property expenditures (9,115,658) (16,046,135)
Purchase of capital assets (31,137) (521,132)
------------ ------------
Net cash used in investing activities (9,146,795) (16,567,267)

Cash flows from financing activities:
Increase (decrease) in long-term debt (4,000,000) 12,500,000
Proceeds from exercise of options 146,140 594,693
------------ ------------
Net cash provided by financing activities (3,853,860) 13,094,693

Net increase in cash and cash equivalents 415,704 2,612,321
Cash and cash equivalents, beginning of period 1,417,711 1,379,462
------------ ------------
Cash and cash equivalents, end of period $ 1,833,415 $ 3,991,783
============ ============

3

ULTRA PETROLEUM CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

4

ULTRA PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. dollars unless otherwise noted)

Three months ended March 31, 2003 and 2002

DESCRIPTION OF THE BUSINESS

Ultra Petroleum Corp. (the "Company") is an independent oil and gas company
engaged in the acquisition, exploration, development, and production of oil and
gas properties. The Company was incorporated under the laws of British Columbia,
Canada. On March 1, 2000, the Company was continued under the laws of the Yukon
Territory, Canada. The Company's principal business activities are in the Green
River Basin of Southwest Wyoming and Bohai Bay, China.

1. SIGNIFICANT ACCOUNTING POLICIES:

The accompanying financial statements, other than the balance sheet data as of
December 31, 2002, are unaudited and were prepared from the Company's records.
Balance sheet data as of December 31, 2002 was derived from the Company's
audited financial statements, but do not include all disclosures required by
U.S. generally accepted accounting principles. The Company's management believes
that these financial statements include all adjustments necessary for a fair
presentation of the Company's financial position and results of operations. All
adjustments are of a normal and recurring nature unless specifically noted. The
Company prepared these statements on a basis consistent with the Company's
annual audited statements and Regulation S-X. Regulation S-X allows the Company
to omit some of the footnote and policy disclosures required by generally
accepted accounting principles and normally included in annual reports on Form
10-K. You should read these interim financial statements together with the
financial statements, summary of significant accounting policies and notes to
the Company's most recent annual report on Form 10-K.

(a) Basis of presentation and principles of consolidation:

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries UP Energy Corporation, Ultra Resources, Inc, and
Sino-American Energy Corporation. The Company presents its financial statements
in accordance with accounting principles generally accepted in the United States
(US GAAP).

All material inter-company transactions and balances have been eliminated upon
consolidation.

(b) Accounting principles:

The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States.

(c) Cash and cash equivalents:

We consider all highly liquid investments with an original maturity of three
months or less to be cash equivalents.

(d) Restricted cash:

Restricted cash represents cash received by the Company from production sold
where the final division of ownership of the production is unknown or in
dispute. Wyoming law requires that these funds be held in a federally insured
bank in Wyoming.

(e) Capital assets:

Capital assets are recorded at cost and depreciated using the declining-balance
method based on a seven-year useful life.

(f) Oil and gas properties:

The Company uses the full cost method of accounting for oil and gas operations
whereby all costs associated with the exploration for and development of oil and
gas reserves are capitalized to the Company's cost centers. Such costs include
land acquisition costs, geological and geophysical expenses, carrying charges on
non-producing properties, costs of drilling both productive and non-productive
wells and overhead charges directly related to acquisition, exploration and
development activities. The Company conducts operations in both the United
States and China. Separate cost centers are maintained for each country in which
the Company has operations.

The capitalized costs, together with the costs of production equipment, are
depleted using the units-of-production method based on the proven reserves as
determined by independent petroleum engineers. Oil and gas reserves and
production are converted into equivalent units based upon relative energy
content.

Costs of acquiring and evaluating unproved properties are initially excluded
from the costs subject to depletion. These unproved properties are assessed
periodically to ascertain whether impairment has occurred. When proved reserves
are assigned or the property is considered to be impaired, the cost of the
property or the amount of the impairment is added to the costs subject to
depletion.

The total capitalized cost of oil and gas properties less accumulated depletion
is limited to an amount equal to the estimated future net cash flows from proved
reserves, discounted at 10%, using year-end prices, plus the cost (net of
impairment) of unproved properties as adjusted for related tax effects (the
"full cost ceiling test limitation").
5

Proceeds from the sale of oil and gas properties are applied against capitalized
costs, with no gain or loss recognized, unless such a sale would significantly
alter the rate of depletion.

Substantially all of the Company's exploration, development and production
activities are conducted jointly with others and, accordingly, these financial
statements reflect only the Company's proportionate interest in such activities.

(g) Hedging transactions:

The Company has entered into commodity price risk management transactions to
manage its exposure to gas price volatility. These transactions are in the form
of price swaps with a financial institution or other credit worthy counter
parties. These transactions have been designated by the Company as cash flow
hedges. As such, unrealized gains and losses related to the change in fair
market value of the derivative contracts are recorded in other comprehensive
income in the balance sheet.

(h) Income taxes:

The Company uses the asset and liability method of accounting for income taxes
under which deferred tax assets and liabilities are recognized for the future
tax consequences. Accordingly, deferred tax liabilities and assets are
determined based on the temporary differences between the financial statement
and tax basis of assets and liabilities, using the enacted tax rates in effect
for the year in which the differences are expected to reverse.

(i) Earnings per share:

Basic earnings per share is computed by dividing net earnings attributable to
common stock by the weighted average number of common shares outstanding during
each period. Diluted earnings per share is computed by adjusting the average
number of common shares outstanding for the dilutive effect, if any, of stock
options. The Company uses the treasury stock method to determine the dilutive
effect.

The following table provides a reconciliation of the components of basic and
diluted net income per common share:

(j) Use of estimates:

Preparation of consolidated financial statements in accordance with US GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

(k) Reclassifications:

Certain amounts in the financial statements of the prior years have been
reclassified to conform to the current year financial statement presentation.

2. OIL AND GAS PROPERTIES:

6

3. LONG-TERM DEBT:

The Company (through its subsidiary) has a long-term credit facility with a
group of banks led by Bank One N.A. The agreement specifies a maximum loan
amount of $150 million and with a current borrowing base of $120 million. At
March 31, 2003, the Company had $82 million outstanding and $38 million unused
and available on the credit facility.

The credit facility matures on March 1, 2005. The notes bear interest at either
the bank's prime rate plus a margin of one-half of one percent (0.50%) to one
and one-quarter percent (1.25%) based on the percentage of available credit
drawn or at LIBOR plus a margin of one and one-half percent (1.50%) to two and
one-quarter percent (2.25%) based on the percentage of available credit drawn.
An average annual commitment fee of 0.375% is charged quarterly for any unused
portion of the credit line.

The borrowing base is subject to periodic (at least semi-annual) review and
re-determination by the bank and may be decreased or increased depending on a
number of factors including the Company's proved reserves and the bank's
forecast of future oil and gas prices. Additionally, the Company is subject to
quarterly reviews of compliance with the covenants under the bank facility
including minimum coverage ratios relating to interest, working capital, general
and administrative expenditures and advances to Sino-American Energy Company. In
the event of a default under the covenants, the Company may not be able to
access funds otherwise available under the facility and may be required to make
immediate principal repayment. As of March 31, 2003, the Company was in
compliance with the covenants and required ratios.

The credit facility is secured by a majority of proved domestic oil and gas
properties.

Other long-term obligations: These costs relate to the long-term portion of
production taxes payable as well as net liability production imbalances.

4. DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND
THE UNITED STATES:

Currently under Canadian generally accepted accounting principles ("Canadian
GAAP"), there is not a provision in place to expense stock-based compensation as
with FASB Statement No. 123 Accounting for Stock-Based Compensation; however,
there was an exposure draft issued in December 2002 that would essentially
harmonize their accounting standards to US GAAP. The proposed effective date for
implementing Stock-Based Compensation and Other Stock-Based Payments, Section
3870, is January 1, 2004. During the quarter ended March 31, 2003, the Company
recorded to the full cost pool under capitalized general and administrative
expenses a consultant's stock-based compensation expense of $56,052. Under
current Canadian GAAP, this amount would have been recognized as a disclosure
item, with no impact on the financial statements.

Recorded in other comprehensive income in the Equity section of our balance
sheet is an offset to a liability that measures a future effect of the fixed
price to index price swap agreements that the Company currently has in place. We
have recorded this in compliance with FASB 133 addressing accounting impacts of
derivative instruments. Currently under Canadian GAAP the future effects of
derivative instruments are recorded through revenue in the period in which the
production is sold. The total future value of the swap is not captured as an
asset or liability, and the term Other Comprehensive Income, is not recognized
in Canada. In 2002, the Canadian Accounting Standards Board issued a draft
proposal to put in place Canadian standards which would be in harmony with U.S.
standards on financial instruments. Canadian enterprises could then choose to
apply accounting policies and practices that are in accordance with both US
and Canadian GAAP.

5. RECENT ACCOUNTING PRONOUNCEMENTS:

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations ("SFAS No. 143"). SFAS No. 143 requires the Company to record the
fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition, construction, development
and/or normal use of the assets. The Company adopted SFAS No. 143 on January 1,
2003. Based on current estimates, the Company would record asset retirement
obligations (using a 10% discount rate) and a cumulative effect of change in
accounting principle, related to the depreciation and accretion expense that
would have been recorded had the fair value of the asset retirement obligation,
and corresponding increase in the carrying amount of the related long-lived
asset been determined in prior years. Currently the Company has determined that
the impact of adopting SFAS No. 143 is not material to its financial position or
results of operations.

The Company adopted the disclosure provisions of SFAS No. 148, Accounting for
Stock-based Compensation-Transition and Disclosure" effective January 1, 2003.
SFAS No. 148 amended FASB Statement No. 123, Accounting for Stock-Based
Compensation ("Statement No. 123"), to provide alternative methods of transition
for a voluntary change to the fair-value based method of accounting for
stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on the
reported results. The provision of SFAS No. 148 has no material impact on us, as
we do not plan to adopt the fair-value method of accounting for stock options at
the current time. For the period ended March 31, 2003, the pro-forma net income,
had the Company adopted the provisions of SFAS No. 123 approximates actual net
income.

7

ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2003 VS. THREE MONTHS ENDED MARCH 31, 2002

OPERATING REVENUES

Oil and gas revenues increased 171% to $24,671,095 for the quarter ended March
31, 2003 from $9,106,319 for the same period in 2002. This increase was
attributable to increased production and an increase in prices received for that
production. During the first quarter, the Company's production increased 60% to
6.0 Bcf of gas, and 50,000 barrels of condensate, up from 3.8 Bcf of gas and
34,000 barrels of condensate for the same period in 2002. During the quarter
ended March 31, 2003, the average product prices for gas and condensate were
$3.84 per Mcf and $30.90 per barrel, respectively, compared to $2.24 per Mcf and
$20.58 per barrel for the same period in 2002.

PRODUCTION EXPENSES AND TAXES

During the quarter ended March 31, 2003, production expenses and taxes increased
to $5,201,744 from $2,488,932 for the quarter ended March 31, 2002. Direct lease
operating expenses increased to $945,286 for the quarter ended March 31, 2003
from $486,867 for the same period in 2002, attributable primarily to increased
production volumes. On a per unit of production basis, these costs increased to
$.15 per Mcfe in the first quarter 2003, as compared to $.12 per Mcfe in the
first quarter 2002. Production taxes for the first quarter of 2003 were
$2,663,222, compared to $935,587 in first quarter of 2002 or $.42 per Mcfe in
first quarter 2003, compared to $.24 per Mcfe in first quarter of 2002.
Production taxes are calculated based on a percentage of revenue from
production, therefore higher realized prices contributed to the increase.
Gathering fees for the quarter ended March 31, 2003 increased to $1,593,236 from
$1,066,478 for the same period in 2002, attributable to higher production
volumes.

DEPLETION AND DEPRECIATION

Depletion, depreciation and amortization expense increased to $3,605,846 during
the quarter ended March 31, 2003 from $2,108,297 for the same period in 2002,
primarily due to increased production volumes. On a per unit basis, depletion,
depreciation and amortization increased to $.57 per Mcfe, from $.53 in 2002
primarily as a result of increases in the Company's estimated future development
costs.

GENERAL AND ADMINISTRATIVE

General and administrative expenses increased to $1,237,703 during the quarter
ended March 31, 2003 from $848,311 for the same period in 2002. The increase was
attributable to legal, professional and compensation expenses that coincide with
the Company's increased activity in both Wyoming and China.

STOCK COMPENSATION

Stock compensation expense increased to $612,500 during the quarter ended March
31, 2003 from $370,885 for the same period in 2002. The increase was
attributable to the stock price at the time of grant.

INTEREST

Interest expense for the period increased to $653,600 in the first quarter of
2003 from $514,061 in the first quarter of 2002. This increase was attributable
to the increase in borrowings under the senior credit facility. At March 31,
2003 the line of credit outstanding was $82,000,000, compared to $55,500,000 at
March 31, 2002.

INCOME TAXES

The Company recorded deferred income tax expense of $5,146,788 at an effective
rate of 38.5% for the quarter ended March 31, 2003, compared to $1,071,387 for
the quarter ended March 31, 2002. Although the Company is not expected to pay
cash taxes in 2003, in accordance with FAS 109 and specifically, the guidance
concerning intraperiod tax allocations, the Company is required to recognize tax
expense evenly throughout the year. In the prior year, income tax expense, as
calculated at the statutory rate including estimated state income tax effect,
was offset by recognition of deferred tax assets for which a valuation allowance
had previously been provided.

LIQUIDITY AND CAPITAL RESOURCES

During the quarter ended March 31, 2003, the Company relied on cash provided by
operations to finance its capital expenditures. The Company participated in the
drilling of five wells in Wyoming, and two wells in the China blocks. For the
three-month period ended March 31, 2003 net capital expenditures were $9.1
million. At March 31, 2003, the Company reported a cash position of $1.8 million
compared to $4.0 million at March 31, 2002. Working capital at March 31, 2003
was $(2.4) million as compared to $(4.8) million at March 31, 2002. As of March
31, 2003, the Company had incurred bank indebtedness of $82.0 million and other
long-term debt of $4.0 million comprised of items payable in more than one year.

The positive cash provided by operating activities that the Company continues to
produce, along with the availability under the senior credit facility, are
projected to be sufficient to fund the Company's budgeted capital expenditures
for 2003, which are currently projected to be $110.0 million. Of the $110.0
million budget, the Company plans to spend approximately $90.0 million of its
2003 budget in Wyoming and approximately $20.0 million in China. Of the $90.0
million for Wyoming, the Company plans to drill or participate in an estimated
57 gross wells in 2003, of which approximately 40% will be for exploration wells
and the remaining will be for development wells. Of the $20.0 million budgeted
for China, approximately 50% will be for exploratory/appraisal activity and the
balance will be for development activity. The Company currently has no budget
for acquisitions in 2003.

As of March 3, 2003, the revolving senior credit facility provides for a $150.0
million revolving credit line with a current borrowing base of $120.0 million.
The credit facility matures on March 1, 2005. The notes bear interest at either
Bank One's prime rate plus a margin of one-half of one percent (0.50%) to one
and one-quarter percent (1.25%) based on the percentage of available credit
drawn or at LIBOR plus a margin of one and one-half percent (1.50%) to two and
one-quarter percent (2.25%) based on the percentage of available credit drawn.
An average annual commitment fee of 0.375% is charged quarterly for any unused
portion of the credit line. The borrowing base is subject to periodic (at least
semi-annual) review and re-determination by the banks and may be increased or
decreased depending on a number of factors including the Company's proved
reserves and the bank's forecast of future oil and gas prices. Additionally, the
Company is subject to quarterly reviews of compliance with the covenants under
the bank facility including minimum coverage ratios relating to interest,
working capital, general and administrative expenditures and advances to
Sino-American Energy. In the event of a default under the covenants, the Company
may not be able to access funds otherwise available under the facility and may,
in certain circumstances, be

8

required to repay the credit facilities. The notes are collateralized by a
majority of the Company's proved domestic oil and gas properties. At March 31,
2003, the Company had $82.0 million of outstanding borrowings under this credit
facility, with a current average interest rate of approximately 3%. The Company
was in compliance with all loan covenants at March 31, 2003.

During the quarter ended March 31, 2003, net cash provided by operating
activities was $13.4 million as compared to $6 million for the quarter ended
March 31, 2002. The increase in cash provided by operating activities was
attributable to the increase in earnings and the decrease in net changes to
non-cash working capital items.

During the quarter ended March 31, 2003, cash used in investing activities was
$9.1 million as compared to $16.6 million for the quarter ended March 31, 2002.
The change is primarily attributable to decrease in costs carried over for 2002
and 2001 drilling and completion activity in Wyoming.

During the quarter ended March 31, 2003, cash provided by financing activities
was $(4.0) million as compared to $13.1 million for the quarter ended March 31,
2002. The change is primarily attributable to paying down debt under the senior
credit facility.

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

This report contains or incorporates by reference forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
Section 21E of the Securities Exchange Act of 1934 and the Private Securities
Litigation Reform Act of 1995. All statements other than statements of
historical facts included in this document, including without limitation,
statements in Management's Discussion and Analysis of Financial Condition and
Results of Operations regarding our financial position, estimated quantities and
net present values of reserves, business strategy, plans and objectives of the
Company's management for future operations, covenant compliance and those
statements preceded by, followed by or that otherwise include the words
"believe", "expects", "anticipates", "intends", "estimates", "projects",
"target", "goal", "plans", "objective", "should", or similar expressions or
variations on such expressions are forward-looking statements. The Company can
give no assurances that the assumptions upon which such forward-looking
statements are based will prove to be correct nor can the Company assure
adequate funding will be available to execute the Corporation's planned future
capital program.

Other risks and uncertainties include, but are not limited to, fluctuations in
the price the Company receives for oil and gas production, reductions in the
quantity of oil and gas sold due to increased industry-wide demand and/or
curtailments in production from specific properties due to mechanical, marketing
or other problems, operating and capital expenditures that are either
significantly higher or lower than anticipated because the actual cost of
identified projects varied from original estimates and/or from the number of
exploration and development opportunities being greater or fewer than currently
anticipated and increased financing costs due to a significant increase in
interest rates. See the Company's annual report on Form 10-K for the year ended
December 31,2002 for additional risks related to the Company's business.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's major market risk exposure is in the pricing applicable to its gas
and oil production. Realized pricing is primarily driven by the prevailing price
for crude oil and spot prices applicable to the Company's United States natural
gas production. Historically, prices received for gas production have been
volatile and unpredictable. Pricing volatility is expected to continue. Gas
price realizations averaged $3.84 per Mcf during the quarter ended March 31,
2003. This average wellhead price includes the effects of hedging and gas
balancing between working interest owners.

The Company periodically enters into various hedging arrangements for its
natural gas production. During the first quarter of 2003, the total impact of
the Company's hedges to the consolidated statements of income was $(518,350).

In the first quarter of 2003, the Company entered into additional swaps covering
an additional 10,000 MMBtu or approximately 9 MMcf of gas for the period from
April 1, 2003 to October 31, 2003 at a price of $3.75 per MMBtu or approximately
$3.95 per Mcf (pricing referenced to Opal), plus an additional 5,000 MMBtu or
approximately 4 MMcf of gas per day for the same period at a price of $4.25 per
MMBtu or approximately $4.48 per Mcf (pricing referenced to Opal).

The table below summarizes the hedges in place as of March 3, 2003:

These hedges represent approximately 45% of the Company's forecasted production
for the period from April 1, 2003 to October 31, 2003, and approximately 30% of
the Company's forecasted production for calendar 2003.

ITEM 4 - CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Based on their
evaluation as of a date within 90 days of the filing date of this
quarterly report on Form 10-Q, the Company's principal executive
officer and principal financial officer have concluded that the
Company's disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the
"Exchange Act")) are effective to ensure that information required to
be disclosed by the Company in reports that it files or submits under
the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the
Securities and Exchange Commission.

9

(b) Changes in Internal Controls. There were no significant changes in the
Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

PART 2 - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is currently involved in various routine disputes and allegations
incidental to its business operations. While it is not possible to determine the
ultimate disposition of these matters, the Company believes that the resolution
of all such pending or threatened litigation is not likely to have a material
adverse effect on the Company's financial position, or results of operations.

ITEM 2. CHANGES IN SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 Certificate of Continuance of Ultra Petroleum Corp. (incorporated
by reference to Exhibit 3.1 to the Company's quarterly report on
form 10-Q for the period ended June 30, 2001)

3.2 By-Laws of Ultra Petroleum Corp. (incorporated by reference to
Exhibit 3.2 to the Company's quarterly report on form 10-Q for
the period ended June 30, 2001)

4.1 Specimen common share certificate (incorporated by reference to
Exhibit 4.1 to the Company's quarterly report on form 10-Q for
the period ended June 30, 2001)

10.1 First Amendment to First Amended and Restated Credit Agreement
dated November 4, 2002 among Ultra Resources, Inc., Bank One
N.A., Union Bank of California, N.A., Guaranty Bank, FSB,
Hibernia National Bank and Compass Bank (incorporated by
reference to Exhibit 10.1 to the Company's annual report on Form
10-K for the period ended December 31, 2002)

10.2 First Amended and Restated Credit Agreement dated March 1, 2002
among Bank One N.A., Union Bank of California N. A., Guaranty
Bank FSB, Hibernia National Bank, Banc One Capital Markets, Inc.
and Ultra Resources, Inc. (incorporated by reference to Exhibit
10.1 to the Company's annual report on Form 10-K for the period
ended December 31, 2001)

99.1 Certification of Chief Executive Officer

99.2 Certification of Chief Financial Officer

(c) Reports on Form 8-K

None

10

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

ULTRA PETROLEUM CORP.

Date May 8, 2003 By: /s/ MICHAEL D. WATFORD
----------------------------
Name: Michael D. Watford
Title: Chief Executive Officer

By: /s/ F. FOX BENTON III
----------------------------
Name: F. Fox Benton III
Title: Chief Financial Officer

11

EXHIBIT INDEX

Exhibit
Number Description
- ------- -----------

3.1 Certificate of Continuance of Ultra Petroleum Corp. (incorporated by
reference to Exhibit 3.1 to the Company's quarterly report on form 10-Q
for the period ended June 30, 2001)

3.2 By-Laws of Ultra Petroleum Corp. (incorporated by reference to Exhibit
3.2 to the Company's quarterly report on form 10-Q for the period ended
June 30, 2001)

4.1 Specimen common share certificate (incorporated by reference to Exhibit
4.1 to the Company's quarterly report on form 10-Q for the period ended
June 30, 2001)

10.1 First Amendment to First Amended and Restated Credit Agreement dated
November 4, 2002 among Ultra Resources, Inc., Bank One N.A., Union Bank
of California, N.A., Guaranty Bank, FSB, Hibernia National Bank and
Compass Bank (incorporated by reference to Exhibit 10.1 to the
Company's annual report on Form 10-K for the period ended December 31, 2002)

10.2 First Amended and Restated Credit Agreement dated March 1, 2002 among
Bank One N.A., Union Bank of California N. A., Guaranty Bank FSB,
Hibernia National Bank, Banc One Capital Markets, Inc. and Ultra
Resources, Inc. (incorporated by reference to Exhibit 10.1 to the
Company's annual report on Form 10-K for the period ended December 31, 2001)

99.1 Certification of Chief Executive Officer

99.2 Certification of Chief Financial Officer