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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year ended
    December 31, 2006o

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.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Yukon Territory, Canada(Jurisdiction of
    Incorporation or Organization)

N/A(I.R.S. Employer
    Identification No.)     363 North Sam Houston Parkway East, Suite 1200
 Houston, Texas 77060
 (Address of Principal Executive
    Offices) (Zip Code)
    281-876-0120
    (Registrants Telephone Number, Including Area
    Code)
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Each Class

Name of Each Exchange on Which RegisteredCommon Shares, without par value


American Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ
      Form 10-K.




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##### 



TABLE OF
    CONTENTS
  PagePART ICertain
    Definitions


3Item 1.


Business


6Item 1A.


Risk
    Factors


17Item 1B.


Unresolved Staff
    Comments


24Item 2.


Properties


24Item 3.


Legal
    Proceedings


33Item 4.


Submission of
    Matters to a Vote of Security Holders


33PART IIItem 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


33Item 6.


Selected Financial
    Data


35Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


35Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


45Item 8.


Financial
    Statements and Supplementary Data


47Item 9.


Changes in and
    Disagreements With Accountants on Accounting and Financial
    Disclosures


82Item 9A.


Controls and
    Procedures


82Item 9B.


Other
    Information


84PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance


84Item 11.


Executive
    Compensation


84Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


84Item 13.


Certain
    Relationships, Related Transactions and Auditor
    Independence


84Item 14.


Principal
    Accounting Fees and Services


84PART IVItem 15.


Exhibits, Financial
    Statement Schedules


84Signatures


87SubsidiariesConsent of Netherland, Sewell & Associates, Inc.Consent of Ryder Scott CompanyConsent of Ernst & Young LLPConsent of KPMG LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906   2




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##### Table of Contents



Certain
    Definitions  Terms
    used to describe quantities of oil and natural gas and
    marketing
  
    Bbl  One stock tank barrel, or 42
    U.S. gallons liquid volume, of crude oil or other liquid
    hydrocarbons.
    Bcf  One billion cubic feet of natural gas.
    Bcfe  One billion cubic feet of natural gas
    equivalent.
    BOE  One barrel of oil equivalent, converting
    natural gas to oil at the ratio of 6 Mcf of natural gas to
    1 Bbl of oil.
    BTU  British Thermal Unit.
    CFD  Caofaedian  the Chinese
    designation for the area in Bohai Bay area in the vicinity of
    the 04/36 and 05/36 Blocks, offshore China.
    Condensate  An oil-like liquid produced in
    association with natural gas production that condenses from
    natural gas as it is produced and delivered into a separator or
    similar equipment and collected in tanks at each well prior to
    the delivery of such natural gas to the natural gas gathering
    pipeline system.
    ICP  Indonesian Crude Price.
    MBbl  One thousand barrels.
    Mcf  One thousand cubic feet of natural gas.
    Mcfe  One thousand cubic feet of natural gas
    equivalent, converting oil or condensate to natural gas at the
    ratio of 1 Bbl of oil or condensate to 6 Mcf of
    natural gas.
    MMBbl  One million barrels of oil or other
    liquid hydrocarbons.
    MMcf  One million cubic feet of natural gas.
    MBOE  One thousand BOE.
    MMBOE  One million BOE.
    MMBTU  One million British Thermal Units.  Terms
    used to describe the Companys interests in wells and
    acreage
  
    Gross oil and natural gas wells or acres  The
    Companys gross wells or gross acres represent the total
    number of wells or acres in which the Company owns a working
    interest.
    Net oil and natural gas wells or acres 
    Determined by multiplying gross oil and natural gas
    wells or acres by the working interest that the Company owns in
    such wells or acres represented by the underlying properties.
    Prospect  A location where hydrocarbons such
    as oil and gas are believed to be present in quantities which
    are economically feasible to produce.  Terms
    used to assign a present value to the Companys
    reserves
  
    Standardized measure of discounted future net cash flows,
    after income taxes  The present value, discounted
    at 10%, of the pre-tax future net cash flows attributable to
    estimated net proved reserves. The Company calculates this
    amount by assuming that it will sell the oil and natural gas
    production attributable to the proved reserves estimated in its
    independent engineers reserve report for the oil and
    natural gas spot prices on the last day of the year, adjusted
    for quality and transportation. The Company also assumes that
    the cost to produce the reserves will remain constant at the
    costs prevailing on the date of the report. The assumed costs
    are subtracted from the assumed revenues resulting in a stream
    of future net cash flows. Estimated future income taxes, using
    rates in effect on the date of the report, are deducted from the
    net 3




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cash flow stream. The after-tax cash flows are discounted at 10%
    to result in the standardized measure of the Companys
    proved reserves.  
    Standardized measure of discounted future net cash flows
    before income taxes  The discounted present value
    of proved reserves is identical to the standardized measure
    described above, except that estimated future income taxes are
    not deducted in calculating future net cash flows. The Company
    discloses the discounted present value without deducting
    estimated income taxes to provide what it believes is a better
    basis for comparison of its reserves to the producers who may
    have different income tax rates.  Terms
    used to classify the Companys reserve
    quantities
  Regulation S-X,
  Proved oil and natural gas reserves. Rule 4-10(a)(2).
  (a)
    Reservoirs are considered proved if economic producibility is
    supported by either actual production or conclusive formation
    test. The area of a reservoir considered proved includes
    (1) that portion delineated by drilling and defined by
    gas-oil
    and/or
    oil-water contacts, if any; and (2) the immediately
    adjoining portions not yet drilled, but which can be reasonably
    judged as economically productive on the basis of available
    geological and engineering data. In the absence of information
    on fluid contacts, the lowest known structural occurrence of
    hydrocarbons controls the lower proved limit of the reservoir.  (b)
    Reserves which can be produced economically through application
    of improved recovery techniques (such as fluid injection) are
    included in the proved classification when successful testing by
    a pilot project, or the operation of an installed program in the
    reservoir, provides support for the engineering analysis on
    which the project or program was based.  (c)
    Estimates of proved reserves do not include the following:
    (1) oil that may become available from known reservoirs but
    is classified separately as indicated additional
    reserves; (2) crude oil, natural gas, and natural gas
    liquids, the recovery of which is subject to reasonable doubt
    because of uncertainty as to geology, reservoir characteristics,
    or economic factors; (3) crude oil, natural gas, and
    natural gas liquids, that may occur in undrilled prospects; and
    (4) crude oil, natural gas, and natural gas liquids, that
    may be recovered from oil shales, coal, gilsonite and other such
    sources.  Proved developed reserves Rule 4-10(a)(3).
  Proved undeveloped reserves
  Terms
    used to describe the legal ownership of the Companys oil
    and natural gas properties
  
    Working interest  A real property interest
    entitling the owner to receive a specified percentage of the
    proceeds of the sale of oil and natural gas production or a
    percentage of the production, but requiring the owner of the
    working interest to bear the cost to explore for, develop and
    produce such oil and natural gas. A working interest owner who
    owns a portion of the working interest may participate either as
    operator or by voting his percentage interest to approve or
    disapprove the appointment of an operator and drilling and other
    major activities in connection with the development and
    operation of a property.
    Production sharing contract  A commercial
    contract between the investor and the owner, which allows the
    investor to undertake large scale, long-term investments. The
    purpose of the production sharing contract 4




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is to define the terms and conditions for the exploration and
    development of resources by replacing existing tax and license
    regimes with a contract based arrangement that exists for the
    life of the project.  Terms
    used to describe seismic operations
  
    Seismic data  Oil and natural gas companies
    use seismic data as their principal source of information to
    locate oil and natural gas deposits, both to aid in exploration
    for new deposits and to manage or enhance production from known
    reservoirs. To gather seismic data, an energy source is used to
    send sound waves into the subsurface strata. These waves are
    reflected back to the surface by underground formations, where
    they are detected by geophones which digitize and record the
    reflected waves. Computers are then used to process the raw data
    to develop an image of underground formations.
    2-D
    seismic data 
    2-D seismic
    survey data has been the standard acquisition technique used to
    image geologic formations over a broad area.
    2-D seismic
    data is collected by a single line of energy sources which
    reflect seismic waves to a single line of geophones. When
    processed,
    2-D seismic
    data produces an image of a single vertical plane of
    sub-surface
    data.
    3-D
    seismic data 
    3-D seismic
    data is collected using a grid of energy sources, which are
    generally spread over several miles. A
    3-D survey
    produces a three dimensional image of the subsurface geology by
    collecting seismic data along parallel lines and creating a cube
    of information that can be divided into various planes, thus
    improving visualization. Consequently,
    3-D seismic
    data is generally considered a more reliable indicator of
    potential oil and natural gas reservoirs in the area evaluated. 5




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PART I
  Item 1.
    Business.  Business Corporations Act
        Form 10-K, Form 10-Q, Form 8-K, (281) 876-0120.
  and/or 1-800-SEC-0330.
 6




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Business
    Strategy
  Green
    River Basin, Wyoming
  40-acre (40-acre section (10-acre 80-acre (10-acre 80-acre (5-acre
  Bohai
    Bay, China
  11-1, 11-2, 11-3, 11-5, 11-6, 12-1 12-1S
  Pennsylvania
    Marketing
    and Pricing
   7




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Natural
    Gas Marketing
         8




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9




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Oil
    Marketing
  Sino-American 12-1 12-1 11-6
        Environmental
    Matters
  rights-of-way
 10




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80-acre 80-acre 80-acre 80-acre 80-acre
    40-acres. 40-acre
 11




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40-acre 40-acre 10-acres. 10-acre 20-acre 40-acre
  2004-2005. 2005-2006 2013-2014
  2004-2005; 2005-2006 2013-2014;
     12




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2005-2006
      rights-of-way
    Regulation
  Oil
    and Gas Regulation
   13




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cost-of-service
    on-site and/or
    Risk Factors
  Environmental
    Regulations
  General.
 14




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Solid and Hazardous Waste.
    Superfund.
  National Environmental Policy Act.
 15




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Oil Pollution Act.
  Air Emissions.
  Clean Water Act.
  Endangered Species Act and the Migratory Bird Treaty
    Act.
  OSHA and other Regulations. right-to-know and/or
   16




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Employees
    Item 1A.
    Risk
    Factors.  There
    are inherent limitations in all control systems and failure of
    our controls and procedures to detect error or fraud could
    seriously harm our business and results of
    operations.
    Our
    reserve estimates may turn out to be incorrect if the
    assumptions upon which these estimates are based are inaccurate.
    Any material inaccuracies in these reserve estimates or
    underlying assumptions will materially affect the quantities and
    present value of our reserves.
    Competitive
    industry conditions may negatively affect our ability to conduct
    operations.
      
    our access to the capital necessary to drill wells and acquire
    properties;
    our ability to acquire and analyze seismic, geological and other
    information relating to a property; 17




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
    our ability to retain the personnel necessary to properly
    evaluate seismic and other information relating to a
    property; and
    our ability to access platforms and pipelines, and the locations
    of facilities used to produce and transport oil and natural gas
    production.  Factors
    beyond our control affect our ability to effectively market
    production and may ultimately affect our financial
    results.
    
    the extent of domestic production and imports of oil and natural
    gas;
    the availability of pipeline capacity;
    the proximity of natural gas production to those natural gas
    pipelines;
    the effects of inclement weather;
    the demand for oil and natural gas by utilities and other end
    users;
    the availability of alternative fuel sources;
    state and federal regulations of oil and natural gas marketing;
    and
    federal regulation of natural gas sold or transported in
    interstate commerce.    We may
    experience a temporary decline in revenues if we lose one of our
    significant customers.
    A
    decrease in oil and natural gas prices may adversely affect our
    results of operations and financial condition.
     18




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A
    price decrease may more adversely affect the price received for
    our Wyoming production than production in other
    U.S. regions.
  and/or
  Compliance
    with environmental and other government regulations could be
    costly and could negatively impact our production.
    
    require that we acquire permits before commencing drilling;
    restrict the substances that can be released into the
    environment in connection with drilling and production
    activities;
    limit or prohibit drilling activities on protected areas such as
    wetlands or wilderness areas;
    require remedial measures to mitigate pollution from former
    operations, such as plugging abandoned wells; and
    require governmental approval of the overall development plan
    prior to the start of development of fields in China.  clean-up
  on-site and/or
 19




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We may
    not be able to replace our reserves or generate cash flows if we
    are unable to raise capital. We will be required to make
    substantial capital expenditures to develop our existing
    reserves and to discover new oil and gas reserves.
      Our
    operations may be interrupted by severe weather or drilling
    restrictions, particularly in the Rocky Mountain
    region.
    Our
    focus on exploration projects increases the risks inherent in
    our oil and gas activities.
    Unless
    we are able to replace reserves which we have produced, our cash
    flows and production will decrease over time.
   20




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We are
    exposed to operating hazards and uninsured risks that could
    adversely impact our results of operations and cash
    flow.
    There
    are risks associated with our drilling activity that could
    impact our results of operations.
    Our
    decision to drill a prospect is subject to a number of factors
    which may alter our drilling schedule or our plans to drill at
    all.
    
    receipt of additional seismic data or reprocessing of existing
    data;
    material changes in oil or natural gas prices;
    the costs and availability of drilling equipment;
    success or failure of wells drilled in similar formations or
    which would use the same production facilities;
    availability and cost of capital;
    changes in the estimates of costs to drill or complete wells;
    the approval of partners to participate in the drilling or, in
    the case of CNOOC, approval of expenditures for budget purposes;
    our ability to attract other industry partners to acquire a
    portion of the working interest to reduce exposure to costs and
    drilling risks;
    decisions of our joint working interest owners; and
    the BLMs interpretation of an EIS and the results of the
    permitting process.   21




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If oil
    and natural gas prices decrease, we may be required to take
    write-downs of the carrying value of our oil and gas
    properties.
  and/or country-by-country
  We are
    not the operator, and have limited influence over the
    operations, of our Bohai Bay properties.
    Political,
    economic or legal factors associated with our ownership of
    properties in China could impact our results of
    operations.
    
    loss of revenue, property and equipment as a result of
    expropriation, nationalization, war or insurrections;
    increases in taxes and governmental royalties;
    renegotiation of contracts with governmental entities and
    quasi-governmental agencies;
    change in laws and policies governing operations of foreign
    based companies;
    labor problems;
    other uncertainties arising out of foreign government
    sovereignty over its international operations; and
    currency restrictions and exchange rate fluctuations.   22




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15-years
  Our
    operations in China have special operational risks that may
    negatively affect the value of those assets.
  and/or
  Forward-Looking
    Statements
      
    our oil and natural gas reserve quantities, and the discounted
    present value of those reserves;
    the amount and nature of our capital expenditures;
    drilling of wells;
    the timing and amount of future production and operating costs;
    business strategies and plans of management; and
    prospect development and property acquisitions.    
    general economic conditions;
    the volatility of oil and natural gas prices;
    the uncertainty of estimates of oil and natural gas reserves;
    the impact of competition;
    the availability and cost of seismic, drilling and other
    equipment;
    operating hazards inherent in the explorations for and
    production of oil and natural gas;
    difficulties encountered during the explorations for and
    production of oil and natural gas; 23




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
    difficulties encountered in delivering oil and natural gas to
    commercial markets;
    changes in customer demand and producers supply;
    the uncertainty of our ability to attract capital;
    compliance with, or the effect of changes in, the extensive
    governmental regulations regarding the oil and natural gas
    business;
    actions of operators of our oil and natural gas properties; and
    weather conditions.    Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.  Location
    and Characteristics
  10-year 30-years 30-years.
  Green
    River Basin, Wyoming
    Exploratory Wells.
 24




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Development Wells.
  Bohai
    Bay, China
  Block 04/36: 11-1 11-2 11-3 11-5
  Block 05/36:
  Block 04/36 and Block 05/36 Unitized
    Development: 11-6 12-1 12-1S
  Exploration/Appraisal Activity:
  Development Activity: 11-1 11-2 11-1 11-2 11-3 11-5 11-3 11-5 11-6, 12-1 12-1S 11-6, 12-1 12-1S
   25




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15-year 10-years,
  Pennsylvania
    Exploratory Wells.
 26




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Oil and
    Gas Reserves
    December 31,2006


2005


2004(In thousands)Proved Undeveloped ReservesNatural gas (MMcf)


1,415,132



1,264,632



899,315Oil (MBbl)


11,321



10,117



7,195Proved Developed ReservesNatural gas (MMcf)


842,969



635,591



514,686Oil (MBbl)


6,522



5,087



4,195Total Proved Reserves (MMcfe)


2,365,159



1,991,447



1,482,341Estimated future net cash flows,
    before income tax

$
6,590,206


$
12,067,267


$
5,889,630Standardized measure of discounted
    future net cash flows, before income taxes(1)

$
2,690,464


$
5,311,312


$
2,438,837Future income tax

$
905,384


$
1,809,228


$
823,372Standardized measure of discounted
    future net cash flows, after income tax

$
1,785,080


$
3,502,084


$
1,615,465Calculated weighted average price
    at December 31,Gas ($/Mcf)  WY

$
4.50


$
8.00


$
5.46Gas ($/Mcf)  PA

$
5.51







Oil ($/Bbl)

$
59.95


$
60.81


$
42.80     (1)
    
    Management believes that the presentation of the standardized
    measure of discounted future net cash flows, before income
    taxes, of estimated proved reserves, discounted at 10% per
    annum, may be considered a non-GAAP financial measure as defined
    in Item 10(e) of
    Regulation S-K,
    therefore the Company has included this reconciliation of the
    measure to the most directly comparable GAAP financial measure
    (Standardized measure of discounted future net cash flows, after
    income taxes). Management believes that the presentation of the
    standardized measure of future net cash flows before income
    taxes, provides useful information to investors because it is
    widely used by professional analysts and sophisticated investors
    in evaluating oil and gas companies. Because many factors that
    are unique to each individual company may impact the amount of
    future income taxes to be paid, the use of the pre-tax measure
    provides greater comparability when evaluating companies. It is
    relevant and useful to investors for evaluating the relative
    monetary significance of the Companys oil and natural gas
    properties. Further, investors may utilize the measure as a
    basis for comparison of the relative size and value of the
    Companys reserves to other companies. The standardized
    measure of discounted future net cash flows, before income
    taxes, is not a measure of financial or operating performance
    under GAAP, nor is it intended to represent the current market
    value of the estimated oil and natural gas reserves owned by the
    Company. Standardized measure of discounted future net cash
    flows, before income taxes, should not be considered in
    isolation or as a substitute for the standardized measure of
    discounted future net cash flows as defined under GAAP. 27




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December 31,2006


2005


2004(In thousands)Proved Undeveloped ReservesNatural gas (MMcf)










Oil (MBbl)


1,301



2,577



3,231Proved Developed ReservesNatural gas (MMcf)










Oil (MBbl)


2,686



2,484



4,356Total Proved Reserves (MMcfe)


23,922



30,366



45,526Estimated future net cash flows,
    before income tax

$
111,994


$
166,931


$
137,762Standardized measure of discounted
    future net cash flows, before income taxes(1)

$
91,984


$
134,271


$
103,518Future Income Tax

$
5,511


$
59,861


$
49,647Standardized measure of discounted
    future net cash flows, after income tax

$
86,473


$
74,410


$
53,871Calculated weighted average price
    at December 31, Oil ($/Bbl)

$
46.57


$
48.74


$
29.46     (1)
    
    Management believes that the presentation of the standardized
    measure of discounted future net cash flows, before income
    taxes, of estimated proved reserves, discounted at 10% per
    annum, may be considered a non-GAAP financial measure as defined
    in Item 10(e) of
    Regulation S-K,
    therefore the Company has included this reconciliation of the
    measure to the most directly comparable GAAP financial measure
    (Standardized measure of discounted future net cash flows, after
    income taxes). Management believes that the presentation of the
    standardized measure of future net cash flows, before income
    taxes, provides useful information to investors because it is
    widely used by professional analysts and sophisticated investors
    in evaluating oil and gas companies. Because many factors that
    are unique to each individual company may impact the amount of
    future income taxes to be paid, the use of the pre-tax measure
    provides greater comparability when evaluating companies. It is
    relevant and useful to investors for evaluating the relative
    monetary significance of the Companys oil and natural gas
    properties. Further, investors may utilize the measure as a
    basis for comparison of the relative size and value of the
    Companys reserves to other companies. The standardized
    measure of discounted future net cash flows, before income
    taxes, is not a measure of financial or operating performance
    under GAAP, nor is it intended to represent the current market
    value of the estimated oil and natural gas reserves owned by the
    Company. Standardized measure of discounted future net cash
    flows, before income taxes, should not be considered in
    isolation or as a substitute for the standardized measure of
    discounted future net cash flows as defined under GAAP. 28




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December 31,2006


2005


2004(In thousands)Proved Undeveloped ReservesNatural gas (MMcf)


1,415,132



1,264,632



899,315Oil (MBbl)


12,622



12,694



10,426Proved Developed ReservesNatural gas (MMcf)


842,969



635,591



514,686Oil (MBbl)


9,208



7,571



8,551Total Proved Reserves (MMcfe)


2,389,081



2,021,813



1,527,867Estimated future net cash flows,
    before income tax

$
6,702,200


$
12,234,198


$
6,027,392Standardized measure of discounted
    future net cash flows, before income taxes(1)

$
2,782,448


$
5,445,583


$
2,542,355Future income tax

$
910,895


$
1,869,089


$
873,019Standardized measure of discounted
    future net cash flows, after income tax

$
1,871,553


$
3,576,494


$
1,669,336     (1)
    
    Management believes that the presentation of the standardized
    measure of discounted future net cash flows, before income
    taxes, of estimated proved reserves, discounted at 10% per
    annum, may be considered a non-GAAP financial measure as defined
    in Item 10(e) of
    Regulation S-K,
    therefore the Company has included this reconciliation of the
    measure to the most directly comparable GAAP financial measure
    (Standardized measure of discounted future net cash flows, after
    income taxes). Management believes that the presentation of the
    standardized measure of future net cash flows, before income
    taxes, provides useful information to investors because it is
    widely used by professional analysts and sophisticated investors
    in evaluating oil and gas companies. Because many factors that
    are unique to each individual company may impact the amount of
    future income taxes to be paid, the use of the pre-tax measure
    provides greater comparability when evaluating companies. It is
    relevant and useful to investors for evaluating the relative
    monetary significance of the Companys oil and natural gas
    properties. Further, investors may utilize the measure as a
    basis for comparison of the relative size and value of the
    Companys reserves to other companies. The standardized
    measure of discounted future net cash flows, before income
    taxes, is not a measure of financial or operating performance
    under GAAP, nor is it intended to represent the current market
    value of the estimated oil and natural gas reserves owned by the
    Company. Standardized measure of discounted future net cash
    flows, before income taxes, should not be considered in
    isolation or as a substitute for the standardized measure of
    discounted future net cash flows as defined under GAAP. 29




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##### Table of Contents



Production
    Volumes, Average Sales Prices and Average Production
    Costs
    Year Ended December 31,2006


2005


2004ProductionNatural gas (Mcf)


78,395,453



61,722,349



43,667,384Oil (Bbl)  US


594,128



464,330



349,673Oil (Bbl)  China


1,603,360



1,556,280



624,560Total (Mcfe)


91,580,381



73,846,009



49,512,782RevenuesNatural Gas sales

$
470,324,244


$
422,091,034


$
224,207,694Oil sales  US


38,335,280



26,639,931



14,659,219Oil sales  China


84,008,059



67,762,036



20,179,534Total Revenues

$
592,667,583


$
516,493,001


$
259,046,447Lease Operating
    ExpensesProduction costs  US(a)

$
15,067,413


$
9,047,390


$
6,286,715Production costs 
    China(a)


8,922,400



7,352,000



2,286,000Severance/production
    taxes  US


57,899,339



52,689,060



28,151,661Severance/production
    taxes  China


8,398,473



3,388,089



1,009,098Gathering


19,721,269



17,125,147



13,135,809Total Lease Operating Expenses

$
110,008,894


$
89,601,686


$
50,869,283Realized PricesNatural Gas ($/Mcf, including
    hedges)

$
6.00


$
6.84


$
5.13Natural Gas ($/Mcf, excluding
    financial hedges)(b)

$
6.00


$
6.99


$
5.32Oil ($/Bbl)  US

$
64.52


$
57.37


$
41.92Oil ($/Bbl)  China

$
52.40


$
43.57


$
32.31Operating Costs per
    McfeProduction costs

$
0.26


$
0.22


$
0.17Severance/production taxes

$
0.72


$
0.76


$
0.59Gathering

$
0.22


$
0.23


$
0.27DD&A

$
1.02


$
0.79


$
0.61Interest

$
0.04


$
0.04


$
0.08Total Operating Costs per Mcfe

$
2.26


$
2.04


$
1.72     (a)
    
    Production costs include lifting costs and remedial workover
    expenses.(b)
    
    In addition to our financial hedges and to a larger extent, we
    sell a portion of our production pursuant to fixed price forward
    natural gas sales contracts. During 2004, 2005 and 2006, we sold
    12.1 MMBtu (24%), 22.2 MMBtu (30%) and 20.4 MMBtu
    (22%) pursuant to these contracts, respectively. The average
    price we received for production sold pursuant to term fixed
    price contracts was $4.40, $5.95 and $5.86 per MMBtu in
    2004, 2005 and 2006, respectively. The average spot price (as
    measured by the Inside FERC First of Month Index for
    Northwest Pipeline  Rocky Mountains) was $5.24, $6.96
    and $5.66 per MMBtu in 2004, 2005 and 2006, respectively.
    If we had sold the production we sold under the fixed price
    contracts at spot market prices during these periods, we may
    have received more or less than these prices, because the amount
    of production 30




---



##### Table of Contents



we sell could have influenced the spot market prices in the
    areas in which we produce and because we are able to select
    among several market indices when selling our production.  Productive
    Wells
    Productive Wells*

Gross Wells


Net WellsDomesticNatural Gas and Condensate


488.00



209.70ChinaChina Oil


79.00



6.89TOTAL


567.00



216.59     *
    
    Productive wells are producing wells plus shut-in wells the
    Company deems capable of production. A gross well is a well in
    which a working interest is owned. The number of net wells
    represents the sum of fractional working interests the Company
    owns in gross wells.  Oil and
    Gas Acreage
    United
    States Acreage:
  Developed Acres


Undeveloped AcresGross


Net


Gross


NetWyoming


15,067



6,404



132,850



73,162Pennsylvania


320



320



232,691



124,271Texas


80



14







All States


15,467



6,738



365,541



197,433     Bohai
    Bay Acreage:
  Developed Acres


Undeveloped AcresGross


Net


Gross


NetBlock 04/36


40,377



3,598



413,623



75,197Block 05/36


15,221



1,119



218,079



50,376Total Bohai Acreage


55,598



4,717



631,702



125,573  31




---



##### Table of Contents



Drilling
    Activities
    Wyoming 
    Green River Basin
  2006


2005


2004Gross


Net


Gross


Net


Gross


NetDevelopment WellsProductive


80.00



38.44



60.00



23.68



34.00



14.48Dry


0.00



0.00



0.00



0.00



0.00



0.00Total


80.00



38.44



60.00



23.68



34.00



14.48     2006


2005


2004Gross


Net


Gross


Net


Gross


NetExploratory WellsProductive


44.00



19.79



18.00



8.62



32.00



14.00Dry


0.00



0.00



0.00



0.00



0.00



0.00Total


44.00



19.79



18.00



8.62



32.00



14.00     Pennsylvania
  2006


2005


2004Gross


Net


Gross


Net


Gross


NetExploratory WellsProductive


0.00



0.00



1.00



1.00



0.00



0.00Dry


0.00



0.00



0.00



0.00



0.00



0.00Total


0.00



0.00



1.00



1.00



0.00



0.00     Texas
  2006


2005


2004Gross


Net


Gross


Net


Gross


NetExploratory WellsProductive


0.00



0.00



0.00



0.00



0.00



0.00Dry


0.00



0.00



0.00



0.00



1.00



0.73Total


0.00



0.00



0.00



0.00



1.00



0.73  32




---



##### Table of Contents



China 
    Bohai Bay
  2006


2005


2004Gross


Net


Gross


Net


Gross


NetDevelopment WellsProductive


26.00



2.16



17.00



1.52



36.00



3.21Dry


0.00



0.00



0.00



0.00



0.00



0.00Total


26.00



2.16



17.00



1.52



36.00



3.21Exploratory WellsProductive and Successful
    Appraisal*


0.00



0.00



0.00



0.00



0.00



0.00Dry


1.00



0.23



1.00



0.18



1.00



0.18Total


1.00



0.23



1.00



0.18



1.00



0.18     *
    
    A successful appraisal well is a well that is drilled into a
    formation shown to be productive of oil or natural gas by an
    earlier well for the purpose of obtaining more information about
    the reservoir.  Item 3.
    Legal
    Proceedings.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.    PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  intra-day
  AMERICAN
    STOCK EXCHANGE (US$)
  2006

High


LowFirst Quarter

$
70.00


$
49.65Second Quarter

$
68.60


$
44.40Third Quarter

$
61.84


$
41.80Fourth Quarter

$
56.80


$
44.60   AMERICAN
    STOCK EXCHANGE (US$)
  2005

High


LowFirst Quarter

$
29.17


$
22.20Second Quarter

$
30.50


$
21.48Third Quarter

$
57.89


$
30.36Fourth Quarter

$
60.32


$
45.10  33




---



##### Table of Contents



MaximumNumber (orApproximate DollarValue) of SharesTotal Number of Shares


that may yet beTotal Number


Average Price


Purchased as Part of


Purchasedof Shares


Paid


Publicly Announced


Under the Plans orPeriod

Purchased


Per Share


Plans or Programs


ProgramsMay 1 - May 31, 2006


283,417


$
56.29



283,417


$
984 millionJune 1 - June 30, 2006


1,147,157


$
50.03



1,147,157


$
927 millionJuly 1 - July 31, 2006


572,858


$
53.14



572,858


$
896 millionAug 1 - Aug 31, 2006


278,900


$
53.02



278,900


$
881 millionSept 1 - Sept 30, 2006


1,198,700


$
46.50



1,198,700


$
826 millionOct 1 - Oct 31, 2006


488,500


$
47.56



488,500


$
802 millionNov 1 - Nov 30, 2006













$
802 millionDec 1 - Dec 31, 2006













$
802 millionTOTAL


3,969,532


$
49.77



3,969,532


$
802 million  34




---



##### Table of Contents



Item 6.
    Selected
    Financial Data.    Year Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share data)Statement of Operations DataRevenues:Natural gas sales

$
470,324


$
422,091


$
224,208


$
114,841


$
38,503Oil sales


122,343



94,402



34,839



6,740



3,839Interest and other


1,943



612



91



37



23Total revenues

$
594,610


$
517,105


$
259,138


$
121,618


$
42,365Expenses:Production expenses and taxes


110,009



89,602



50,869



25,224



11,411Depreciation, depletion and
    amortization


93,499



58,103



30,249



16,216



9,712General and administrative


13,378



11,484



6,152



5,733



4,199Stock compensation


1,557



2,859



924



1,018



1,211Interest


3,909



3,286



3,783



2,851



2,691Total expenses


222,352



165,333



91,977



51,042



29,224Income before income taxes


372,258



351,772



167,160



70,576



13,141Income tax provision


141,063



123,472



58,010



25,254



5,059Net income

$
231,195


$
228,300


$
109,150


$
45,323


$
8,082Basic income per common share

$
1.50


$
1.49


$
0.73


$
0.31


$
0.05Diluted income per common share

$
1.43


$
1.41


$
0.68


$
0.29


$
0.05Statement of Cash Flows DataNet cash provided by (used in):Operating activities

$
435,857


$
414,353


$
175,343


$
90,051


$
21,490Investing activities


(454,840
)


(306,547
)


(165,014
)


(103,622
)


(64,360
)Financing activities


(10,705
)


(80,344
)


4,770



13,988



42,908Balance Sheet DataCash and cash equivalents

$
14,707


$
44,395


$
16,933


$
1,834


$
1,418Working capital (deficit)


(41,429
)


42,713



(9,969
)


(22,057
)


(4,415
)Oil and gas properties


1,119,368



702,663



474,634



307,864



207,362Total assets


1,257,769



847,266



537,186



345,770



221,874Total long-term debt


165,000







102,000



99,000



86,000Other long-term obligations


26,573



20,577



9,735



5,120



3,859Deferred income taxes, net


250,925



155,746



85,035



33,446



10,033Total shareholders equity


629,005



571,201



267,992



149,453



104,067   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.   35




---



##### Table of Contents



2002-2006
        2006


2005


2004


2003Production  Bcfe


91.6



73.8



49.5



28.9     Critical
    Accounting Policies
   36




---



##### Table of Contents



Oil and Gas Reserves. Rule 4-10(a) Regulation S-X
      Full Cost Method of Accounting. units-of-production
    country-by-country
  and/or
 37




---



##### Table of Contents



Asset Retirement Obligation. period-to-period
  Entitlements Method of Accounting for Oil and Natural Gas
    Sales.
  Make-up
  Valuation of Deferred Tax Assets.
    Commodity Derivative Instruments and Hedging
    Activities. and/or and/or
 38




---



##### Table of Contents



Legal, Environmental and Other
    Contingencies. and/or
  Share-Based Payment Arrangements.
       39




---



##### Table of Contents



Recently issued accounting pronouncements.
     40




---



##### Table of Contents



Results
    of Operations  Year Ended December 31, 2006
    Compared to Year Ended December 31, 2005
                 41




---



##### Table of Contents



U.S.-Canada
    For the Year-Ended December 31,2006


2005$


Rate


$


RateCurrent:China

$
18,941,127



5.1
%

$
3,564,990



1.0
%United States


16,543,461



4.4
%

$
50,636,118



14.4
%Withholding taxes 
    stock distribution


10,400,543



2.8
%






0.0
%Deferred tax expense


95,178,288



25.6
%


69,270,977



19.7
%Total Income Tax Provision

$
141,063,419



37.9
%

$
123,472,085



35.1
%Deferred taxes payable

$
(95,178,288
)


(25.6
)%

$
(69,270,977
)


(19.7
)%Stock option benefits


(10,502,522
)


(2.8
)%


(50,636,118
)


(14.4
)%Current net cash tax liability

$
35,382,609



9.5
%

$
3,564,990



1.0
%   Results
    of Operations  Year Ended December 31, 2005
    Compared to Year Ended December 31, 2004
         42




---



##### Table of Contents



Liquidity
    and Capital Resources
         43




---



##### Table of Contents



Sino-American
          Off-Balance
    Sheet Arrangements
    Contractual
    Obligations
    Payments Due by Period:Less Than








More ThanTotal


One Year


1-3 Years


3-5 Years


5 YearsLong-term debt

$
165,000,000


$



$



$
165,000,000


$
Drilling contracts


136,990,625



74,848,535



62,142,090







Operating leases


799,026



799,026











Office space lease


636,157



408,347



227,810







Total contractual obligations

$
303,425,808


$
76,055,908


$
62,369,900


$
165,000,000


$
   2006-2009
   44




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.     45




---



##### Table of Contents



Volume


AverageContract Period

MMbtu/Day


Price/MMbtuApril 2007 - October 2007


40,000


$
6.20     Volume


AverageContract Period

MMbtu/Day


Price/MMbtuCalendar 2008


60,000


$
6.63  46




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data.  MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
    Rules 13a-15(f).
    
      47




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                
    48




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           KPMG
    LLP
    49




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              
    50




---



##### Table of Contents



ULTRA
    PETROLEUM CORP.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2006


2005(Expressed in U.S. dollars)ASSETSCurrent assetsCash and cash equivalents

$
14,706,855


$
44,394,775Restricted cash


667,332



213,899Accounts receivable


90,098,871



75,656,031Deferred tax asset


8,266,499



Inventory


19,337,214



22,062,585Prepaid drilling costs and other
    current assets


3,493,731



128,044Total current assets


136,570,502



142,455,334Oil and gas properties, using the
    full cost method of accounting
    Proved


1,048,307,743



612,960,790Unproved


71,060,353



89,702,465Capital assets


1,830,039



2,147,528TOTAL ASSETS

$
1,257,768,637


$
847,266,117LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable and accrued
    liabilities

$
76,290,552


$
49,297,861Current taxes payable


6,842,057



3,564,990Capital cost accrual


94,866,741



46,879,289Total current liabilities


177,999,350



99,742,140Long-term debt


165,000,000



Deferred income tax liability


259,191,252



155,746,465Other long-term obligations


26,573,220



20,576,574Shareholders equity:Common stock  no par
    value; authorized  unlimited; issued and
    outstanding  151,795,633 and 155,075,864 at
    December 31, 2006 and 2005, respectively


5,414,421



178,806,030Treasury stock


(1,193,650
)


(1,193,650
)Retained earnings


624,784,044



393,588,558Total shareholders equity


629,004,815



571,200,938Commitments and contingencies
    (Note 12)TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
1,257,768,637


$
847,266,117       /s/  Michael D. Watford,
    Chairman
    of the Board, Chief Executive Officer
    and President

/s/  Stephen J.
    McDaniel, Director  51




---



##### Table of Contents



ULTRA
    PETROLEUM CORP.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
  Year Ended December 31,2006


2005


2004(Expressed in U.S. Dollars)REVENUES:Natural gas sales

$
470,324,244


$
422,091,034


$
224,207,694Oil sales


122,343,339



94,401,967



34,838,753592,667,583



516,493,001



259,046,447EXPENSES:Production expenses and taxes,
    excluding depreciation and amortization


110,008,894



89,601,686



50,869,283Depletion, depreciation and
    amortization


93,498,556



58,102,871



30,249,061General and administrative,
    excluding depreciation and amortization


14,935,103



14,342,178



7,075,720218,442,553



162,046,735



88,194,064OPERATING INCOME


374,225,030



354,446,266



170,852,383OTHER INCOME (EXPENSE):Interest income


1,943,121



612,153



90,760Interest expense


(3,909,246
)


(3,286,087
)


(3,783,070
)(1,966,125
)


(2,673,934
)


(3,692,310
)INCOME BEFORE INCOME TAXES


372,258,905



351,772,332



167,160,073Income tax provision


141,063,419



123,472,085



58,010,278NET INCOME


231,195,486



228,300,247



109,149,795RETAINED EARNINGS, beginning of
    year


393,588,558



165,288,311



56,138,516RETAINED EARNINGS, end of year

$
624,784,044


$
393,588,558


$
165,288,311NET INCOME PER COMMON
    SHARE  BASIC

$
1.50


$
1.49


$
0.73NET INCOME PER COMMON
    SHARE  DILUTED

$
1.43


$
1.41


$
0.68Weighted average common shares
    outstanding  basic


153,878,715



153,100,067



149,735,666Weighted average common shares
    outstanding  diluted


161,614,570



161,943,400



161,205,534    52




---



##### Table of Contents



ULTRA
    PETROLEUM CORP.
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  AccumulatedOtherComprehensive





TotalShares


Common


Retained


Income


Treasury


ShareholdersIssued


Stock


Earnings


(Loss)


Stock


EquityBalances at December 31, 2003


149,095,336



97,448,221



56,138,516



(2,940,357
)


(1,193,650
)


149,452,730Stock options exercised


1,106,600



1,770,099















1,770,099Employee stock plan grants


33,000



560,175















560,175Fair value of non-employee stock
    option grants






100,550















100,550Tax benefit of stock options
    exercised






6,634,807















6,634,807Comprehensive earnings:Net earnings










109,149,795











109,149,795Change in derivative instruments
    fair value














323,590







323,590Total comprehensive earnings






















109,473,385Balances at December 31, 2004


150,234,936



106,513,852



165,288,311



(2,616,767
)


(1,193,650
)


267,991,746Stock options exercised


4,793,700



20,266,680















20,266,680Employee stock plan grants


47,228



1,389,380















1,389,380Tax benefit of stock options
    exercised






50,636,118















50,636,118Comprehensive earnings:Net earnings










228,300,247











228,300,247Change in derivative instruments
    fair value














2,616,767







2,616,767Total comprehensive earnings






















230,917,014Balances at December 31, 2005


155,075,864



178,806,030



393,588,558







(1,193,650
)


571,200,938Stock options exercised


655,900



9,202,730















9,202,730Employee stock plan grants


33,401



2,141,003















2,141,003Shares repurchased and retired


(3,969,532
)


(197,551,398
)














(197,551,398
)Fair value of employee stock option
    grants






2,313,534















2,313,534Tax benefit of stock options
    exercised






10,502,522















10,502,522Comprehensive earnings:Net earnings










231,195,486











231,195,486Total comprehensive earnings






















231,195,486Balances at December 31, 2006


151,795,633


$
5,414,421


$
624,784,044


$



$
(1,193,650
)

$
629,004,815    53




---



##### Table of Contents



ULTRA
    PETROLEUM CORP.
  CONSOLIDATED
    STATEMENTS OF CASH FLOW
  Year Ended December 31,2006


2005


2004Cash flows from operating
    activities:Net income

$
231,195,486


$
228,300,247


$
109,149,795Adjustments to reconcile net
    income to net cash provided by operating activities:Depletion, depreciation and
    amortization


93,498,556



58,102,871



30,249,061Deferred and current non-cash
    income taxes


105,680,810



69,270,977



57,748,452Tax benefit of stock options
    exercised






50,636,118



Stock compensation


1,556,767



2,858,515



923,623Excess tax benefit from stock
    based compensation


(10,502,522
)






Net changes in working capital:Restricted cash


(453,433
)


(1,938
)


(1,292
)Accounts receivable


(14,442,840
)


(39,906,744
)


(16,400,426
)Inventory


664,409



(518,576
)


(275,424
)Prepaid expenses and other current
    assets


(3,365,687
)


1,597,799



(14,106
)Accounts payable and accrued
    liabilities


26,592,691



32,518,107



(10,169,082
)Other long-term obligations


2,155,923



7,931,130



3,870,179Taxation payable


3,277,067



3,564,990



261,826Net cash provided by operating
    activities


435,857,227



414,353,496



175,342,606Cash flows from investing
    activities:Oil and gas property expenditures


(503,881,901
)


(282,668,055
)


(195,598,484
)Change in capital costs accrual


47,987,452



(6,239,096
)


22,501,473Inventory


1,677,260



(16,054,472
)


9,037,557Purchase of capital assets


(622,815
)


(1,585,819
)


(954,702
)Net cash (used in) investing
    activities


(454,840,004
)


(306,547,442
)


(165,014,156
)Cash flows from financing
    activities:Borrowings of long-term debt, gross


165,000,000



22,000,000



44,000,000Payments on long-term debt, gross






(124,000,000
)


(41,000,000
)Repurchased shares


(197,551,398
)






Proceeds from issuance of common
    stock


9,202,730



20,266,680



1,770,099Excess tax benefit from stock
    based compensation


10,502,522







Stock issued for compensation


2,141,003



1,389,380



Net cash (used in) provided by
    financing activities


(10,705,143
)


(80,343,940
)


4,770,099Net (decrease)/increase in cash
    and cash equivalents


(29,687,920
)


27,462,114



15,098,549Cash and cash equivalents,
    beginning of year


44,394,775



16,932,661



1,834,112Cash and cash equivalents, end of
    year

$
14,706,855


$
44,394,775


$
16,932,661SUPPLEMENTAL INFORMATIONCash paid for:Interest

$
1,912,949


$
3,393,279


$
3,783,070Income taxes

$
21,379,990


$
326,502


$
153,905Non-cash tax benefit of stock
    options exercised





$
50,636,118


$
6,634,807    54




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in U.S. dollars unless otherwise noted)
 Years ended December 31, 2006, 2005 and 2004
  DESCRIPTION
    OF THE BUSINESS
    1.
    SIGNIFICANT
    ACCOUNTING POLICIES:  Basis of presentation and principles of
    consolidation: Sino-American
  Accounting principles:
  Cash and cash equivalents:
  Restricted cash:
  Capital assets:
  Oil and natural gas properties:
  units-of-production
  country-by-country
 55




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Regulation S-X Rule 4-10. country-by-country
  Inventories:
  Derivative transactions:
  Income taxes:
  Earnings per share:
 56




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,2006


2005


2004Net income

$
231,195,486


$
228,300,247


$
109,149,795Weighted average common shares
    outstanding during the period


153,878,715



153,100,067



149,735,666Effect of dilutive instruments


7,735,855



8,843,333



11,469,868Weighted average common shares
    outstanding during the period including the effects of dilutive
    instruments


161,614,570



161,943,400



161,205,534Basic earnings per share

$
1.50


$
1.49


$
0.73Diluted earnings per share

$
1.43


$
1.41


$
0.68Number of shares not included in
    dilutive earnings per share that would have been anti-dilutive
    because the exercise price was greater than the average market
    price of the common shares


239,966



540,000



   Use of estimates:
  Accounting for share-based
    compensation:
     57




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          58




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  For the Year Ended December 31,2005


2004Net income:As reported

$
228,300,247


$
109,149,795Deduct: Fair value of stock
    options issued, net of tax


(13,511,140
)


(17,714,486
)Pro forma

$
214,789,107


$
91,435,309Net income per common share:Basic earnings per share:As reported

$
1.49


$
0.73Pro forma

$
1.40


$
0.61Diluted earnings per share:As reported

$
1.41


$
0.68Pro forma

$
1.33


$
0.57     For the Year Ended2005


2004Expected volatility


34.8 - 44.9
%


38.4
%Expected dividends


0.0
%


0.0
%Expected term (in years)


1.9



6.50Risk free rate


4.18% - 4.41
%


3.71
%Expected forfeiture rate


Actual forfeitures



Actual forfeitures   Revenue Recognition.
    Accumulated Other Comprehensive Earnings
    (Loss):
  59




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Year Ended December 31,2006


2005


2004Net income

$
231,195,486


$
228,300,247


$
109,149,795Unrealized loss on derivative
    instruments, net of tax










(2,616,767
)Pro Forma , including the effect
    of dilutive instruments

$
231,195,486


$
228,300,247


$
106,533,028   Impact of recently issued accounting
    pronouncements:
      2.
    ASSET
    RETIREMENT OBLIGATIONS:  and/or
 60




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2006Asset retirement obligations at
    beginning of period

$
3,601,348Accretion expense


280,725Liabilities incurred


1,681,865Liabilities settled


Revisions of estimated liabilities


1,878,133Asset retirement obligations at
    end of period


7,442,071Less: current asset retirement
    obligations


Long-term asset retirement
    obligations

$
7,442,071   3.
    OIL AND
    GAS PROPERTIES:  December 31,


December 31,2006


2005Developed Properties:Acquisition, equipment,
    exploration, drilling and environmental costs 
    Domestic

$
1,174,683,088


$
700,425,880Acquisition, equipment,
    exploration, drilling and environmental costs  China


96,873,985



43,890,413Less accumulated depletion,
    depreciation and amortization  Domestic


(196,683,521
)


(118,172,467
)Less accumulated depletion,
    depreciation and amortization  China


(26,565,809
)


(13,183,036
)1,048,307,743



612,960,790Unproven Properties:Acquisition and exploration
    costs  Domestic


28,997,935



17,647,300Acquisition and exploration
    costs  China


42,062,418



72,055,165$
1,119,368,096


$
702,663,255  61




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Total


2006


2005


2004


PriorUnited States:Acquisition costs

$
31,386,056


$
12,779,651


$
1,818,954


$
222,685


$
16,564,766Exploration costs


7,629,315



151,428



545,602



1,082,804



5,849,481Less transfers to proved


(10,017,436
)


(1,580,444
)


(1,627,266
)






(6,809,726
)28,997,935



11,350,635



737,290



1,305,489



15,604,521China:Acquisition costs


44,857,346















44,857,346Exploration costs


74,826,615



6,915,587



19,167,259



29,390,964



19,352,805Less transfers to proved


(77,621,543
)


(36,908,334
)


(19,041,544
)


(21,671,665
)


42,062,418



(29,992,747
)


125,715



7,719,299



64,210,151Total

$
71,060,353


$
(18,642,112
)

$
863,005


$
9,024,788


$
79,814,672   4.
    CAPITAL
    ASSETS:  December 31,December 31,


2006


December 31,


December 31,2006


Accumulated


2006


2005Cost


Depreciation


Net Book Value


Net Book ValueComputer equipment

$
1,293,655


$
(826,760
)

$
466,895


$
311,884Office equipment


329,266



(206,086
)


123,180



88,385Field equipment


1,782,387



(841,318
)


941,069



1,025,915Other


2,482,916



(2,184,021
)


298,895



721,344$
5,888,224


$
(4,058,185
)

$
1,830,039


$
2,147,528   5.
    LONG-TERM
    LIABILITIES:  December 31,


December 31,2006


2005Bank indebtedness

$
165,000,000


$
Other long-term obligations


26,573,220



20,576,574$
191,573,220


$
20,576,574   Bank indebtedness:
 62




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Sino-American
    Other long-term obligations:
  6.
    SHARE
    BASED COMPENSATION:       63




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Accounting
    for share-based compensation
     64




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Valuation
    and Expense Information under SFAS 123R
    Year-EndedDecember 31,2006Total cost of share-based payment
    plans

$
2,313,534Amounts capitalized in inventory
    and oil and gas properties


1,156,767Amounts recognized in income for
    amounts previously capitalized in inventory and fixed assets


Amounts charged against income,
    before income tax benefit

$
1,156,767Amount of related income tax
    benefit recognized in income

$
406,025Impact from adoption of
    SFAS No. 123R on:Income from continuing operations

$
1,156,767Income before income taxes

$
1,156,767Net income

$
750,742Cash flow from operations

$
(10,502,522
)Cash flow from financing activities

$
10,502,522Basic earnings per share


Diluted earnings per share


     Non-Executives


ExecutivesExpected volatility


43.7-45.8
%


43.5-47.4
%Expected dividends


0
%


0
%Expected term (in years)


2.75-4.71



3.58-5.55Risk free rate


4.51-5.03
%


4.76-4.84
%Expected forfeiture rate


20.0
%


20.0
%  65




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Number ofSecurities to





Number of SecuritiesBe Issued





Remaining Available forUpon


Weighted-


Future Issuance UnderExercise


Average


Equity Compensationof


Exercise Price of


Plans (ExcludingOutstanding


Outstanding


Securities Reflected inPlan Category

Options


Options


the First Column)Equity compensation plans approved
    by security holders


9,082,756


$
10.62



10,739,034Equity compensation plans not
    approved by security holders


n/a



n/a



n/aTotal


9,082,756


$
10.62



10,739,034   Changes
    in Stock Options and Stock Options Outstanding
    Number of


Weighted AverageOptions


Exercise Price (US$)Balance, December 31, 2003


11,805,000


$
0.26 to $7.10Granted


2,005,000


$
11.69 to $24.31Exercised


(1,106,600
)

$
0.38 to $7.10Balance, December 31, 2004


12,703,400


$
0.26 to $24.31Granted


1,529,000


$
23.90 to $58.71Exercised


(4,793,700
)

$
0.32 to $25.68Cancelled


(50,000
)

$
25.68 to $25.68Balance, December 31, 2005


9,388,700


$
0.26 to $58.71Granted


379,966


$
46.05 to $67.73Exercised


(655,900
)

$
0.46 to $40.00Cancelled


(30,010
)

$
16.97 to $63.05Balance, December 31, 2006


9,082,756


$
0.26 to $67.73  66




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Options OutstandingWeighted


WeightedAverage


Average


AggregateNumber


Remaining


Exercise Price


Intrinsic ValueRange of Exercise Price ($US)

Outstanding


Contractual Life


($US)


($US)$0.38 - 0.46


2,577,500



2.08


$
0.46


$
121,864,398$0.25 - 0.57


760,000



3.29


$
0.34


$
36,025,200$1.49 - 2.61


1,355,000



4.21


$
1.90


$
62,109,550$3.91 - 4.43


657,500



5.36


$
4.40


$
28,498,425$4.83 - 7.10


856,600



6.36


$
5.05


$
36,569,320$11.68 - 24.21


1,298,500



7.31


$
15.89


$
41,361,355$23.90 - 58.71


1,199,700



8.49


$
35.93


$
15,181,956$46.05 - 67.73


377,956



9.53


$
56.76


$
44,800   Options ExercisableWeighted


WeightedAverage


Average


AggregateNumber


Remaining


Exercise Price


Intrinsic ValueRange of Exercise Price ($US)

Exercisable


Contractual Life


($US)


($US)$0.38 - 0.46


2,577,500



2.08


$
0.46


$
121,864,398$0.25 - 0.57


760,000



3.29


$
0.34


$
36,025,200$1.49 - 2.61


1,355,000



4.21


$
1.90


$
62,109,550$3.91 - 4.43


657,500



5.36


$
4.40


$
28,498,425$4.83 - 7.10


856,600



6.36


$
5.05


$
36,569,320$11.68 - 24.21


1,298,500



7.31


$
15.89


$
41,361,355$23.90 - 58.71


1,199,700



8.49


$
35.93


$
15,181,956$46.05 - 67.73














   in-the-money
      PERFORMANCE
    SHARE PLANS:
  Long-Term
    Incentive Plan
   67




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Best
    in Class
       68




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      7.
    DERIVATIVE
    FINANCIAL INSTRUMENTS:        Volume


AverageContract Period

MMbtu/Day


Price/MMbtuApril 2007  October 2007


40,000


$
6.20  69




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Volume


AverageContract Period

MMbtu/Day


Price/MMbtuCalendar 2008


60,000


$
6.63   8.
    SHARE
    REPURCHASE PROGRAM:        9.
    INCOME
    TAXES:    Year Ended December 31,2006


2005


2004United States

$
320,034,244


$
304,943,491


$
153,553,816Foreign


52,224,661



46,828,841



13,606,257Total

$
372,258,905


$
351,772,332


$
167,160,073     Year Ended December 31,2006


2005


2004Current:U.S. federal & state

$
26,944,004


$
50,636,118


$
261,826Foreign


18,941,127



3,564,990



Deferred:U.S. federal & state


95,178,288



57,228,294



53,144,257Foreign






12,042,683



4,604,195Total income tax provision

$
141,063,419


$
123,472,085


$
58,010,278    70




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,2006


2005


2004Income tax provision computed at
    the U.S. statutory rate

$
130,290,617


$
123,120,316


$
58,506,026State income tax provision net of
    federal benefit


150,248



297,319



159,628Withholding tax on share
    repurchase transactions


10,400,543







Other, net


222,011



54,450



(655,376
)$
141,063,419


$
123,472,085


$
58,010,278       Year Ended December 31,2006


2005Deferred tax assets:U.S. federal tax credit
    carryforwards

$
7,101,181


$
Canadian net operating loss
    carryforwards


1,474,648



1,976,930Other, net


1,165,318



4,4699,741,147



1,981,399Valuation allowance


(1,474,648
)


(1,976,930
)Net deferred tax assets


8,266,499



4,469Deferred tax liabilities:Property and equipment


(259,191,252
)


(155,750,934
)Net deferred tax asset (liability)

$
(250,924,753
)

$
(155,746,465
)        71




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           10.
    EMPLOYEE
    BENEFITS:   72




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   11.
    SEGMENT
    INFORMATION:    United States


China


TotalYear-ended December 31,
    2006Oil and gas sales

$
508,659,524


$
84,008,059


$
592,667,583Costs and Expenses:Depletion, depreciation and
    amortization


79,676,165



13,822,391



93,498,556Lease operating expenses


15,067,413



8,922,400



23,989,813Production taxes


57,899,339



8,398,473



66,297,812Gathering


19,721,269







19,721,269Operating income

$
336,295,338


$
52,864,795


$
389,160,133General and administrative










14,935,103Other expense, net










1,966,125Income before income taxes









$
372,258,905Capital expenditures

$
481,390,936


$
22,490,965


$
503,881,901Net oil and gas properties

$
1,006,997,502


$
112,370,594


$
1,119,368,096   United States


China


TotalYear-ended December 31,
    2005Oil and gas sales

$
448,730,965


$
67,762,036


$
516,493,001Costs and Expenses:Depletion, depreciation and
    amortization


48,455,070



9,647,801



58,102,871Lease operating expenses


9,047,390



7,352,000



16,399,390Production taxes


52,689,060



3,388,089



56,077,149Gathering


17,125,147







17,125,147Operating income

$
321,414,298


$
47,374,146


$
368,788,444General and administrative










14,342,178Other expense, net










2,673,934Income before income taxes









$
351,772,332Capital expenditures

$
263,486,693


$
19,181,362


$
282,668,055Net oil and gas properties

$
599,900,713


$
102,762,542


$
702,663,255   73




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  United States


China


TotalYear-ended December 31,
    2004Oil and gas sales

$
238,866,913


$
20,179,534


$
259,046,447Costs and Expenses:Depletion, depreciation and
    amortization


27,346,061



2,903,000



30,249,061Lease operating expenses


6,286,715



2,286,000



8,572,715Production taxes


28,151,661



1,009,098



29,160,759Gathering


13,135,809







13,135,809Operating income

$
163,946,667


$
13,981,436


$
177,928,103General and administrative










7,075,720Other expense, net










3,692,310Income before income taxes









$
167,160,073Capital expenditures

$
179,592,969


$
16,005,515


$
195,598,484Net oil and gas properties

$
381,408,507


$
93,225,879


$
474,634,386   12.
    COMMITMENTS
    AND CONTINGENCIES:      2006-2009
   74




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        13.
    FAIR
    VALUE OF FINANCIAL INSTRUMENTS:    14.
    SIGNIFICANT
    CUSTOMERS:   75




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    SUMMARIZED
    QUARTERLY FINANCIAL INFORMATION (UNAUDITED):  Income Before


Income





Basic


DilutedIncome Tax


Tax


Net


Earnings


EarningsRevenues


Expenses


Provision


Provision


Income


per Share


per Share(In thousands, except for per share data)2006First Quarter

$
151,250


$
47,284


$
103,966


$
36,492


$
67,474


$
0.43


$
0.41Second Quarter

$
129,892


$
45,959


$
83,933


$
33,258


$
50,675


$
0.33


$
0.31Third Quarter

$
145,366


$
56,561


$
88,805


$
36,330


$
52,475


$
0.34


$
0.33Fourth Quarter

$
166,160


$
70,605


$
95,555


$
34,983


$
60,571


$
0.40


$
0.38$
592,668


$
220,409


$
372,259


$
141,063


$
231,1952005First Quarter

$
89,364


$
31,857


$
57,507


$
20,185


$
37,322


$
0.25


$
0.23Second Quarter

$
110,635


$
36,848


$
73,787


$
25,899


$
47,888


$
0.31


$
0.30Third Quarter

$
134,378


$
40,618


$
93,760


$
32,910


$
60,850


$
0.40


$
0.38Fourth Quarter

$
182,116


$
55,398


$
126,718


$
44,478


$
82,240


$
0.53


$
0.50$
516,493


$
164,721


$
351,772


$
123,472


$
228,300   16.
    DISCLOSURE
    ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED):    A.  OIL
    AND GAS RESERVES:
   76




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   B.  ANALYSES
    OF CHANGES IN PROVEN RESERVES:
  United States


China


TotalNatural Gas





Natural





Natural GasOil (Bbls)


(Mcf)


Oil (Bbls)


Gas (Mcf)


Oil (Bbls)


(Mcf)Reserves, December 31, 2003


8,342,500



1,023,367,300











8,342,500



1,023,367,300Extensions, discoveries and
    additions


4,520,000



562,548,000



8,180,900







12,700,900



562,548,000Production


(349,700
)


(43,667,400
)


(624,560
)






(943,000
)


(43,667,400
)Revisions


(1,123,700
)(1)


(128,247,300
)(2)


31,228







(1,123,700
)


(128,247,300
)Reserves, December 31, 2004


11,389,100



1,414,000,600



7,587,600







18,976,700



1,414,000,600Extensions, discoveries and
    additions


5,516,300



680,671,500



370,600







5,886,900



680,671,500Production


(464,300
)


(61,722,300
)


(1,556,300
)






(2,020,600
)


(61,722,300
)Revisions


(1,236,400
)(3)


(132,727,000
)(4)


(1,341,000
)






(2,577,400
)


(132,727,000
)Reserves, December 31, 2005


15,204,700



1,900,222,800



5,060,900







20,265,600



1,900,222,800Extensions, discoveries and
    additions


3,962,000



505,773,000











3,962,000



505,773,000Production


(594,100
)


(78,395,500
)


(1,603,400
)






(2,197,500
)


(78,395,500
)Revisions


(730,000
)(5)


(69,499,600
)(6)


529,200







(200,800
)


(69,499,600
)Reserves, December 31, 2006


17,842,600



2,258,100,700



3,986,700







21,829,300



2,258,100,700Proved developed reserves:December 31, 2003


3,028,000



359,072,000















359,072,000December 31, 2004


4,195,000



514,686,000



4,356,000







8,551,000



514,686,000December 31, 2005


5,087,000



635,591,000



2,484,000







7,571,000



635,591,000December 31, 2006


6,522,000



842,969,000



2,686,000







9,208,000



842,969,000     (1)
    
    Revision amount of 936,500 attributable to 40 wells dropped
    from PUD category replaced by more attractive wells.(2)
    
    Revision amount of 117,064,000 associated with above 40
    mentioned wells.(3)
    
    Revision amount of 412,500 attributable to 26 wells dropped
    from PUD category replaced by more attractive wells.(4)
    
    Revision amount of 51,560,000 associated with above mentioned
    26 wells.(5)
    
    Revision amount of 460,000 attributable to 28 wells dropped
    from PUD category replaced by more attractive wells.(6)
    
    Revision amount of 57,489,000 associated with above mentioned
    28 wells. 77




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##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   C.  STANDARDIZED
    MEASURE (US$000):
    United States


China


TotalAs of December 31, 2004Future cash inflows

$
8,213,061


$
223,531


$
8,436,592Future production costs


(1,699,891
)


(67,387
)


(1,767,278
)Future development costs


(623,539
)


(18,382
)


(641,921
)Future income taxes


(1,988,387
)


(21,436
)


(2,009,823
)Future net cash flows


3,901,244



116,326



4,017,570Discounted at 10%


(2,285,779
)


(62,455
)


(2,348,234
)Standardized measure of discounted
    future net cash flows

$
1,615,465


$
53,871


$
1,669,336As of December 31, 2005Future cash inflows

$
16,124,248


$
246,666


$
16,370,914Future production costs


(2,943,364
)


(72,920
)


(3,016,284
)Future development costs


(1,113,618
)


(6,815
)


(1,120,433
)Future income taxes


(4,110,554
)


(30,235
)


(4,140,789
)Future net cash flows


7,956,712



136,696



8,093,408Discounted at 10%


(4,454,628
)


(62,286
)


(4,516,914
)Standardized measure of discounted
    future net cash flows

$
3,502,084


$
74,410


$
3,576,494As of December 31, 2006Future cash inflows

$
11,239,526


$
185,659


$
11,425,185Future production costs


(2,974,427
)


(67,750
)


(3,042,177
)Future development costs


(1,674,893
)


(5,915
)


(1,680,808
)Future income taxes


(2,217,709
)


(6,710
)


(2,224,419
)Future net cash flows


4,372,497



105,284



4,477,781Discounted at 10%


(2,587,417
)


(18,811
)


(2,606,228
)Standardized measure of discounted
    future net cash flows

$
1,785,080


$
86,473


$
1,871,553    78




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##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   D.
    SUMMARY
    OF CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET
    CASH FLOWS (US$000):  December 31,


December 31,


December 31,2006


2005


2004Standardized measure, beginning

$
3,576,494


$
1,669,336


$
1,135,513Net revisions


(185,419
)


(436,425
)


(245,950
)Extensions, discoveries and other
    changes


755,149



2,306,982



1,062,236Changes in future development costs


(193,004
)


(130,727
)


(123,051
)Sales of oil and gas, net of
    production costs


(482,659
)


(426,891
)


(216,670
)Net change in prices and
    production costs


(2,915,081
)


1,992,707



2,645Development costs incurred during
    the period that reduce future development costs


243,933



172,962



96,220Accretion of discount


544,558



254,236



178,431Net changes in production rates
    and other


(395,071
)






Net change in income taxes


922,653



(1,825,686
)


(220,038
)Standardized measure, ending

$
1,871,553


$
3,576,494


$
1,669,336     E.
    COSTS
    INCURRED IN OIL AND GAS EXPLORATION AND DEVELOPMENT ACTIVITIES
    (US$000):  UNITED
    STATES
  Years EndedDecember 31,


December 31,


December 31,2006


2005


2004Acquisition costs 
    unproved properties

$
11,351


$
775


$
1,268Exploration


152,922



56,894



97,068Development


317,118



208,173



82,646Total

$
481,391


$
265,842


$
180,982  79




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##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CHINA
  Years EndedDecember 31,


December 31,


December 31,2006


2005


2004Acquisition costs 
    unproved properties

$
7,152


$
2,876


$
2,351Exploration










Development


15,339



16,465



12,657Total

$
22,491


$
19,341


$
15,008   TOTAL
  Years EndedDecember 31,


December 31,


December 31,2006


2005


2004Acquisition costs 
    unproved properties

$
18,503


$
3,651


$
3,619Exploration


152,922



56,894



97,068Development


332,457



224,638



95,303Total

$
503,882


$
285,183


$
195,990   F.  RESULTS
    OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES
    (US$000):
  UNITED
    STATES
  Years EndedDecember 31,


December 31,


December 31,2006


2005


2004Oil and gas revenue

$
508,660


$
448,731


$
238,867Production expenses and taxes


(92,688
)


(78,861
)


(47,574
)Depletion and depreciation


(79,676
)


(48,456
)


(27,346
)Income taxes


(111,722
)


(107,916
)


(53,406
)Total

$
224,574


$
213,498


$
110,541   CHINA
  Years EndedDecember 31,


December 31,


December 31,2006


2005


2004Oil and gas revenue

$
84,008


$
67,762


$
20,180Production expenses and taxes


(17,321
)


(10,740
)


(3,295
)Depletion and depreciation


(13,822
)


(9,648
)


(2,903
)Income taxes


(18,941
)


(15,556
)


(4,604
)Total

$
33,924


$
31,818


$
9,378  80




---



##### Table of Contents



ULTRA
    PETROLEUM CORP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  TOTAL
  Years EndedDecember 31,


December 31,


December 31,2006


2005


2004Oil and gas revenue

$
592,668


$
516,493


$
259,047Production expenses and taxes


(110,009
)


(89,601
)


(50,869
)Depletion and depreciation


(93,498
)


(58,104
)


(30,249
)Income taxes


(130,663
)


(123,472
)


(58,010
)Total

$
258,498


$
245,316


$
119,919   G.  CAPITALIZED
    COSTS RELATING TO OIL AND GAS PRODUCING
    ACTIVITIES:
  December 31,


December 31,2006


2005Developed Properties:Acquisition, equipment,
    exploration, drilling and environmental costs 
    Domestic

$
1,174,683,088


$
700,425,880Acquisition, equipment,
    exploration, drilling and environmental costs  China


96,873,985



43,890,413Less accumulated depletion,
    depreciation and amortization  Domestic


(196,683,521
)


(118,172,467
)Less accumulated depletion,
    depreciation and amortization  China


(26,565,809
)


(13,183,036
)1,048,307,743



612,960,790Unproven Properties:Acquisition and exploration
    costs  Domestic


28,997,935



17,647,300Acquisition and exploration
    costs  China


42,062,418



72,055,165$
1,119,368,096


$
702,663,255  81




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##### Table of Contents



Item 9.
    Change
    in and Disagreements with Accountants on Accounting and
    Financial Disclosures.    Item 9A.
    Controls
    and Procedures.  Managements
    Report on Assessment of Internal Control Over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
    Remediation
    of Material Weakness
  Form 10-K 10-K),
  
    The Company did not maintain effective company level controls.
    Specifically, (i) certain of its accounting personnel in
    key roles did not possess an appropriate level of technical
    expertise, and (ii) the Companys monitoring of the
    internal audit function was not sufficient to provide management
    a basis to assess the quality of the Companys internal
    control performance over time. These deficiencies resulted in
    more than a remote likelihood that a material misstatement of
    the Companys annual or interim financial statements would
    not be prevented or detected.
    The Company did not have adequate policies and procedures
    regarding supervisory review of account reconciliations and
    account and transaction analyses. This deficiency resulted in
    material errors (as reported in the 2005
    10-K) which
    were corrected prior to the issuance of the Companys 2005
    consolidated financial statements.
    The Company did not have adequate policies and procedures to
    ensure that accurate and reliable interim and annual
    consolidated financial statements were prepared and reviewed on
    a timely basis. Specifically, the Company did not have
    sufficient personnel with the skills and experience in the
    application of U.S. generally accepted accounting
    principles and policies and procedures regarding the preparation
    and management review of footnote disclosures accompanying the
    Companys financial statements. As a result of these
    deficiencies, material errors were identified in the footnotes
    to the Companys preliminary 2005 consolidated financial
    statements. These errors were corrected by management prior to
    the issuance of the Companys 2005 consolidated financial
    statements. 82




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##### Table of Contents



10-K Form 10-Q
  10-K,
  
    increasing training for the Companys current accounting
    personnel, hiring additional accounting personnel and engaging
    outside consultants with technical accounting expertise, as
    needed, and reorganizing the accounting department to ensure
    that accounting personnel have adequate experience, skills and
    knowledge relating to the accounting and internal audit
    functions assigned to them; and
    establishing additional and refining current policies and
    procedures to more effectively reconcile the Companys
    accounting entries along with better documentation procedures to
    meet the standards established by COSO.  10-K,
  
    implemented an internal review and assessment process regarding
    its financial reporting and internal audit functions;
    engaged Protiviti to (1) review and assess current
    Sarbanes-Oxley processes and control documentation and
    compliance plans, (2) recommend remediation and project
    plans for 2006, and (3) assist management with
    Sarbanes-Oxley compliance requirements during 2006;
    engaged Grant Thornton LLP to assist in identifying and
    recommending any necessary organization and procedural changes
    for improving the Companys controls for the purposes of
    complying with Sarbanes-Oxley;
    increased training and hired additional accounting personnel;
    acted on the recommendations of Protiviti and Grant Thornton LLP;
    effected a reorganization and alignment of the Companys
    financial reporting and internal audit functions;
    established additional policies and procedures for monitoring
    and reconciling the Companys accounting entries; and
    established better documentation procedures to more fully comply
    with the standards established by COSO.  Changes
    in Internal Control Over Financial Reporting
    Evaluation
    of Effectiveness of Disclosure Controls and Procedures
  Rule 13a-15(e) Rule 15d-15(e)
 83




---



##### Table of Contents



Item 9B.
    Other
    Information.    Part III
  Item 10.
    Directors,
    Executive Officers and Corporate Governance      Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.  Regulation S-K
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    Item 14.
    Principal
    Accounting Fees and Services.    Part IV
  Item 15.
    Exhibits,
    Financial Statement Schedules.    Financial Statements:
  Financial Statement Schedules:
  Exhibits. Regulation S-K
  ExhibitNumber

Description3
.1

Articles of Incorporation of Ultra
    Petroleum Corp. (incorporated by reference to Exhibit 3.1
    of 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 of the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2001). 84




---



##### Table of Contents



ExhibitNumber

Description4
.1

Specimen Common Share Certificate
    (incorporated by reference to Exhibit 4.1 of the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2001).10
.1

Fourth Amendment to Second Amended
    and Restated Credit Agreement, dated as of November 14,
    2005 and effective as of November 18, 2005, by and among
    Ultra Resources, Inc., JPMorgan Chase Bank N.A., Union Bank of
    California N.A., Hibernia National Bank, Guaranty Bank FSB,
    Compass Bank, Bank of Scotland and Bank of America, N.A.
    (incorporated by reference to Exhibit 10.1 of the
    Companys Report on
    Form 8-K
    filed on November 23, 2005).10
.2

Third Amendment to Second Amended
    and Restated Credit Agreement dated May 5, 2005 among Ultra
    Resources, Inc., JPMorgan Chase Bank N.A., Union Bank of
    California N.A., Hibernia National Bank, Guaranty Bank FSB,
    Compass Bank, Bank of Scotland and Bank of America, N.A.
    (incorporated by reference to Exhibit 10.1 of the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005).10
.3

Second Amendment to Second Amended
    and Restated Credit Agreement dated November 1, 2004 among
    Ultra Resources, Inc., Bank One, NA, Union Bank of California,
    N.A., Hibernia National Bank, Guaranty Bank, FSB, Compass Bank,
    Bank of Scotland and Fleet National Bank. (incorporated by
    reference to Exhibit 10.1 of the Companys Report on
    Form 10-K
    for the year ended December 31, 2004).10
.4

First Amendment to Second Amended
    and Restated Credit Agreement dated August 10, 2004 among
    Ultra Resources, Inc., Bank One, NA, Union Bank of California,
    N.A., Hibernia National Bank, Guaranty Bank, FSB, Compass Bank,
    Bank of Scotland and Fleet National Bank. (incorporated by
    reference to Exhibit 10.2 of the Companys Report on
    Form 10-K
    for the year ended December 31, 2004).10
.5

Second Amended and Restated Credit
    Agreement dated June 9, 2004 among Ultra Resources, Inc.,
    Bank One, NA, Union Bank of California, N.A., Hibernia National
    Bank, Guaranty Bank, FSB, Compass Bank, Bank of Scotland and
    Fleet National Bank (incorporated by reference to
    Exhibit 10.1 of the Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2004).10
.6

Precedent Agreement between
    Rockies Express Pipeline LLC and Ultra Resources, Inc. dated
    December 19, 2005 (incorporated by reference to
    Exhibit 10.1 of the Companys Report of
    Form 8-K
    filed on February 9, 2006).10
.7

Precedent Agreement between
    Rockies Express Pipeline LLC, Entrega Gas Pipeline LLC and Ultra
    Resources, Inc. dated December 19, 2005 (incorporated by
    reference to Exhibit 10.2 of the Companys Report on
    Form 8-K
    filed on February 9, 2006).10
.8

Ultra Petroleum Corp. 2005 Stock
    Incentive Plan (incorporated by reference to Exhibit 99.1
    of the Companys Registration Statement on
    Form S-8
    (Reg.
    No. 333-132443),
    filed with the SEC on March 15, 2006).10
.9

Ultra Petroleum Corp. 2000 Stock
    Incentive Plan (incorporated by reference to Exhibit 99.1
    of the Companys Registration Statement on
    Form S-8
    (Reg.
    No. 333-13278),
    filed with the SEC on March 15, 2001).10
.10

Ultra Petroleum Corp. 1998 Stock
    Option Plan (incorporated by reference to Exhibit 99.1 of
    the Companys Registration Statement on
    Form S-8
    (Reg.
    No. 333-13342)
    filed with the SEC on April 2, 2001).10
.11

Employment Agreement between Ultra
    Petroleum Corp. and Michael D. Watford dated February 1,
    2004 (incorporated by reference from Exhibit 10.11 of the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2005).14
.1

Code of Ethics for Chief Executive
    Officer and Senior Financial Officers of Ultra Petroleum Corp.
    (incorporated by reference to Exhibit 3.3 of the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2003).*21
.1

Subsidiaries of the Company.*23
.1

Consent of Netherland,
    Sewell & Associates, Inc.*23
.2

Consent of Ryder Scott Company.*23
.3

Consent of Ernst & Young
    LLP.*23
.4

Consent of KPMG LLP. 85




---



##### Table of Contents



ExhibitNumber

Description*31
.1

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.*31
.2

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.*32
.1

Certification of Chief Executive
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.*32
.2

Certification of Chief Financial
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.     *
    
    Filed herewith 86




---



##### Table of Contents



SIGNATURES      By:
    /s/  Michael
    D. Watford   Title:
    Chairman of the Board,       Signature

Title

Date/s/  Michael
    D. WatfordMichael
    D. Watford

Chairman of the Board, Chief 
    Executive Officer, and President 
    (principal executive officer)

February 26, 2007/s/  Marshall
    D. SmithMarshall
    D. Smith

Chief Financial Officer
    (principal financial officer)

February 26, 2007/s/  Garland
    R. ShawGarland
    R. Shaw

Corporate Controller
    (principal accounting officer)

February 26, 2007/s/  W.
    Charles HeltonW.
    Charles Helton

Director

February 26, 2007/s/  Stephen
    J. McDanielStephen
    J. McDaniel

Director

February 26, 2007/s/  Robert
    E. RigneyRobert
    E. Rigney

Director

February 26, 2007/s/  James
    C. RoeJames
    C. Roe

Director

February 26, 2007  87




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description3
.1

Articles of Incorporation of Ultra
    Petroleum Corp. (incorporated by reference to Exhibit 3.1
    of 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 of 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 of the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2001).10
.1

Fourth Amendment to Second Amended
    and Restated Credit Agreement, dated as of November 14,
    2005 and effective as of November 18, 2005, by and among
    Ultra Resources, Inc., JPMorgan Chase Bank N.A., Union Bank of
    California N.A., Hibernia National Bank, Guaranty Bank FSB,
    Compass Bank, Bank of Scotland and Bank of America, N.A.
    (incorporated by reference to Exhibit 10.1 of the
    Companys Report on
    Form 8-K
    filed on November 23, 2005).10
.2

Third Amendment to Second Amended
    and Restated Credit Agreement dated May 5, 2005 among Ultra
    Resources, Inc., JPMorgan Chase Bank N.A., Union Bank of
    California N.A., Hibernia National Bank, Guaranty Bank FSB,
    Compass Bank, Bank of Scotland and Bank of America, N.A.
    (incorporated by reference to Exhibit 10.1 of the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005).10
.3

Second Amendment to Second Amended
    and Restated Credit Agreement dated November 1, 2004 among
    Ultra Resources, Inc., Bank One, NA, Union Bank of California,
    N.A., Hibernia National Bank, Guaranty Bank, FSB, Compass Bank,
    Bank of Scotland and Fleet National Bank. (incorporated by
    reference to Exhibit 10.1 of the Companys Report on
    Form 10-K
    for the year ended December 31, 2004).10
.4

First Amendment to Second Amended
    and Restated Credit Agreement dated August 10, 2004 among
    Ultra Resources, Inc., Bank One, NA, Union Bank of California,
    N.A., Hibernia National Bank, Guaranty Bank, FSB, Compass Bank,
    Bank of Scotland and Fleet National Bank. (incorporated by
    reference to Exhibit 10.2 of the Companys Report on
    Form 10-K
    for the year ended December 31, 2004).10
.5

Second Amended and Restated Credit
    Agreement dated June 9, 2004 among Ultra Resources, Inc.,
    Bank One, NA, Union Bank of California, N.A., Hibernia National
    Bank, Guaranty Bank, FSB, Compass Bank, Bank of Scotland and
    Fleet National Bank (incorporated by reference to
    Exhibit 10.1 of the Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2004).10
.6

Precedent Agreement between
    Rockies Express Pipeline LLC and Ultra Resources, Inc. dated
    December 19, 2005 (incorporated by reference to
    Exhibit 10.1 of the Companys Report of
    Form 8-K
    filed on February 9, 2006).10
.7

Precedent Agreement between
    Rockies Express Pipeline LLC, Entrega Gas Pipeline LLC and Ultra
    Resources, Inc. dated December 19, 2005 (incorporated by
    reference to Exhibit 10.2 of the Companys Report on
    Form 8-K
    filed on February 9, 2006).10
.8

Ultra Petroleum Corp. 2005 Stock
    Incentive Plan (incorporated by reference to Exhibit 99.1
    of the Companys Registration Statement on
    Form S-8
    (Reg.
    No. 333-132443),
    filed with the SEC on March 15, 2006).10
.9

Ultra Petroleum Corp. 2000 Stock
    Incentive Plan (incorporated by reference to Exhibit 99.1
    of the Companys Registration Statement on
    Form S-8
    (Reg.
    No. 333-13278),
    filed with the SEC on March 15, 2001).10
.10

Ultra Petroleum Corp. 1998 Stock
    Option Plan (incorporated by reference to Exhibit 99.1 of
    the Companys Registration Statement on
    Form S-8
    (Reg.
    No. 333-13342)
    filed with the SEC on April 2, 2001).10
.11

Employment Agreement between Ultra
    Petroleum Corp. and Michael D. Watford dated February 1,
    2004 (incorporated by reference from Exhibit 10.11 of the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2005).14
.1

Code of Ethics for Chief Executive
    Officer and Senior Financial Officers of Ultra Petroleum Corp.
    (incorporated by reference to Exhibit 3.3 of the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2003).*21
.1

Subsidiaries of the Company. 88




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##### Table of Contents



ExhibitNumber

Description*23
.1

Consent of Netherland,
    Sewell & Associates, Inc.*23
.2

Consent of Ryder Scott Company.*23
.3

Consent of Ernst & Young
    LLP.*23
.4

Consent of KPMG LLP.*31
.1

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.*31
.2

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.*32
.1

Certification of Chief Executive
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.*32
.2

Certification of Chief Financial
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.     *
    
    Filed herewith 89