##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM ______________ TO ________________
 Commission file number 0-29370
 ULTRA PETROLEUM CORP.
  Yukon Territory, Canada
    
    N/A(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. employer
identification number)
 363 North Sam Houston Parkway E., Suite 1200, Houston, Texas
(Address of principal executive offices)
    
    77060
(Zip code)
 
 þ o
 þ o




---



##### 



PART 1  FINANCIAL INFORMATION
 ITEM 1  FINANCIAL STATEMENTS
  
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Revenues:Natural gas sales
    
    $
    82,076,643
    
    
    $
    43,174,208
    
    
    $
    156,027,616
    
    
    $
    89,251,431Oil sales
    
    
    27,421,604
    
    
    
    2,936,082
    
    
    
    42,311,971
    
    
    
    5,477,632Total operating revenues
    
    
    109,498,247
    
    
    
    46,110,290
    
    
    
    198,339,587
    
    
    
    94,729,063Expenses:Production expenses and taxes
    
    
    18,489,289
    
    
    
    9,424,401
    
    
    
    34,581,201
    
    
    
    19,149,299Depletion and depreciation
    
    
    12,656,404
    
    
    
    5,415,985
    
    
    
    23,895,913
    
    
    
    10,896,704General and administrative
    
    
    3,120,170
    
    
    
    1,190,350
    
    
    
    5,681,952
    
    
    
    2,744,388General and administrative  stock compensation
    
    
    396,083
    
    
    
    523,500
    
    
    
    1,010,659
    
    
    
    623,523Total operating expenses
    
    
    34,661,946
    
    
    
    16,554,236
    
    
    
    65,169,725
    
    
    
    33,413,914Operating income
    
    
    74,836,301
    
    
    
    29,556,054
    
    
    
    133,169,862
    
    
    
    61,315,149Other income (expense):Interest expense
    
    
    (1,167,763
    )
    
    
    (848,742
    )
    
    
    (2,068,406
    )
    
    
    (1,948,912
    )Interest income
    
    
    118,693
    
    
    
    9,910
    
    
    
    193,558
    
    
    
    22,644Total other income (expense)
    
    
    (1,049,070
    )
    
    
    (838,832
    )
    
    
    (1,874,848
    )
    
    
    (1,926,268
    )Income, before income tax provision
    
    
    73,787,231
    
    
    
    28,717,222
    
    
    
    131,295,014
    
    
    
    59,388,881Income tax provision
    
    
    25,899,316
    
    
    
    10,194,718
    
    
    
    46,084,550
    
    
    
    21,083,159Net income
    
    
    47,887,915
    
    
    
    18,522,504
    
    
    
    85,210,464
    
    
    
    38,305,722Retained earnings, beginning of period
    
    
    202,610,860
    
    
    
    75,921,734
    
    
    
    165,288,311
    
    
    
    56,138,516Retained earnings, end of period
    
    $
    250,498,775
    
    
    $
    94,444,238
    
    
    $
    250,498,775
    
    
    $
    94,444,238Income per common share  basic
    
    $
    0.31
    
    
    $
    0.12
    
    
    $
    0.56
    
    
    $
    0.26Income per common share  fully diluted
    
    $
    0.30
    
    
    $
    0.12
    
    
    $
    0.53
    
    
    $
    0.24Weighted average common shares outstanding  basic
    
    
    152,929,693
    
    
    
    149,929,660
    
    
    
    151,903,632
    
    
    
    149,722,174Weighted average common shares outstanding  fully diluted
    
    
    161,275,842
    
    
    
    159,890,858
    
    
    
    161,067,073
    
    
    
    159,715,394
 2




---



##### 



(Expressed in U.S. Dollars)
    
    Six Months EndedJune 30,2005
    
    2004Cash provided by (used in):Operating activities:Net income
    
    $
    85,210,464
    
    
    $
    38,305,722Add (deduct) items not involving cash:Depletion and depreciation
    
    
    23,895,913
    
    
    
    10,896,704Deferred income taxes
    
    
    46,084,550
    
    
    
    21,083,159Stock compensation
    
    
    1,010,659
    
    
    
    623,523Net changes in non-cash working capital:Restricted cash
    
    
    (878
    )
    
    
    (629
    )Accounts receivable
    
    
    (14,652,671
    )
    
    
    1,588,509Inventory
    
    
    (155,576
    )
    
    
    Prepaid expenses and other current assets
    
    
    (17,917
    )
    
    
    (3,641,480
    )Accounts payable and accrued liabilities
    
    
    26,105,193
    
    
    
    (9,279,205
    )Other long-term obligations
    
    
    388,552
    
    
    
    2,699,709Taxation-payable
    
    
    (130,000
    )
    
    
    Cash provided by operating activities
    
    
    167,738,289
    
    
    
    62,276,012Investing activities:Oil and gas property expenditures
    
    
    (111,001,119
    )
    
    
    (63,673,697
    )Oil and gas property expenditures in accounts payable
    
    
    (14,171,171
    )
    
    
    (10,458,509
    )Inventory
    
    
    (15,185,448
    )
    
    
    4,073,175Purchase of capital assets
    
    
    (762,569
    )
    
    
    (634,196
    )Cash used in investing activities
    
    
    (141,120,307
    )
    
    
    (70,693,227
    )Financing activities:Borrowings on long-term debt, gross
    
    
    13,000,000
    
    
    
    24,000,000Payments on long-term debt, gross
    
    
    (28,000,000
    )
    
    
    (9,000,000
    )Proceeds from exercise of options
    
    
    8,423,075
    
    
    
    744,413Cash
provided by (used in) financing activities
    
    
    (6,576,925
    )
    
    
    15,744,413Increase in cash during the period
    
    
    20,041,057
    
    
    
    7,327,198Cash and cash equivalents, beginning of period
    
    
    16,932,661
    
    
    
    1,834,112Cash and cash equivalents, end of period
    
    $
    36,973,718
    
    
    $
    9,161,310Supplemental disclosures of cash flow informationNon-cash tax benefit of stock options exercised
    
    $
    24,547,479
    
    
    $
    3,223,453
 3




---



##### 



(Expressed in U.S. Dollars)June 30,
    
    December 31,2005
    
    2004AssetsCurrent assetsCash and cash equivalents
    
    $
    36,973,718
    
    
    $
    16,932,661Restricted cash
    
    
    212,839
    
    
    
    211,961Accounts receivable
    
    
    50,401,958
    
    
    
    35,749,287Deferred tax asset
    
    
    1,316,379
    
    
    
    1,327,489Inventory
    
    
    20,491,978
    
    
    
    5,180,024Prepaid expenses and other current assets
    
    
    1,743,760
    
    
    
    1,725,843Total current assets
    
    
    111,140,632
    
    
    
    61,127,265Oil and gas properties, using the full cost method of accountingProved
    
    
    472,342,128
    
    
    
    385,794,926Unproved
    
    
    90,157,488
    
    
    
    88,839,460Capital assets
    
    
    1,824,906
    
    
    
    1,424,367Total assets
    
    $
    675,465,154
    
    
    $
    537,186,018Liabilities and shareholders equityCurrent liabilitiesAccounts payable and accrued liabilities
    
    $
    40,067,492
    
    
    $
    14,238,836Fair value of derivative instrument liability
    
    
    3,750,366
    
    
    
    3,739,406Capital costs accrual
    
    
    38,927,214
    
    
    
    53,118,385Total current liabilities
    
    
    82,745,072
    
    
    
    71,096,627Bank indebtedness
    
    
    87,000,000
    
    
    
    102,000,000Deferred income taxes
    
    
    107,882,558
    
    
    
    86,362,741Other long-term obligations
    
    
    10,492,380
    
    
    
    9,734,904Shareholders equityShare capital
    
    
    140,474,006
    
    
    
    106,513,852Treasury stock
    
    
    (1,193,650
    )
    
    
    (1,193,650
    )Other
comprehensive loss  fair value of derivative instruments
    
    
    (2,433,987
    )
    
    
    (2,616,767
    )Retained earnings
    
    
    250,498,775
    
    
    
    165,288,311Total shareholders equity
    
    
    387,345,144
    
    
    
    267,991,746Total liabilities and shareholders equity
    
    $
    675,465,154
    
    
    $
    537,186,018
 4




---



##### 



DESCRIPTION OF THE BUSINESS:
  1. SIGNIFICANT ACCOUNTING POLICIES:
                5




---



##### 



Three Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004Net income
    
    $
    47,887,915
    
    
    $
    18,522,504
    
    
    $
    85,210,464
    
    
    $
    38,305,722Weighted average common shares outstanding
during the period
    
    
    152,929,693
    
    
    
    149,929,660
    
    
    
    151,903,632
    
    
    
    149,722,174Effect of dilutive instruments
    
    
    8,346,149
    
    
    
    9,961,198
    
    
    
    9,163,441
    
    
    
    9,993,220Weighted average common shares outstanding
during the period including the effects of dilutive
Instruments
    
    
    161,275,842
    
    
    
    159,890,858
    
    
    
    161,067,073
    
    
    
    159,715,394Basic earnings per share
    
    $
    0.31
    
    
    $
    0.12
    
    
    $
    0.56
    
    
    $
    0.26Diluted earnings per share
    
    $
    0.30
    
    
    $
    0.12
    
    
    $
    0.53
    
    
    $
    0.24
      6




---



##### 



Three Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004Net income:As reported
    
    $
    47,887,915
    
    
    $
    18,522,504
    
    
    $
    85,210,464
    
    
    $
    38,305,722Deduct: Fair value of stock options issued
net of tax,
    
    
    (1,649,332
    )
    
    
    (575,202
    )
    
    
    (3,492,631
    )
    
    
    (1,132,978
    )Pro forma
    
    $
    46,238,583
    
    
    $
    17,947,302
    
    
    $
    81,717,833
    
    
    $
    37,172,744Basic earnings per share:As reported
    
    $
    0.31
    
    
    $
    0.12
    
    
    $
    0.56
    
    
    $
    0.26Pro forma
    
    $
    0.30
    
    
    $
    0.12
    
    
    $
    0.54
    
    
    $
    0.25Diluted earnings per share:As reported
    
    $
    0.30
    
    
    $
    0.12
    
    
    $
    0.53
    
    
    $
    0.24Pro forma
    
    $
    0.29
    
    
    $
    0.11
    
    
    $
    0.51
    
    
    $
    0.23
     Six Months EndedJune 30, 2005
    
    June 30, 2004Net income
    
    $
    85,210,464
    
    
    $
    38,305,722Unrealized loss on derivative
instruments, net of tax
    
    
    (2,433,987
    )
    
    
    (6,800,695
    )Total comprehensive income
    
    $
    82,776,477
    
    
    $
    31,505,027
  2. ASSET RETIREMENT OBLIGATIONS:
  7




---



##### 



3. OIL AND GAS PROPERTIES:
 June 30,
    
    December 31,2005
    
    2004Developed Properties:Acquisition, equipment, exploration, drilling and environmental
costs  Domestic
    
    $
    529,444,138
    
    
    $
    429,597,822Acquisition, equipment, exploration, drilling and environmental
costs  China
    
    
    34,685,173
    
    
    
    24,552,316Less accumulated depletion, depreciation and amortization  Domestic
    
    
    (84,570,680
    )
    
    
    (65,099,325
    )Less accumulated depletion, depreciation and amortization  China
    
    
    (7,216,503
    )
    
    
    (3,255,887
    )472,342,128
    
    
    
    385,794,926Unproven Properties:Acquisition and exploration costs  Domestic
    
    
    17,378,645
    
    
    
    16,910,010Acquisition and exploration costs  China
    
    
    72,778,843
    
    
    
    71,929,450Net oil and gas properties
    
    $
    562,499,616
    
    
    $
    474,634,386
 4. LONG-TERM LIABILITIES:
 June 30,
    
    December 31,2005
    
    2004Bank indebtedness
    
    $
    87,000,000
    
    
    $
    102,000,000Other long-term obligations
    
    
    10,492,380
    
    
    
    9,734,904Total long-term debt
    
    $
    97,492,380
    
    
    $
    111,734,904
     5. DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED
STATES:
     8




---



##### 



6. SEGMENT INFORMATION
  Three Months Ended June 30,2005
    
    2004Domestic
    
    China
    
    Total
    
    Domestic
    
    China
    
    TotalOil and gas sales
    
    $
    87,899,347
    
    
    $
    21,598,900
    
    
    $
    109,498,247
    
    
    $
    46,110,290
    
    
    
    
    
    
    $
    46,110,290Costs and Expenses:Depletion and depreciation
    
    
    10,236,718
    
    
    
    2,419,686
    
    
    
    12,656,404
    
    
    
    5,415,985
    
    
    
    
    
    
    
    5,415,985Lease operating expenses
    
    
    2,032,364
    
    
    
    2,166,000
    
    
    
    4,198,364
    
    
    
    1,246,745
    
    
    
    
    
    
    
    1,246,745Production taxes
    
    
    10,204,694
    
    
    
    
    
    
    
    10,204,694
    
    
    
    5,430,719
    
    
    
    
    
    
    
    5,430,719Gathering
    
    
    4,086,231
    
    
    
    
    
    
    
    4,086,231
    
    
    
    2,746,937
    
    
    
    
    
    
    
    2,746,937Operating income
    
    
    61,339,340
    
    
    
    17,013,214
    
    
    
    78,352,554
    
    
    
    31,269,904
    
    
    
    
    
    
    
    31,269,904General and administrative
    
    
    
    
    
    
    
    
    
    
    3,516,253
    
    
    
    
    
    
    
    
    
    
    
    1,713,850Other expense
    
    
    
    
    
    
    
    
    
    
    1,049,070
    
    
    
    
    
    
    
    
    
    
    
    838,832Income before income taxes
    
    
    
    
    
    
    
    
    
    $
    73,787,231
    
    
    
    
    
    
    
    
    
    
    $
    28,717,222Capital expenditures
    
    $
    53,416,720
    
    
    $
    3,768,152
    
    
    $
    57,184,872
    
    
    $
    27,358,587
    
    
    $
    1,326,262
    
    
    $
    28,684,849Net oil and gas properties
    
    $
    462,252,103
    
    
    $
    100,247,513
    
    
    $
    562,499,616
    
    
    $
    273,757,358
    
    
    $
    87,493,335
    
    
    $
    361,250,693
 Six Months Ended June 30,2005
    
    2004Domestic
    
    China
    
    Total
    
    Domestic
    
    China
    
    TotalOil and gas sales
    
    $
    166,809,736
    
    
    $
    31,529,851
    
    
    $
    198,339,587
    
    
    $
    94,729,063
    
    
    
    
    
    
    $
    94,729,063Costs and Expenses:Depletion and depreciation
    
    
    19,906,227
    
    
    
    3,989,686
    
    
    
    23,895,913
    
    
    
    10,896,704
    
    
    
    
    
    
    
    10,896,704Lease operating expenses
    
    
    4,017,670
    
    
    
    3,620,000
    
    
    
    7,637,670
    
    
    
    2,529,669
    
    
    
    
    
    
    
    2,529,669Production taxes
    
    
    19,226,756
    
    
    
    
    
    
    
    19,226,756
    
    
    
    11,100,496
    
    
    
    
    
    
    
    11,100,496Gathering
    
    
    7,716,775
    
    
    
    
    
    
    
    7,716,775
    
    
    
    5,519,134
    
    
    
    
    
    
    
    5,519,134Operating income
    
    
    115,942,308
    
    
    
    23,920,165
    
    
    
    139,862,473
    
    
    
    64,683,060
    
    
    
    
    
    
    
    64,683,060General and administrative
    
    
    
    
    
    
    
    
    
    
    6,692,611
    
    
    
    
    
    
    
    
    
    
    
    3,367,911Other expense
    
    
    
    
    
    
    
    
    
    
    1,874,848
    
    
    
    
    
    
    
    
    
    
    
    1,926,268Income before income taxes
    
    
    
    
    
    
    
    
    
    $
    131,295,014
    
    
    
    
    
    
    
    
    
    
    $
    59,388,881Capital expenditures
    
    $
    100,018,868
    
    
    $
    10,982,251
    
    
    $
    111,001,119
    
    
    $
    57,150,607
    
    
    $
    6,523,090
    
    
    $
    63,673,697Net oil and gas properties
    
    $
    462,252,103
    
    
    $
    100,247,513
    
    
    $
    562,499,616
    
    
    $
    273,757,358
    
    
    $
    87,493,335
    
    
    $
    361,250,693
 9




---



##### 



ITEM 2
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 10




---



##### 



11




---



##### 



ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     Average
    
    UnrealizedRemaining Contract
    
    Volume-
    
    Price /
    
    loss atType
    
    Period
    
    MMBTU / day
    
    MMBTU
    
    6/30/05*Swap
    
    Jul 2005  Dec 2005
    
    
    10,000
    
    
    $
    4.42
    
    
    $
    3,750,367
 Remaining Contract
    
    Volume -
    
    AveragePeriod
    
    MMBTU / day
    
    Price / MMBTUCalendar 2005
    
    
    70,000
    
    
    $
    5.03Apr  Oct 2005
    
    
    10,000
    
    
    $
    6.03Calendar 2006
    
    
    60,000
    
    
    $
    5.60
 .
 12




---



##### 



ITEM 4  CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Controls.
 PART 2  OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
  
     ITEM 5. OTHER INFORMATION
  ITEM 6. EXHIBITS
     13




---



##### 



ULTRA PETROLEUM CORP.-s- Michael D. WatfordDate July 29, 2005
    
    By:Name: Michael D. WatfordTitle: Chief Executive Officer(on behalf of the registrant and as the Principal Financial Officer)
 14




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##### 



Index to Exhibits