UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33614

ULTRA PETROLEUM CORP.

(Exact name of registrant as specified in its charter)

Yukon, Canada	N/A
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)

116 Inverness Drive East, Suite 400 Englewood, Colorado	80112
(Address of principal executive offices)	(Zip code)

(303) 708-9740

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☑ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☑

Smaller reporting company

☑

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☑

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distributions of securities under a plan confirmed by a court. YES ☑ NO ☐

The number of shares, without par value, of Ultra Petroleum Corp., outstanding as of ~~May~~July 31, 2020 was 199,~~665~~713,~~509~~518.

EXPLANATORY NOTE

As previously disclosed in the Current Report on Form 8-K filed by Ultra Petroleum Corp. (the “Company” or “Ultra”) on May 12, 2020, the Company expected that the filing of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Report”), originally due on May 15, 2020, would be delayed due to disruptions caused by the COVID-19 coronavirus (“COVID-19”) pandemic. In particular, the ongoing COVID-19 pandemic’s effect on economic activity across the globe resulted in a rapid and precipitous drop in demand for oil, which in turn has caused oil prices to plummet since the first week of March 2020, negatively affecting the Company’s cash flow, liquidity and financial position. Additionally, overall demand for natural gas and crude oil was negatively impacted due to decreased economic activity, stay-at-home orders, and decreasing manufacturing and transportation requirements; each of these created more pressure on commodity prices. These events have worsened a deteriorated oil market which followed the early-March 2020 failure by the Organization of Petroleum Exporting Countries (“OPEC”) and the non-OPEC oil producing countries to reach an agreement over proposed oil production cuts. These significant and rapid changes required complex

accounting judgments and revisions of estimates upon which the Company’s financial statements are based, which required additional

time for compilation, preparation, and review necessary to prepare the Company’s Quarterly Report.

The Company relied on Release No. 34- 88318 issued by the Securities and Exchange Commission on March 4, 2020, as

modified by Release No. 34-88465 issued by the Securities and Exchange Commission on March 25, 2020, pursuant to Section 36 of the Securities Exchange Act of 1934, as amended, to delay the filing of this Quarterly Report.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
ITEM 1.	Financial Statements	43
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2223
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3237
ITEM 4.	Controls and Procedures	3237
PART II — OTHER INFORMATION
ITEM 1.	Legal Proceedings	3438
ITEM 1A.	Risk Factors	3438
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3739
ITEM 3.	Defaults upon Senior Securities	3739
ITEM 4.	Mine Safety Disclosures	3739
ITEM 5.	Other Information	3739
ITEM 6.	Exhibits	3840
	Signatures	4042

PART I – FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

ULTRA PETROLEUM CORP. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

	March 31,			December 31,
	June 30,			December 31,
	2020			2019
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	632,~~571~~262		$	1,664
Restricted cash		12,~~926~~241			1,777
Oil and gas revenue receivable and other receivables, net of allowances $11,967		42,453			78,321
Oil and gas revenue receivable and other receivables, net of allowances $2,978 and $11,967, respectively		39,568			78,321
Derivative assets		441,~~261~~602			32,100
Income tax receivable		—			881
Other current assets		79,~~911~~402			10,746
Total current assets		~~103~~85,~~122~~075			125,489
Oil and gas properties, net, using the full cost method of accounting:
Proven, net of accumulated depletion, depreciation, amortization and impairments		1,~~266~~139,~~743~~791			1,552,419
Property, plant and equipment, net		8,~~435~~101			9,779
Long-term right-of-use assets		~~116~~2,~~579~~001			119,496
Other assets		511,~~779~~321			8,093
Total assets	$	1,~~500~~246,~~658~~289		$	1,815,276
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	9,314		$	13,570
Debtor-in-possession financing	$	10,375		$	—
Accrued liabilities		41,885			44,480
Accounts payable		6,496			13,570
Production taxes payable		72,088			53,428
Accrued liabilities		45,760			44,480
Production taxes payable		46,076			53,428
Current portion of long-term debt
Credit facility		—			64,700
Long-term debt		~~1,928,528~~—			1,928,048
Add: Premium on exchange transactions		~~193,237~~—			203,883
Less: Unamortized deferred financing costs and discount		~~(43,730~~—	)		(46,421	)
Total current portion of long-term debt, net		~~2,078,035~~—			2,150,210
Interest payable		~~23,390~~71			29,903
Lease liabilities		~~12,166~~954			11,938
Derivative liabilities		42,~~866~~519			20,692
Total current liabilities		2112,~~241,744~~251			2,324,221
Long-term lease liabilities		~~104~~1,~~447~~084			107,587
Asset retirement obligations		~~197~~201,~~482~~508			193,995
Other long-term obligations		1821,~~181~~210			34,287
Total liabilities		2,561,854			2,660,090
Total liabilities not subject to compromise		336,053			2,660,090
Liabilities subject to compromise		2,016,744			—
Commitments and contingencies (Note 11)
Shareholders' equity:
Common stock - As of March 31, 2020 and December 31, 2019, no par value; authorized - unlimited; issued and outstanding - 199,310,216 and 197,888,473, respectively		2,141,751			2,140,520
Common stock - As of June 30, 2020 and December 31, 2019, no par value; authorized - unlimited; issued and outstanding - 199,713,518 and 197,888,473, respectively		2,142,261			2,140,520
Treasury stock		(49	)		(49	)
Retained loss		(3,~~202~~248,~~898~~720	)		(2,985,285	)
Total shareholders' deficit		(1,~~061~~106,~~196~~508	)		(844,814	)
Total liabilities and shareholders' equity	$	1,~~500~~246,~~658~~289		$	1,815,276

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ULTRA PETROLEUM CORP. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

	For the Three Months Ended March 31,
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands, except per share data)
Revenues:
Natural gas sales	$	~~114~~72,~~281~~920		$	~~245~~125,~~989~~915		$	187,200		$	371,903
Oil sales		158,~~574~~818			2327,~~465~~301			24,393			50,767
Other revenues		~~221~~23			2,~~007~~190			244			4,197
Total operating revenues		~~130~~81,~~076~~761			~~271~~155,~~461~~406			211,837			426,867
Expenses:
Lease operating expenses		1916,~~411~~603			1715,~~225~~889			36,013			33,114
Facility lease expense		5,~~463~~464			6,~~645~~543			10,927			13,188
Production taxes		137,~~922~~985			3016,~~175~~443			21,907			46,618
Gathering fees		16,~~682~~112			1920,~~817~~256			32,794			40,072
Transportation charges		32,~~894~~239			64			6,133			128
Depletion, depreciation, and amortization		47,284			51,653
Depletion, depreciation and amortization		38,812			55,768			86,096			107,422
Ceiling test write-down		242,603			—
Ceiling test write down		110,603			—			353,206			—
General and administrative expenses		8,379			7,051
General and administrative		8,116			7,433			16,496			14,485
Prepetition restructuring expenses		2,644			—
Pre-petition restructuring expenses		9,724			—			12,368			—
Other operating expenses, net		31,~~438~~148			~~684~~15,281			4,586			16,085
Total operating expenses		~~363~~216,~~720~~806			~~133~~137,~~314~~677			580,526			271,112
Operating income (loss)		(~~233~~135,~~644~~045	)		~~138~~17,~~147~~729			(368,689	)		155,755
Other income (expense), net:
Interest expense		(30,398	)		(33,327	)
Interest expense (excludes contractual interest expense of $19.5 million for the three and six months ended June 30, 2020)		(14,519	)		(32,376	)		(44,918	)		(65,703	)
Gain (loss) on commodity derivatives		44(15,~~294~~266	)		~~(64~~71,~~339~~654	)		29,029			7,316
Other income (expense), net		21,~~094~~411			~~166~~(43	)		3,505			243
Total other income (expense), net		15,990			(97,500	)
Total other (expense) income, net		(28,374	)		39,235			(12,384	)		(58,144	)
Income (loss) before income tax (benefit) provision		(217,654	)		40,647
Reorganization items, net (See Introductory Note)		117,599			—			117,599			—
Income tax (benefit) provision		(49	)		(27	)
Income before income tax benefit		(45,820	)		56,964			(263,474	)		97,611
Net income (loss)	$	(217,605	)	$	40,674
Income tax benefit		—			(141	)		(49	)		(169	)
Net earnings (loss) per common share
Net income (loss)	$	(45,820	)	$	57,105		$	(263,425	)	$	97,780
Basic	$	(1.10	)	$	0.21
Earnings (loss) per share:
Diluted	$	(1.10	)	$	0.21
Basic	$	(0.23	)	$	0.29		$	(1.33	)	$	0.50
Weighted-average common shares outstanding
Diluted	$	(0.23	)	$	0.29		$	(1.33	)	$	0.49
Basic		198,333			197,383
Weighted average common shares outstanding - basic		199,292			197,514			198,746			197,449
Diluted		198,333			197,801
Weighted average common shares outstanding - fully diluted		199,292			198,069			198,746			198,089

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ULTRA PETROLEUM CORP. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

(In thousands)

	Common Stock
	Shares		Amount		Retained (Loss) Earnings			Treasury Stock			Total Shareholders' (Deficit) Equity
Balances at December 31, 2018		197,383	$	2,137,443	$	(3,186,016	)	$	(49	)	$	(1,048,622	)
Balances at December 31, 2019		197,888	$	2,140,520	$	(2,985,285	)	$	(49	)	$	(844,814	)
Fair value of employee stock plan grants		—		1,127		—			—			1,127
Net share settlements		1,422		—		(8	)		—			(8	)
Initial adoption of ASC 842		—		—		92,818			—			92,818
Fair value of employee stock plan awards		—		1,231		—			—			1,231
Net income		—		—		40,674			—			40,674
Net loss		—		—		(217,605	)		—			(217,605	)
Balances at March 31, 2019		197,383	$	2,138,570	$	(3,052,524	)	$	(49	)	$	(914,003	)
Balances at March 31, 2020		199,310	$	2,141,751	$	(3,202,898	)	$	(49	)	$	(1,061,196	)
Net share settlements		404		—		(2	)		—			(2	)
Fair value of employee stock plan awards		—		510		—			—			510
Net loss		—		—		(45,820	)		—			(45,820	)
Balances at June 30, 2020		199,714	$	2,142,261	$	(3,248,720	)	$	(49	)	$	(1,106,508	)

	Common Stock					~~Retained (Loss) Earnings~~			~~Treasury Stock~~			~~Total Shareholders' (Deficit) Equity~~
	Shares			Amount		Retained (Loss) Earnings			Treasury Stock			Total Shareholders' (Deficit) Equity
Balances at December 31, 2019		197,888		$	2,140,520	$	(2,985,285	)	$	(49	)	$	(844,814	)
Balances at December 31, 2018		197,383		$	2,137,443	$	(3,186,016	)	$	(49	)	$	(1,048,622	)
Net share settlements		1,422			—		(8	)		—			(8	)
Fair value of employee stock plan awards		—			1,127		—			—			1,127
Fair value of employee stock plan grants		—			1,231		—			—			1,231
Net income		—			—		40,675			—			40,675
Net income (loss)		—			—		(217,605	)		—			(217,605	)
Initial adoption of ASC 842		—			—		92,818			—			92,818
Balances at March 31, 2020		199,310		$	2,141,751	$	(3,202,898	)	$	(49	)	$	(1,061,196	)
Balances at March 31, 2019		197,383		$	2,138,570	$	(3,052,523	)	$	(49	)	$	(914,002	)
Employee stock plan grants		648			—		—			—			—
Net share settlements		(191	)		—		(71	)		—			(71	)
Fair value of employee stock plan awards		—			744		—			—			744
Net income		—			—		57,105			—			57,105
Balances at June 30, 2019		197,840		$	2,139,314	$	(2,995,489	)	$	(49	)	$	(856,224	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ULTRA PETROLEUM CORP. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

		Three Months Ended March 31,
			Six Months Ended June 30,
		~~2020~~	2020			~~2019~~				2019
		~~(In thousands)~~	(In thousands)
Operating activities - cash provided by:
Operating activities - cash provided by (used in):
Net income (loss) for the period		$	~~(217,605~~$	)	(263,425	$	~~40,674~~)			$		97,780
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depletion, depreciation, and amortization			47,284				51,653
Depletion, depreciation and amortization					86,096							107,422
Ceiling test write-down			242,603				—
Unrealized loss (gain) on commodity derivatives					12,366							(82,527	)
Unrealized loss (gain) on commodity derivatives			(27,945	)			(14,292	)
Write-off of premium on restructuring associated with liabilities subject to compromise					(188,188		)					—
Stock compensation			1,180				841
Write-off of deferred financing costs associated with liabilities subject to compromise					47,529							—
Payable-in-kind (“PIK”) interest payable			2,917				3,183
Original issue discount on DIP financing facility					375							—
Amortization of premium on debt exchange			(10,647	)			(9,716	)
Reorganization expenses associated with DIP financing facility					555							—
Amortization of deferred financing costs			3,459				3,123
Non-cash reorganization items					9,351							—
Inventory write-down			3,336				—
Stock compensation					1,665							1,521
Other			(127	)			582
Payable-in-kind (“PIK”) interest payable					4,313							6,722
Net changes in operating assets and liabilities:
Amortization of premium					(15,695		)					(20,572	)
Accounts receivable			35,869				50,243
Amortization of deferred financing costs					5,116							6,308
Other current assets			(564	)			(307	)
Ceiling test write-down					353,206							—
Other non-current assets			30				30
Inventory write-down					3,341							—
Accounts payable			(3,637	)			(359	)
Other					—							1,915
Accrued liabilities			(985	)			4,425
Net changes in operating assets and liabilities:
Production taxes payable			18,660				25,743
Accounts receivable					38,753							86,645
Interest payable			(6,513	)			99
Other current assets					(2,245		)					(636	)
Other long-term obligations			(14,590	)			(11,663	)
Other non-current assets					(10,968		)					59
Income taxes payable/receivable			881				6,431
Accounts payable					(7,049		)					(1,449	)
Net cash provided by operating activities			73,606				150,690
Accrued liabilities					(4,827		)					(5,519	)
Investing Activities - cash used in:
Production taxes payable					(7,352		)					(3,214	)
Oil and gas property expenditures			(220	)			(92,352	)
Interest payable					9,673							6,052
Change in capital cost accrual and accounts payable			(2,229	)			1,702
Other long-term obligations					(10,251		)					8,187
Inventory			—				419
Income taxes payable/receivable					881							6,431
Proceeds from sale of capital assets			1,469				—
Net cash provided by operating activities					63,220							215,125
Purchase of capital assets			(424	)			(211	)
Investing Activities - cash provided by (used in):
Net cash used in investing activities			(1,404	)			(90,442	)
Oil and gas property expenditures					(1,684		)					(176,791	)
Financing activities - cash used in:
Change in capital cost accrual and accounts payable					(2,091		)					(2,743	)
Borrowings under Credit Agreement			88,880				232,000
Acquisition of the liquids gathering system					(18,000		)					—
Payments under Credit Agreement			(153,580	)			(298,000	)
Inventory					—							1,567
Payments under Term Loan			(2,438	)			—
Proceeds from sale of property, plant and equipment					1,469							—
Deferred financing costs			—				(488	)
Purchase of property, plant and equipment					(449		)					(373	)
Repurchased shares from net share settlements			(8	)			—
Net cash used in investing activities					(20,755		)					(178,340	)
Net cash used in financing activities			(67,146	)			(66,488	)
Financing activities - cash provided by (used in):
Increase (decrease) in cash during the period			5,056				(6,240	)
Borrowings under Credit Agreement					147,580							431,000
Cash, cash equivalents, and restricted cash, beginning of period			3,441				19,305
Payments under Credit Agreement					(165,980		)					(476,000	)
Cash, cash equivalents and restricted cash, end of period		$	8,497			$	13,065
Payments under Term Loan					(2,438		)					(2,438	)
Proceeds from DIP financing facility					10,000							—
Financing fees associated with DIP financing facility					(555		)					—
Deferred financing costs					—							(488	)
Repurchased shares from net share settlements					(10		)					(71	)
Net cash used in financing activities					(11,403		)					(47,997	)
Increase (decrease) in cash during the period					31,062							(11,212	)
Cash, cash equivalents, and restricted cash, beginning of period					3,441							19,305
Cash, cash equivalents and restricted cash, end of period	$			34,503					$		8,093
SUPPLEMENTAL INFORMATION:
Cash paid for reorganization items			$		13,334					$		—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

All dollar amounts in this Quarterly Report on Form 10-Q are expressed in U.S. dollars unless otherwise noted.

DESCRIPTION OF THE BUSINESS:

Ultra Petroleum Corp. and its wholly-owned subsidiaries (collectively the “Company,” “Ultra,” “our,” “we,” or “us”) is an independent oil and gas company engaged in the operation and production, development and exploration, and acquisition of oil and natural gas properties. Ultra Petroleum Corp. is incorporated under the laws of Yukon, Canada. The Company’s principal business activities are operating and developing its long-life natural gas reserves in the Pinedale and Jonah fields of the Green River Basin of southwest Wyoming.

VOLUNTARY REORGANIZATION UNDER CHAPTER 11:

On May 14, 2020 (the “Petition Date”), Ultra Petroleum Corp. and all of its direct and indirect subsidiaries, including UP Energy Corporation (“UPE”), Ultra Resources, Inc. (“Ultra Resources”), Keystone Gas Gathering, LLC, Ultra Wyoming, LLC, Ultra Wyoming LGS, LLC, UPL Pinedale, LLC, and UPL Three Rivers Holdings, LLC (collectively, the “Filing Subsidiaries” and, together with the Company, the “Debtors”), filed voluntary petitions (the “Bankruptcy Petitions”) for reorganization under chapter 11 of the United States Bankruptcy Code (“Chapter 11”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Court”). The Court entered an order to jointly administer the Chapter 11 cases under the caption In re Ultra Petroleum Corp., et al., Case No. 20-32631 (collectively, the “Chapter 11 Cases”). ~~The~~Information ~~Debtors~~about ~~will~~the ~~continue~~Chapter to11 ~~operate~~Cases ~~their~~is ~~businesses~~available asat ~~“debtors-in-possession” under~~ the ~~jurisdiction~~Company’s ofwebsite ~~the~~(www.ultrapetroleum.com) ~~Court~~ and inalso ~~accordance~~at ~~with~~a ~~the~~website ~~applicable~~maintained ~~provisions~~by of the ~~United~~Company’s ~~States~~claims ~~Bankruptcy~~agent, ~~Code~~Prime ~~and~~Clerk ~~orders of the Court~~(https://cases.primeclerk.com/UltraPetroleum/).

~~For~~The Debtors are currently operating the ~~duration~~business as debtors-in-possession under the jurisdiction of the ~~Chapter~~Court 11and ~~Cases,~~in accordance with the ~~Company’s~~applicable ~~operations~~provisions ~~and~~of ~~its~~the ~~ability~~United toStates ~~develop~~Bankruptcy Code and ~~execute~~orders ~~its~~of the Court. After the Debtors filed the Bankruptcy Petitions, the Court granted certain relief which enabled the Debtors to conduct their business ~~plan~~activities ~~are~~in the ordinary course, including, among other things and subject to ~~risks~~the terms and ~~uncertainties~~conditions ~~associated~~of ~~with~~such orders, authorizing the ~~Chapter~~Debtors 11to ~~Cases.~~pay Asemployee awages ~~result~~and ofbenefits, ~~these~~pay ~~risks~~taxes and ~~uncertainties~~certain governmental fees and charges, continue to operate its cash management system in the ~~Company’s~~ordinary ~~assets~~course, ~~liabilities,~~remit ~~officers~~funds ~~and/or~~held ~~directors~~from ~~could~~time beto ~~significantly~~time ~~different~~for ~~following~~ the ~~outcome~~benefit of ~~the~~third ~~Chapter~~parties 11(such ~~Cases~~as royalty owners), and pay the ~~description~~pre-petition claims of ~~its~~certain ~~operations,~~of ~~properties~~the ~~and~~Debtors’ ~~capital~~vendors ~~plans~~that ~~included~~hold inliens ~~these~~under ~~financial~~applicable ~~statements~~non-bankruptcy ~~may~~law. ~~not~~For ~~accurately~~goods ~~reflect~~and ~~its~~services ~~operations~~provided following the Petition Date, ~~properties~~the ~~and~~Debtors ~~capital~~intend ~~plans~~to ~~following~~pay ~~the~~vendors ~~Chapter~~in 11full ~~Cases~~under normal terms.

~~The~~Subject ~~commencement~~to ofcertain aexceptions ~~voluntary~~provided ~~proceeding~~for in ~~bankruptcy~~Section ~~constitutes~~362 anof ~~immediate~~the ~~event~~Bankruptcy Code, all judicial and administrative proceedings against the Debtors or the Debtors’ property were automatically enjoined, or stayed, as of ~~default~~the ~~that~~Petition ~~accelerated~~Date. In addition, the ~~Company~~filing of new judicial or administrative actions against the Debtors or the Debtors’s property for claims arising prior to the Petition Date were automatically enjoined. This prohibits, for example, the Debtors’ lenders or noteholders from pursuing claims for defaults under the debt agreements and the contract counterparties from pursuing claims for defaults under the Debtors’ contracts. Accordingly, unless the Court agrees to lift the automatic stay, all of the Debtors’ pre-petition liabilities and obligations should be settled or compromised under the ~~following~~Bankruptcy ~~debt~~Code ~~instruments:~~as part of the Chapter 11 proceedings.

•For ~~The~~the ~~Credit~~duration ~~Agreement~~of the Chapter 11 Cases, ~~dated~~the asCompany’s ofoperations ~~April~~and ~~12,~~its ~~2017,~~ability asto ~~amended~~develop (and execute its business plan are subject to risks and uncertainties associated with the Chapter 11 Cases as described in Item 1A, “~~Credit~~Risk ~~Agreement~~Factors”), byin ~~and~~the ~~between~~Company’s ~~Ultra~~Quarterly ~~Resources~~Report on Form 10-Q for the quarter ended March 31, as2020. As ~~borrower~~a result of these risks and uncertainties, the Company’s assets, liabilities, contractual obligations, officers and/or ~~UPE~~directors ascould ~~parent~~be ~~guarantors,~~significantly ~~Bank~~different following the outcome of ~~Montreal~~the Chapter 11 Cases. Additionally, asthe ~~administrative~~description ~~agent~~of the Company’s operations, properties and ~~the~~capital ~~lenders~~plans ~~party~~included ~~thereto~~in (these financial statements may not accurately reflect its operations, properties and capital plans following the ~~“Consenting~~Chapter ~~RBL~~11 ~~Lenders”);~~Cases.

•On the ~~Term~~Petition ~~Loan~~Date, the Debtors entered into a Restructuring Support Agreement, ~~dated~~(the as“RSA”) with the holders of ~~April~~(i) ~~12,~~100% ~~2017,~~of asthe ~~amended~~aggregate principal amount of loans outstanding under the Credit Agreement (the “Consenting RBL Lenders”); (ii) approximately 85% of the aggregate principal amount of loans outstanding under the Term Loan Agreement (the “Consenting Term Lenders”); and (iii) 67% of the Second Lien Notes issued pursuant to the Second Lien Indenture, by and between Ultra Resources, as ~~borrower~~issuer, ~~the Company~~ and ~~UPE~~U.S. asBank ~~parent~~National ~~guarantors~~Association, ~~Wilmington~~a ~~Trust,~~national ~~National~~banking ~~Association (“WTNA”)~~association, as ~~administrative~~trustee and collateral agent, ~~and the lenders party thereto~~ (the “Consenting ~~Term Lenders~~Noteholders” and, together with the Consenting RBL Lenders and Consenting Term Lenders, the “~~Consenting~~Restructuring ~~Lenders~~Support Parties”);. As of July 31, 2020, the percentage consenting lenders increased to 99% and 96% for the Consenting Term Lenders and Consenting Noteholders, respectively.

•Pursuant to the ~~Company’s~~RSA, ~~9.00%~~the ~~Cash~~Restructuring /Support ~~2.00%~~Parties ~~PIK~~agreed ~~Senior~~(subject ~~Secured~~to ~~Second~~the ~~Lien~~terms ~~Notes~~and ~~due~~conditions ~~July~~of ~~2024 (~~the ~~“Second Lien Notes”~~RSA), ~~issued~~to ~~pursuant~~vote to accept the ~~indenture,~~Debtors’ ~~dated~~prepackaged ~~December~~joint ~~21,~~Chapter ~~2018,~~11 byPlan ~~and~~of ~~between~~Reorganization ~~Ultra Resources,~~ (as ~~issuer~~proposed, the ~~Company~~“Plan”) ~~and~~described ~~its other subsidiaries, as guarantors, and U~~below.~~S. Bank, as trustee;~~

• the Company’s 6.875% Senior Notes due April 2022 (the “2022 Notes”), issued pursuant to the indenture, dated April 12, 2017, by and between Ultra Resources, as issuer, the Company and its other subsidiaries, as guarantors, and UMB Bank, N.A., as trustee; and7

•ULTRA ~~the~~PETROLEUM ~~Company’s 7~~CORP.~~125%~~ ~~Senior Notes due April 2025~~ (~~the “2025 Notes” and together with the 2022 Notes, the “Unsecured Notes”~~DEBTOR-IN-POSSESSION), issued pursuant to the indenture, dated April 12, 2017, by and between Ultra Resources, as issuer, the Company and its other subsidiaries, as guarantors, and UMB Bank, N.A., as trustee. The Unsecured Notes interest payments due in April 2020 have not been paid as of the date of this filing, which also created an event of default.

Accordingly, the Company has classified all of its outstanding debt as a current liability on its condensed consolidated balance sheet as of March 31, 2020.

On the Petition Date, the Debtors entered into a Restructuring Support Agreement (the “RSA”) with the holders of (i) 100% of the aggregate principal amount of loans outstanding under the Credit Agreement; (ii) approximately 85% of the aggregate principal amount of loans outstanding under the Term Loan Agreement; and (iii) 67% of the Second Lien Notes issued pursuant to the Second Lien Indenture, by and between Ultra Resources, as issuer, and U.S. Bank National Association, a national banking association (“U.S.

ULTRA PETROLEUM CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~Bank”)~~On May 15, as2020, ~~trustee~~consistent ~~and~~with ~~collateral~~the ~~agent~~RSA, (the ~~“Consenting~~Debtors ~~Noteholders”~~solicited acceptances of and, ~~together~~filed with the ~~Consenting~~Court ~~Lenders~~the proposed Plan which, subject to Court approval and the ~~“Restructuring~~requisite ~~Support~~support ~~Parties”).~~of the Debtors’ creditors:

~~Pursuant~~• toequitizes ~~the~~or ~~RSA,~~eliminates ~~the~~all ~~Restructuring Support Parties agreed (subject to the terms and conditions~~ of the ~~RSA) to vote to accept the~~ Debtors’ ~~prepackaged~~pre-petition ~~joint Chapter 11 Plan of Reorganization (as proposed, the “Plan”) described below.~~indebtedness;

Also on the Petition Date, consistent with the RSA, the Debtors solicited acceptances of and filed with the Court the proposed Plan which, subject to Court approval and the requisite support of the Debtors’ creditors:

• equitizes or eliminates all of the Debtors’ prepetition indebtedness;

•

provides for a $25 million DIP Facility (as defined below) to the Company by certain Consenting Term Lenders;

• provides for a new capital investment by the Consenting Term Lenders of up to approximately $85 million under an equity rights offering, with proceeds to be utilized by the Company to repay the value of the Credit Agreement including the letter of credit obligation associated with Rockies Express Pipeline (“REX”), net of impairment; the outstanding borrowings and balance of the DIP Facility (defined below); and, to provide the option for up to $15 million of proceeds in the event of aan agreed upon use of such funds;

• contemplates a term loan of up to $5 million being issued upon exit with no prepayment penalties and issued as part of the equity rights offering;

•

contemplates an exit revolving credit facility with a $60 million commitment amount and an initial $100 million borrowing base;

• contemplates the rejection of the obligations under the REX firm transportation agreement through December 2026 ~~and the rejection of the lease contract with the remaining term through December 2027 for the liquids gathering system owned by Pinedale Corridor, LP~~;

•

contemplates the rejection of the lease contract with the remaining term through December 2027 for the liquids gathering system (“LGS”) owned by Pinedale Corridor, LP (“Corridor”) which has since been terminated and the Company acquired the LGS for a purchase price of $18.0 million on June 26, 2020, as described below;

•

pays all ongoing trade obligations in the ordinary course; and

•

contains customary releases and exculpations.

~~During~~On ~~the~~June ~~quarter~~22, ~~ended~~2020 ~~March~~and ~~31,~~in ~~2020~~connection with the Chapter 11 Cases, the ~~Company~~Debtors ~~recognized~~filed ~~$2.6~~a ~~million~~motion ~~consisting~~for approval of ~~professional,~~the ~~advisory,~~Purchase ~~consulting~~Agreement (as defined below) [Docket No. 301], and ~~legal~~on ~~fees~~June ~~related~~26, to2020, the ~~Chapter~~Court 11approved ~~Cases. These~~such ~~expenses~~motion ~~are~~and ~~reported~~entered asan ~~Pre-petition~~order ~~restructuring~~approving ~~expenses~~the onPurchase ~~the~~Agreement ~~condensed~~[Docket ~~consolidated~~No. ~~statement~~333] of(the ~~operations~~“PSA Order”).

~~DIP~~On ~~Credit~~June ~~Agreement.~~26, In2020, ~~connection with~~ the ~~RSA~~Debtors ~~and the Chapter 11 Cases, Ultra Resources~~ entered into athe ~~senior~~First ~~secured~~Amendment ~~super~~to ~~priority debtor-in-possession credit agreement (~~the ~~“DIP~~Restructuring ~~Credit~~Support Agreement~~”),~~ with ~~dated as of May 19, 2020, among Ultra Resources, as borrower, UPE and~~ the ~~other~~requisite ~~Filing~~consenting ~~Subsidiaries,~~parties ~~as guarantors, WTNA, as administrative agent and collateral agent, and the lenders party~~ thereto. ~~The DIP Credit Agreement provides for a multi-draw term loan credit facility in an aggregate principal amount of $25 million~~ (the “~~DIP~~Consenting ~~Facility~~Stakeholders”). ~~Ultra intends~~ to ~~use~~permit ~~proceeds of~~ the ~~DIP~~Debtors ~~Facility, among other things: (1)~~ to ~~pay~~enter ~~interest,~~into ~~fees, costs~~ and ~~expenses~~perform ~~related~~under toan ~~the~~agreement ~~loans thereunder, (2)~~ to ~~pay~~purchase the ~~fees,~~LGS costs and expenses of the estate professionals retained in the Chapter 11 Cases and approved by the Court, (3) to pay certain fees, costs, disbursements and expenses of the Consenting Term Lenders, (4) to make all permitted payments of costs of administration of the Chapter 11 Cases, (5) to pay such prepetition expenses as ~~are~~described ~~consented~~under ~~to in writing by~~ the ~~Required~~Company’s ~~Lenders~~lease ~~(as~~agreement ~~defined~~with inCorridor ~~the DIP Credit Agreement) and approved by the Court, (6) to satisfy any adequate protection obligations owing under the DIP Orders (~~as ~~defined~~described ~~in the RSA); and (7) for general corporate and working capital purposes of the Debtors during the Chapter 11 Cases~~below.

~~The~~In ~~DIP~~accordance ~~Facility~~with isthe ~~subject~~PSA toOrder, ~~certain~~on ~~affirmative~~June 28, 2020, the Company’s indirect wholly-owned subsidiary, Ultra Wyoming, LLC (“Ultra Wyoming”), entered into a purchase and ~~negative~~sale ~~covenants~~agreement (the “Purchase Agreement”), ~~including~~by and between Ultra Wyoming and Corridor, pursuant to which, among other ~~covenants~~things, ~~the~~Ultra ~~Company~~Wyoming ~~believes~~agreed to bepurchase ~~customary~~the inLGS ~~debtor-in-possession~~for ~~financings~~a purchase price of $18.0 million. On June 30, ~~reporting~~2020, Ultra Wyoming and Corridor closed the transaction contemplated by the ~~Filing~~Purchase ~~Subsidiaries~~Agreement in accordance with the ~~form~~terms thereof. Concurrent with the closing of athe ~~rolling~~Purchase ~~13-week~~Agreement, ~~budget~~the preexisting lease agreement between the Company and aCorridor ~~weekly~~was ~~report~~terminated ~~with~~pursuant ato ~~reasonably~~the ~~detailed~~Court’s ~~written~~acceptance ~~explanation~~of the rejection notice of ~~all~~the ~~material~~LGS ~~variances~~lease ~~from~~agreement. As a result, the ~~budget~~right-of-use assets and lease liability was reduced by the remaining payments under the lease agreement.

~~Ability~~On toJuly ~~Continue~~27, as2020, athe ~~Going~~Debtors ~~Concern. The~~entered ~~significant~~into ~~risks~~a ~~and~~backstop ~~uncertainties~~purchase ~~related~~agreement to (the ~~Company’s~~“Backstop ~~liquidity~~Purchase ~~and~~Agreement”) ~~the~~with ~~Chapter~~certain 11holders ~~Cases~~of ~~described above raise substantial doubt about~~ the Company’s ~~ability~~pre-petition toindebtedness ~~continue as a going concern. As such~~(collectively, the ~~accompanying~~“Backstop ~~condensed consolidated financial statements (unaudited~~Parties”). ~~are~~Pursuant ~~prepared~~to inthe ~~accordance~~Backstop ~~with~~Purchase ~~generally~~Agreement, ~~accepted~~the ~~accounting~~Backstop ~~principles~~Parties ~~applicable~~agreed to abackstop ~~going concern, which contemplates~~ the ~~realization~~rights ofoffering ~~assets~~contemplated ~~and~~by the ~~satisfaction~~Plan offor ~~liabilities~~new incommon ~~the~~stock ~~normal course~~ of ~~business. If~~reorganized ~~the~~UPE ~~Company~~to ~~cannot~~be ~~continue~~issued asupon ~~a going concern, adjustments to~~ the ~~carrying~~effectiveness ~~values and classification~~ of ~~its~~the ~~assets~~Plan ~~and~~for ~~liabilities~~an ~~and~~aggregate ~~the~~purchase ~~reported~~price ~~amounts~~ of ~~income~~up ~~and~~to ~~expenses~~$85.0 ~~could be required and could be material~~million.

AsPre-Petition ~~discussed~~Restructuring ~~above,~~Expenses. ~~the~~For ~~filing of~~ the ~~Chapter~~three 11and ~~Cases~~six ~~constitutes~~months anended ~~event~~June 30, of2020, ~~default under~~ the Company’s ~~outstanding~~incurred ~~debt~~$9.7 ~~agreements,~~million ~~resulting in the automatic~~ and ~~immediate~~$12.4 ~~acceleration~~million of ~~all~~professional, ofadvisory, ~~the~~consulting, ~~Company’s~~and ~~outstanding~~legal ~~debt. The~~fees ~~Company~~related ~~projects~~to ~~that~~the itChapter ~~will~~11 ~~not~~Cases ~~have~~prior ~~sufficient cash on hand or available liquidity~~ to ~~repay~~the ~~such~~petition ~~debt~~date, respectively. These ~~conditions~~expenses ~~and~~are ~~events~~reported ~~raise~~as ~~substantial~~“Pre-petition ~~doubt~~restructuring ~~about~~expenses” ~~the~~in ~~Company’s~~Operating ~~ability~~income to(loss) ~~continue~~on asthe acondensed ~~going~~consolidated ~~concern~~statement of operations.

Costs of Reorganization. Expenses incurred after the petition date are recorded as “Reorganization items, net” on the condensed consolidated statement of operations. The Company has incurred and will continue to incur significant direct costs associated with its reorganization and the Chapter 11 proceedings. The Company expects these direct costs, which are being expensed as incurred, will significantly affect its results of operations.

In addition, a non-cash charge to write-off the unamortized debt issuance costs, discounts and premiums related to the Company’s funded indebtedness are included in “Reorganization items, net” as these debt instruments are expected to be impacted by the pendency of the Chapter 11 Cases. For additional information about the costs of the Company’s reorganization and Chapter 11 proceedings, see “Reorganization items, net” below.

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following table summarizes the components included in “Reorganization items, net” in the condensed consolidated statements of operations for the three and six months ended June 30, 2020:

	For the three and six months ended June 30, 2020
Reorganization items – direct expenses ¹	$	23,060
Reorganization items – recognition of items attributed to liabilities subject to compromise ²		(140,659	)
Total Reorganization items, net	$	(117,599	)

(1)

Includes professional advisory fees and other costs directly associated with the Company’s reorganization. Professional fees include legal and other advisor fees related to the bankruptcy proceedings. As of June 30, 2020, the Company has $9.4 million of accrued and unpaid professional advisory fees associated with the Chapter 11 filings, such fees will be paid in the ordinary course of business.

(2)

A non-cash charge to write-off all of the unamortized debt issuance costs, discount and premium related to the pre-petition debt instruments issued by Ultra Resources is included in “Reorganization items, net” as these debt instruments are expected to be impacted by the pendency of the Chapter 11 Cases.

DIP Credit Agreement. In connection with the RSA and the Chapter 11 Cases, Ultra Resources entered into a senior secured super priority debtor-in-possession credit agreement (the “DIP Credit Agreement”), dated as of May 19, 2020, among Ultra Resources, as borrower, UPE and the other Filing Subsidiaries, as guarantors, Wilmington Trust, National Association (“WTNA”), as administrative agent and collateral agent, and the lenders party thereto. The DIP Credit Agreement provides for a multi-draw term loan credit facility in an aggregate principal amount of $25 million (the “DIP Facility”). Ultra intends to use proceeds of the DIP Facility, among other things: (1) to pay interest, fees, costs and expenses related to the loans thereunder, (2) to pay the fees, costs and expenses of the estate professionals retained in the Chapter 11 Cases and approved by the Court, (3) to pay certain fees, costs, disbursements and expenses of the lenders under the DIP Credit Agreement, (4) to make all permitted payments of costs of administration of the Chapter 11 Cases, (5) to pay such pre-petition expenses as are consented to in writing by the Required Lenders (as defined in the DIP Credit Agreement) and approved by the Court, (6) to satisfy any adequate protection obligations owing under the DIP Orders (as defined in the RSA); and (7) for general corporate and working capital purposes of the Debtors during the Chapter 11 Cases.

The DIP Facility is subject to certain affirmative and negative covenants, including, among other covenants the Company believes to be customary in debtor-in-possession financings, continuing reporting obligations by the Company on a consolidated basis in the form of a rolling 13-week budget and a weekly report with a reasonably detailed written explanation of all material variances from the budget.

On June 16, 2020, the Company entered into the First Amendment to the DIP Credit Agreement with WTNA as administrative agent and the other lenders party thereto (the “DIP First Amendment”). The DIP First Amendment modified the DIP Credit Agreement by, among other items, (i) removing change of control cross-triggers upon acceleration of other Material Debt (as defined in the DIP Credit Agreement), (ii) including a carve-out to Material Adverse Effects (as defined in the DIP Credit Agreement) based upon the effects of the ongoing COVID-19 pandemic, (iii) including carve-outs to certain covenants and events of default in connection with the Chapter 11 Cases, and (iv) including a carve-out to events of default based on the termination of the RSA in connection with a Noteholder Termination Event or a Termination Event (each as defined in the DIP Credit Agreement).

Liabilities Subject to Compromise. The Company has applied Accounting Standards Codification (“ASC”) 852, Reorganizations, in preparing the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. The consolidated financial statements presented herein include amounts classified as “Liabilities subject to compromise.” This amount represents estimates of known or potential pre-petition claims expected to be resolved in connection with the Chapter 11 proceedings. Additional amounts may be included in liabilities subject to compromise in future periods if the Company elects to reject executory contracts and unexpired leases as part of the Chapter 11 Cases. Due to the uncertain nature of many of the potential claims, the magnitude of potential claims is not reasonably estimable at this time. Potential claims not currently included with “Liabilities subject to compromise” in the Company’s condensed consolidated balance sheets may be material. In addition, differences between amounts reported as “Liabilities subject to compromise” in this Quarterly Report on Form 10-Q and the amounts attributable to such matters claimed by the Company’s creditors or approved by the Court may be material. The Company will continue to evaluate its liabilities throughout the Chapter 11 process and will plan to make adjustments in future periods as necessary and appropriate. Such adjustments may be material.

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Asexecutory ~~part~~contract ofor ~~the~~unexpired ~~Chapter~~lease ~~11 Cases~~agreement, the Company ~~submitted~~is ~~the~~generally ~~Plan~~required to ~~the~~cure ~~Bankruptcy~~any ~~Court. The~~existing ~~Company’s~~monetary ~~operations~~defaults ~~and~~under ~~its~~such ~~ability~~contract toor ~~develop~~lease agreement and ~~execute~~provide ~~its~~adequate ~~business~~assurance ~~plan~~of ~~are~~future ~~subject~~performance to ~~a high degree of risk and uncertainty associated with~~ the ~~Chapter~~counterparty. 11Accordingly, ~~Cases. The~~any ~~outcome~~description of ~~the~~an ~~Chapter~~executory 11contract ~~Cases~~or isunexpired ~~subject~~lease toin athis ~~high~~Quarterly ~~degree~~Report ofon ~~uncertainty~~Form ~~and~~10-Q, isincluding ~~dependent~~any ~~upon~~quantification ~~factors that are outside~~ of the Company’s ~~control,~~obligations ~~including~~under ~~actions~~any ofsuch ~~the~~contract ~~Bankruptcy~~or ~~Court~~lease ~~and~~agreement, ~~the~~is ~~Company’s~~wholly ~~creditors. There~~qualified ~~can~~by bethe norejection ~~assurance~~rights ~~that~~ the Company ~~will~~has ~~confirm~~under ~~and consummate~~ the ~~Plan~~Bankruptcy asCode. ~~contemplated~~Further, bynothing ~~the~~herein ~~RSA~~is or ~~complete~~shall ~~another~~be ~~plan~~deemed ofan ~~reorganization~~admission with respect to ~~the~~any ~~Chapter~~claim 11amounts ~~Cases. As~~or acalculations ~~result,~~arising from the ~~Company~~rejection ~~has~~of ~~concluded~~any ~~that~~executory ~~management’s~~contract ~~plans~~or dounexpired ~~not~~lease ~~alleviate~~agreement ~~substantial~~and ~~doubt about~~ the Company’s ~~ability~~expressly topreserves ~~continue~~all asof aits ~~going~~rights ~~concern~~with ~~absent~~respect ~~a successful restructuring~~thereto.

~~Furthermore,~~The asfollowing ~~noted~~table insummarizes the ~~Annual~~components ~~Report~~of on“Liabilities ~~Form~~subject ~~10-K,~~to ~~the~~compromise” ~~Company’s independent registered public accounting firm~~ included ~~an explanatory paragraph~~ in ~~its opinion of~~ the ~~audited consolidated financial statement regarding substantial doubt about the~~ Company’s ~~ability~~condensed toconsolidated ~~continue~~balance sheets as ~~a going concern. As a result, the Company was in default under each~~ of ~~the Credit Agreement and Term Loan Agreement on April 14~~June 30, 2020 ~~when it delivered its financial statements to the lenders under the Credit Agreement and the Term Loan Agreement, respectively.~~ :

Accordingly, the Company has classified all of its outstanding debt as a current liability on its condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019.

	As of June 30, 2020
Accrued liabilities	$	1,015
Accrued interest payable		43,368
Debt		1,972,361
Liabilities subject to compromise	$	2,016,744

Ability to Continue as a Going Concern. The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not reflect any adjustments that might result from the outcome of the Chapter 11 proceedings. The Company has significant pre-petition indebtedness, all of which has been reclassified to Liabilities subject to compromise as of June 30, 2020. The Company’s level of pre-petition indebtedness has adversely impacted and is continuing to adversely impact its financial condition. As a result of the Company’s financial condition, the defaults under its debt agreements, the expected liquidity deficiency had the Company not filed for bankruptcy, and the risks and uncertainties surrounding the Chapter 11 proceedings, substantial doubt exists as to whether the Company will be able to continue as a going concern..

1. SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) on a going concern basis for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended ~~March~~June 3130, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020.

The condensed consolidated balance sheet atas of December 31, 2019, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (as amended, the “2019 Form 10-K”).

Significant Accounting Policies: The significant accounting policies followed by the Company are set forth in Note 1 – Significant Accounting Policies, in the 2019 Form 10-K and are supplemented by the notes to the unaudited condensed consolidated financial statements included in this report. These unaudited condensed consolidated financial statements should be read in conjunction with the 2019 Form 10-K.

Reclassifications: Certain amounts in the financial statements of prior periods have been reclassified to conform to the current period financial statement presentation.

Reorganization Accounting: Effective May 14, 2020, as a result of the filing of the Chapter 11 Cases, the Company began accounting and reporting according to ~~FASB~~ ASC Topic 852 – Reorganizations, which specifies the accounting and financial reporting requirements for entities reorganizing through ~~chapter~~Chapter 11 bankruptcy proceedings. These requirements include distinguishing transactions associated with the reorganization separate from activities related to the ongoing operations of the business.

New Accounting Pronouncements: From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ~~Accounting Standards Codification (“~~ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that ~~the impact of~~ recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on the consolidated financial statements upon adoption.

Recent Accounting Pronouncements Not Yet Adopted:

Financial Instruments. In June 2016, The FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for the Company for starting January 1, 2023. The Company is currently assessing the impact of ASU 2016-13 on its consolidated financial statements.

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

toRecent ~~the~~Accounting ~~general~~Pronouncements ~~approach~~Not toYet the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods. We are currently evaluating the potential impact of this guidance on our consolidated financial statements. Adopted:

Financial Instruments. In June 2016, The FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for the Company starting January 1, 2023. The Company is currently assessing the impact of ASU 2016-13 on its consolidated financial statements.

Income Taxes. In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods. We are currently evaluating the potential impact of this guidance on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. ASU 2020-04 will be in effect through December 31, 2022. We are currently assessing the potential impact of ASU 2020-04 on our consolidated financial statements.

2. REVENUE RECOGNITION:

Revenue from Contracts with Customers

Sales of oil and natural gas are recognized at the point when title and custody (collectively, “control”) of the product is transferred to the customer, collectability is reasonably assured, and the performance obligations are satisfied. Virtually all of our contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering line or a transmission line, the quality of the oil or natural gas, and prevailing supply and demand conditions. As a result, the price we receive for our produced oil and natural gas fluctuates to remain competitive with other available oil and natural gas supplies.

Natural gas sales

We sell natural gas production at the tailgate of the processing plant or at a delivery point downstream, as specified in the contracts with our customers. The production is sold at set volumes and we collect either (i) an agreed upon index price, (ii) a specific index price adjusted for pricing differentials, or (iii) a set price. We recognize revenue at the net price received when control transfers to the purchaser at the tailgate of the processing plant or at the agreed-upon delivery point. For these contracts, we have concluded that the Company is the principal for our net revenue interest share of the volumes being sold. Gathering fees are incurred prior to the customer taking control of the product, are not considered to be promised services, and are not included in the transaction price; thus, they are presented as expenses in the condensed consolidated statement of operations.

Our working interest partners are considered the principal for their working interest shares. They have the option to take their gas volumes in kind. The Company may act as an agent and market the other partners’ share of the natural gas production from wells we operate. If it does so, the Company is considered the agent and revenue is recorded at the Company’s net revenue interest in the production.

Oil sales

We sell oil production at either (a) a lease automatic custody transfer meter, (b) a tank battery, or (c) a delivery point downstream, as specified in the contracts with our customers. The production is sold at set volumes and we collect either (i) an agreed upon index price, (ii) a specific index price adjusted for pricing differentials, or (iii) a set price. We recognize revenue at the point when the customer takes control of the product. For these contracts, we have concluded that the Company is the principal for its net revenue interest share of the volumes being sold. Gathering fees are performed prior to the customer taking control of the product, are not considered to be promised services, and are not included in the transaction price; thus, they are presented as expenses in the condensed consolidated statement of operations.

Our working interest partners are considered the principal for their working interest shares. They have the option to take their oil volumes in kind. The Company ~~acts~~serves as an agent and markets the other partners’ share of almost all oil production from wells we operate. In these situations, the Company is considered the agent and revenue is recorded at the Company’s net revenue interest in the production.

Other revenues

Our other revenue is comprised of fees paid to us by the operators of the gas processing plants where our gas is processed. Control is transferred upon completion of the processing service. The Company is considered the principal, and revenue is recognized at the point in time that the control is transferred.

Transaction price allocated to remaining performance obligations

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~transaction~~Other ~~price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.~~revenues

Transaction price allocated to remaining performance obligations

A significant number of our product sales are short-term in nature with a contract term of one year or less at index-based prices. For those contracts, we have utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

For our product sales that have a contract term greater than one year, we have utilized the practical expedient in ASC 606-10-50-14(a) which states that the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required.

Contract balances

Under our product sales contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our product sales contracts do not give rise to contract assets or liabilities under ASC 606.

Prior-period performance obligations

We record revenue in the month when control is transferred to the purchaser and all contractual obligations are satisfied. However, settlement statements for certain natural gas sales may not be received for 30 to 90 days after the date production is delivered. Consequently, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. We record the differences between our estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. We have existing internal controls for our revenue estimation process and related accruals, and any identified differences between our revenue estimates and actual revenue received historically have been insignificant. ~~Revenue~~ For the three and six months ended June 30, 2020, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material ~~for the three months ended March 31, 2020 and 2019~~.

3. OTHER CURRENT ASSETS:

The following table summarizes the major components of “Other current assets” included on the condensed consolidated balance sheet:

	March 31,		December 31,
	June 30,		December 31,
	2020		2019
Deposits and retainers	$	~~526~~543	$	651
Prepaids and others		12,~~442~~347		1,087
Crude oil		~~958~~1,022		1,032
Pipe and production equipment		45,~~985~~490		7,976
Total Other current assets	$	79,~~911~~402	$	10,746

~~During~~The ~~the quarter ended March 31, 2020, the~~ Company recorded a write-down of pipe and production inventory to the lower of cost or net realizable value during 2020. The Company’s inventories are valued at the lower of cost or net realizable value, with cost determined using either the weighted-average cost, including the cost of transportation and storage, and with net realizable value defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of transportation. Accordingly, the Company recorded a write-down of pipe and production equipment of $3.3 million in the first quarter of 2020. The non-cash expense is reported as “Other operating expenses” on the condensed consolidated statement of operations. for the six months ended June 30, 2020.

4. OIL AND GAS PROPERTIES:

	March 31,			December 31,
	2020			2019
Proven properties:
Acquisition, equipment, exploration, drilling and abandonment costs	$	11,820,726		$	11,820,392
Less: Accumulated depletion, depreciation, amortization, and impairment		(10,553,983	)		(10,267,973	)
Total Oil and gas properties, net	$	1,266,743		$	1,552,419

The Company uses the full cost method of accounting for its oil and natural gas exploration and development activities and it is required to perform a ceiling test calculation each quarter. The full cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test is performed quarterly, on a country-by-country basis, utilizing the average of prices in

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~effect on the first day of the month for the preceding twelve-month period in accordance with SEC Release No~~4. ~~33-8995.~~OIL ~~The~~AND ~~ceiling~~GAS limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved crude oil and natural gas reserves discounted at 10%, plus the lower of cost or market value of unproved properties, less any associated tax effects. If such capitalized costs exceed the ceiling, the Company will record a write-down to the extent of such excess as a non-cash charge to earnings.PROPERTIES:

In order to fulfill the obligation to evaluate the full cost ceiling and to calculate DD&A of its oil and gas properties, the Company is required to estimate its reserves on a quarterly basis. The estimated proven oil and gas reserves considers the estimated future production based on the most current well information available including decline rate changes causing downward revisions and updated pricing in accordance with SEC requirements. The reserve estimated as of March 31, 2020 were prepared by Netherland, Sewell & Associates, Inc. The comparable calculated average SEC prices utilized in the preparation of the reserves as of March 31, 2020 were $2.07 per Mcf and $55.35 per Bbl. These prices represent a decrease of 15% and <1% for natural gas and oil, respectively, as compared to the pricing utilized as of December 31, 2019.

	June 30,			December 31,
	2020			2019
Proven properties:
Acquisition, equipment, exploration, drilling and abandonment costs	$	11,839,277		$	11,820,392
Less: Accumulated depletion, depreciation and amortization		(10,699,486	)		(10,267,973	)
Total Oil and gas properties, net	$	1,139,791		$	1,552,419

As The aCompany ~~result~~uses of the ~~decrease~~full incost ~~both~~method ~~quantities~~ of accounting for its oil and natural gas ~~reserves~~exploration and development activities, asand ~~well~~it asis ~~the~~required ~~discounted~~to ~~future~~perform ~~cash~~a ~~flow~~ceiling ~~estimates,~~test ~~the~~calculation ~~Company~~each ~~recorded~~quarter. The full cost ceiling test is an ~~increased~~impairment ~~rate~~test ofprescribed ~~DD&A~~by ~~per~~SEC ~~Mcfe and~~Regulation ~~recorded~~S-X aRule ~~$242~~4-10.6 ~~million~~The ~~non-cash~~ceiling ~~write~~test is performed quarterly, on a country-~~down~~by-country basis, utilizing the average of prices in effect on the ~~carrying~~first ~~value~~day of the ~~Company’s~~month ~~oil~~for ~~and~~the ~~gas~~preceding ~~properties~~twelve-month ~~from~~period ~~the~~in accordance with SEC Release No. 33-8995. The ceiling ~~test~~limits ~~limitation~~such aspooled ofcosts ~~March~~to ~~31,~~the ~~2020.~~aggregate ~~Given~~of the ~~continued~~present ~~depressed~~value ~~commodity~~of ~~prices,~~future ~~there~~net isrevenues aattributable ~~reasonable~~to ~~possibility~~proved ~~that~~crude oil and natural gas reserves discounted at 10%, plus the lower of cost or market value of ~~the~~unproved ~~reserves~~properties, ~~will~~less beany ~~further~~associated ~~reduced~~tax ineffects. ~~future~~If ~~quarters,~~such ~~requiring~~capitalized ancosts ~~additional~~exceed the ceiling, ~~test~~the Company will record a write-down to the extent of such excess as a non-cash charge to earnings.

As a result of the decreases in remaining quantities of oil and gas reserves associated with quarterly production, as well as the discounted future cash flow estimates driven by further effects of decreases to the required prices utilized in the preparation of the reserves, the Company recorded a non-cash write-down of the carrying value of the Company’s oil and gas properties from the ceiling test limitation in the amount of $110.6 million for the three months ended June 30, 2020. A write-down was also recorded in the first quarter of 2020, as described in the quarterly report filed on Form 10-Q for the three months ended March 31, 2020. The total non-cash write-down of the carrying value of the Company’s oil and gas properties for the six months ended June 30, 2020 was $353.2 million. Given continued depressed commodity prices, there is a reasonable possibility that the value of the reserves will be further reduced in future quarters, requiring an additional ceiling test write-down.

5. EARNINGS PER SHARE:

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

Certain share-based payments subject to market conditions are considered contingently issuable shares for purposes of calculating diluted earnings per share. Thus, they are excluded from the diluted earnings per share denominator until the market conditions are met. Additionally, warrants are excluded from the diluted earnings per share denominator until the date on which the volume-weighted average price of the Common Shares is at least $2.50 per Common Share for 30 consecutive trading days. For further information on the warrants, refer to the consolidated financial statements and footnotes thereto included in the Company’s ~~Annual~~2019 ~~Report on~~ Form 10-K ~~for the year ended December 31, 2019~~.

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

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

	For the Three Months Ended					For the Six Months Ended
	March 31,
	June 30,					June 30,
	2020			2019		2020			2019
	(Share amounts in 000's)
Net income (loss)	$	(~~217~~45,~~605~~820	)	$	4057,~~674~~105	$	(263,425	)	$	97,780
Weighted average common shares outstanding - basic		~~198~~199,~~333~~292			197,~~383~~514		198,746			197,449
Effect of dilutive instruments		—			~~418~~555		—			640
Weighted average common shares outstanding - diluted		~~198~~199,~~333~~292			~~197~~198,~~801~~069		198,746			198,089
Basic	$	(10.1023	)	$	0.2129	$	(1.33	)	$	0.50
Diluted	$	(10.1023	)	$	0.2129	$	(1.33	)	$	0.49
Number of contingently issuable shares, including warrants, that are not included in the diluted earnings per share denominator as the performance or market criteria have not been met		10,939			20,218		10,939			20,109

6. DEBT:

Chapter 11 Cases and Effect of Automatic Stay. On May 14, 2020, the Debtors filed for relief under Chapter 11 of the United States Bankruptcy Code. The commencement of a voluntary proceeding in bankruptcy constitutes an immediate event of default under the Credit Agreement, Term Loan Agreement, Second Lien Indenture, and the Unsecured Notes Indentures, resulting in the automatic and immediate acceleration of all of the Company’s outstanding debt. Any efforts to enforce payment obligations related to the Company’s debt, including the acceleration thereof, have been automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement are subject to the applicable provisions of the United States Bankruptcy Code. For more information on the Chapter 11 Cases and related matters, refer to the Introductory Note – Voluntary Reorganization under Chapter 11. ~~All~~The ~~debt~~following ~~obligations~~tables ~~has~~summarize ~~been~~the ~~classified~~Company’s asdebt ~~current~~instruments as of ~~March~~June 30, 2020 and December 31, ~~2020.~~2019:

	June 30, 2020
	Principal repayment obligation (1)			Unamortized DFC and discounts (2)		Unamortized premium (2)		Carrying value
DIP Facility	$	10,375		$	—	$	—	$	10,375
Credit Facility		46,300			—		—		46,300
Term Loan		966,319			—		—		966,319
Second Lien Notes		584,303			—		—		584,303
2022 Notes		150,439			—		—		150,439
2025 Notes		225,000			—		—		225,000
Total debt	$	1,982,736		$	—	$	—	$	1,982,736
Less: Liabilities subject to compromise(3) (See Introductory Note)		(1,972,361	)		—		—		(1,972,361	)
Total debt not subject to compromise	$	10,375		$	—	$	—	$	10,375

~~ULTRA~~(1) ~~PETROLEUM~~Includes ~~CORP~~PIK on the Term Loan and Second Lien Notes of $1.1 million and $12.3 million, respectively.

(2)

A non-cash charge to write-off all of the unamortized debt issuance costs, discount, and premium related to the debt instruments issued by Ultra Resources, Inc., is included in “Reorganization items, net” in the condensed consolidated statements of operations as these debt instruments are expected to be impacted by the pendency of the Company’s Chapter 11 Cases.

(3)

The Company has significant indebtedness, all of which has been reclassified to liabilities subject to compromise as of June 30, 2020 on the condensed consolidated balance sheets. The Company’s level of indebtedness has adversely impacted and is continuing to adversely impact its financial condition. As a result of the Company’s financial condition, the defaults under its debt agreements and the risks and uncertainties surrounding the Chapter 11 proceedings, substantial doubt exists that the Company will be able to continue as a going concern.

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following tables summarize the Company’s debt instruments as of March 31, 2020, and December 31, 2019:

	December 31, 2019
	Principal repayment obligation (1)		Unamortized DFC and discounts (2)			Unamortized premium		Carrying value
Credit Facility	$	64,700	$	—		$	—	$	64,700
Term Loan		968,756		(22,498	)		—		946,258
Second Lien Notes		583,853		—			203,883		787,736
2022 Notes		150,439		(11,146	)		—		139,293
2025 Notes		225,000		(12,777	)		—		212,223
Total debt, net	$	1,992,748	$	(46,421	)	$	203,883	$	2,150,210

	March 31, 2020
	Principal repayment obligation (1)		Unamortized DFC and discounts (2)(3)			Unamortized premium (3)		Carrying value
Credit Facility, secured, due January 2022	$	—	$	—		$	—	$	—
Term Loan, secured, due April 2024		966,319		(21,359	)		—		944,960
Second Lien Notes, secured, due July 2024		586,770		—			193,237		780,007
6.875% Notes, unsecured, due April 2022		150,439		(10,077	)		—		140,362
7.125% Notes, unsecured, due April 2025		225,000		(12,294	)		—		212,706
Total debt, net	$	1,928,528	$	(43,730	)	$	193,237	$	2,078,035

(1)	Includes PIK on the Term Loan and Second Lien Notes of $1.1 million and $11.8 million, respectively.

(1) Includes PIK interest on the Term Loan and Second Lien Notes of $1.1 million and $14.7 million, respectively.

(2)	Deferred financing costs related to the Revolving Credit Facility are reported within Other assets on the condensed consolidated balance sheet, rather than as a reduction of the carrying amount of long-term debt.

~~(3)~~DIP AsCredit aAgreement. ~~result~~In ofconnection with the ~~Bankruptcy~~RSA ~~Petitions~~and ~~filed~~the onChapter ~~May~~11 14Cases, ~~2020,~~Ultra ~~subsequent~~Resources toentered ~~March~~into ~~31,~~the ~~2020,~~DIP Credit Agreement. The DIP Credit Agreement provides for the ~~Company~~DIP ~~wrote~~Facility ~~off~~and ~~approximately~~borrowings up to $~~144~~25.0 million. Ultra has utilized $10.0 million of ~~unamortized~~this ~~net~~facility ~~deferred~~and ~~financing~~is allowed to request additional borrowings up to $15.0 million, in tranches greater than $5.0 million. Ultra intends to use proceeds of the DIP Facility, among other things: (1) to pay interest, fees, costs and expenses related to the loans thereunder, ~~discounts~~(2) to pay the fees, costs and ~~premium~~expenses of the estate professionals retained in the Chapter 11 Cases and approved by the Court, ~~net~~(3) to pay the fees, costs, disbursements and expenses of the lenders under the DIP Credit Agreement, (4) to make all permitted payments of costs of administration of the Chapter 11 Cases, (5) to pay such pre-petition expenses as are consented to in writing by the Required Lenders (as defined in the DIP Credit Agreement) and approved by the Court, (6) to satisfy any adequate protection obligations owing under the DIP Orders (as defined in the RSA); and (7) for general corporate and working capital purposes of the Debtors during the Chapter 11 Cases.

	December 31, 2019
	Principal repayment obligation (1)		Unamortized DFC and discounts (2)			Unamortized premium		Carrying value
Credit Facility, secured, due January 2022	$	64,700	$	—		$	—	$	64,700
Term Loan, secured, due April 2024		968,756		(22,498	)		—		946,258
Second Lien Notes, secured, due July 2024		583,853		—			203,883		787,736
6.875% Notes, unsecured, due April 2022		150,439		(11,146	)		—		139,293
7.125% Notes, unsecured, due April 2025		225,000		(12,777	)		—		212,223
Total debt, net	$	1,992,748	$	(46,421	)	$	203,883	$	2,150,210

The DIP Facility bears an interest rate (a) with respect to LIBOR Loans (as defined in the DIP Credit Agreement), of LIBOR plus 400 basis points, subject to a LIBOR floor of 1.0%, and (b) with respect to Base Rate Loans, the greatest of (i) Prime Rate (as defined in the DIP Credit Agreement), (ii) the Federal Funds Effective Rate (as defined in the DIP Credit Agreement), plus 50 basis points, and (iii) the Adjusted Eurodollar Rate (as defined in the DIP Credit Agreement) for a one month interest period plus 100 basis points, plus the applicable margin of 300 basis points in each case. Unutilized fees are 50 basis points and the upfront fees in an aggregate amount equal to $0.2 million. The DIP Facility is subject to certain affirmative and negative covenants, including, among other covenants the Company believes to be customary in debtor-in-possession financings, continuing reporting obligations by the Company, on a consolidated basis, in the form of a rolling 13-week budget and a weekly report with a reasonably detailed written explanation of all material variances from the budget. As of the filing date of this report, the Company is not aware of any breaches of any covenants of the DIP Facility.

~~(1)~~On ~~Includes~~June ~~PIK~~16, ~~interest~~2020, on the ~~Term~~Company ~~Loan~~entered ~~and~~into ~~Second~~the ~~Lien~~DIP ~~Notes~~First ofAmendment ~~$1.1~~as ~~million~~described ~~and~~in ~~$11.8~~the ~~million,~~Introductory ~~respectively~~Note.

~~(2)~~Credit ~~Deferred~~Agreement. On ~~financing~~April ~~costs~~12, ~~related~~2017, toUltra ~~the~~Resources ~~Revolving~~entered into the Credit ~~Facility~~Agreement, ~~are~~as ~~reported~~amended ~~within~~(the ~~Other~~“Credit ~~assets~~Agreement”), onas the ~~condensed~~borrower, ~~consolidated~~with ~~balance~~the ~~sheet~~Company and UPE, ~~rather~~as ~~than~~parent guarantors, Bank of Montreal, as administrative agent, and the other lenders party thereto from time to time, providing for a ~~reduction~~revolving ofcredit facility (the ~~carrying~~“Revolving Credit Facility”) subject to a borrowing base redetermination, which limits the aggregate amount of ~~long-term~~first lien debt under the Revolving Credit Facility and Term Loan Agreement.

~~Credit~~As ~~Agreement. On~~of ~~April~~the ~~12,~~Petition ~~2017~~Date, Ultra Resources ~~entered~~had ~~into~~$46.3 ~~the~~million ~~Credit~~of ~~Agreement,~~outstanding asborrowings under the ~~borrower,~~Revolving ~~with~~Credit ~~the~~Facility. The Company ~~and~~also ~~UPE,~~had as$10.2 ~~parent~~million ~~guarantors,~~of ~~Bank~~outstanding letters of ~~Montreal,~~credit. These asamounts ~~administrative~~remain ~~agent~~subject ~~(the~~to ~~“RBL~~settlement ~~Administrative~~under ~~Agent”),~~the ~~and~~terms of the ~~other~~RSA. As ~~lenders~~a ~~party~~result ~~thereto~~of ~~from~~the ~~time~~commencement toof ~~time~~the ~~(collectively~~Chapter 11 Cases, the ~~“RBL~~Company ~~Lenders”),~~is ~~providing~~no ~~for~~longer ain ~~revolving~~compliance ~~credit~~with ~~facility (~~the ~~“Revolving~~covenants under the Credit ~~Facility”)~~Agreement ~~subject~~and tothe alenders’ ~~borrowing~~previous ~~base~~commitments ~~redetermination,~~of ~~which~~$100 ~~limits~~million under the ~~aggregate~~Credit ~~amount~~Agreement ofhave ~~first~~been ~~lien~~terminated. The ~~debt~~Company ~~under~~is ~~the~~therefore ~~Revolving~~unable ~~Credit~~to ~~Facility~~make ~~and~~additional ~~Term~~borrowings ~~Loan~~or issue additional letters of credit under the Credit Agreement.

As of March 31, 2020, Ultra Resources had zero outstanding borrowings under the Revolving Credit Facility. The Company had $10.2 million of outstanding letters of credit. Total commitments under the Revolving Credit Facility were $100 million. As a result of the commencement of the Chapter 11 Cases, the Company is no longer in compliance with the covenants under the Credit Agreement and the lender’s commitments under the Credit Agreement have been terminated. The Company is therefore unable to make additional borrowings or issue additional letters of credit under the Credit Agreement.15

InULTRA ~~February~~PETROLEUM ~~2020, Ultra Resources entered into a Sixth Amendment to the Credit Agreement (the “Sixth Amendment”) with the RBL Administrative Agent and the RBL Lenders party thereto~~CORP. ~~Pursuant to the Sixth Amendment and the spring 2020 borrowing base redetermination, both of which were completed in February 2020, the Borrowing Base~~ (as defined in the Credit Agreement) was reduced, effective April 1, 2020, to $1.075 billion, with $100 million attributed to the Revolving Credit Facility. As described in previous periodic reports, the commitment amount for the Revolving Credit Facility was reduced from $200 million to $120 million on February 29, 2020 based on the Fifth Amendment to the Credit agreement, and then from $120 million to $100 million, as established by the Sixth Amendment. Also included in the Sixth Amendment was the reduction of the antiDEBTOR-~~cash hoarding amount to $15 million and a provision to complete the borrowing base redetermination quarterly.~~ IN-POSSESSION)

Prior to default and as stayed by the relief provided by the filing of the Chapter 11 Cases, the Revolving Credit Facility has $35.0 million of the commitments available for the issuance of letters of credit. The Revolving Credit Facility bears interest either at a rate equal to (a) a customary London interbank offered rate plus an applicable margin that varies from 250 to 350 basis points or

ULTRA PETROLEUM CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Prior to default and as stayed by the relief provided by the filing of the Chapter 11 Cases, the Revolving Credit Facility had $35.0 million of the commitments available for the issuance of letters of credit. The Revolving Credit Facility bears interest either at a rate equal to (a) a customary London interbank offered rate plus an applicable margin that varies from 250 to 350 basis points or (b) the base rate plus an applicable margin that varies from 150 to 250 basis points based upon the borrowing base utilization grid. The applicable margin increases by 25 basis points in the event the Company’s consolidated net leverage ratio, as defined, exceeds 4.00 to 1.00. Ultra Resources is required to pay a commitment fee on the average daily unused portion of the Revolving Credit Facility, of 50 basis points. Ultra Resources is also required to pay customary letter of credit and fronting fees. The Revolving Credit Facility’s original maturity date is January 12, 2022; however, if the Plan is confirmed the Revolving Credit Facility will terminate in connection with the Company’s emergence from bankruptcy.

The Credit Agreement established a maximum capital expenditure provision and other affirmative and negative covenants which are no longer applicable under the mandatory stay order effected by the Chapter 11 filing. The affirmative and negative covenants include compliance with laws (including environmental laws, ERISA and anti-corruption laws), delivery of quarterly and annual financial statements and oil and gas engineering reports, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments and other customary covenants.

Other provisions of the Credit Agreement have been disclosed in previous regulatory filings and have been deleted from this filing as the compliance elements of the Credit Agreement have been stayed by the bankruptcy filing under the Chapter 11 Cases.

Refer to Note 6 – Debt in the 2019 Form 10-K for additional details on the terms of the Revolving Credit Facility.

Term Loan. On April 12, 2017, Ultra Resources entered into the Term Loan Agreement, as amended (the “Term Loan Agreement”), as borrower, with the Company and UPE, as parent guarantors, Barclays Bank PLC, as administrative agent, and with the other lenders party thereto from time to time ~~(collectively, the “Term Loan Lenders”)~~ providing for a term loan ~~credit~~ facility. As of ~~March~~June 3130, 2020, Ultra Resources had a balance of approximately $966.3 million in borrowings, including $1.1 million of PIK interest. The administrative and collateral agent responsibilities were transferred to WTNA on May 14, 2020.

Subject to the stay order referenced previously, borrowings under the Term Loan Agreement bear interest at a rate equal to either (a) a customary London interbank offered rate plus 400 basis points or (b) the base rate plus 300 basis points, in each case, of which 25 basis points of the applicable margin is payable-in-kind (“PIK”) solely upon election by Ultra Resources. During 2019, the Company ~~has~~ elected the PIK option for several of its selected interest payments. In the third quarter 2019, the Company began electing not to utilize this PIK option.

Prior to default, the borrowings under the Term Loan Agreement amortized in equal quarterly installments in aggregate annual amounts equal to 0.25% of the initial aggregate principal amount. The stated maturity date of the Term Loan Agreement is April 12, 2024; however, the Term Loan Agreement and its maturity date will be impacted by the final resolution of the Chapter 11 Cases.

Other provisions of the Term Loan Agreement have been disclosed in previous regulatory filings and have been deleted from this filing as the compliance elements of the Term Loan ~~are~~Agreement have been stayed by the bankruptcy filing under the Chapter 11 Cases.

Refer to Note 6 – Debt in the 2019 Form 10-K for additional details on the terms of the Term Loan Agreement.

Second Lien Notes. As of ~~March~~June 3130, 2020, Ultra Resources had approximately $~~586~~584.83 million, including $1412.73 million of PIK interest, in outstanding borrowings of 9.00% Cash / 2.00% PIK Senior Secured Second Lien Notes due July 2024 (the “Second Lien Notes”), pursuant to the Indenture, dated December 21, 2018 (the “Second Lien Notes Indenture”), with Ultra Resources, as issuer, the Company and its other subsidiaries, as guarantors, and WTNA, as trustee and collateral agent. The trustee and collateral agent responsibilities were transferred to US Bank, N.A. on May 14, 2020.

The Second Lien Notes are senior secured obligations of Ultra Resources and rank senior in right of payment to all of its existing and future unsecured senior debt, to the extent of the value of the collateral pledged under the Second Lien Notes Indenture and related collateral arrangements, senior in right of payment to all of its future subordinated debt, and junior in right of payment to all of its existing and future secured debt of senior priority, to the extent of the value of the collateral pledged thereby. The Second Lien Notes are secured by second priority security interests in substantially all assets of the Company. Payment by Ultra Resources of all amounts due on or in respect of the Second Lien Notes and the performance of Ultra Resources under the Indenture are initially guaranteed by the Company.

Subject to the stay order previously described, interest on the Second Lien Notes accrued at (i) an annual rate of 9.00% payable in cash and (ii) an annual rate of 2.00% PIK. The cash interest payment dates for the Second Lien Notes were January 15 and July 15 of each year, commencing in July 2019. The Company has accounted for such PIK interest as an increase to the principal outstanding. The Second Lien Notes have a stated maturity date of July 12, 2024; however, the Second Lien Notes and their maturity date will be impacted by the final resolution of the Chapter 11 Cases.

Other provisions of the Second Lien Notes have been disclosed in previous filings and have been deleted from this filing as compliance elements of the Second Lien Notes are stayed by the bankruptcy filing under the Chapter 11 Cases.16

~~Refer~~ULTRA toPETROLEUM ~~Note 6 – Debt in the 2019 Form 10-K for additional details on the terms of the Second Lien Notes~~CORP. (DEBTOR-IN-POSSESSION)

ULTRA PETROLEUM CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~Senior~~Other ~~Unsecured~~provisions ~~Notes. At March 31, 2020, Ultra Resources had approximately $150.4 million~~ of the ~~2022~~Second Lien Notes ~~outstanding~~have ~~and~~been ~~$225.0~~disclosed ~~million~~in ofprevious ~~the~~filings ~~2025~~and ~~Notes~~have ~~outstanding.~~been ~~The~~deleted ~~Unsecured~~from ~~Notes~~this ~~are~~filing ~~treated~~ as acompliance ~~single~~elements ~~class~~ of ~~securities under~~ the ~~Unsecured~~Second Lien Notes ~~Indenture.~~have ~~UMB~~been ~~Bank,~~stayed ~~N.A.~~by isthe ~~now~~bankruptcy ~~serving~~filing asunder the ~~trustee~~Chapter ~~for~~11 ~~the Unsecured Notes Indenture~~Cases.

Prior to default, the 2022 Notes were scheduled to mature on April 15, 2022. Interest on the 2022 Notes accrued at an annual rate of 6.875% and interest payment dates for the 2022 Notes were April 15 and October 15 of each year. The 2025 Notes were scheduled to mature on April 15, 2025. Interest on the 2025 Notes accrued at an annual rate of 7.125% and interest payment dates for the 2025 Notes are April 15 and October 15 of each year. Interest was to be paid on the Unsecured Notes from the issue date until maturity. Refer to Note 6 – Debt in the 2019 Form 10-K for additional details on the terms of the ~~Unsecured~~Second Lien Notes.

~~DIP~~Senior ~~Credit~~Unsecured ~~Agreement~~Notes. InAs ~~connection~~of ~~with~~June 30, ~~the RSA and the Chapter 11 Cases~~2020, Ultra Resources ~~entered~~had ~~into~~approximately ~~the DIP Credit Agreement~~$150.4 ~~The~~million ~~DIP~~of ~~Credit Agreement provides for the DIP Facility~~6.875% ~~Ultra~~Senior ~~intends~~Notes todue ~~use~~April ~~proceeds~~2022 ~~of the DIP Facility, among other things:~~ (~~1) to pay interest, fees, costs and expenses related to~~ the ~~loans~~“2022 ~~thereunder, (2~~Notes”) tooutstanding ~~pay the fees, costs~~ and ~~expenses~~$225.0 million of ~~the~~7.125% ~~estate~~Senior ~~professionals~~Notes ~~retained~~due inApril ~~the~~2025 ~~Chapter 11 Cases and approved by the Court,~~ (~~3) to pay~~ the ~~fees,~~“2025 ~~costs, disbursements and expenses of the Consenting Term Lenders, (4~~Notes”) tooutstanding. ~~make~~The ~~all~~Unsecured ~~permitted~~Notes ~~payments~~are oftreated ~~costs of administration of the Chapter 11 Cases, (5) to pay such prepetition expenses~~ as ~~are~~a ~~consented~~single toclass inof ~~writing~~securities byunder the ~~Required~~Unsecured ~~Lenders~~Notes ~~(as~~Indenture. ~~defined~~UMB ~~in the DIP Credit Agreement) and approved by the Court~~Bank, ~~(6)~~N.A. toserves ~~satisfy any adequate protection obligations owing under the DIP Orders (~~as ~~defined in~~ the ~~RSA);~~trustee ~~and (7)~~ for ~~general corporate and working capital purposes of~~ the ~~Debtors~~Unsecured ~~during~~Notes ~~the Chapter 11 Cases~~Indenture.

~~The~~Prior ~~DIP~~to ~~Facility~~default, ~~bears~~the an2022 ~~interest~~Notes ~~rate~~were ofscheduled ~~LIBOR~~to ~~plus~~mature ~~100~~on ~~basis points~~April 15, ~~subject~~2022. toInterest aon ~~LIBOR~~the ~~floor~~2022 ofNotes ~~1.0%.~~accrued ~~Unutilized~~at ~~fees~~an ~~are~~annual 50rate ~~basis~~of ~~points~~6.875% and ~~the~~interest ~~upfront~~payment ~~fees~~dates ~~were~~for ~~$0.4~~the ~~million. The~~2022 ~~DIP~~Notes ~~Facility~~were isApril 15 ~~subject to certain affirmative~~ and ~~negative~~October 15 ~~covenants,~~of ~~including,~~each ~~among~~year. ~~other~~The ~~covenants~~2025 ~~the~~Notes ~~Company~~were ~~believes~~scheduled to bemature ~~customary~~on ~~in debtor-in-possession financings~~April 15, ~~reporting~~2025. byInterest on the ~~Filing~~2025 ~~Subsidiaries~~Notes inaccrued ~~the~~at ~~form~~an ofannual arate ~~rolling~~of ~~13-week~~7.125% ~~budget~~ and ainterest ~~weekly~~payment ~~report~~dates ~~with~~for athe ~~reasonably~~2025 ~~detailed~~Notes ~~written~~were ~~explanation~~April 15 ofand ~~all~~October 15 ~~material~~of ~~variances~~each ~~from the budget~~year.

Other provisions of the Unsecured Notes have been disclosed in previous regulatory filings and have been deleted from this filing as the compliance elements of the Unsecured Notes have been stayed by the bankruptcy filing under the Chapter 11 Cases.

Refer to Note 6 – Debt in the 2019 Form 10-K for additional details on the terms of the Unsecured Notes.

7. SHARE BASED COMPENSATION:

Valuation and Expense Information

	For the Three Months				For the Six Months Ended
	Ended March 31,
	Ended June 30,				Ended June 30,
	2020		2019		2020		2019
Total cost of share-based payment plans	$	~~1,231~~510	$	~~1,127~~745	$	1,741	$	1,872
Amounts capitalized in oil and gas properties and equipment	$	5125	$	~~286~~64	$	76	$	351
Amounts charged against income, before income tax benefit	$	~~1,180~~485	$	~~841~~681	$	1,665	$	1,521
Amount of related income tax benefit recognized in income before valuation allowance	$	~~248~~102	$	~~177~~143	$	350	$	319

Performance Share Plans:

2017 Stock Incentive Plan. In April 2017, the Ultra Petroleum Corp. 2017 Stock Incentive Plan (“2017 Stock Incentive Plan”) was established by our board of directors (the “Board”) pursuant to which 7.5% of the equity in the Company (on a fully-diluted/fully-distributed basis) is reserved for grants to be made from time to time to the directors, officers, employees, and consultants of the Company. Detailed historical activity associated with the 2017 Stock Incentive Plan is disclosed in Note 7 of the ~~December 31,~~ 2019 Form 10-K. Activity pertaining to the period being presented in this report is described below.

In March 2019, management incentive ~~plan~~ grants were exchanged for new equity awards of time-based and performance-based restricted stock units. The Company evaluated the cancellation of an outstanding award of stock-based compensation followed by the issuance of a replacement award under ASC 718. For this modification, the fair value of the award is assessed both prior to modification and after modification. Per ASC 718, if the fair value after modification exceeds the fair value prior to modification, incremental expense is generated and recognized over the remaining vesting period.

Long Term Incentive Awards. In 2018 and March 2019, the Board approved long-term incentive awards under the 2017 Stock Incentive Plan in order to further align the interests of key employees with shareholders and to give key employees the opportunity to share in the long-term performance of the Company when specific corporate financial and operational goals are achieved. The awards cover a performance period of three years and include time-based and performance-based measures established by the Board at the beginning of the three-year period.

16Stock-Based Compensation Cost:

~~ULTRA~~Market-Based ~~PETROLEUM~~Condition ~~CORP~~Awards. When vesting of an award of stock-based compensation is dependent, at least in part, on the value of a company’s total equity, for purposes of ASC 718, the award is considered to be subject to a “market condition”. Because the Company’s total equity value is a component of its enterprise value, the awards based on enterprise value are considered to be subject to a market condition. Unlike the valuation of an award that is subject to a service condition (i.e., time vested awards) or a performance condition that is not related to stock price, ASC 718 requires the impact of the market condition to be considered when

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~Stock-Based~~estimating ~~Compensation~~the ~~Cost:~~fair value of the award. As a result, we have used a Monte Carlo simulation model to estimate the fair value of the awards that include a market condition.

~~Market-Based~~ASC ~~Condition~~718 ~~Awards.~~requires ~~When~~the ~~vesting~~expense offor an award of stock-based compensation that is ~~dependent,~~subject atto ~~least~~a inmarket ~~part,~~condition onthat ~~the~~can ~~value~~be ofattained aat ~~company’s~~any ~~total~~point ~~equity,~~during ~~for~~the ~~purposes~~performance ofperiod ~~FASB~~to ~~ASC~~be ~~718,~~recognized over the ~~award~~shorter isof ~~considered~~(a) tothe beperiod ~~subject~~between tothe adate ~~“market~~of ~~condition”.~~grant ~~Because~~and the ~~Company’s~~date ~~total~~the ~~equity~~market ~~value~~condition is aattained, ~~component~~and of(b) ~~its enterprise value,~~ the ~~awards~~award’s ~~based~~derived onservice ~~enterprise~~period. ~~value~~For ~~are~~purposes ~~considered~~of toASC be718, ~~subject~~the toderived aservice ~~market~~period ~~condition.~~represents ~~Unlike~~ the ~~valuation~~duration of anthe ~~award~~median ~~that~~of isthe ~~subject~~distribution toof ashare ~~service~~price ~~condition~~paths ~~(i.e.,~~on ~~time~~which ~~vested~~the ~~awards)~~market orcondition ais ~~performance~~satisfied. ~~condition~~That ~~that~~median is ~~not~~the ~~related~~middle toshare ~~stock~~ price, ~~FASB~~path ~~ASC~~(the ~~718~~midpoint ~~requires~~of the ~~impact~~distribution of paths within the model) on which the market condition tois besatisfied. ~~considered~~The ~~when~~duration ~~estimating~~is the ~~fair~~period ~~value~~ of ~~the~~time ~~award.~~from Asthe aservice ~~result,~~inception wedate ~~have~~to ~~used~~the aexpected ~~Monte~~date ~~Carlo~~of ~~simulation~~market ~~model~~condition tosatisfaction. ~~estimate~~Compensation ~~the~~expense ~~fair~~is ~~value~~recognized regardless of whether the ~~awards~~market ~~that~~condition ~~include~~is aactually ~~market condition~~satisfied.

~~FASB~~Expense. ~~ASC~~The ~~718~~accounting ~~requires the expense~~ for anexisting ~~award of stock~~share-based compensation ~~that~~awards iswill ~~subject~~continue tothroughout ~~a market condition that can be attained at any point during~~ the ~~performance~~ period tocovered beby ~~recognized over~~ the ~~shorter~~Chapter of11 ~~(a)~~Cases. ~~the~~For ~~period between~~ the ~~date~~six ofmonths ~~grant~~ended ~~and~~June 30, ~~the date the market condition is attained~~2020, ~~and (b)~~ the ~~award’s~~Company ~~derived~~recognized ~~service period~~$1.7 ~~For~~million ~~purposes~~in ofpre-tax ~~FASB~~compensation ~~ASC 718~~expense, ~~the derived service period represents the duration of the median of the distribution of share price paths on~~ which ~~the market condition~~ is ~~satisfied.~~included ~~That~~within ~~median~~“General isand ~~the~~administrative ~~middle~~expenses” ~~share~~on ~~price path (~~the ~~midpoint~~condensed ofconsolidated ~~the~~statement ~~distribution~~ of ~~paths within the model) on which the market condition is satisfied~~operations. ~~The~~During ~~duration is~~ the ~~period~~six ofmonths ~~time~~ended ~~from~~June 30, ~~the~~2019, ~~service inception date to~~ the ~~expected~~Company ~~date~~recognized ~~of market condition satisfaction~~$1.5 ~~Compensation~~million ~~expense~~in ispre-tax ~~recognized~~compensation ~~regardless of whether the market condition is actually satisfied~~expense.

Expense. The accounting for existing share-based compensation awards will continue throughout the period covered by the Chapter 11 Cases. For the three months ended March 31, 2020, the Company recognized $1.2 million in pre-tax compensation expense, which is included within General and administrative expenses on the condensed consolidated statement of operations. During the three months ended March 31, 2019, the Company recognized $0.8 million in pre-tax compensation expense.

8. INCOME TAXES:

The Company’s overall effective tax rate on pre-tax income was different than the statutory rate of 21% due primarily to the adjustment of the valuation allowances against the deferred tax assets.

The Company has a valuation allowance recorded against all deferred tax assets, net as of ~~March~~June 3130, 2020. Some or all of this valuation allowance may be reversed in future periods against future income.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. Further guidance and clarifications continue to be issued regarding the regulations and provisions of the Tax Act. The Company will continue to monitor these new regulations and analyze their applicability and impact on the Company.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company continues to examine the impact that the CARES Act may have on its business but does not expect the impact to be material.

~~The~~As ~~future~~a ~~availability~~result of ~~U.S. federal income tax attributes associated with existing net operating loss carryforwards, interest deduction carryforwards, and other tax attributes of~~ the Company’s ~~will~~bankruptcy beand ~~affected~~planned byreorganization, the ultimate ~~outcome~~realization of the ~~Chapter~~Company’s 11net ~~Cases. Generally~~operating ~~speaking,~~losses ~~the equitization~~ and ~~termination~~tax ofbasis ~~indebtedness~~is ~~will result in cancelation of indebtedness income (“CODI”)~~uncertain. ~~While~~ ~~anticipated~~Our ~~CODI~~tax ~~will~~attributes ~~not~~may ~~result~~be inreduced anand/or ~~immediate~~subject ~~tax liability~~ to ~~the~~annual ~~Company,~~utilization ~~such~~limits ~~CODI~~depending ~~will~~on ~~result~~several infactors aincluding ~~reduction~~ownership ofchanges ~~our~~and ~~tax~~other ~~attributes~~factors. ~~Additionally,~~ ~~the~~A ~~“ownership~~significant ~~change”~~portion ~~that will result, from the anticipated equitization will, under section 382~~ of the ~~Internal~~Company’s ~~Revenue~~net ~~Code~~operating oflosses ~~1986,~~may asbe ~~amended,~~offset ~~result~~by ~~in a significant limitation being imposed on our ability to utilize certain~~ tax ~~attributes,~~gains ~~unless~~or wecancellation ~~are able to, and do not elect to, utilize section 382(l)(5)~~ of ~~the Internal Revenue Code of 1986~~debt.

9. DERIVATIVE FINANCIAL INSTRUMENTS:

Objectives and Strategy: The Company’s major market risk exposure is in the pricing applicable to its natural gas and oil production. Realized pricing is currently driven primarily by the prevailing price for the Company’s natural gas production. Historically, prices received for natural gas production have been volatile and unpredictable. Pricing volatility is expected to continue. The prices we receive for our production depend on many factors outside of our control, including volatility in the differences between product prices at sales points and the applicable index price.

The Company relies on various types of derivative instruments to manage its exposure to commodity price risk and to provide a level of certainty in the Company’s forward cash flows supporting the Company’s operations and capital investment program. These types of instruments may include fixed price swaps, costless collars, deferred premium puts or basis differential swaps. These contracts are financial instruments, and do not require or allow for physical delivery of the hedged commodity. While mitigating the effects of fluctuating commodity prices, these derivative contracts may limit the benefits we would receive from increases in commodity prices above the fixed hedge prices.

17The Company voluntarily liquidated its outstanding derivative contracts prior to its filing for bankruptcy. The total proceeds collected by the Company was $12.8 million in early May 2020.

~~ULTRA~~During ~~PETROLEUM~~the ~~CORP~~post-petition period of the bankruptcy, the Company entered into new derivative contracts, as allowed by the DIP Facility. Such contracts will stay in place following emergence from bankruptcy.

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~contracts~~As ~~are~~a ~~financial~~result ~~instruments,~~of the Chapter 11 filing and dowhile ~~not~~in ~~require~~bankruptcy, orthe ~~allow~~terms of the DIP Facility limits the Company’s ability to enter into hedges for ~~physical~~no ~~delivery~~more than 25% and 12.5% of ~~the~~its ~~hedged~~projected ~~commodity~~monthly proved developed oil and gas reserve projections in 2020 and 2021, respectively. Following ~~While~~the ~~mitigating~~Company’s emergence from bankruptcy, the ~~effects~~terms of ~~fluctuating~~the ~~commodity~~exit ~~prices~~revolving credit facility will require the Company to have a rolling hedging requirement, ~~these~~based ~~derivative~~on ~~contracts~~the ~~may~~most ~~limit~~recently delivered reserve report, of 33% of forecast natural gas production for the ~~benefits~~immediately wesucceeding ~~would~~twelve-month ~~otherwise~~period, ~~receive~~plus ~~from~~a ~~increases~~minimum inof ~~commodity~~25% ~~prices~~of ~~above~~forecast natural gas production for the ~~fixed~~immediate ~~hedge~~succeeding ~~prices~~six-month period thereafter.

Under the Revolving Credit Facility, the Company was subject to minimum hedging requirements through March 31, 2020. As of April 1, 2020, the Company is longer be subject to a minimum hedging requirement.

As a result of the Chapter 11 filing and while in bankruptcy, the terms of the DIP facility and the exit revolving credit facility commitment filed with the Plan limits the Company’s ability to enter into hedges for no more than 25% and 15% of its projected monthly proved developed oil and gas reserve projections in 2020 and 2021, respectively. Following the Company’s emergence from bankruptcy, the terms of the exit revolving credit facility will require the Company to have a rolling hedging requirement, based on the most recently delivered reserve report, of 33% of forecast natural gas production for the immediately succeeding twelve-month period, plus a minimum of 25% of forecast natural gas production for the immediate succeeding six-month period thereafter.

Fair Value of Commodity Derivatives: The Company follows FASB ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company does not apply hedge accounting to any of its derivative instruments. Instead, in accordance with ASC 815 the derivative contracts are recorded at fair value as derivative assets and liabilities on the condensed consolidated balance sheets and the associated unrealized gains and losses are recorded as current income or expense on the condensed consolidated statements of operations. The Company does not offset the value of its derivative arrangements with the same counterparty. Unrealized gains or losses on commodity derivatives represent the non-cash change in the fair value of these derivative instruments and do not impact operating cash flows on the condensed consolidated statements of cash flows.

Commodity Derivative Contracts: AtAs ~~March~~of June 3130, 2020, the Company had open commodity derivative contracts to manage commodity price risks as presented in the table below. For the fixed price swaps, the Company receives the fixed price for the contract and pays the variable price to the counterparty. For the basis swaps, the Company receives a fixed price for the difference between two sales points for a specified commodity volume over a specified time period. For the collars, the Company pays the counterparty if the market price is above the ceiling price and the counterparty pays if the market price is below the floor price on a notional quantity. For deferred premium puts, the Company pays the deferred premium in the month of settlement. To the extent the market price is below the put price, the counterparty owes the Company the difference between the market price and put price in the period of settlement. The reference prices of these commodity derivative contracts are typically referenced to index prices as published by independent third parties. Refer to Note 10 – Fair Value Measurements for more information regarding the fair value of the Company’s derivative instruments.

The table below reflects the commodity derivative contracts that were outstanding as of March 31, 2020. Subsequent to March 31, 2020, the Company received $8.3 million and $6.5 million in April and May respectively, from the scheduled settlements of derivatives. Additionally, subsequent to March 31, 2020 and prior to its Chapter 11 filing, the Company monetized all of its remaining derivative contracts and received proceeds of approximately $12.8 million. The actual amounts realized differed from the fair values as of March 31, 2020, due to different commodity prices at the time of settlement.

Type/Year	Index	Total Volumes (MMbtu)		Weighted Average Price per Unit ($/MMbtu)			Fair Value - June 30, 2020
		(in millions)					Asset (Liability)
Natural gas fixed price swaps
2020 (July through December)	NYMEX-Henry Hub		12.0	$	2.01		$	(1,048	)
Natural gas basis swaps ¹
2020 (July through December)	NW Rockies Basis Swap		3.7	$	(0.18	)	$	131

Type/Year

Index

Total Volumes

Weighted Average Price per Unit

Fair Value - March 31, 2020

(in millions)

Asset (Liability)

Crude oil fixed price swaps

(Bbl)

($/Bbl)

2020 (April through September)

NYMEX-WTI

0.2

59.79

7,960

(1)

Represents swap contracts that fix the basis differentials for gas sold at or near Opal, Wyoming and the value of natural gas established on the last trading day of the month by the NYMEX for natural gas swaps for the respective period.

Type/Year	Index	Total Volumes		Weighted Average Floor Price ($/MMBTU)			Weighted Average Ceiling Price ($/MMBTU)			Fair Value - March 31, 2020
		(in millions)								Asset (Liability)
Natural gas collars		(Mmbtu)
2020 (April through December)	NYMEX		57.4		$	2.39		$	2.87		$	26,255
2021	NYMEX		7.2		$	2.46		$	3.05		$	(180	)
Natural gas deferred premium put options (1)		(Mmbtu)
2020 (April through December)	NYMEX		13.4		$	2.42		N/A			$	5,360

The following table summarizes the pre-tax realized and unrealized gain (loss) the Company recognized related to its derivative instruments in the condensed consolidated statements of operations for the three and six months ended June 30, 2020 and 2019:

(1) The natural gas deferred premium put options include an average deferred premium cost of $0.13.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
Commodity Derivatives (in thousands):	2020			2019			2020			2019
Realized gain (loss) on commodity derivatives - natural gas (1)	$	15,925		$	3,936		$	27,376		$	(77,267	)
Realized gain (loss) on commodity derivatives - oil (1)		9,121			(516	)		14,019			2,056
Unrealized gain (loss) on commodity derivatives (1)		(40,312	)		68,234			(12,366	)		82,527
Total gain (loss) on commodity derivatives	$	(15,266	)	$	71,654		$	29,029		$	7,316

18(1) Included in Gain (Loss) on commodity derivatives in the condensed consolidated statements of operations.

~~ULTRA PETROLEUM CORP.~~ 19

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

	For the Three Months
	Ended March 31,
Commodity Derivatives (in thousands):	2020		2019
Realized gain on commodity derivatives - natural gas (1)	$	11,452	$	(81,203	)
Realized gain on commodity derivatives - oil (1)		4,897		2,572
Unrealized gain on commodity derivatives (1)		27,945		14,292
Total gain (loss) on commodity derivatives	$	44,294	$	(64,339	)

(1) Included in Gain (Loss) on commodity derivatives in the condensed consolidated statements of operations.

10. FAIR VALUE MEASUREMENTS:

As required by ~~FASB~~ ASC 820, the Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-level hierarchy for measuring fair value. Fair value measurements are classified and disclosed in one of the following categories:

Level 1:

Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date.

Level 2:

Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 include non-exchange traded derivatives such as over-the-counter forwards and swaps.

Level 3:

Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability.

The valuation assumptions the Company has used to measure the fair value of its commodity derivatives were observable inputs based on market data obtained from independent sources and are considered Level 2 inputs (quoted prices for similar assets, liabilities (adjusted) and market-corroborated inputs).

	Level 1		Level 2		Level 3		Total
Assets:
Current derivative asset	$	—	$	44,261	$	—	$	44,261
Total derivative instruments	$	—	$	44,261	$	—	$	44,261
Liabilities:
Current derivative liability	$	—	$	4,866	$	—	$	4,866
Total derivative instruments	$	—	$	4,866	$	—	$	4,866

The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they are classified withing the fair value hierarchy as of June 30, 2020:

The Company entered into commodity derivative contracts and as a result, we expose ourselves to counterparty credit risk. Credit risk is the potential failure of the counterparty to perform under the terms of a derivative contract. In order to minimize our credit risk in derivative instruments, we (i) enter into derivative contracts with counterparties that our management has deemed credit worthy as competent and competitive market makers and (ii) routinely monitor and review the credit of our counterparties. In addition, each of our current counterparties are lenders under our Revolving Credit Facility. We believe that all of our counterparties are of substantial credit quality. Other than as provided in our Revolving Credit Facility, we are not required to provide credit support or collateral to any of our counterparties under our derivative contracts, nor are they required to provide credit support to us. As of March 31, 2020, we did not have any past-due receivables from, or payables to, any of the counterparties of our derivative contracts. Refer to Note 9 – Derivative Financial Instruments for additional details on our derivative financial instruments.

	Level 1		Level 2		Level 3		Total
Assets:
Current derivative asset	$	—	$	1,602	$	—	$	1,602
Liabilities:
Current derivative liability	$	—	$	2,519	$	—	$	2,519

The Company entered into commodity derivative contracts and as a result, we expose ourselves to counterparty credit risk. Credit risk is the potential failure of the counterparty to perform under the terms of a derivative contract. In order to minimize our credit risk in derivative instruments, we (i) enter into derivative contracts with counterparties that our management has deemed credit worthy as competent and competitive market makers and (ii) routinely monitor and review the credit of our counterparties. We believe that all of our counterparties are of substantial credit quality. We are not required to provide credit support or collateral to any of our counterparties under our derivative contracts, nor are they required to provide credit support to us. While we are in bankruptcy, the counterparties share super-priority and are subject to International Swaps and Derivatives Association (“ISDA”) master agreements. As of June 30, 2020, we did not have any past-due receivables from, or payables to, any of the counterparties of our derivative contracts. Refer to Note 9 – Derivate Financial Instruments for additional details on our derivative financial instruments.

Assets and Liabilities Measured on a Non-Recurring Basis

The Company uses fair value to determine the value of its asset retirement obligations. The inputs used to determine such fair value under the expected present value technique are primarily based upon internal estimates prepared by reservoir engineers for costs of dismantlement, removal, site reclamation and similar activities associated with the Company’s oil and gas properties and would be classified Level 3 inputs.

19Fair Value of Financial Instruments

~~ULTRA~~The ~~PETROLEUM~~estimated ~~CORP~~fair value of financial instruments is the estimated amount at which the instrument could be exchanged currently between willing parties. The carrying amounts reported in the Condensed Consolidated Balance Sheets for cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments. The carrying amount of floating-rate debt approximates fair value because the interest rates are variable and reflective of market rates. The Company uses available market data and valuation methodologies to estimate the fair value of its debt and the fair values presented in the tables below reflect original maturity dates for each of the debt instruments. The valuation assumptions utilized to measure the fair value of the Company’s debt are considered Level 2 inputs. This disclosure is

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

ofpresented ~~dismantlement,~~in ~~removal~~accordance with ASC 825, ~~site~~Financial ~~reclamation~~Instruments, and ~~similar~~does ~~activities~~not ~~associated~~impact ~~with~~ the Company’s ~~oil~~consolidated ~~and~~financial ~~gas~~position, ~~properties~~results ~~and~~of ~~would~~operations beor ~~classified~~cash ~~Level 3 inputs~~flows.

Fair Value of Financial Instruments

	June 30, 2020				December 31, 2019
	Principal		Estimated		Principal		Estimated
	repayment obligation		Fair Value		repayment obligation		Fair Value
DIP Facility, due 2020	$	10,375	$	10,375	$	—	$	—
Credit Facility ^{1 & 2}		46,300		39,355		64,700		64,700
Term Loan ²		966,319		640,186		968,756		566,723
Second Lien Notes ²		584,303		32,137		583,853		86,994
2022 Notes ²		150,439		120		150,439		18,805
2025 Notes ²		225,000		563		225,000		15,750
Total debt	$	1,982,736	$	722,736	$	1,992,748	$	752,972

~~The~~(1) ~~estimated~~Under ~~fair~~the ~~value~~terms of ~~financial instruments is~~ the ~~estimated~~Plan, ~~amount at which~~ the ~~instrument~~Consenting ~~could~~RBL beLenders ~~exchanged~~have ~~currently~~agreed ~~between~~to ~~willing~~an ~~parties.~~85% ~~The~~recovery ~~carrying~~on ~~amounts reported in~~ the ~~Condensed~~outstanding ~~Consolidated~~balance ~~Balance~~of ~~Sheets~~the ~~for~~Credit ~~cash~~Facility ~~and~~including ~~cash equivalents, restricted cash, accounts receivable, and accounts payable approximate fair value due to~~ the ~~immediate~~letter ~~or short-term maturity~~ of ~~these~~credit ~~financial~~obligation ~~instruments.~~associated ~~The~~with ~~carrying amount of floating-rate debt approximates fair value because the interest rates are variable and reflective of market rates~~REX. ~~The~~ ~~Company~~As ~~uses~~such, ~~available market data and valuation methodologies to estimate~~ the fair value ofin ~~its debt and~~ the ~~fair~~table ~~values~~above ~~presented~~reflects in the ~~tables~~recovery ~~below~~rate ~~reflect original maturity dates for each~~ of the ~~debt~~outstanding ~~instruments.~~Credit ~~The~~Facility ~~valuation~~as ~~assumptions utilized to measure the fair value~~ of ~~the~~June ~~Company’s debt are considered Level 2 inputs. This disclosure is presented in accordance with FASB ASC Topic 825~~30, ~~Financial Instruments, and does not impact the Company’s consolidated financial position, results of operations or cash flows~~2020.

	March 31, 2020				December 31, 2019
	Principal		Estimated		Principal		Estimated
	repayment obligation		Fair Value		repayment obligation		Fair Value
Credit Facility, secured, due January 2022	$	-	$	-	$	64,700	$	64,700
Term Loan, secured, due April 2024		966,319		396,191		968,756		566,723
Second Lien Notes, secured, due July 2024		586,770		44,008		583,853		86,994
6.875% Notes, unsecured, due April 2022, issued 2017		150,439		16,172		150,439		18,805
7.125% Notes, unsecured, due April 2025, issued 2017		225,000		16,598		225,000		15,750
Total debt	$	1,928,528	$	472,969	$	1,992,748	$	752,972

⁽²⁾

As of June 30, 2020, the principal repayment obligation for this debt instrument is included in the table above is a component of liabilities subject to compromise in the condensed consolidated balance sheet.

11. COMMITMENTS AND CONTINGENCIES:

Chapter 11 Proceedings

On May 14, 2020, the Debtors filed the Chapter 11 Cases seeking relief under the Bankruptcy Code. The Company expects to continue operations in the normal course for the duration of the Chapter 11 Cases. In addition, commencement of the Chapter 11 Cases automatically stayed all of the proceedings and actions against the Company (other than regulatory enforcement matters), including those noted below. For more information on the Chapter 11 Cases and related matters, refer to the Introductory Note – Voluntary Reorganization Under Chapter 11 and Note 6 – Debt.

Litigation Matters

Pending Claims – Ultra Resources Indebtedness

On April 29, 2016, the Company and its subsidiaries filed voluntary petitions under Chapter 11 of the ~~United~~U.S. ~~States Bankruptcy~~ Code in the United States Bankruptcy Court. Our 2016 Chapter 11 cases were jointly administered under the caption In re Ultra Petroleum Corp., et al, Case No. 16-32202 (MI) (Bankr. S.D. Tex.) (the “Prior Chapter 11 Cases”). On March 14, 2017, the Court confirmed our Debtors’ Second Amended Joint Chapter 11 Plan of Reorganization (the “Prior Plan”) and on April 12, 2017, we emerged from bankruptcy.

The Prior Plan provided for the treatment of claims against our bankruptcy estates, including claims for ~~prepetition~~pre-petition liabilities that have not otherwise been satisfied or addressed before we emerged from Chapter 11 proceedings. The claims resolution process associated with our Prior Chapter 11 ~~proceedings~~Cases is on-going, and we expect it to continue for an indefinite period of time.

20During our previous bankruptcy proceedings in 2016 and 2017, many holders of indebtedness filed proofs of claim with the Court, asserting claims for the outstanding balance of the indebtedness, unpaid pre-petition interest, unpaid post-petition interest (including interest at the default rates under the pre-petition debt agreements), make-whole amounts, and other fees and obligations allegedly arising under the pre-petition debt agreements. As previously disclosed, in connection with our emergence from bankruptcy and in accordance with the Prior Plan, all of our obligations with respect to Ultra Resources pre-petition indebtedness and the associated debt agreements were cancelled, except to the limited extent expressly set forth in the Prior Plan, and the holders of claims related to the indebtedness received payment in full of allowed claims (including with respect to outstanding principal, unpaid pre-petition interest, and certain other pre-petition fees and obligations arising under the debt agreements). In connection with the confirmation and consummation of the Prior Plan, we entered into a stipulation with the claimants pursuant to which we agreed to establish and fund a $400.0 million reserve account after the Company’s emergence from bankruptcy, pending resolution of make-whole and post-petition interest claims. On April 14, 2017, we funded the account. Following our emergence from bankruptcy, we continued to dispute the claims made by holders of the Ultra Resources’ indebtedness for certain make-whole amounts and post-petition interest at the default rates provided for in the debt agreements.

~~ULTRA PETROLEUM CORP.~~ 21

ULTRA PETROLEUM CORP. (DEBTOR-IN-POSSESSION)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~During~~On ~~our~~September ~~previous~~22, ~~bankruptcy proceedings in 2016 and~~ 2017, ~~many holders of this indebtedness filed proofs of claim with~~ the Court, ~~asserting~~denied ~~claims for~~ the ~~outstanding~~Company’s ~~balance~~objection ofto the ~~indebtedness,~~pending ~~unpaid prepetition interest, unpaid postpetition interest (including interest at the default rates under the prepetition debt agreements),~~ make-whole ~~amounts,~~ and ~~other~~post-petition ~~fees~~interest ~~and obligations allegedly arising under the prepetition debt agreements~~claims. AsOn ~~previously~~October ~~disclosed~~6, in2017, ~~connection~~the ~~with~~Court ~~our~~entered ~~emergence~~an ~~from~~order ~~bankruptcy~~requiring ~~and in accordance with~~ the ~~Prior~~Company ~~Plan,~~to ~~all~~distribute ofamounts ~~our~~attributable ~~obligations with respect~~ to ~~Ultra~~the ~~Resources~~disputed ~~prepetition~~claims ~~indebtedness~~to ~~and~~ the ~~associated~~applicable ~~debt~~parties. ~~agreements~~Pursuant ~~were cancelled, except~~ to the ~~limited~~order, ~~extent~~on ~~expressly~~October ~~set~~12, ~~forth in the Prior Plan~~2017, ~~and~~ the ~~holders~~Company ofdistributed ~~claims~~$399.0 ~~related~~million tofrom the ~~indebtedness~~reserve ~~received~~fund ~~payment in full of allowed claims (including with respect~~ to ~~outstanding~~the ~~principal,~~parties ~~unpaid~~asserting ~~prepetition~~the ~~interest,~~make-whole and ~~certain~~post-petition ~~other~~interest ~~prepetition~~claims ~~fees~~ and ~~obligations arising under the debt agreements)~~$1. In3 ~~connection~~million ~~with~~ (the ~~confirmation~~balance ~~and~~remaining ~~consummation~~after ofdistributions to the ~~Prior~~parties ~~Plan,~~asserting weclaims) ~~entered~~was ~~into~~returned ato ~~stipulation with~~ the ~~claimants~~Company. ~~pursuant~~The todisbursement ~~which~~of we$399.0 ~~agreed~~million towas ~~establish~~comprised ~~and~~of ~~fund a~~ $~~400~~223.08 million ~~reserve~~representing ~~account after~~ the ~~Company’s~~fees ~~emergence~~owed ~~from~~under ~~bankruptcy,~~the ~~pending resolution of~~ make-whole claims and ~~postpetition interest claims~~$175.2 Onmillion ~~April~~representing ~~14,~~post-petition ~~2017,~~interest weat ~~funded~~ the ~~account~~default rate. ~~Following~~The ~~our~~Company ~~emergence~~appealed ~~from~~the ~~bankruptcy,~~court weorder ~~continued~~denying toits ~~dispute~~objections ~~the~~to these claims ~~made~~to ~~by holders of~~ the ~~Ultra~~U.S. ~~Resources’~~Court ~~indebtedness~~of Appeals for ~~certain make-whole amounts and postpetition interest at~~ the ~~default~~Fifth ~~rates~~Circuit ~~provided for in~~ (the ~~debt~~“Appellate ~~agreements~~Court”).

OnDuring ~~September~~the ~~22,~~fourth ~~2017,~~quarter ~~the~~of ~~Court~~2018, ~~denied~~ the Company’s ~~objection~~entered tointo ~~the~~settlement ~~pending~~agreements ~~make-whole and postpetition interest claims. On October 6~~(collectively, ~~2017,~~ the ~~Court~~“Settlement ~~entered~~Agreements”) anwith ~~order~~holders ~~requiring~~of ~~the~~certain ~~Company~~claims related to ~~distribute~~Ultra ~~amounts~~Resources’ ~~attributable~~pre-petition toindebtedness (the ~~disputed~~“Claimants”) ~~claims~~pursuant to which the ~~applicable~~ parties. ~~Pursuant~~agreed to ~~the~~settle ~~order, on October 12, 2017,~~ the ~~Company~~pending ~~distributed~~disputes ~~$399.0~~between ~~million from~~ the ~~reserve~~Claimants ~~fund to the parties asserting the make-whole~~ and ~~postpetition interest claims and $1.3 million (~~the ~~balance remaining after distributions to the parties asserting claims) was returned to the~~ Company. ~~The~~Under ~~disbursement~~the ofterms ~~$399.0 million was comprised~~ of ~~$223.8~~the ~~million~~Settlement ~~representing~~Agreements, the ~~fees~~Claimants ~~owed~~collectively ~~under~~agreed ~~the~~to ~~make-whole~~pay ~~claims~~approximately ~~and~~ $~~175~~16.24 million ~~representing postpetition interest at the default rate. The Company appealed the court order denying its objections~~ to ~~these claims to~~ the UCompany.~~S. Court of Appeals for the Fifth Circuit (the “Appellate Court”).~~

~~During~~On ~~the~~January ~~fourth~~17, ~~quarter of 2018~~2019, the ~~Company~~Appellate ~~entered~~Court ~~into~~issued ~~settlement~~an ~~agreements~~opinion ~~(collectively,~~vacating the ~~“Settlement~~order ~~Agreements”) with holders~~ of ~~certain~~the ~~claims~~Court ~~related~~that tohad ~~Ultra~~denied ~~Resources’ prepetition indebtedness (~~the ~~“Claimants”)~~Company’s ~~pursuant~~objection to ~~which~~ the ~~parties~~asserted ~~agreed~~make-whole toand ~~settle~~post-petition ~~the~~interest ~~pending~~claims ~~disputes~~and ~~between~~remanding the ~~Claimants~~matter and ~~the~~those ~~Company.~~determinations ~~Under~~to the ~~terms~~Court offor ~~the~~further ~~Settlement~~reconsideration. On ~~Agreements~~January 31, 2019, the ~~Claimants~~holders ~~collectively~~of ~~agreed~~these toclaims ~~pay~~filed ~~approximately~~a ~~$16~~petition for rehearing en banc.4 It ~~million~~is not possible to determine the ~~Company~~ultimate disposition of these matters at this time.

OnDuring ~~January 17,~~ 2019, the ~~Appellate~~Company ~~Court~~entered ~~issued~~into anadditional ~~opinion~~settlement ~~vacating~~agreements ~~the~~with ~~order~~holders of ~~the~~certain ~~Court~~make-whole ~~that~~and ~~had~~post-petition ~~denied~~interest claims. Pursuant to these settlements, the ~~Company’s~~parties ~~objection~~agreed to settle the ~~asserted~~pending ~~make-whole~~disputes ~~and~~between ~~post-petition~~such ~~interest~~holders ~~claims~~ and ~~remanding~~ the ~~matter~~Company, and ~~those~~the ~~determinations~~holders collectively agreed to ~~the~~pay ~~Court~~approximately ~~for~~$13.5 ~~further~~million ~~reconsideration~~to the Company. On As ~~January~~of 31June 30, ~~2019~~2020, ~~the~~there ~~holders~~is ofapproximately ~~these~~$240 million of claims ~~filed~~subject ato ~~petition~~the ~~for~~Appellate ~~rehearing en banc~~Court decision. It is not possible to determine the ultimate disposition of these matters at this time.

During 2019, the Company entered into additional settlement agreements with holders of certain make-whole and post-petition interest claims. Pursuant to these settlements, the parties agreed to settle the pending disputes between such holders and the Company, and the holders collectively agreed to pay approximately $13.5 million to the Company. As of March 31, 2020, there is approximately $240 million of claims subject to the Appellate Court decision. It is not possible to determine the ultimate disposition of these matters at this time.

Other Claims

We are also party to various disputes with respect to certain overriding royalty and net profits interests in certain of our operated leases in the Pinedale field. At this time, no determination of the outcome of these claims can be made, and we cannot reasonably estimate the potential impact of these claims. We are defending these cases vigorously, and we expect these claims to be resolved in our Chapter 11 proceedings. In addition, we are currently involved in various routine disputes and allegations incidental to our business operations. While it is not possible to determine the ultimate disposition of these matters, we believe the Company has adequately reserved for such items where it has been determined that a liability is probable and is reasonably estimable. Additionally, we believe that resolution of all such additional pending or threatened litigation is not likely to have a material adverse effect on our financial position, results of operations, or cash flows.

12. SUBSEQUENT EVENTS:

AsThe ~~previously~~Company ~~mentioned,~~has evaluated the ~~Company~~period ~~filed~~subsequent ~~for~~to ~~bankruptcy~~June 30, ~~protection~~2020, ~~under~~for ~~Chapter~~material 11events onthat ~~May~~did ~~14,~~not ~~2020. For~~exist ~~more~~at ~~information on~~ the ~~Chapter~~balance 11sheet ~~Cases~~date ~~and~~but ~~related~~arose ~~matters,~~after ~~refer~~that todate ~~the~~and ~~Introductory~~determined ~~Note~~that –no ~~Voluntary~~additional ~~Reorganization~~subsequent ~~under~~events ~~Chapter~~arose 11that ~~and~~should ~~Note~~be 6disclosed –in ~~Debt~~order into keep the ~~notes~~financial tostatements ~~the~~from ~~unaudited~~being ~~condensed~~misleading, ~~consolidated~~except ~~financial~~as ~~statements~~otherwise disclosed herein.

The Company has evaluated the period subsequent to March 31, 2020, for material events that did not exist at the balance sheet date but arose after that date and determined that no additional subsequent events arose that should be disclosed in order to keep the financial statements from being misleading, except as otherwise disclosed herein. 22

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and operating results of Ultra Petroleum Corp. and its wholly-owned subsidiaries (collectively, the “Company,” “Ultra,” “we,” or “us”) should be read in conjunction with the Company’s condensed consolidated financial statements and related notes. Except as otherwise indicated, all amounts are expressed in U.S. dollars.

FORWARD-LOOKING STATEMENTS:

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

Other risks and uncertainties include, but are not limited to, the risks related to the Company’s voluntary petition for relief under Chapter 11; expectations relating to the duration, effects and ultimate outcome of the Chapter 11 ~~cases~~Cases, the adequacy of the Company’s sources of liquidity and capital resources, including after entering into the DIP Credit Agreement; the effects of the Chapter 11 Cases on the Company and its various constituents, including its stockholders; the Company’s ability to obtain the Court’s approval with respect to motions or other requests made to the Court in the Chapter 11 Cases, including maintaining strategic control as debtor-in-possession; the Court rulings in the Chapter 11 Cases as well as the outcome of all other pending litigation and the outcome of the Chapter 11 Cases in general; the Company may not be able to obtain the Court’s confirmation of the Plan or may have to modify the terms of the Plan; the Plan may not become effective; third-party motions in the Chapter 11 Cases, which may interfere with the Company’s ability to consummate the Plan ~~of Reorganization~~; the length of time the Company will operate under the Chapter 11 Cases; the Company’s ability to comply with the restrictions imposed by the financing arrangements entered into pursuant to the Company’s filing for bankruptcy; the Company’s ability to satisfy the conditions and milestones set forth in the Restructuring Support Agreement; the Company’s ability to enter into commodity derivatives for future production on favorable terms; the Company’s ability to implement strategies to reduce costs, increase operational efficiencies and lower its capital spending in connection with the COVID-19 pandemic; increased competition; the Company’s ability to maintain relationships with suppliers, customers, employees and other third parties as a result of the Chapter 11 Cases; the timing and extent of changes in prices for oil and gas, particularly in the areas where the Company owns properties, conduct operations, and markets its production; as well as the timing and extent of the Company’s success in discovering, developing, producing and estimating oil and gas reserves; the ability and willingness of members of the Organization of Petroleum Exporting Countries (“OPEC”) along with non-OPEC oil-producing countries (“OPEC+”) to agree to and maintain oil price and production controls; the Company’s ability to successfully monetize the properties it is marketing; weather and government regulation; and the availability of oil field services, personnel and equipment. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (as amended, the “2019 Form 10-K”) and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 for additional risks related to the Company’s business.

OVERVIEW:

The Company is an independent exploration and production company focused on developing and producing its long-life natural gas reserves in the Pinedale and Jonah fields of the Green River Basin of southwest Wyoming. The Company operates in one industry segment, natural gas and oil exploration and development, with one geographical segment, the United States.

The Company conducts operations exclusively in the United States. Substantially all of its oil and natural gas activities are conducted jointly with others and, accordingly, amounts presented reflect only the Company’s proportionate interest in such activities. The Company continues to focus on disciplined capital allocation decisions, generating operating cash flows, reducing its indebtedness, and preserving future potential pad level drilling inventory for more constructive natural gas prices. The Company’s emphasis on these elements is critically relevant as the natural gas commodity price has eroded over the course of 2019 and into the ~~first~~second quarter of 2020. Given Ultra’s focus on profitability and generating operating cash flows towith ~~repay~~the objective of meeting its ~~indebtedness~~obligations, the Company elected to suspend pad level drilling operations in the third quarter of 2019, as the investment returns were uneconomical in the current commodity price environment. The Company determined it is in the best interest of its stakeholders to retain core personnel necessary in order to operate its prolific asset base safely, efficiently, and profitably; to ensure necessary regulatory and environmental compliance; to continue to fulfill its obligations as a public reporting company; to continue to dedicate appropriate resources to studying the underlying geologic and subsurface in order to maximize the value of the Pinedale and Jonah ~~fields; and to prepare to resume a drilling program with much of the historical knowledge and intellectual property developed over many years by Ultra personnel.~~

2223

~~The~~fields; ~~Company currently generates its revenue, earnings~~ and ~~cash~~to ~~flow~~prepare ~~from~~to ~~the~~resume production and sales of natural gas and crude oil and condensate from its Pinedale field. Total production for the quarter ended March 31, 2020 was 48.5 Bcf of natural gas and 331.0 MBbl of crude oil and condensate, for a ~~total~~drilling ofprogram ~~50.5~~with ~~Bcfe~~much of ~~production. For~~ the ~~three~~historical ~~months~~knowledge ~~ended~~and ~~March 31,~~intellectual ~~2020,~~property ~~cash~~developed ~~flow~~over ~~from~~many ~~operations~~years ~~was~~by ~~$73.6~~Ultra ~~million~~personnel.

The Company currently generates its revenue, earnings and cash flow from the production and sales of natural gas and crude oil and condensate from its Pinedale field. Total production for the quarter ended June 30, 2020 was 45.5 Bcf of natural gas and 312.3 MBbl of crude oil and condensate, for a total of 47.3 Bcfe of production.

RECENT DEVELOPMENTS:

Voluntary Reorganization under Chapter 11 of the United States Bankruptcy Code. On May 14, 2020 (the “Petition Date”), Ultra Petroleum Corp. and all of its direct and indirect subsidiaries (the “Debtors”), filed voluntary cases (the “Chapter 11 Cases”). The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the United States Bankruptcy Code and orders of the Court.

The ~~commencement~~Debtors are currently operating the business as debtors-in-possession under the jurisdiction of athe ~~voluntary~~Court ~~proceeding~~and in ~~bankruptcy~~accordance ~~constitutes~~with anthe ~~immediate~~applicable ~~event~~provisions of ~~default~~the United States Bankruptcy Code and ~~resulted~~orders of the Court. After the Debtors filed the Chapter 11 petitions, the Court granted certain relief which enabled the Debtors to conduct their business activities in the ~~automatic~~ordinary course, including, among other things and ~~immediate~~subject ~~acceleration~~to ofthe ~~all~~terms and conditions of such orders, authorizing the ~~Company’s~~Debtors ~~debt~~to ~~outstanding. Accordingly~~pay employee wages and benefits, pay taxes and certain governmental fees and charges, continue to operate their cash management system in the ~~Company~~ordinary ~~has~~course, ~~classified~~remit ~~all~~funds their holds from time to time for the benefit of ~~its~~third ~~outstanding~~parties ~~debt~~(such as aroyalty ~~current~~owners), ~~liability~~and onpay the pre-petition claims of certain of its ~~condensed~~vendors ~~consolidated~~that ~~balance~~hold ~~sheet~~liens asunder ofapplicable ~~March 31~~non-bankruptcy law. For goods and services provided following the Petition Date, ~~2020~~the Debtors intend to pay vendors in full under normal terms.

Subject to certain exceptions provided for in Section 362 of the Bankruptcy Code, all judicial and administrative proceedings against the Debtors or their property were automatically enjoined, or stayed, as of the Petition Date. In addition, the filing of new judicial or administrative actions against the Debtors or their property for claims arising prior to the Petition Date were automatically enjoined. This prohibits, for example, the Debtors’ lenders or noteholders from pursuing claims for defaults under the debt agreements and the contract counterparties from pursuing claims for defaults under the Debtors’ contracts. Accordingly, unless the Court agrees to lift the automatic stay, all of the Debtors’ pre-petition liabilities and obligations should be settled or compromised under the Bankruptcy Code as part of the Chapter 11 proceedings.

For the duration of the Chapter 11 Cases, the Company’s operations and its ability to develop and execute its business plan are subject to risks and uncertainties associated with the Chapter 11 Cases as described in Item 1A, “Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. As a result of these risks and uncertainties, the Company’s assets, liabilities, contractual obligations, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases. Additionally, the description of the Company’s operations, properties and capital plans included in these financial statements may not accurately reflect its operations, properties and capital plans following the Chapter 11 Cases.

On the Petition Date, the Debtors entered into a Restructuring Support Agreement (the “RSA”) with the holders the Credit Agreement, Term Loan Agreement, and Second Lien Notes. Pursuant to the RSA, the Restructuring Support Parties agreed (subject to the terms and conditions of the RSA) to vote to accept the Debtors’ prepackaged Joint Chapter 11 Plan of Reorganization (as proposed, the “Plan”) described below.

~~Also~~On onMay ~~the~~15, ~~Petition Date~~2020, consistent with the RSA, of the Debtors solicited acceptances of and filed with the Court the proposed Plan which, subject to Court approval and the requisite support of the Debtors’ creditors:

• equitizes or eliminates all of the Debtors’ ~~prepetition~~pre-petition indebtedness;

•

provides for a $25 million DIP Facility (as defined below) to the Company by certain Consenting Term Lenders;

•

provides for a new capital investment by the Consenting Term Lenders of up to approximately $85 million under an equity rights offering, with proceeds to be utilized by the Company to repay the value of the Credit Agreement including the letter of credit obligation associated with Rockies Express Pipeline (“REX”), net of impairment; the outstanding borrowings and balance of the DIP Facility; and, to provide the option for up to $15 million of proceeds in the event of a use of such funds;

•

contemplates a term loan of up to $5 million being issued upon exit with no prepayment penalties;

•

contemplates an exit revolving credit facility with a $60 million commitment amount and an initial $100 million borrowing base;

•

pays all ongoing trade obligations in the ordinary course; and

•

contains customary releases and exculpations.

DIP Credit Agreement. In connection with the RSA and the Chapter 11 Cases, Ultra Resources entered into a senior secured super priority debtor-in-possession credit agreement (the “DIP Credit Agreement”), dated as of May 19, 2020, among Ultra Resources, as borrower, UPE and the other Filing Subsidiaries, as guarantors, WTNA, as administrative agent and collateral agent, and the lenders party thereto. The DIP Credit Agreement provides for a multi-draw term loan credit facility in an aggregate principal amount of $25 million (the “DIP Facility”). Ultra intends to use proceeds of the DIP Facility, among other things: (1) to pay interest, fees, costs and expenses related to the loans thereunder, (2) to pay the fees, costs and expenses of the estate professionals retained in the Chapter 11 Cases and approved by the Court, (3) to pay certain fees, costs, disbursements and expenses of the Consenting Term Lenders, (4) to make all permitted payments of costs of administration of the Chapter 11 Cases, (5) to pay such prepetition expenses as are consented to in writing by the Required Lenders (as defined in the DIP Credit Agreement) and approved by the Court, (6) to satisfy any adequate protection obligations owing under the DIP Orders (as defined in the RSA); and (7) for general corporate and working capital purposes of the Debtors during the Chapter 11 Cases.24

~~The~~On ~~DIP~~June ~~Facility~~22, is2020 ~~subject~~and toin ~~certain~~connection ~~affirmative~~with ~~and~~the ~~negative~~Chapter ~~covenants,~~11 ~~including~~Cases, ~~among other covenants~~ the ~~Company~~Debtors ~~believes~~filed toa bemotion ~~customary~~for inapproval ~~debtor-in-possession~~of ~~financings,~~the ~~reporting~~Purchase byAgreement ~~the~~(as ~~Filing~~defined ~~Subsidiaries~~below) in[Docket ~~the~~No. ~~form~~301], ofand aon ~~rolling~~June ~~13-week~~26, ~~budget~~2020, ~~and~~the aCourt ~~weekly~~approved ~~report~~such ~~with~~motion aand ~~reasonably~~entered ~~detailed~~an ~~written~~order ~~explanation~~approving ofthe ~~all~~Purchase ~~material~~Agreement ~~variances~~[Docket ~~from~~No. 333] (the ~~budget~~“PSA Order”).

On June 26, 2020, the Debtors entered into the First Amendment to the Restructuring Support Agreement with the requisite consenting parties thereto (the “Consenting Stakeholders”) to permit the Debtors to enter into and perform under an agreement to purchase that certain gathering system (the “LGS”) as described under the Company’s lease agreement with Corridor as described below.

In accordance with the PSA Order, on June 28, 2020, the Company’s indirect wholly-owned subsidiary, Ultra Wyoming, LLC (“Ultra Wyoming”), entered into a purchase and sale agreement (the “Purchase Agreement”), by and between Ultra Wyoming and Corridor, pursuant to which, among other things, Ultra Wyoming agreed to purchase the LGS for a purchase price of $18.0 million. On June 30, 2020, Ultra Wyoming and Corridor closed the transaction contemplated by the Purchase Agreement in accordance with the terms thereof. Concurrent with the closing of the Purchase Agreement, the preexisting lease agreement between the Company and Corridor was terminated pursuant to the Court’s acceptance of the rejection notice of the LGS lease agreement. As a result, the right-of-use assets and lease liability was reduced by the remaining payments under the lease agreement.

On July 27, 2020, the Debtors entered into a backstop purchase agreement (the “Backstop Purchase Agreement”) with certain holders of the Company’s prepetition indebtedness (collectively, the “Backstop Parties”). Pursuant to the Backstop Purchase Agreement, the Backstop Parties agreed to backstop the rights offering contemplated by the Plan for new common stock of reorganized UPE to be issued upon the effectiveness of the Plan for an aggregate purchase price of up to $85.0 million.

Pre-Petition Restructuring Expenses. For the three and six months ended June 30, 2020, the Company incurred $9.7 million and $12.4 million of professional, advisory, consulting, and legal fees related to the Chapter 11 Cases prior to the petition date, respectively. These expenses are reported as “Pre-petition restructuring expenses” in “Operating income (loss)” on the condensed consolidated statement of operations.

Costs of Reorganization. Expenses incurred after the petition date are recorded as “Reorganization items, net” on the condensed consolidated statement of operations. The Company has incurred and will continue to incur significant direct costs associated with our reorganization and the Chapter 11 proceedings. We expect these direct costs, which are being expensed as incurred, will significantly affect our results of operations.

In addition, a non-cash charge to write-off the unamortized debt issuance costs, discounts and premiums related to our funded indebtedness are included in “Reorganization items, net” as these debt instruments are expected to be impacted by the pendency of the Chapter 11 Cases. For additional information about the costs of the Company’s reorganization and Chapter 11 proceedings, see “Reorganization items, net” below.

The following table summarizes the components included in Reorganization items, net in the condensed consolidated statements of operations for the three and six months ended June 30, 2020:

	For the three and six months ended June 30, 2020
Reorganization items – direct expenses ¹	$	23,060
Reorganization items – recognition of items attributed to liabilities subject to compromise ²		(140,659	)
Total Reorganization items, net	$	(117,599	)

(1)

(2)

A non-cash charge to write-off all of the unamortized debt issuance costs, discount and premium related to the pre-petition debt instruments issued by Ultra Resources is included in Reorganization items, net as these debt instruments are expected to be impacted by the pendency of the Chapter 11 Cases.

The DIP Facility is subject to certain affirmative and negative covenants, including, among other covenants the Company believes to be customary in debtor-in-possession financings, continuing reporting obligations by the Company, on a consolidated basis, in the form of a rolling 13-week budget and a weekly report with a reasonably detailed written explanation of all material variances from the budget.

Liabilities Subject to Compromise. The Company has applied Accounting Standards Codification (“ASC”) 852, Reorganizations, in preparing the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. The consolidated financial statements presented herein include amounts classified as “Liabilities subject to compromise.” This amount represents estimates of known or potential pre-petition claims expected to be resolved in connection with the Chapter 11 proceedings. Additional amounts may be included in liabilities subject to compromise in future periods if the Company elects to reject executory contracts and unexpired leases as part of the Chapter 11 Cases. Due to the uncertain nature of many of the potential claims, the magnitude of potential claims is not reasonably estimable at this time. Potential claims not currently included with “Liabilities subject to compromise” in our condensed consolidated balance sheets may be material. In addition, differences between amounts reported as “Liabilities subject to compromise” in this Quarterly Report on Form 10-Q and the amounts attributable to such matters claimed by the Company’s creditors or approved by the Court may be material. The Company will continue to evaluate its liabilities throughout the Chapter 11 process and will plan to make adjustments in future periods as necessary and appropriate. Such adjustments may be material.

Under the Bankruptcy Code, the Company may assume, assign, or reject certain executory contracts and unexpired leases agreements for future services, subject to the approval of the Court and certain other conditions. If the Company rejects a contract or lease agreement, such rejection generally (1) is treated as a pre-petition breach of the contract or lease agreement, (2) subject to certain exceptions, relieves the Debtors of performing their future obligations under such contract or lease agreement, and (3) entitles the counterparty thereto to a pre-petition general unsecured claim for damages caused by such deemed breach. If the Company assumes an executory contract or unexpired lease agreement, the Company is generally required to cure any existing monetary defaults under such contract or lease agreement and provide adequate assurance of future performance to the counterparty. Accordingly, any description of an executory contract or unexpired lease in this Quarterly Report on Form 10-Q, including any quantification of the Company’s obligations under any such contract or lease agreement, is wholly qualified by the rejection rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease agreement and the Company expressly preserves all of its rights with respect thereto.

The following table summarizes the components of “Liabilities subject to compromise” included in the Company’s condensed consolidated balance sheets as of June 30, 2020:

	As of June 30, 2020
Accrued liabilities		1,015
Accrued interest payable		43,368
Debt		1,972,361
Liabilities subject to compromise	$	2,016,744

Ability to Continue as a Going Concern. The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not reflect any adjustments that might result from the outcome of the Chapter 11 proceedings. The Company has significant pre-petition indebtedness, all of which has been reclassified to Liabilities subject to compromise as of June 30, 2020. The Company’s level of pre-petition indebtedness has adversely impacted and is continuing to adversely impact its financial condition. As a result of the Company’s financial condition, the defaults under its debt agreements, the expected liquidity deficiency had the Company not filed for bankruptcy, and the risks and uncertainties surrounding the Chapter 11 proceedings, substantial doubt exists that the Company as to whether the Company will be able to continue as a going concern.

For more information on the Chapter 11 Cases and related matters, refer to the Introductory Note – Voluntary Reorganization under Chapter 11 and Note 6 – Debt in the notes to the unaudited condensed consolidated financial statements.

2326

OPERATIONS HIGHLIGHTS:

The ~~production~~prices ~~results~~of ~~for~~oil ~~the~~and ~~three~~natural ~~months~~gas ~~ended~~are ~~March 31,~~critical ~~2020~~factors ~~were~~to ~~slightly~~the ~~favorable~~Company’s tobusiness. ~~our~~Commodity ~~initial~~prices ~~expectations~~have atbeen ~~the~~significantly ~~beginning~~volatile offor ~~the~~several ~~year~~years, ~~driven~~and bybeginning ~~strong~~in ~~performance~~March in2020, ~~overall~~oil ~~up-time~~and ofnatural ~~the~~gas ~~operations~~commodity ~~and~~prices ~~improved~~have ~~operating~~experienced ~~parameters~~extreme ~~from~~volatility ~~our~~primarily ~~gas~~attributable ~~gather.~~to ~~For~~decreased ~~the~~demand ~~three~~resulting ~~months~~from ~~ended~~the ~~March 31,~~COVID-19 ~~2020,~~pandemic weand ~~produced~~to ~~48.5~~the ~~Bcf~~actions of ~~natural~~OPEC ~~gas~~ and ~~approximately~~OPEC+ ~~331,000~~to ~~Bbls~~cut ofthe ~~condensate,~~price ~~resulting~~for incrude aoil. ~~total~~These ~~production~~events ofhave ~~50.5~~adversely ~~Bcfe.~~affected ~~The~~commodity ~~daily~~prices ~~production~~and ~~rate~~have ~~was~~increased ~~approximately~~the ~~554,000~~level ~~Mcfe~~of ~~per~~uncertainty ~~day~~regarding future price realizations.

The ~~prices~~Company ofutilizes ~~oil~~derivative ~~and~~commodity ~~natural~~contracts ~~gas~~from ~~are~~time-to-time ~~critical~~in ~~factors~~order to limit the ~~Company’s~~impact ~~business~~of this commodity price volatility on its results. OnIn aaddition ~~per~~to ~~unit~~fixed ~~basis~~price swap contracts, the ~~average~~Company ~~realized~~utilizes ~~prices~~costless ~~for~~collars and deferred put contracts, with low premium costs, to provide a degree of floor price protection and allow the Company to participate in ~~the~~more ~~quarters~~upward ~~ended~~price ~~March 31,~~exposure. In early May 2020 and ~~2019~~prior to filing for bankruptcy, ~~excluding~~the ~~realized~~Company ~~gains~~liquidated ~~and~~all ~~losses~~of onits ~~commodity~~outstanding ~~derivatives,~~derivative ~~was~~contracts ~~$2.57~~for ~~per~~total ~~Mcfe~~proceeds ~~and~~of approximately $412.338 ~~per~~million. The ~~Mcfe~~Company, ~~respectively. Included~~on ina ~~these~~limited ~~net~~basis ~~realized~~and ~~prices~~for isterms anof ~~improved~~less than one month, also entered into short-term fixed price ~~premium~~forward ~~above~~physical ~~index~~delivery ~~pricing~~contracts ~~resulting~~for natural gas and oil from time-to-time. While in bankruptcy, the ~~renegotiation~~terms of ~~certain~~the ~~marketing~~DIP ~~agreements.~~Facility ~~The~~limits ~~average~~the ~~price~~Company’s ~~realization~~ability to enter into hedges for ~~the~~no ~~Company~~more ~~during~~than ~~the~~25% ~~quarter~~and ~~ended~~12.5% ~~March 31,~~of its projected proved developed reserve projections in 2020 ~~was~~and $22021, respectively.90 ~~per~~Following ~~Mcfe~~the Company’s emergence from bankruptcy, ~~including~~the ~~realized~~terms ~~gains~~of ~~and~~the ~~losses~~exit revolving credit facility will require the Company to have a rolling hedging requirement, based on ~~commodity~~the ~~derivatives~~most recently delivered reserve report, ~~compared~~of to33% ~~$3.07~~of ~~per~~forecast ~~Mcfe~~production ~~during~~for the ~~quarter~~immediately ~~ended~~succeeding ~~March 31~~twelve-month period, ~~2019~~plus a minimum of 25% of forecast production for the immediate succeeding six-month period thereafter.

~~The~~On a per unit basis, the average ~~price~~realized ~~realization~~prices for the Company’s ~~natural~~in ~~gas during~~ the ~~quarter~~quarters ended ~~March~~June 3130, 2020 and 2019, was $2.5926 per ~~Mcf,~~Mcfe ~~including realized gains~~ and ~~losses on commodity derivatives, compared to~~ $2.7751 per ~~Mcf~~Mcfe, ~~during~~respectively. Included in the ~~quarter~~net ~~ended~~realized ~~March 31,~~prices ~~2019.~~for ~~The~~2020 ~~average~~is ~~price~~an ~~realization~~improved ~~for~~price ~~the~~premium ~~Company’s~~above ~~natural~~index ~~gas~~pricing ~~during~~resulting from the ~~quarters~~renegotiation ~~ended~~of ~~March 31,~~certain ~~2020~~marketing ~~and~~agreements ~~2019,~~as ~~excluding~~well ~~realized~~as ~~gains~~the ~~and~~proceeds ~~losses~~it onreceived ~~commodity~~when ~~derivatives,~~the ~~was~~Company ~~$2.36~~voluntarily ~~per~~liquidated ~~Mcf~~its ~~and~~outstanding ~~$4.13~~derivative ~~per~~contracts ~~Mcf,~~prior ~~respectively.~~to its filing for bankruptcy.

The average price realization for the Company’s ~~crude~~natural ~~oil~~gas ~~and condensate~~ during the quarter ended ~~March~~June 3130, 2020 was $611.8595 per ~~barrel~~Mcf, including realized gains and losses on commodity derivatives, compared to $592.5817 per ~~barrel~~Mcf during the quarter ended ~~March~~June 3130, 2019. The average price realization for the Company’s ~~crude~~natural ~~oil~~gas ~~and condensate~~ during the quarter ended ~~March~~June 3130, 2020 and 2019, excluding realized gains and losses on commodity derivatives, was $471.0560 per ~~barrel,~~Mcf ~~compared~~and to $532.7011 per ~~barrel during the quarter ended March 31~~Mcf, ~~2019~~respectively.

~~While~~The ~~there~~average ~~has~~price ~~been~~realization ~~significant~~for ~~volatility~~the inCompany’s ~~commodity~~crude ~~prices~~oil ~~for~~and ~~several~~condensate ~~years,~~during ~~beginning~~the inquarter ~~March~~ended June 30, 2020 was $57.50 per barrel, ~~oil~~including realized gains and ~~natural~~losses ~~gas~~on commodity ~~prices~~derivatives, ~~have~~compared ~~experienced~~to ~~extreme~~$59.65 ~~volatility~~per ~~primarily~~barrel ~~attributable~~during tothe ~~decreased~~quarter ~~demand~~ended ~~resulting~~June 30, ~~from~~2019. ~~the~~The ~~COVID-19~~average ~~pandemic~~price ~~and~~realization tofor the ~~actions~~Company’s ofcrude ~~OPEC~~oil and ~~other~~condensate ~~oil~~during ~~exporting~~the ~~nations~~quarter toended ~~cut~~June 30, ~~the~~2020, ~~price~~excluding ~~for~~realized ~~crude~~gains ~~oil.~~and ~~These~~losses ~~events~~on ~~have~~commodity ~~adversely~~derivatives, ~~affected~~was ~~commodity~~$28.26 ~~prices~~per ~~and~~barrel, ~~increased~~compared ~~the~~to ~~level~~$60.80 ofper ~~uncertainty~~barrel ~~regarding~~during ~~future~~the ~~price~~quarter ~~realizations~~ended June 30, 2019.

~~The~~As ~~Company~~previously ~~utilizes derivative commodity contracts in order to limit the impact of this commodity price volatility on its results. In addition to fixed price swap contracts~~announced, the Company ~~utilizes~~suspended ~~costless~~its ~~collars~~operated ~~and~~pad ~~deferred~~level ~~put~~drilling ~~contracts,~~program ~~with~~in ~~low premium costs, to provide a degree of floor price protection and allow~~ the ~~Company~~Pinedale tofield ~~participate~~ in ~~more~~September ~~upward price exposure~~2019. The ~~Company~~total ~~also~~capital ~~enters~~investment ~~into~~in ~~short-term~~oil ~~fixed~~and ~~price~~gas ~~forward~~properties ~~physical~~for ~~delivery~~the ~~contracts~~six ~~for~~months ~~natural~~ended ~~gas~~June 30, ~~and~~2020 ~~oil~~was ~~from time-to-time~~$19.7 million ~~Under~~including the ~~Credit~~purchase ~~Agreement,~~of the ~~Company~~LGS ~~was~~for ~~subject~~$18.0 tomillion ~~minimum~~as ~~hedging~~part ~~requirements through March 31, 2020. As~~ of ~~April 1, 2020,~~ the ~~Company~~Purchase ~~is no longer subject to a minimum hedging requirement~~Agreement.

As a result of the Chapter 11 filing and while in bankruptcy, the terms of the DIP facility and the exit revolving credit facility commitment filed with the Plan limits the Company’s ability to enter into hedges for no more than 25% and 15% of its projected proved developed reserve projections in 2020 and 2021, respectively. Following the Company’s emergence from bankruptcy, the terms of the exit revolving credit facility will require the Company to have a rolling hedging requirement, based on the most recently delivered reserve report, of 33% of forecast production for the immediately succeeding twelve-month period, plus a minimum of 25% of forecast production for the immediate succeeding six-month period thereafter.27

As previously announced, the Company suspended its operated drilling program in the Pinedale Field in September 2019. The total capital investment in oil and gas properties was $0.2 million for the three months ended March 31, 2020.

CONSOLIDATED RESULTS OF OPERATIONS:

The following table summarizes our unaudited condensed consolidated statement of operations for the periods indicated:

	For the Quarter Ended									For the Six Months
	Ended March 31,						%
	Ended June 30,						%			Ended June 30,						%
	2020			2019			Variance			2020			2019			Variance
	(Amounts in thousands, except per unit data)
Production, Commodity Prices and Revenues:
Production:
Natural gas (Mcf)		4845,~~468~~463			59,~~574~~805			(1924	)%		93,931			119,380			(21	)%
Crude oil and condensate (Bbl)		~~331~~312			~~437~~449			(2431	)%		643			886			(27	)%
Total production (Mcfe)		5047,~~454~~335			62,~~196~~499			(1924	)%		97,789			124,696			(22	)%
Commodity Prices:
Natural gas ($/Mcf, excluding hedges)	$	21.3660		$	42.1311			(4324	)%	$	1.99		$	3.12			(36	)%
Natural gas ($/Mcf, including realized hedges)	$	21.5995		$	2.7717			(610	)%	$	2.28		$	2.47			(8	)%
Oil and condensate ($/Bbl, excluding hedges)	$	4728.0526		$	5360.7080			(1254	)%	$	37.92		$	57.30			(34	)%
Oil and condensate ($/Bbl, including realized hedges)	$	6157.8550		$	59.5865			(4	)%	$	59.71		$	59.62			0	%
Revenues:
Natural gas sales	$	~~114~~72,~~281~~920		$	~~245~~125,~~989~~915			(5442	)%	$	187,200		$	371,903			(50	)%
Oil sales		158,~~574~~818			2327,~~465~~301			(3468	)%		24,393			50,767			(52	)%
Other revenues		~~221~~23			2,~~007~~190			(8999	)%		244			4,197			(94	)%
Total operating revenues	$	~~130~~81,~~076~~761		$	~~271~~155,~~461~~406			(5247	)%	$	211,837		$	426,867			(50	)%
Derivatives:
Realized gain (loss) on commodity derivatives	$	1625,~~349~~046		$	~~(78~~3,~~631~~420	)		~~(121~~632	)%	$	41,395		$	(75,211	)		(155	)%
Unrealized gain (loss) on commodity derivatives		27(40,~~945~~312	)		1468,~~292~~234			96(159	)%		(12,366	)		82,527			(115	)%
Total Gain (loss) on commodity derivatives	$	44(15,~~294~~266	)	$	~~(64~~71,~~339~~654	)		(~~169~~121	)%	$	29,029		$	7,316			297	%
Operating Costs and Expenses:
Lease operating expenses	$	1916,~~411~~603		$	1715,~~225~~889			134	%	$	36,013		$	33,114			9	%
Facility lease expense	$	5,~~463~~464		$	6,~~645~~543			(1816	)%	$	10,927		$	13,188			(17	)%
Production taxes	$	137,~~922~~985		$	3016,~~175~~443			(5451	)%	$	21,907		$	46,618			(53	)%
Gathering fees	$	16,~~682~~112		$	1920,~~817~~256			(1620	)%	$	32,794		$	40,072			(18	)%
Transportation charges	$	32,~~894~~239		$	64			~~5984~~3398	%	$	6,133		$	128			4691	%
Depletion, depreciation, and amortization	$	47,284		$	51,653			(8	)%
Depletion, depreciation and amortization	$	38,812		$	55,768			(30	)%	$	86,096		$	107,422			(20	)%
Ceiling test write-down	$	242,603		$	—		n/a
Ceiling test write down	$	110,603		$	—		n/a			$	353,206		$	—		n/a
General and administrative expenses	$	8,379		$	7,051			19	%
General and administrative	$	8,116		$	7,433			9	%	$	16,496		$	14,485			14	%
Prepetition restructuring expenses	$	2,644		$	—		n/a
Pre-petition restructuring expenses	$	9,724		$	—		n/a			$	12,368		$	—		n/a
Per Unit Costs and Expenses ($/Mcfe):
Lease operating expenses	$	0.3835		$	0.2825			3640	%	$	0.37		$	0.27			37	%
Facility lease expense	$	0.1112		$	0.1110			—20	%	$	0.11		$	0.11			—
Production taxes	$	0.2817		$	0.4926			(4335	)%	$	0.22		$	0.37			(41	)%
Gathering fees	$	0.3334		$	0.32			36	%	$	0.34		$	0.32			6	%
Transportation charges	$	0.0805		$	—		n/a			$	0.06		$	—		n/a
Depletion, depreciation, and amortization	$	0.94		$	0.83			13	%
Depletion, depreciation and amortization	$	0.82		$	0.89			(8	)%	$	0.88		$	0.86			2	%
General and administrative expenses	$	0.17		$	0.11			55	%
Ceiling test write down	$	2.34		$	—		n/a			$	3.61		$	—		n/a
Prepetition restructuring expenses	$	0.05		$	—		n/a
General and administrative	$	0.17		$	0.12			42	%	$	0.17		$	0.12			42	%
Pre-petition restructuring expenses	$	0.21		$	—		n/a			$	0.13		$	—		n/a

2528

Quarter Ended ~~March~~June 3130, 2020 vs. Quarter Ended ~~March~~June 3130, 2019

Production, Commodity Prices and Revenues:

Production. During the quarter ended ~~March~~June 3130, 2020, total production decreased on a gas equivalent basis to 5047.53 Bcfe compared to 62.25 Bcfe for the same period in 2019., ~~The decrease is~~ primarily attributable to the Company’s decision to suspend its operated pad level drilling program effective and as announced in September 2019. The Company’s production has decreased as expected, based on the natural decline of the proven developed wells that were online as of the end of September 2019, and no new wells have come online since that time.

Commodity Prices – Natural Gas. Realized natural gas prices, including realized gains and losses on commodity derivatives, decreased 610% to $21.5995 per Mcf during the quarter ended ~~March~~June 3130, 2020, as compared to $2.7717 per Mcf for the same period in 2019. The Company has entered into various natural gas price commodity derivative contracts with contract periods extending through the ~~first~~fourth quarter of ~~2021~~2020. ~~Refer~~ toSee Note 9 – Derivative Financial Instruments in the notes to the unaudited condensed consolidated financial statements for additional details. ~~relating~~As topreviously ~~these~~noted, ~~derivative contracts. During~~ the ~~quarter~~Company ~~ended~~voluntarily ~~March 31,~~liquidated ~~2020~~its ~~and~~outstanding ~~2019,~~derivative ~~the~~contracts ~~Company’s~~prior ~~average~~to ~~price~~its filing for ~~natural~~bankruptcy. The ~~gas,~~total ~~excluding~~proceeds ~~realized~~collected ~~gains~~by ~~and~~the ~~losses~~Company onwere ~~commodity derivatives, was~~ $212.368 ~~per~~million ~~Mcf~~in ~~and~~early ~~$4.13~~May ~~per Mcf~~2020, ~~respectively.~~which ~~While~~are included in the ~~Company~~realized ~~benefited~~natural ~~from~~gas aprices ~~net~~for ~~positive~~the ~~basis~~quarter ~~differential~~ended ofJune 30, $02020.~~265~~ During ~~per MMBtu for~~ the quarter ended ~~March 31~~June 30, 2020 and 2019, the ~~positive~~Company’s ~~basis~~average ~~differential~~price ~~realization~~for ofnatural ~~$0.641~~gas, ~~per~~excluding ~~MMBtu~~realized ingains ~~the~~and ~~first~~losses ~~quarter~~on ofcommodity ~~2019~~derivatives, was ~~even~~$1.60 ~~stronger~~per ~~driven~~Mcf byand ~~supply~~$2.11 ~~outages~~per ~~from~~Mcf, ~~Canadian imports~~respectively.

Commodity Prices – Oil. Realized oil prices, including realized gains and losses on commodity derivatives, ~~increased~~decreased to $6157.8550 per barrel during the quarter ended ~~March~~June 3130, 2020, as compared to $59.5865 per barrel for the same period in 2019. The Company ~~has~~had ~~entered into~~ various oil price commodity derivative contracts ~~with~~prior ~~contract~~to ~~periods~~filing ~~extending~~for ~~through the third quarter 2020~~bankruptcy. ~~Refer~~See Note 9 – Derivative Financial Instruments in the notes to the unaudited condensed consolidated financial statements for additional details relating to these derivative contracts. During the three months ended ~~March~~June 3130, 2020, the Company’s average price for oil, excluding realized gains and losses on commodity derivatives, was $4728.0526 per barrel as compared to $5360.7080 per barrel for the same period in 2019.

Revenues. During the quarter ended ~~March~~June 3130, 2020, revenues decreased to $~~130~~81.18 million as compared to $~~271~~155.54 million for the same period in 2019. This decrease is primarily attributable to the decrease in total production and the decrease in natural gas and oil prices.

Operating Costs and Expenses:

The Company has been focused on continued cost management and expects total costs to trend down. However, on a per Mcfe basis, the Company expects pressure on ~~Lease~~lease ~~Operating~~operating ~~Expense~~expense (“LOE”) and ~~General~~general and ~~Administrative~~administrative expenses (“G&A Expenses”) due to the expected decrease in future production as the Company has suspended its operated pad level drilling program and is susceptible to declining base production from its proved developed producing reserves. Management expects it can mitigate some of this per unit pressure through further cost management and investment initiatives. However, with certain costs being fixed, it is not expected to fully mitigate this pressure.

Lease Operating Expense. LOE slightly increased to $1916.46 million during the quarter ended ~~March~~June 3130, 2020, as compared to $1715.29 million during the same period in 2019. The increase for the period was attributable to an increase in net water handling costs, ~~as well as an increase~~ in ~~environmental monitoring costs in~~ the ~~first~~ quarter ~~of 2020 as compared to the same period in 2019. These costs increased LOE by approximately $0.06 per Mcfe for the quarter~~ ended ~~March~~June 3130, 2020 as compared to the same period in 2019. On a unit of production basis, LOE costs increased to $0.3835 per Mcfe during the quarter ended ~~March~~June 3130, 2020, as compared with $0.2825 per Mcfe during the same period in 2019 due to the decreased production.

General and Administrative Expenses. During the quarter ended ~~March~~June 3130, 2020, ~~General~~G&A ~~and Administrative~~ Expenses increased to $8.41 million as compared to $7.14 million for the same period in 2019. Due to the suspension of the drilling program in September 2019, the Company reduced its capitalized overhead which is the primary increase in ~~General~~G&A ~~and~~Expenses ~~Administrative~~for ~~Expenses~~the quarter ended ~~March~~June 3130, 2020 as compared to the same period in 2019. On a per unit basis, ~~General~~G&A ~~and Administrative~~ Expenses increased to $0.17 per Mcfe for the quarter ended ~~March~~June 3130, 2020 compared to $0.1112 per Mcfe for the same period in 2019 ~~due to decreased production~~.

The Company analyzes the combined LOE and ~~General~~G&A ~~and Administrative~~ Expenses as controllable costs. The combined LOE and ~~General~~G&A ~~and Administrative~~ Expenses for the quarter ended ~~March~~June 3130, 2020, was $0.5552 per Mcfe compared to $0.3937 per Mcfe for the same period in 2019. Management also analyzes the combined LOE and ~~General~~G&A ~~and Administrative~~ Expenses, excluding the non-cash element of stock compensation. The cash component of LOE and ~~General~~G&A ~~and~~Expenses ~~administrative expenses~~ for the quarter ended ~~March~~June 3130, 2020, was $0.5351 per Mcfe compared to $0.3836 per Mcfe for the same period in 2019, with the changes being driven by the items described above.

~~Prepetition~~Facility ~~Restructuring~~Lease ~~expenses~~Expense. ~~During~~In 2012, the ~~quarter~~Company ~~ended~~sold ~~March 31,~~a ~~2020,~~system of liquids gathering pipelines and central gathering facilities (the “LGS”) and certain associated real property rights in the Pinedale field. The Company ~~recognized~~entered $2into a long-term, triple net lease agreement with the buyer relating to the use of the LGS (the “Lease Agreement”).6 ~~million~~The ~~consisting~~Lease Agreement provided for an initial term of ~~professional,~~15 ~~advisory~~years, ~~consulting~~ and ~~legal~~annual ~~fees~~base ~~related~~rent toof $20.0 million during the ~~Chapter~~initial 11term ~~Cases~~(as adjusted annually for changes based on the consumer price index), which base rent may increase if certain volume thresholds are exceeded. For ~~additional~~the ~~information~~quarters onended June 30, 2020 and 2019, the Company’s recognized expense associated with the Lease Agreement of $5.5 million and $6.5 million, respectively.

2629

~~Chapter~~This 11lease ~~Cases~~was ~~and~~listed ~~related~~for ~~matters,~~rejection ~~refer~~through to the ~~Introductory~~Plan ~~Note~~filed –on ~~Voluntary~~May ~~Reorganization~~15, ~~under~~2020. On ~~Chapter~~June 1128, ~~and~~2020, ~~Note~~the 6Company’s –indirect ~~Debt~~wholly-owned insubsidiary, Ultra Wyoming, entered into the ~~notes~~Purchase Agreement, pursuant to ~~the~~which, ~~unaudited~~among ~~condensed~~other ~~consolidated~~things, ~~financial~~Ultra ~~statements.~~Wyoming Onagreed to purchase the LGS for a ~~unit~~purchase price of ~~production~~$18.0 ~~basis~~million. Effective June 30, ~~prepetition~~2020, ~~restructuring~~Ultra ~~expenses~~Wyoming ~~were~~and $0Corridor closed the transaction contemplated by the Purchase Agreement in accordance with the terms thereof and the Lease Agreement was terminated.05 The ~~per~~Company ~~Mcfe~~has no further obligations associated with this Lease Agreement.

~~Facility~~Production ~~Lease Expense~~Taxes. InDuring ~~2012,~~ the ~~Company~~quarter ~~sold~~ended aJune 30, ~~system~~2020, ofproduction ~~liquids~~taxes ~~gathering~~decreased ~~pipelines~~to ~~and~~$8.0 million ~~central~~compared ~~gathering~~to ~~facilities~~$16.4 million (during the ~~“LGS”)~~same ~~and~~period ~~certain associated real property rights~~ in ~~the~~2019, ~~Pinedale~~or ~~field~~$0.17 ~~The~~per ~~Company~~Mcfe ~~entered~~compared ~~into~~to a$0.26 ~~long-term~~per Mcfe, ~~triple~~respectively. ~~net~~Production ~~lease~~taxes ~~agreement~~are ~~with~~primarily ~~the~~calculated ~~buyer~~based ~~relating~~on toa ~~the~~percentage ~~use~~ of ~~the~~revenue ~~LGS~~from ~~(the~~production, ~~“Lease~~net ~~Agreement”). The Lease Agreement provides for an initial term~~ of 15gathering ~~years~~fees, ~~and~~in ~~annual~~Wyoming ~~base~~and ~~rent~~were ~~of $20~~12.02% ~~million~~of ~~during~~revenues ~~the initial term (as adjusted annually~~ for ~~changes based on~~ the ~~consumer price index), which base rent may increase if certain volume thresholds are exceeded. For the~~ quarters ended ~~March~~June 3130, 2020 and 2019~~, the Company recognized expense associated with the Lease Agreement of $5~~.5 ~~million and $6.6 million, respectively.~~ The decrease in ~~cost~~per inunit ~~2020~~taxes asis ~~compared~~primarily attributable to ~~2019~~decreased ~~was~~natural agas ~~result~~prices ofduring ~~reduced production year-over-year and~~ the ~~amount~~quarter ofended ~~liquids~~June 30, ~~running through the leased LGS facilities~~2020, ~~thereby~~as ~~eliminating~~compared to the ~~variable~~same ~~rent~~period ~~component~~in ~~under of the Lease Agreement~~2019.

~~Production~~Gathering ~~Taxes~~Fees. During the quarter ended ~~March~~June 3130, 2020, ~~production~~gathering ~~taxes~~fees decreased to $1316.91 million compared to $3020.23 million during the same period in 2019, orrelated ~~$0.28 per Mcfe compared~~ to ~~$0.49~~decreased ~~per~~production ~~Mcfe, respectively~~volumes. ~~Production~~On ~~taxes in Wyoming are primarily calculated based on~~ a ~~percentage~~per ofunit ~~revenue from the physical production and realized revenues~~basis, ~~excluding~~gathering ~~derivative~~fees ~~hedge~~increased ~~settlements,~~to ~~after certain deductions and were 10~~$0.7%34 ofper ~~revenues~~Mcfe for the quarter ended ~~March~~June 3130, 2020 ~~and~~as 11compared to $0.1%32 ofper ~~revenues~~Mcfe ~~for~~in the same period in 2019.

Transportation Charges. During the quarter ended ~~March~~June 3130, 2020, transportation charges ~~were~~increased to $32.92 million, or $0.0805 per Mcfe, as compared to $0.1 million, or nil per Mcfe, in the same period in 2019. Commencing on December 1, 2019 and extending for a term expiring December 31, 2026, the Company has committed to firm transportation capacity of 200,000 Dekatherms per day at a rate of approximately $0.37 per Dekatherm on the Rockies Express Pipeline. ~~This~~In exchange for the fixed demand fee, this agreement provides the Company with the opportunity to transport a portion of its natural gas production away from its properties in Wyoming to ~~capture~~markets ~~improved~~east ~~basis~~of ~~differentials~~the ~~available~~Rockies atbased ~~sales~~delivery points ~~along~~in the ~~Rockies~~southwestern ~~Express~~region ~~Pipeline~~of Wyoming. The Company has filed a motion to reject this contract as part of the Chapter 11 Case and, ifas result, the Company has not recorded any further expense associated with REX since the petition date of the bankruptcy.

~~Gathering~~Depletion, ~~Fees~~Depreciation and Amortization. During the quarter ended ~~March~~June 3130, 2020, ~~gathering~~depletion, ~~fees~~depreciation and amortization (“DD&A”) expense decreased to $1638.78 million compared to $1955.8 million ~~during~~for the same period in 2019~~, related to decreased production volumes~~. On a ~~per~~ unit of production basis, ~~gathering~~the ~~fees~~DD&A ~~increased~~rate ~~slightly~~decreased to $0.3382 per Mcfe for the quarter ended ~~March~~June 3130, 2020, as compared to $0.3289 per Mcfe infor the same period in 2019. ~~This~~ The isprimary adriver ~~result~~ of the ~~renegotiation~~rate ofchange on a ~~marketing~~per ~~agreement~~unit inbasis ~~the~~is ~~fourth~~a ~~quarter~~result of ~~2019~~reduced ~~whereby~~historical ~~gas~~costs ~~revenue~~associated ~~and~~with ~~gathering fees were both increased. As previously mentioned,~~ the ~~renegotiation~~Company’s ~~impacted~~oil ~~the combination of gathering, processing,~~ and gas ~~purchase~~properties ~~agreements.~~as ~~The~~a ~~per~~result ~~unit impact~~ of ~~these~~the ~~negotiations~~ceiling ~~was~~test anwrite-down ~~increase~~recorded in ~~total value of approximately $0.04 per Mcfe. Because~~ the ~~gathering~~first ~~fees~~quarter ~~are~~of ~~charged on a per unit basis~~2020, ~~management~~as ~~expects~~well as the ~~gathering~~reduced ~~fees~~volumes onattributable ~~a unit basis~~ to bethe ~~relatively~~June ~~consistent~~30, ~~except~~2020 ~~for~~proved ~~contractual pricing adjustments for such services, into the future~~reserves.

~~Depletion,~~Ceiling ~~Depreciation~~Test ~~and Amortization~~Write-down. ~~During~~In addition to the ceiling test write-down that occurred in the quarter ended March 31, 2020, ~~depletion,~~the ~~depreciation~~Company ~~and~~also ~~amortization~~recorded ~~(“DD&A”)~~a ~~expense decreased to~~ $47110.36 million ~~from~~non-cash ~~$51.7~~write-down ~~million~~of ~~for~~ the ~~same~~carrying ~~period~~value inof ~~2019.~~its Onproved aoil ~~unit~~and ofnatural ~~production~~gas ~~basis,~~properties ~~the~~as ~~DD&A~~a ~~rate~~result ~~increased~~of toceiling ~~$0.94~~test ~~per~~limitations ~~Mcfe~~during ~~for~~ the quarter ended ~~March~~June 3130, 2020. ~~compared~~The toceiling ~~$0.83~~test ~~per~~was ~~Mcfe~~calculated ~~for~~based upon the ~~same~~SEC ~~period~~based inreserve ~~2019. The~~preparation ~~primary~~as ~~driver~~ of ~~the~~June ~~rate~~30, ~~increase~~2020. onAs adisclosed ~~per~~in ~~unit~~the ~~basis~~2019 isForm a10-K, ~~result~~the ofpricing ~~reduced~~applied ~~volumes attributable~~ to ~~the March 31, 2020 proved~~ reserves. ~~The~~prepared ~~March 31,~~for ~~2020~~SEC ~~proved~~presentation ~~reserves~~are ~~were~~the ~~1,766~~average ~~Bcfe, all~~ of ~~which~~quoted ~~are~~market ~~proved~~prices ~~developed~~in ~~reserves,~~effect ~~and~~on bythe ~~volume~~first ~~are~~day ~~comprised~~ of ~~96%~~the ~~natural~~month ~~gas~~for ~~and~~the 4%preceding ~~oil~~twelve ~~with~~month ~~prices~~period ~~of $2.30 per MMBtu~~ for Henry Hub natural gas and ~~$55.96 per Bbl for~~ West Texas Intermediate oil, adjusted for market differentials.

~~Ceiling~~Pre-Petition ~~Test~~Restructuring ~~Write-down~~Expenses. During the quarter ended ~~March~~June 3130, 2020, the Company ~~recorded~~incurred a $~~242~~9.67 million ~~non-cash~~in ~~write-down~~costs ~~of the carrying value of its proved oil~~ and ~~natural~~fees ~~gas properties as a result of ceiling test limitations. The ceiling test was calculated based upon the SEC based reserve preparation as of March 31, 2020. As disclosed~~ in ~~the~~connection ~~Form~~with ~~10-K,~~its ~~the~~efforts ~~pricing applied~~ to ~~reserves~~restructure ~~prepared~~its ~~for~~debt ~~SEC~~prior ~~presentation~~to ~~are~~filing the ~~average~~Chapter of11 ~~quoted~~petitions ~~market prices in effect~~ on ~~the~~May ~~first day of the month for the preceding twelve month period for Henry Hub natural gas and West Texas Intermediate oil~~14, ~~adjusted for market differentials~~2020. ~~The Company did not have a write-down related to the full cost ceiling limitation during the quarter ended March 31, 2019.~~

Other ~~operating~~Operating ~~expenses~~Expenses, net. ~~During~~As ~~the~~a ~~quarter~~result ~~ended~~of ~~March 31,~~a ~~2020~~court ruling related to a previous outstanding litigation item, the Company ~~incurred~~adjusted ~~$3.4~~receivables ~~million~~and ofpayables ~~other~~related ~~operating~~to ~~expenses. Of~~a ~~this~~net ~~amount,~~profits ~~$3.3~~interest ~~million~~and ~~related~~recorded toa ~~the~~related non-cash ~~inventory~~expense ~~impairment~~of ~~and~~ $01.1 million ofduring ~~other recurring and nonrecurring expenses. During~~ the quarter ended ~~March~~June 3130, ~~2019, the Company incurred $0~~2020.~~6 million of other operating expenses.~~

Other Income and Expenses:

Interest Expense. Interest expense decreased to $3014.45 million during the quarter ended ~~March~~June 3130, 2020 as compared to $3332.34 million during the same period in 2019. ~~Interest~~In ~~expense~~accordance iswith ~~comprised~~ASC of852, ~~four primary elements: (i) cash interest expense; (ii) PIK interest expense; (iii) amortization of deferred premium; and (iv) amortization of deferred financing costs. The table below reflects~~ the ~~comparative~~Company ~~amounts~~did innot ~~each~~recognize ~~period presented (in thousands). The primary driver of the decreased~~ interest expense ~~was~~related ato ~~reduction in the LIBOR rate by approximately 20 basis points during the first quarter 2020. Additionally, the Company had a lower balance on~~ its ~~Revolving~~pre-petition ~~Credit~~debt ~~Facility~~subsequent ~~during the quarter ended March 31, 2020 as compared~~ to the ~~same~~Petition ~~period~~Date ~~in 2019. In conjunction with the issuance~~ of ~~the~~May ~~Second Lien Notes~~14, ~~the Company recognized a deferred premium which is amortized over the term of the Second Lien Notes~~2020.

	For the Three Months Ended March 31,
	2020			2019
Cash interest expense	$	34,669		$	36,737
PIK interest expense		2,917			3,183
Amortization of deferred premium		(10,647	)		(9,716	)
Amortization of deferred financing costs and discount		3,459			3,123
Total interest expense	$	30,398		$	33,327

Gain (Loss) on Commodity Derivatives. During the quarter ended June 30, 2020, the Company recognized a loss of $15.3 million, as compared to a gain of $71.7 million related to commodity derivatives for the same period in 2019. Of this total, the Company recognized $25.0 million related to a realized gain on commodity derivatives that was settled during the quarter ended June 30, 2020, as compared with $3.4 million related to a realized gain on commodity derivatives during the same period in 2019. The realized gain or loss on commodity derivatives relates to actual amounts received or paid under the Company’s derivative contracts. This amount also includes an unrealized loss of $40.3 million on commodity derivatives during the quarter ended June 30, 2020, as compared to an unrealized gain of $68.2 million during the same period in 2019. The unrealized gain or loss on commodity derivatives represents the non-cash charge attributable to the change in the fair value of these derivative instruments over the remaining term of the contract.

Other Income (Expense). During the quarter ended March 31, 2020, the Company recorded other income of $2.1 million in Other income (expense) on the condensed consolidated statement of operations which is attributed to a severance tax adjustment from the state of Utah. 30

~~Commodity~~Reorganization ~~Derivatives~~Items:

~~Gain~~Reorganization ~~(Loss)~~Items, ~~on Commodity Derivatives~~Net. ~~During the quarter ended March~~ ~~31,~~Reorganization ~~2020~~items, ~~the~~net ~~Company recognized a gain~~ of $44117.36 million, ~~as compared to a loss of $64.3 million related to commodity derivatives~~ for the ~~same~~six ~~period~~months inended ~~2019.~~June 30, ~~Of this total~~2020, ~~the~~are ~~Company~~comprised ~~recognized~~of $1623.31 million ~~related~~of toprofessional ~~a realized gain on commodity derivatives that were settled during the quarter ended March 31~~fees, ~~2020,~~and asoffset ~~compared~~by ~~with~~ $78140.67 million ~~related~~of to a ~~realized~~non-cash ~~loss on commodity derivatives during the same period in 2019. The realized~~ gain orresulting ~~loss~~from ~~on commodity derivatives relates to actual amounts received or paid under~~ the ~~Company’s~~net ~~derivative~~write-off ~~contracts. This amount also includes an unrealized gain~~ of ~~$27.9~~all ~~million~~unamortized onpremiums, ~~commodity~~discounts ~~derivatives~~and ~~during~~debt ~~the~~issuance ~~quarter~~costs ~~ended~~totaling ~~March 31,~~related ~~2020, as compared~~ to ~~an unrealized gain of $14.3 million during~~ the ~~same~~debt ~~period~~instruments inwhich ~~2019.~~are ~~The~~expected ~~unrealized gain or loss on commodity derivatives represents the non-cash charge attributable~~ to ~~the~~be ~~change~~impacted inby the ~~fair~~pendency ~~value~~ of ~~these derivative instruments over~~ the ~~remaining~~Chapter ~~term~~11 ~~of the contract~~Cases.

Net Income (Loss):

Pretax Income(Loss). During the quarter ended ~~March~~June 3130, 2020, the Company recognized loss before income taxes of $~~217~~45.78 million compared to ~~income~~a ~~before~~pretax income ~~taxes~~ of $4057.60 million for the same period in 2019. The pretax loss is driven by the operating income and operating expense elements, including the ceiling test impairment of $110.6 million, and offset by the $117.6 million gain on reorganization items, net.

Income Taxes. The Company has a recorded a valuation allowance against all deferred tax assets as of ~~March~~June 3130, 2020. Some or all of this valuation allowance may be reversed in future periods against future income.

Net Income (Loss). During the quarter ended ~~March~~June 3130, 2020, the Company recognized net loss of $~~217~~45.68 million, or $10.1023 per diluted share, as compared to a net income of $4057.71 million, or $0.2129 per diluted share, for the same period in 2019. The decrease in earnings is driven by the operating income and operating expense elements together with ceiling test impairment of $~~242~~110.6 million, offset by the $44117.36 million gain on ~~commodity~~reorganization ~~derivatives~~items, net were the primary elements resulting in net loss during the quarter ended ~~March~~June 3130, 2020, as compared to the ~~net income result from the~~ same period in 2019.

Six Months Ended June 30, 2020 vs. Six Months Ended June 30, 2019

Production, Commodity Derivatives and Revenues:

Production. During the six months ended June 30, 2020, total production decreased by 22% on a gas equivalent basis to 97.8 Bcfe compared to 124.7 Bcfe for the same period in 2019, primarily attributable to the Company’s decision to suspend its operated pad level drilling program effective and as announced in September 2019. The Company’s production has decreased as expected, based on the natural decline of the proven developed wells that were online as of the end of September 2019, and no new wells have come online since that time.

Commodity Prices – Natural Gas. Realized natural gas prices, including realized gains and losses on commodity derivatives, decreased to $2.28 per Mcf during the six months ended June 30, 2020, as compared to $2.47 per Mcf for the same period in 2019. The Company has entered into various natural gas price commodity derivative contracts with contract periods extending through 2020. See Note 9 – Derivative Financial Instruments in the notes to the unaudited condensed consolidated financial statements for additional details. As previously noted, the Company voluntarily liquidated its outstanding derivative contracts prior to its filing for bankruptcy. The total proceeds collected by the Company were $12.8 million in early May 2020 and are included in the realized natural gas prices for the six months ended June 30, 2020. During the six months ended June 30, 2020, the Company’s average price for natural gas excluding realized gains and losses on commodity derivatives was $1.99 per Mcf as compared to $3.12 per Mcf for the same period in 2019.

Commodity Prices – Oil. Realized oil prices, including realized gains and losses on commodity derivatives, increased slightly to $59.71 per barrel during the six months ended June 30, 2020 as compared to $59.62 per barrel for the same period in 2019. The Company had various oil price commodity derivative contracts prior to filing for bankruptcy. See Note 9 – Derivative Financial Instruments in the notes to the unaudited condensed consolidated financial statements for additional details. During the six months ended June 30, 2020, the Company’s average price for oil excluding realized gains and losses on commodity derivatives was $37.92 per barrel as compared to $57.30 per barrel for the same period in 2019.

Revenues. During the six months ended June 30, 2020 revenues decreased to $211.8 million as compared to $426.9 million for the same period in 2019. This decrease is primarily attributable to the decrease in total production and the decrease in natural gas prices.

Operating Costs and Expenses:

As previously mentioned, the Company has been focused on continued cost management and expects total costs to trend down. However, on a per Mcfe basis, the Company expects pressure on LOE and G&A Expenses due to the expected decrease in future production as the Company has suspended its operated pad level drilling program and is susceptible to declining base production from its proved developed producing reserves. Management expects it can mitigate some of this per unit pressure through further cost management and investment initiatives. However, with certain costs being fixed, it is not expected to fully mitigate this pressure.

Lease Operating Expense. LOE increased to $36.0 million during the six months ended June 30, 2020 compared to $33.1 million during the same period in 2019. The increase for the period was attributable to an increase in net water handling costs, as well as an increase in environmental monitoring costs in the first half of 2020 as compared to the same period in 2019. On a unit of

production basis, LOE costs increased to $0.37 per Mcfe during the six months ended June 30, 2020 compared to $0.27 per Mcfe during the same period in 2019.

General and Administrative Expenses. G&A Expenses increased to $16.5 million for the six months ended June 30, 2020 compared to $14.5 million for the same period in 2019. Due to the suspension of the drilling program in September 2019, the Company reduced its capitalized overhead which is the primary increase in General and administrative expenses for the six months ended June 30, 2020 as compared to the same period in 2019. On a per unit basis, G&A Expenses increased to $0.17 per Mcfe for the six months ended June 30, 2020 compared to $0.12 per Mcfe for the six months ended June 30, 2019 due to the increase in G&A Expenses and a decrease in production volumes.

The Company analyzes the combined LOE and G&A Expenses as controllable costs. The combined LOE and G&A Expenses for the six months ended June 30, 2020, was $0.54 per Mcfe compared to $0.39 per Mcfe for the same period in 2019. Management also analyzes the combined LOE and G&A Expenses, excluding the non-cash element of stock compensation. The cash component of LOE and G&A Expenses for the six months ended June 30, 2020, was $0.52 per Mcfe compared to $0.37 per Mcfe for the same period in 2019, with the changes being driven by the items described above.

Facility Lease Expense. For the six months ended June 30, 2020, the Company recognized operating lease expense associated with the Lease Agreement of $10.9 million, or $0.11 per Mcfe, as compared to $13.2 million, or $0.11 per Mcfe, for the same period in 2019. This decrease was a result of lower liquid production volumes in the first half of 2020 compared to the same period in 2019.

As previously mentioned, this lease was listed for rejection through the Plan filed on May 15, 2020. On June 28, 2020, the Company’s indirect wholly-owned subsidiary, Ultra Wyoming, entered into the Purchase Agreement, pursuant to which, among other things, Ultra Wyoming agreed to purchase the LGS for a purchase price of $18.0 million. Effective June 30, 2020, Ultra Wyoming and Corridor closed the transaction contemplated by the Purchase Agreement in accordance with the terms thereof and the Lease Agreement was terminated. The Company has no further obligations associated with this Lease Agreement.

Production Taxes. During the six months ended June 30, 2020, production taxes were $21.9 million compared to $46.6 million during the same period in 2019, or $0.22 per Mcfe compared to $0.37 per Mcfe. Production taxes are primarily calculated based on a percentage of revenue from production, net of gathering fees, in Wyoming and were 12.2% for the six months ended June 30, 2020 and 12.1% of revenues for the same period in 2019. The decrease in per unit taxes is primarily attributable to decreased natural gas prices during the six months ended June 30, 2020, as compared to the same period in 2019.

Gathering Fees. Gathering fees decreased to $32.8 million for the six months ended June 30, 2020, compared to $40.1 million during the same period in 2019, largely related to decreased production. On a per unit basis, gathering fees increased to $0.34 per Mcfe for the six months ended June 30, 2020 compared to $0.32 per Mcfe for the same period in 2019.

Transportation Charges. During the six months ended June 30, 2020, transportation charges were $6.1 million, or $0.06 per Mcfe, as compared to $0.1 million, or nil per Mcfe, in the same period in 2019. As previously mentioned, the transportation charges were a result of the firm transport demand changes on REX Pipeline. The Company has filed a motion to reject this contract as part of the Chapter 11 Case and, as result, the Company has not recorded any further expense associated with REX since the petition date of the bankruptcy.

Depletion, Depreciation and Amortization. DD&A expenses decreased to $86.1 million during the six months ended June 30, 2020, from $107.4 million for the same period in 2019. On a unit of production basis, the DD&A rate increased to $0.88 per Mcfe for the six months ended June 30, 2020 compared to $0.86 per Mcfe for the six months ended June 30, 2019. The primary driver of the rate increase on a per unit basis is a result of reduced volumes attributable to the June 30, 2020 proved reserves.

Ceiling Test Write-down. During the six months ended June 30, 2020, the Company recorded $353.2 million of non-cash write-downs of the carrying value of its proved oil and natural gas properties as a result of ceiling test limitations in both the first and second quarters of 2020. The ceiling test is calculated based upon the SEC based reserve preparation as of each quarter end. Natural gas prices used to calculate the reserves ceiling limitation value decreased 15% in the period from December 31, 2019 to March 31, 2020 and then further decreased by 8% from March 31, 2020 to June 30, 2020. The decrease in natural gas prices described above, as well as the decline oil prices over the second quarter of 2020, negatively affected the overall ceiling value as seen broadly across the upstream oil and gas sector. As disclosed in our 2019 Form 10-K, the prices applied to reserves prepared for SEC presentation are the average of quoted market prices in effect on the first day of the month for the preceding twelve month period for Henry Hub natural gas and West Texas Intermediate oil, adjusted for market differentials. The Company did not have a write-down related to the full cost ceiling limitation during the six months ended June 30, 2019.

Pre-Petition Restructuring Expenses. During the six months ended June 30, 2020, the Company incurred $12.4 million in costs and fees in connection with its efforts to restructure its debt prior to filing the Chapter 11 petitions on May 14, 2020.

Other Operating Expenses. During the six months ended June 30, 2020, the Company incurred $4.6 million of other operating expenses. Of this amount, $3.3 million related to the non-cash inventory impairment and $1.3 million of other recurring and

nonrecurring expenses. During the six months ended June 30, 2019, the Company incurred $16.1 million of other operating expenses.

Other Income and Expenses:

Interest Expense. Interest expense decreased to $44.9 million during the six months ended June 30, 2020 compared to $65.7 million during the same period in 2019. In accordance with ASC 852, the Company did not recognize interest expense related to pre-petition debt subsequent to the Petition Date of May 14, 2020.

Other Income (Expense), net. During the six months ended June 30, 2020, the Company recorded other income of $3.5 million in Other income (expense) on the condensed consolidated statement of operations, of which $2.1 million is attributed to a severance tax adjustment from the state of Utah.

Gain (Loss) on Commodity Derivatives. During the six months ended June 30, 2020, the Company recognized a gain of $29.0 million related to commodity derivatives as compared to a gain of $7.3 million related to commodity derivatives during the same period in 2019. Of this total, the Company recognized $41.4 million related to a realized gain on commodity derivatives during the six months ended June 30, 2020, as compared with $75.2 million related to a realized loss on commodity derivatives during the same period in 2019. The realized gain or loss on commodity derivatives relates to actual amounts received or paid under the Company’s derivative contracts. This unrealized gain or loss on commodity derivatives also includes a $12.4 million unrealized loss on commodity derivatives for the six months ended June 30, 2020, as compared to an $82.5 million unrealized gain on commodity derivatives for the same period in 2019. The unrealized gain or loss on commodity derivatives represents the non-cash charge attributable to the change in the fair value of these derivative instruments over the remaining term of the contract. See Note 9 – Derivative Financial Instruments for additional details.

Reorganization Items:

Reorganization Items, Net. Reorganization items, net of $117.6 million for the six months ended June 30, 2020, are comprised of $23.1 million of professional fees, and offset by $140.7 million of a non-cash gain from the net write-off all unamortized premiums, discounts, and debt issuance costs related to the debt instruments which are expected to be impacted by the pendency of the Chapter 11 Cases.

Net Income (Loss):

Pretax Income (Loss). The Company recognized loss before income taxes of $263.5 million for the six months ended June 30, 2020 compared to income before taxes of $97.6 million for the same period in 2019.

Income Taxes. The Company has recorded a valuation allowance against all deferred tax assets as of June 30, 2020. Some or all of this valuation allowance may be reversed in future periods against future income.

Net Income. For the six months ended June 30, 2020, the Company recognized net loss of $263.4 million, or $1.33 per diluted share, as compared to net income of $97.8 million, or $0.49 per diluted share, for the same period in 2019. The decrease in earnings is driven by the operating income and operating expense elements together with ceiling test impairment of $353.2 million, offset by the $117.6 million gain on reorganization items, net were the primary elements resulting in net loss during the six months ended June 30, 2020, as compared to the same period in 2019.

LIQUIDITY AND CAPITAL RESOURCES:

~~Overview.~~Liquidity ~~During~~Before ~~the~~Filing ~~three~~Under ~~months~~Chapter ~~ended~~11 March 31, 2020, we funded our operations entirely through cash flows from operating activities. At March 31, 2020, the Company had no outstanding borrowings under the Revolving Credit Facility. The Revolving Credit Facility balance decreased by $64.7 million from December 31, 2019. The Company was able to make repayments under the Revolving Credit Facility due to its decision to curtail the deployment of ~~capital and to deliver on its strategy of generating operating cash flows in excess of capital deployment. The borrowing base attributed to~~ the ~~Revolving~~United ~~Credit~~States ~~Facility~~Bankruptcy ~~was adjusted down to $100 million effective April 1, 2020.~~Code

AsWe ofhave ~~March 31~~historically funded our operations primarily through cash flows from operating activities and borrowings under the Credit Agreement. Additionally, our liquidity was historically driven by the availability under the Credit Facility commitments. Given that the borrowing base amount was continuing to decrease and the bank pricing decks had been reduced after the borrowing base redetermination completed in February 2020, management concluded that it would have a borrowing base deficiency and a Term Loan Exclusivity period (as defined in the Term Loan Agreement), subjecting the Company ~~had~~to $a 2.0 asset coverage ratio effective July 1, 2020.9 Additionally, ~~billion~~future cash flows were subject to a number of ~~other~~variables ~~indebtedness~~and ~~outstanding~~are inhighly dependent on the ~~form~~prices we receive for oil and natural gas. Oil and natural gas prices declined severely during fiscal year 2019 and declined even further during the first half of ~~term~~2020. ~~loans,~~There ~~secured~~is ~~notes~~still significant volatility in commodity prices and ~~unsecured~~these ~~notes~~prices ~~with~~are ~~maturities~~still lower than the industry has experienced in ~~2022~~recent ~~through~~years. ~~2025~~These lower commodity prices have negatively impacted revenues, earnings and cash flows, and sustained low oil and natural gas prices will have a material and adverse effect on our liquidity position.

OnLiquidity ~~April~~After ~~14,~~Filing ~~2020,~~Under ~~the~~Chapter ~~Company~~11 ~~no longer had access to the available commitment amount under the Revolving Credit Facility due to the occurrence~~ of ~~a default. This default was~~ the ~~issuance~~United ofStates aBankruptcy ~~going concern qualification to the audit opinion in the December~~ Code

28As described in the introductory note, the filing of the Chapter 11 petitions constituted an event of default with respect to the Company’s existing debt obligations. However, subject to certain exceptions under the Bankruptcy Code, the filing of the Chapter 11 petitions automatically enjoined, or stayed, the continuation of any judicial or administrative proceedings or other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the filing of the Chapter 11 petitions. Thus, for example,

31, 2019 financial statements. On the date of the going concern qualification default, the Company had cash of $15.2 million, and an outstanding Revolving Credit Facility balance of $52.7 million. The Revolving Credit Facility balance was reduced prior to the bankruptcy Petition Date when the provisions of the anti-cash hoarding required a repayment.33

most Oncreditor ~~April~~actions ~~15, 2020, the Company decided~~ to ~~forgo~~obtain ~~the~~possession ~~interest~~of ~~payments~~property ~~due~~from ~~under its Unsecured Notes obligations resulting in a second default. Both defaults had a 30-day grace period with~~ the ~~first~~Debtors, ~~grace~~or ~~period~~to ~~expiring on May 14~~create, ~~2020~~perfect ~~and~~or ~~the~~enforce ~~second~~any ~~grace~~lien ~~period~~against ~~expiring~~ the ~~following~~Debtors’ ~~day. During these grace periods~~property, ~~the~~or ~~Company~~to ~~remained~~collect ~~compliant~~on ~~with~~monies ~~the~~owed ~~anti-cash~~or ~~hoarding~~otherwise ~~limit~~exercise ofrights ~~$15~~or ~~million~~remedies aswith ~~established~~respect ~~under~~to ~~the~~a ~~Credit~~pre-petition ~~Agreement. On~~claim ~~May~~are ~~14,~~enjoined ~~2020,~~unless ~~the Company filed its Chapter 11 Case with $11.0 million cash on hand~~ and ~~$46.3~~until ~~million~~the ~~outstanding~~Court onlifts the ~~Revolving~~automatic ~~Credit Facility~~stay.

~~Chapter~~The 11Court ~~Cases~~has ~~and~~approved ~~Effect~~payment of ~~Automatic~~certain ~~Stay. On~~pre-petition ~~May 14~~obligations, ~~2020,~~including ~~the~~payments ~~Debtors filed~~ for ~~relief~~employee ~~under~~wages, ~~Chapter~~salaries 11and ofcertain ~~the~~other ~~United~~benefits, ~~States~~customer ~~Bankruptcy~~programs, ~~Code. The~~taxes, ~~commencement~~utilities, ofinsurance, asurety ~~voluntary~~bond ~~proceeding~~premiums inas ~~bankruptcy~~well ~~constitutes~~as anpayments ~~immediate~~to ~~event~~possessory oflien ~~default~~vendors. ~~under~~Despite the ~~Credit~~liquidity ~~Agreement,~~provided ~~Term~~by ~~Loan~~the ~~Agreement,~~Company’s ~~Second~~existing ~~Lien~~cash ~~Note~~on ~~Indenture~~hand, ~~and~~our ~~the~~ability ~~Unsecured~~to ~~Note~~maintain ~~Indentures,~~normal ~~resulting~~credit interms ~~the~~with ~~automatic~~our ~~and~~suppliers ~~immediate~~may ~~acceleration~~become ofimpaired. ~~all~~The ofCompany ~~our~~may ~~outstanding~~be ~~debt. Any~~required ~~efforts~~ to ~~enforce~~pay ~~payment~~cash ~~obligations~~in ~~related~~advance to ~~the~~certain ~~acceleration~~vendors ofand ~~our~~may ~~debt~~experience ~~have~~restrictions ~~been~~on ~~automatically~~the ~~stayed~~availability asof atrade ~~result~~credit, ofwhich ~~the~~would ~~filing~~further ofreduce ~~the~~our ~~Chapter~~liquidity. 11If ~~Cases,~~liquidity ~~and~~problems persist, the ~~creditors~~Company’s ~~rights~~suppliers ofcould ~~enforcement~~refuse ~~are~~to ~~subject~~provide tokey ~~the~~products ~~applicable~~and ~~provisions~~services ofin the ~~United~~future. ~~States~~In ~~Bankruptcy~~addition, ~~Code. For~~due ~~more~~to ~~information~~the onpublic perception of the ~~Chapter~~Company’s 11financial ~~Cases~~condition and ~~related~~results ~~matters~~of operations, ~~refer~~in toparticular ~~the~~with ~~Introductory~~regard ~~Note~~to –the ~~Voluntary~~Company’s ~~Reorganization~~potential ~~under~~failure ~~Chapter~~to 11meet ~~and~~its ~~Note~~debt 6obligations, –some ~~Debt~~vendors incould ~~the~~be ~~notes~~reluctant to ~~the~~enter ~~unaudited~~into ~~condensed~~long-term ~~consolidated~~agreements ~~financial~~with ~~statements~~the Company.

During the six months ended June 30, 2020, we funded our operations primarily through cash flows from operating activities, borrowings under the Revolving Credit Facility (defined below) until April 14, 2020, at which time the Company was in default under the Credit Agreement due to the issuance of a going concern qualification to the audit opinion on the December 31, 2019 financial statements, and from the DIP Facility following its closing in May 2020. As of June 30, 2020, the Company has cash and cash equivalents of $32.3 million, and $46.3 million and $10.4 million outstanding borrowings under the Revolving Credit Facility and DIP Facility, respectively.

On April 15, 2020, the Company elected to forgo the interest payments due under its Unsecured Notes obligations resulting in a second default. Both defaults had a 30-day grace period with the first grace period expiring on May 14, 2020, and the second grace period expiring the following day. During these grace periods, the Company remained compliant with the anti-cash hoarding limit of $15 million as established under the Credit Agreement. On May 14, 2020, the Company filed the Chapter 11 Cases with $11.0 million cash on hand and $46.3 million outstanding on the Revolving Credit Facility.

On May 14, 2020, the Debtors filed for relief under Chapter 11 of the United States Bankruptcy Code. The commencement of a voluntary proceeding in bankruptcy constituted an immediate event of default under the Credit Agreement, Term Loan Agreement, Second Lien Note Indenture, and the Unsecured Note Indentures, resulting in the automatic and immediate acceleration of all of our outstanding debt. Any efforts to enforce payment obligations related to the acceleration of our debt have been automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement are subject to the applicable provisions of the United States Bankruptcy Code. For more information on the Chapter 11 Cases and related matters, refer to the Introductory Note – Voluntary Reorganization under Chapter 11 and Note 6 – Debt in the notes to the unaudited condensed consolidated financial statements.

On May 14, 2020, the Debtors entered into the RSA with certain creditors to support a restructuring in accordance with the terms set forth in our Plan. As more fully disclosed in the Introductory Note – Voluntary Reorganization under Chapter 11 and Note 6 – Debt in the notes to the unaudited condensed consolidated financial statements, the Plan and the RSA contemplate a restructuring which would provide for the treatment of holders of certain claims and existing equity interests. Accordingly, the liquidity for the Company during the bankruptcy proceedings will come from cash on hand, the initial $10 million draw on the debtor-in-possession term loan, and net operating cash flows during the bankruptcy period. The Company has been granted first day motions that will generally allow the Company to continue to execute its business plan and to conduct its operations in the normal course for the duration of the Chapter 11 Cases.

As part of the RSA and the Plan, the Company has secured commitments for a new exit reserve based credit facility with a $60 million commitment amount under a $100 million borrowing base with the same parties that are currently parties to the Company’s existing Revolving Credit Facility, however in the reorganized entity. Given the contemplated restructuring described by the Plan, this will be a new facility and not a continuation or amendment of the current Revolving Credit Facility.

Capital Expenditures. For the ~~three~~six months ended ~~March~~June 3130, 2020, total capital expenditures were $019.27 million including the purchase of the LGS for $18.0 million as part of the Purchase Agreement. As previously discussed, the Company suspended its operated pad level drilling program in late September 2019. Per the RSA, the Company has agreed to a budget, as defined in the Plan resulting in only minimal capital investments in our Pinedale field while the RSA is in effect.

DIP Credit Agreement. On ~~April~~In ~~12,~~connection ~~2017~~with the RSA and the Chapter 11 Cases, Ultra Resources entered into the DIP Credit Agreement,. asThe ~~the~~DIP ~~borrower,~~Credit ~~with~~Agreement provides for the ~~Company~~DIP Facility and ~~UPE,~~borrowings asup ~~parent~~to ~~guarantors~~$25.0 million. Ultra has utilized $10.0 million of this facility and is allowed to request additional borrowings up to $15.0 million, ~~Bank~~in tranches greater than $5.0 million. Ultra intends to use proceeds of ~~Montreal~~the DIP Facility, asamong ~~administrative~~other ~~agent~~things: (1) to pay interest, fees, costs and expenses related to the ~~“RBL~~loans ~~Administrative~~thereunder, ~~Agent”~~(2) to pay the fees, costs and expenses of the ~~other~~estate ~~lenders~~professionals ~~party~~retained ~~thereto~~in ~~from~~the ~~time~~Chapter to11 ~~time~~Cases ~~(collectively,~~and approved by the ~~“RBL~~Court, ~~Lenders”~~(3) to pay the fees, ~~providing~~costs, ~~for~~disbursements aand ~~revolving~~expenses ~~credit~~of ~~facility~~the (lenders under the ~~“Revolving~~DIP Credit ~~Facility”~~Agreement, (4) ~~subject~~ to amake ~~borrowing~~all ~~base~~permitted ~~redetermination,~~payments ~~which~~of ~~limits~~costs of administration of the ~~aggregate~~Chapter ~~amount~~11 ofCases, ~~first~~(5) ~~lien~~to ~~debt~~pay ~~under~~such pre-petition expenses as are consented to in writing by the ~~Revolving~~Required Lenders (as defined in the DIP Credit ~~Facility~~Agreement) and ~~Term~~approved ~~Loan~~by ~~Agreement.~~ the Court, (6) to satisfy any adequate protection

Inobligations ~~February~~owing ~~2020,~~under ~~Ultra Resources entered into a Sixth Amendment to~~ the ~~Credit~~DIP ~~Agreement~~Orders (the “Sixth Amendment”) with the RBL Administrative Agent and the RBL Lenders party thereto. Pursuant to the Sixth Amendment and the spring 2020 borrowing base redetermination, both of which were completed in February 2020, the Borrowing Base (as defined in the ~~Credit Agreement~~RSA); ~~was~~and ~~reduced,~~(7) ~~effective April 1, 2020, to $1.075 billion, with $100 million attributed to the Revolving Credit Facility. As described in previous periodic reports, the commitment amount~~ for ~~the~~general ~~Revolving~~corporate ~~Credit Facility was reduced from $200 million to $120 million on February 29, 2020 based on the Fifth Amendment to the Credit agreement,~~ and ~~then~~working ~~from~~capital ~~$120~~purposes ~~million to $100 million, as established by the Sixth Amendment. Also included in the Sixth Amendment was the reduction~~ of the ~~anti-cash~~Debtors ~~hoarding~~during ~~amount to $15 million and a provision to complete~~ the ~~borrowing~~Chapter ~~base~~11 ~~redetermination quarterly~~Cases.

~~Prior~~The toDIP ~~default~~Facility ~~and~~bears asan ~~stayed~~interest byrate ~~the~~(a) ~~relief~~with ~~provided~~respect byto LIBOR Loans (as defined in the ~~filing~~DIP Credit Agreement), of ~~the~~LIBOR ~~Chapter~~plus 11400 ~~Cases~~basis points, ~~the~~subject ~~Revolving~~to ~~Credit~~a ~~Facility~~LIBOR ~~has~~floor ~~$35~~of 1.0 ~~million~~%, and (b) with respect to Base Rate Loans, the greatest of (i) Prime Rate (as defined in the ~~commitments~~DIP ~~available~~Credit ~~for~~Agreement), (ii) the ~~issuance~~Federal ofFunds ~~letters~~Effective ofRate ~~credit.~~(as ~~The~~defined ~~Revolving~~in the DIP Credit ~~Facility~~Agreement), ~~bears~~plus ~~interest~~50 ~~either~~basis atpoints, aand ~~rate~~(iii) ~~equal~~the toAdjusted Eurodollar Rate (aas defined in the DIP Credit Agreement) a ~~customary~~for ~~London~~a ~~interbank~~one ~~offered~~month ~~rate~~interest period plus an100 ~~applicable~~basis ~~margin~~points, ~~that~~in ~~varies~~each ~~from~~case ~~250~~plus to300 ~~350~~basis points. Unutilized fees are 50 basis points orand ~~(b)~~ the ~~base~~upfront ~~rate~~fees ~~plus~~in an ~~applicable~~aggregate ~~margin~~amount ~~that~~equal ~~varies~~to ~~from~~$0.2 ~~150~~million. The DIP Facility is subject to ~~250~~certain ~~basis~~affirmative ~~points~~and ~~based~~negative ~~upon~~covenants, including, among other covenants the ~~borrowing~~Company ~~base~~believes ~~utilization~~to ~~grid. The~~be ~~applicable~~customary ~~margin~~in ~~increases~~debtor-in-possession financings, continuing reporting obligations by 25the ~~basis~~Company, ~~points~~on a consolidated basis, in the ~~event~~form of a rolling 13-week budget and a weekly report with a reasonably detailed written explanation of all material variances from the ~~Company’s~~budget. ~~consolidated~~As ~~net~~of ~~leverage~~the ~~ratio,~~filing asdate ~~defined~~of this report, ~~exceeds~~the Company is not aware of any breaches of any covenants of the DIP Facility.

29On June 16, 2020, the Company entered into the DIP First Amendment as described previously.

~~4.00~~Credit ~~to 1~~Agreement.~~00.~~ On April 12, 2017, Ultra Resources isentered ~~required~~into tothe ~~pay~~Credit aAgreement, ~~commitment~~as ~~fee~~amended on (the ~~average~~“Credit ~~daily~~Agreement”), ~~unused~~as ~~portion~~the ofborrower, with the ~~Revolving~~Company ~~Credit~~and ~~Facility~~UPE, as parent guarantors, Bank of 50Montreal, ~~basis~~as ~~points.~~administrative ~~Ultra~~agent, ~~Resources~~and isthe ~~also~~other ~~required~~lenders party thereto from time to ~~pay~~time, ~~customary~~providing ~~letter~~for ofa revolving credit ~~and~~facility ~~fronting~~(the ~~fees. The~~ “Revolving Credit Facility’s”) ~~original~~subject ~~maturity~~to ~~date~~a isborrowing ~~January~~base 12redetermination, ~~2022;~~which ~~however,~~limits if the ~~Plan~~aggregate isamount ~~confirmed~~of first lien debt under the Revolving Credit Facility ~~will~~and ~~terminate~~Term inLoan ~~connection with the Company’s emergence from bankruptcy~~Agreement.

~~The~~As ~~Credit~~of ~~Agreement~~the ~~established~~Petition aDate, ~~maximum~~Ultra ~~capital~~Resources ~~expenditure~~had ~~provision~~$46.3 ~~and~~million ~~other~~of ~~affirmative~~outstanding ~~and~~borrowings ~~negative~~under ~~covenants~~the ~~which~~Revolving ~~are~~Credit noFacility. ~~longer~~The ~~applicable~~Company ~~under~~also ~~the~~had ~~mandatory~~$10.2 ~~stay~~million ~~order~~of ~~effected~~outstanding byletters of credit. These amounts remain subject to settlement under the ~~Chapter~~terms 11of ~~filing~~the RSA. ~~The~~As ~~customary~~a ~~affirmative~~result ~~and~~of ~~negative~~the ~~covenants~~commencement ~~include~~of ~~compliance~~the ~~with~~Chapter ~~laws~~11 ~~(including~~Cases, ~~environmental~~the ~~laws,~~Company ~~ERISA~~is ~~and~~no ~~anti-corruption~~longer ~~laws),~~in ~~delivery~~compliance ofwith ~~quarterly~~the ~~and~~covenants ~~annual~~under ~~financial~~the ~~statements~~Credit Agreement and ~~oil~~the ~~and~~lenders’ ~~gas~~previous ~~engineering~~commitments ~~reports,~~of ~~maintenance~~$100 ~~and~~million ~~operation~~under ofthe ~~property~~Credit ~~(including~~Agreement ~~oil~~have ~~and~~been ~~gas~~terminated. The ~~properties),~~Company ~~restrictions~~is ontherefore ~~the~~unable ~~incurrence~~to ofmake ~~liens,~~additional ~~indebtedness,~~borrowings ~~asset~~or ~~dispositions,~~issue ~~fundamental~~additional ~~changes,~~letters ~~restricted~~of ~~payments~~credit ~~and~~under ~~other~~the ~~customary~~Credit ~~covenants~~Agreement.

Prior to default and as stayed by the relief provided by the filing of the Chapter 11 Cases, the Revolving Credit Facility had $35.0 million of the commitments available for the issuance of letters of credit. The Revolving Credit Facility bears interest either at a rate equal to (a) a customary London interbank offered rate plus an applicable margin that varies from 250 to 350 basis points or (b) the base rate plus an applicable margin that varies from 150 to 250 basis points based upon the borrowing base utilization grid. The applicable margin increases by 25 basis points in the event the Company’s consolidated net leverage ratio, as defined, exceeds 4.00 to 1.00. Ultra Resources is required to pay a commitment fee on the average daily unused portion of the Revolving Credit Facility of 50 basis points. Ultra Resources is also required to pay customary letter of credit and fronting fees. The Revolving Credit Facility’s original maturity date is January 12, 2022; however, if the Plan is confirmed the Revolving Credit Facility will terminate in connection with the Company’s emergence from bankruptcy.

Other provisions of the Credit Agreement have been disclosed in previous regulatory filings and have been deleted from this filing as the compliance elements of the Credit Agreement are stayed by the bankruptcy filing under the Chapter 11 Cases.

Refer to Note 6 – Debt in the 2019 Form 10-K for additional details on the terms of the Revolving Credit Facility.

Term Loan. On April 12, 2017, Ultra Resources entered into the Term Loan Agreement, as amended (the “Term Loan Agreement”), as borrower, with the Company and UPE, as parent guarantors, Barclays Bank PLC, as administrative agent, and with the other lenders party thereto from time to time providing for a term loan ~~credit~~ facility. As of ~~March~~June 3130, 2020, Ultra Resources had a balance of approximately $966.3 million in borrowings, including $1.1 million of PIK interest. The administrative and collateral agent responsibilities were transferred to ~~Wilmington Trust National Association (“~~WTNA”) on May 14, 2020.

Other provisions of the Term Loan Agreement have been disclosed in previous regulatory filings and have been deleted from this filing as the compliance elements of the Term Loan Agreement are stayed by the bankruptcy filing under the Chapter 11 Cases.

Refer to Note 6 – Debt in the 2019 Form 10-K for additional details on the terms of the Term Loan Agreement.

Second Lien Notes. As of March 31, 2020, Ultra Resources had approximately $586.8 million, including $14.7 million of PIK interest, in outstanding borrowings of the Second Lien Notes pursuant to the Indenture, dated December 21, 2018 (the “Second Lien Notes Indenture”), with Ultra Resources, as issuer, the Company and its other subsidiaries, as guarantors, and WTNA, as trustee and collateral agent. The trustee and collateral agent responsibilities were transferred to US Bank, N.A. on May 14, 2020.35

Second Lien Notes. As of June 30, 2020, Ultra Resources had approximately $584.3 million, including $12.3 million of PIK interest, in outstanding borrowings of 9.00% Cash / 2.00% PIK Senior Secured Second Lien Notes due July 2024 (the “Second Lien Notes”), pursuant to the Indenture, dated December 21, 2018 (the “Second Lien Notes Indenture”), with Ultra Resources, as issuer, the Company and its other subsidiaries, as guarantors, and WTNA, as trustee and collateral agent. The trustee and collateral agent responsibilities were transferred to US Bank, N.A. on May 14, 2020.

Refer to Note 6 – Debt in the 2019 Form 10-K for additional details on the terms of the Second Lien Notes.

Senior Unsecured Notes. AtAs ~~March~~of June 3130, 2020, Ultra Resources had approximately $150.4 million of 6.875% Senior Notes due April 2022 (the “2022 Notes”) outstanding and $225.0 million of 7.125% Senior Notes due April 2025 (the “2025 Notes”) outstanding. The Unsecured Notes are treated as a single class of securities under the Unsecured Notes Indenture. UMB Bank, N.A. isserves ~~now serving~~ as the trustee for the Unsecured Notes Indenture.

30Other provisions of the Unsecured Notes have been disclosed in previous regulatory filings and have been deleted from this filing as the compliance elements of the Unsecured Notes are stayed by the bankruptcy filing under the Chapter 11 Cases.

~~the 2025 Notes are April 15 and October 15 of each year. Interest was to be paid on the Unsecured Notes from the issue date until maturity.~~ Refer to Note 6 – Debt in the 2019 Form 10-K for additional details on the terms of the Unsecured Notes.

DIP Credit Agreement. In connection with the RSA and the Chapter 11 Cases, Ultra Resources entered into the DIP Credit Agreement. The DIP Credit Agreement provides for the DIP Facility. Ultra intends to use proceeds of the DIP Facility, among other things: (1) to pay interest, fees, costs and expenses related to the loans thereunder, (2) to pay the fees, costs and expenses of the estate professionals retained in the Chapter 11 Cases and approved by the Court, (3) to pay the fees, costs, disbursements and expenses of the Consenting Term Lenders, (4) to make all permitted payments of costs of administration of the Chapter 11 Cases, (5) to pay such prepetition expenses as are consented to in writing by the Required Lenders (as defined in the DIP Credit Agreement) and approved by the Court, (6) to satisfy any adequate protection obligations owing under the DIP Orders (as defined in the RSA); and (7) for general corporate and working capital purposes of the Debtors during the Chapter 11 Cases.

The DIP Facility bears an interest rate of LIBOR plus 100 basis points, subject to a LIBOR floor of 1.0%. Unutilized fees are 50 basis points and the upfront fees were $0.4 million. The DIP Facility is subject to certain affirmative and negative covenants, including, among other covenants the Company believes to be customary in debtor-in-possession financings, reporting by the Filing Subsidiaries in the form of a rolling 13-week budget and a weekly report with a reasonably detailed written explanation of all material variances from the budget.

Cash flows provided by (used in):

Operating Activities. During the ~~three~~six months ended ~~March~~June 3130, 2020, net cash provided by operating activities was $7363.62 million compared to $~~150~~215.71 million for the same period in 2019. The decrease in net cash provided by operating activities is attributable to ~~decreased~~a ~~revenues~~decrease asin net income and a ~~result~~decrease ofin ~~decreased~~working ~~production~~capital ~~and~~driven ~~significantly~~by lower commodity prices. ~~Net~~and ~~cash~~lower ~~provided~~production, byas ~~operating~~well ~~activities~~as isa ~~also~~payment ~~affected~~of bysignificant ~~working~~reorganization ~~capital~~costs ~~changes~~in ~~and~~2020 ~~the~~related ~~timing~~to ofthe ~~cash~~Chapter ~~receipts~~11 ~~and disbursements~~filing.

Investing Activities. During the ~~three~~six months ended ~~March~~June 3130, 2020, net cash used in investing activities was $120.48 million as compared to $90178.43 million for the same period in 2019. During the six months ended June 30, 2020, the Company had minimal investments into natural gas well related activities and facilities, with the most significant activity related to the purchase of the LGS assets from Corridor. The overall decrease in net cash used in investing activities between periods is largely related to decreased capital investments in 2020 associated with the Company’s suspension of drilling activities as announced in the third quarter of 2019 as a result of natural gas pricing remaining near multi-year lows, resulting in no new wells being drilled or completed in 2020.

Financing Activities. During the ~~three~~six months ended ~~March~~June 3130, 2020, net cash used in financing activities was $6711.14 million as compared to $6648.50 million for the same period in 2019. ~~The~~Activity ~~increase~~ in ~~net~~the ~~cash~~six ~~used~~months inended ~~financing~~June 30, ~~activities~~2020, iswas ~~attributable~~associated towith the ~~payments~~$10 onmillion ~~the~~funding ~~Revolving~~under ~~Credit~~the DIP Facility, ~~from~~and ~~operating~~the ~~cash~~$18.4 ~~flows~~million inof ~~excess~~net ofrepayments under the ~~borrowings~~Revolving ~~for~~Credit ~~the~~Facility, ~~three~~and ~~months~~$2.5 ~~ended~~million ~~March 31,~~repayment ~~2020,~~under asthe ~~well~~Term asLoan ~~cash~~that ~~used~~occurred prior to ~~pay~~ the ~~term~~Petition ~~loan~~Date.

Critical Accounting Policies

Please refer to the corresponding section in Part II, Item 7 and to Note 1, Significant Accounting Policies, included in Part II, Item 8 of our 2019 Form 10-K for discussion of our accounting policies and estimates.

Reorganization Accounting. Effective May 14, 2020, as a result of the filing of the Chapter 11 Cases, the Company began accounting and reporting according to FASB ASC Topic 852 – Reorganizations, which specifies the accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. These requirements include distinguishing transactions associated with the reorganization separate from activities related to the ongoing operations of the business.

reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. These requirements include distinguishing transactions associated with the reorganization separate from activities related to the ongoing operations of the business.

New accounting pronouncements. Please refer to, Significant Accounting Policies, under Part I, Item 1 of this report for new accounting pronouncements.

OFF BALANCE SHEET ARRANGEMENTS:

The Company did not have any off-balance sheet arrangements as of ~~March~~June 3130, 2020.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Commodity~~As ~~Price~~a ~~Risk~~smaller reporting company, we are not required to provide the information required by this Item.

Objectives and Strategy: The Company is exposed to commodity price risk. The following quantitative and qualitative information is provided about financial instruments to which we were a party at March 31, 2020, and from which we may incur future gains or losses from changes in commodity prices. We do not enter into derivative or other financial instruments for speculative or trading purposes.

The Company’s major market risk exposure is in the pricing applicable to its natural gas and oil production. Realized pricing is currently driven primarily by the prevailing price for the Company’s natural gas production. Historically, prices received for natural gas production have been volatile and unpredictable. Pricing volatility is expected to continue. The prices we receive for our production depend on many factors outside of our control, including volatility in the differences between product prices at sales points and the applicable index price.

The Company relies on various types of derivative instruments to manage its exposure to commodity price risk and to provide a level of certainty in the Company’s forward cash flows supporting the Company’s capital investment program. These types of instruments may include fixed price swaps, costless collars, deferred premium puts or basis differential swaps. These contracts are financial instruments, and do not require or allow for physical delivery of the hedged commodity. While mitigating the effects of fluctuating commodity prices, these derivative contracts may limit the benefits we would otherwise receive from increases in commodity prices above the fixed hedge prices.

Under the Revolving Credit Facility, the Company was subject to minimum hedging requirements through March 31, 2020. As of April 1, 2020, the Company is no longer be subject to a minimum hedging requirement.

Fair Value of Commodity Derivatives: The Company follows FASB ASC Topic 815, Derivatives and Hedging (“ASC 815”). Derivative contracts that do not qualify for hedge accounting treatment are recorded at fair value as derivative assets and liabilities on the Condensed Consolidated Balance Sheets and the associated unrealized gains and losses are recorded as current income or expense on the Condensed Consolidated Statements of Operations. The Company does not offset the value of its derivative arrangements with the same counterparty. Unrealized gains or losses on commodity derivatives represent the non-cash change in the fair value of these derivative instruments and do not impact operating cash flows on the condensed consolidated statements of cash flows. The Company does not apply hedge accounting to any of its derivative instruments. Refer to Note 10 – Fair Value Measurements for more information regarding the fair value of the derivative contracts described below.

Commodity Derivative Contracts: At March 31, 2020, the Company had open commodity derivative contracts to manage commodity price risk as presented in Note 9 – Derivative Financial Instruments in the notes to the unaudited condensed consolidated financial statements.

	For the Three Months
	Ended March 31,
Commodity Derivatives (in thousands):	2020		2019
Realized gain (loss) on commodity derivatives - natural gas (1)	$	11,452	$	(81,203	)
Realized gain on commodity derivatives - oil (1)		4,897		2,572
Unrealized gain on commodity derivatives (1)		27,945		14,292
Total gain (loss) on commodity derivatives	$	44,294	$	(64,339	)

(1) Included in Gain (Loss) on commodity derivatives in the Consolidated Statements of Operations.

The realized gain or loss on commodity derivatives relates to actual amounts received or paid or to be received or paid under the Company’s derivative contracts and the unrealized gain or loss on commodity derivatives represents the change in the fair value of these derivative instruments over the remaining term of the contract.

ITEM 4 — CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company has performed an evaluation under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. The Company’s disclosure controls and procedures are the controls and other procedures that it has designed to ensure that it records, processes, accumulates and communicates information to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and submissions within the time periods specified in the SEC’s rules and forms. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those determined to be effective can provide only a reasonable assurance with respect to financial statement preparation and presentation. Based on the evaluation, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective at a reasonable level of assurance as of June 30, 2020.

the SEC’s rules and forms. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those determined to be effective can provide only a reasonable assurance with respect to financial statement preparation and presentation. Based on the evaluation, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective at a reasonable level of assurance as of March 31, 2020.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended ~~March~~June 3130, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Note 11 – Commitments and Contingencies in the notes to the unaudited condensed consolidated financial statements for discussion of on-going claims and disputes that arose during our Chapter 11 proceedings, certain of which may be material. The Company is also currently involved in various routine disputes and allegations incidental to its business operations. While it is not possible to determine or predict the ultimate disposition of these matters, the Company believes that the resolution of all such pending or threatened litigation is not likely to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

ITEM 1A. RISK FACTORS

Our business has many risks. Any of the risks discussed in this Quarterly Report on Form 10-Q or in our other SEC filings, could have a material impact on our business, financial position, or results of operations. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. Except as set forth below, there have been no material changes to the risks described in the Company’s ~~Annual~~2019 Form 10-K and the Quarterly Report on the Form 10-KQ for the ~~year~~period ended ~~December~~ March 31, ~~2019~~2020. This information should be considered carefully, together with other information in this report and other reports and materials we file with the SEC.

~~The COVID-19 pandemic and recent developments in the oil and gas industry have and could continue to materially adversely affect our operations during 2020 and possibly beyond.~~38

In early 2020, global health care systems and economies began to experience strain from the spread of COVID-19, a highly transmissible and pathogenic coronavirus. As the virus spread, global economic activity began to slow and future economic activity was forecast to slow with a resulting decline in oil and gas demand. In response, OPEC and Russia initiated discussions to lower production to support energy prices. By mid-March 2020, with OPEC and Russia unable to agree on cuts, crude oil prices declined to less than $25 per barrel, and subsequently fell below $20 per barrel, compared to $59.80 at December 31, 2019. In April 2020, Russia and OPEC reached a tentative agreement to reduce global output in April 2020. But prices in the oil and gas market have still remained depressed, as there is still an oversupply and lack of demand in the market. Consequently, the uncertainty around the future of oil prices and the impact that it will have on the Company’s revenue adds to its needs to address its current financial situation.

The degree to which the COVID-19 pandemic will adversely impact our future operations and results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration of the spread of the outbreak, its severity, the actions to contain the virus and treat its impact, its impact on the economy and market conditions, and how quickly and to what extent normal economic and operating conditions can resume. The substantial decline in oil price has increased the volatility and amplitude of risks we face as described in this report and in our Annual Report on Form 10-K for the year ended December 31, 2019. If oil prices do not improve, capital availability, our liquidity and profitability will be adversely affected, particularly after our current hedges are realized in 2020 and 2021. There is uncertainty around the timing and recovery of the global economy from COVID-19 and its effects on the supply and demand for crude oil. Therefore, we expect continued volatility and uncertainty in the outlook for near to medium term oil prices.

We have filed voluntary petitions for relief under Chapter 11 and are subject to the risks and uncertainties associated with bankruptcy cases.

We have filed voluntary petitions for relief under Chapter 11. For the duration of the Chapter 11 Cases, our business and operations will be subject to various risks, including but not limited to the following:

• our ability to develop, confirm and consummate a Chapter 11 plan of reorganization;

• our ability to obtain Court, creditor and regulatory approval of a Chapter 11 plan of reorganization in a timely manner;

• our ability to obtain Court approval with respect to motions in the Chapter 11 Cases and the outcomes of Court rulings and of

• the Chapter 11 Cases in general;

• risks associated with third party motions in the Chapter 11 Cases, which may interfere with our business operations or our ability to propose and/or complete a Chapter 11 plan of reorganization;

• increased costs related to the Chapter 11 Cases and related litigation;

• a loss of, or a disruption in the materials or services received from, suppliers, contractors or service providers with whom we have commercial relationships;

• potential increased difficulty in retaining and motivating our key employees through the process of reorganization, and potential increased difficulty in attracting new employees; and

• significant time and effort required to be spent by our senior management in dealing with the bankruptcy and restructuring activities rather than focusing exclusively on business operations.

We are also subject to risks and uncertainties with respect to the actions and decisions of creditors and other third parties who have interests in our Chapter 11 Cases that may be inconsistent with our plans. These risks and uncertainties could affect our business and operations in various ways and may significantly increase the duration of the Chapter 11 Cases. Because of the risks and uncertainties associated with Chapter 11 Cases, we cannot predict or quantify the ultimate impact that events occurring during the Chapter 11 Cases may have on our business, cash flows, liquidity, financial condition and results of operations, nor can we predict the ultimate impact that events occurring during the Chapter 11 Cases may have on our corporate or capital structure.

The RSA contemplates that our outstanding equity will be cancelled and we can make no assurance that there will be any recovery available to investors holding the shares of our existing common stock after the conclusion of our Chapter 11 Cases.

We have a significant amount of indebtedness that is senior to our existing common stock in our capital structure. As a result, the value attributable to shares of our existing common stock will be impacted, possibly materially, by the reorganization of our capital structure through our Chapter 11 Cases. We can make no assurance that there will be any recovery available to investors holding the shares of our existing common stock after the conclusion of our Chapter 11 Cases. The RSA provides that our outstanding equity will be cancelled in our Chapter 11 Cases and will be entitled to a limited recovery, if any. Any trading in shares of our common stock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our equity.

In certain instances, a Chapter 11 case may be converted to a case under chapter 7 of the Bankruptcy Code.

There can be no assurance as to whether the Company will successfully reorganize and emerge from the Chapter 11 Cases or, if the Company does successfully reorganize, as to when it would emerge from the Chapter 11 Cases. If the Court finds that it would be in the best interest of creditors and/or the Debtors, the Court may convert the Company’s Chapter 11 Cases to cases under chapter 7 of the United States Bankruptcy Code (“Chapter 7”). In such event, a Chapter 7 trustee would be appointed or elected to liquidate the Debtors’ assets for distribution in accordance with the priorities established by the United States Bankruptcy Code. The Debtors believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to the Debtors’ creditors than those provided for in a Chapter 11 plan because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a disorderly fashion over a short period of time rather than reorganizing or selling in a controlled manner the Debtors’ businesses as a going concern, (ii) additional administrative expenses involved in the appointment of a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

As a result of the Chapter 11 Cases, our historical financial information may be volatile and not be indicative of our future financial performance.

During the Chapter 11 Cases, we expect our financial results to continue to be volatile as asset impairments, asset dispositions, restructuring activities and expenses, contract terminations and rejections, and claims assessments and may significantly impact our consolidated financial statements. As a result, our historical financial performance may not be indicative of our financial performance after the date of the bankruptcy filing.

Our capital structure will likely be significantly altered under any Chapter 11 plan confirmed by the Court. Under fresh-start accounting rules that may apply to us upon the effective date of a Chapter 11 plan, our assets and liabilities would be adjusted to fair value, which could have a significant impact on our financial statements. Accordingly, if fresh-start accounting rules apply, our financial condition and results of operations following our emergence from Chapter 11 would not be comparable to the financial condition and results of operations reflected in our historical financial statements. In connection with the Chapter 11 Cases and the development of a Chapter 11 plan, it is also possible that additional restructuring and related charges may be identified and recorded in future periods. Such charges could be material to our consolidated financial position, liquidity and results of operations.

We may be unable to comply with restrictions imposed by our DIP Credit Agreement and other financing arrangements.

The agreements governing our outstanding financing arrangements impose a number of restrictions on us. Specifically, the terms of our DIP Credit Agreement require us to comply with certain customary affirmative and negative covenants for debtor-in-possession financings, which include restrictions on: (i) indebtedness, (ii) liens and guaranties, (iii) liquidations, mergers, consolidations, acquisitions, (iv) disposition of assets or subsidiaries, (v) affiliate transactions, (vi) continuation of or change in business, (vii) restricted payments, (viii) sanctions and anticorruption matters, (ix) no restriction in agreements on dividends or certain loans, and (x) loans and investments. In addition, the DIP Credit Agreement contains milestones relating to the Chapter 11 Cases. Our ability to comply with these provisions may be affected by events beyond our control and our failure to comply, or obtain a waiver in the event we cannot comply with a covenant or achieve a milestone, could result in an event of default under the DIP Credit Agreement and our other financing arrangements.

Operating under the Court’s protection for a long period of time may harm our business.

Our future results are dependent upon the successful confirmation and implementation of a plan of reorganization. A long period of operations under the Court’s protection could have a material adverse effect on our business, financial condition, results of operations and liquidity. So long as the proceedings related to the Chapter 11 Cases continue, our senior management will be required

to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on our business operations. A prolonged period of operating under the Court’s protection also may make it more difficult to retain management and other key personnel necessary to the success and growth of our business. In addition, the longer the proceedings related to the Chapter 11 Cases continue, the more likely it is that our customers and suppliers will lose confidence in our ability to reorganize our businesses successfully and seek to establish alternative commercial relationships.

Furthermore, so long as the Chapter 11 Cases continue, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the Chapter 11 Case. We cannot predict the ultimate amount of all settlement terms for the liabilities that will be subject to a plan of reorganization. Even once a plan of reorganization is approved and implemented, our operating results may be adversely affected by the possible reluctance of prospective lenders and other counterparties to do business with a company that recently emerged from Chapter 11 Cases.

The RSA is subject to significant conditions and milestones that may be difficult for us to satisfy.

There are certain material conditions we must satisfy under the RSA, including the timely satisfaction of milestones in the anticipated Chapter 11 Cases, such as confirmation of the Plan and effectiveness of such plan. Our ability to timely complete such milestones is subject to risks and uncertainties that may be beyond our control.

If the RSA is terminated, our ability to confirm and consummate a Chapter 11 plan of reorganization could be materially and adversely affected.

The RSA contains a number of termination events, upon the occurrence of which certain parties to the RSA may terminate the agreement. If the RSA is terminated, each of the parties thereto will be released from their obligations in accordance with the terms of the RSA. Such termination may result in the loss of support for the Plan by the parties to the RSA, which could adversely affect our ability to confirm and consummate the Plan. If the Plan is not consummated, there can be no assurance that any new plan of reorganization would be as favorable to holders of claims as the current Plan.

The pursuit of the Chapter 11 Cases has consumed and will continue to consume a substantial portion of the time and attention of the Company’s management, which may have an adverse effect on the Company’s business and results of operations, and the Company may face increased levels of employee attrition.

While the Chapter 11 Cases continue, management will be required to spend a significant amount of time and effort focusing on the cases. This diversion of attention may materially adversely affect the conduct of the Company’s business, and, as a result, on the Company’s financial condition and results of operations, particularly if the Chapter 11 Cases are protracted. During the pendency of the Chapter 11 Cases, the Company’s employees will face considerable distraction and uncertainty and increased levels of employee attrition may be experienced. A loss of key personnel or material erosion of employee morale could have a materially adverse effect on the Company’s ability to meet customer expectations, thereby adversely affecting the business and results of operations. The failure to retain or attract members of the management team and other key personnel could impair the Company’s ability to execute its strategy and implement operational initiatives, thereby having a material adverse effect on its financial condition and results of operations.

We may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our financial condition and results of operations.

The Court provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation. With few exceptions, all claims that arose prior to May 14, 2020 or before confirmation of the Plan (i) would be subject to compromise and/or treatment under the plan of reorganization and/or (ii) would be discharged in accordance with the United States Bankruptcy Code and the terms of the Plan. Any claims not ultimately discharged through a plan of reorganization could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post-reorganization basis.

The Plan may not become effective.

The Plan may not become effective because it is subject to the satisfaction of certain conditions precedent, some of which are beyond our control. There can be no assurance that such conditions will be satisfied or waived and, therefore, that the Plan will become effective and that we will emerge from the Chapter 11 Cases as contemplated by the Plan. If the effective date of the Plan is delayed, we may not have sufficient cash available to operate our business. In that case, we may need new or additional post-petition financing, which may increase the cost of consummating the Plan. There is no assurance of the terms on which such financing may be available or if such financing will be available. If the transactions contemplated by the Plan are not completed, it may become necessary to amend the Plan. The terms of any such amendment are uncertain and could result in material additional expense and result in material delays to the Chapter 11 Cases.

We may not be able to obtain the Court’s confirmation of the Plan or may have to modify the terms of the Plan.

Even if the Plan is approved by each class of holders of claims and interests entitled to vote (a “Voting Class”), the Court, which, as a court of equity, may exercise substantial discretion and may choose not to confirm the Plan. Section 1129 of the Bankruptcy Code requires, among other things, a showing that confirmation of the Plan will not be followed by liquidation or the need for further financial reorganization for us, and that the value of distributions to dissenting holders of claims and interests will not be less than the value such holders would receive if we, the debtors, liquidated under Chapter 7. Although we believe that the Plan will satisfy such tests, there can be no assurance that the Court will reach the same conclusion.

Confirmation of the Plan will also be subject to certain conditions. These conditions may not be met and there can be no assurance that the Restructuring Support Parties will agree to modify or waive such conditions. Further, changed circumstances may necessitate changes to the Plan. Any such modifications could result in less favorable treatment than the treatment currently anticipated to be included in the Plan based upon the agreed terms of the RSA. Such less favorable treatment could include a distribution of property (including the new common stock that would be issued to the Restructuring Support Parties upon our emergence from bankruptcy) to the class affected by the modification of a lesser value than currently anticipated to be included in the Plan or no distribution of property whatsoever under the Plan. Changes to the Plan may also delay the confirmation of the Plan and our emergence from bankruptcy, which could result in, among other things, incurred costs and expenses to the estates of the debtors.

Even if a Chapter 11 plan of reorganization is consummated, we will continue to face risks.

Even if a Chapter 11 plan of reorganization is consummated, we will continue to face a number of risks, including certain risks that are beyond our control, such as further deterioration or other changes in economic conditions, changes in our industry, potential revaluing of our assets due to Chapter 11 Cases, changes in consumer demand for, and acceptance of, our oil and gas and increasing expenses. Some of these concerns and effects typically become more acute when a case under the Bankruptcy Code continues for a protracted period without indication of how or when the case may be completed. As a result of these risks and others, there is no guaranty that the Plan or any other plan of reorganization will achieve our stated goals.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about purchases made by the Company (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the quarter ended ~~March~~June 3130, 2020, of shares of common stock, which is the sole class of equity securities registered by the Company pursuant to Section 12 of the Exchange Act:

Period	Total Number of Shares Purchased (1)		Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Program
January 2020		—		—	—	—
February 2020		5,717		0.11	—	—
March 2020		85,606		0.09	—	—
Total		91,323		0.09	—	—

PURCHASES OF EQUITY SECURITIES BY ISSUER

1) All shares purchased by the Company in the first quarter of 2020 were surrendered by employees in exchange for the payment of tax withholding upon the vesting of restricted stock awards. The acquisition of the surrendered shares was not part of a publicly announced program to repurchase shares of our common stock.

Period	Total Number of Shares Purchased (1)		Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Program
April 2020		10,765		0.03	—	—
May 2020		148,585		0.01	—	—
June 2020		9,681		0.03	—	—
Total		169,031		0.01	—	—

(1)

All shares purchased by the Company in the second quarter of 2020 were surrendered by employees in exchange for the payment of tax withholding upon the vesting of restricted stock awards. The acquisition of the surrendered shares was not part of a publicly announced program to repurchase shares of our common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None~~The commencement of the Chapter 11 Cases constituted an event of default that accelerated our obligations under our Credit Agreement, Term Loan Agreement, Second Lien Notes and Unsecured Notes. Under the Bankruptcy Code, holders of our Second Lien Notes and Unsecured Notes and the lenders under our Credit Agreement and Term Loan Agreement were stayed from taking any action against us as a result of this event of default.

For additional information concerning the Bankruptcy Petitions under Chapter 11, refer to the Introductory Note – Voluntary Reorganization under Chapter 11 and Note 6 – Debt in the notes to the unaudited condensed consolidated financial statements.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a) Exhibits

Exhibit Number		Description
2.1		Debtors’ Second Amended Joint Chapter 11 Plan of Reorganization (incorporated by reference to Exhibit A of the Order Confirming Debtors’ Second Amended Joint Chapter 11 Plan of Reorganization, filed as Exhibit 99.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 16, 2017).
3.1		Restated Articles of Reorganization of Ultra Petroleum Corp. (incorporated by reference to Exhibit 3.1 to the Form 10-Q filed by Ultra Petroleum Corp. on August 9, 2019).
3.2		Second Amended and Restated Bylaw No. 1 of Ultra Petroleum Corp. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2018).
4.1		Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on April 18, 2017).
4.2		Description of Capital Stock (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed by Ultra Petroleum Corp. on April 15, 2020).
4.3		Interim Order Approving Notification and Hearing Procedures for Certain Transfers of and Declarations of Worthlessness with Respect to Common Stock [Docket No. 67] (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on May 21, 2020).
10.1		Sixth Amendment to Credit Agreement, dated as of February 14, 2020, by and among Ultra Resources, Inc. as borrower, Bank of Montreal, as administrative agent, and each of the lenders and other parties party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on February 18, 2020).
10.2		Restructuring Support Agreement, dated as of May 14, 2020, by and among the Debtors, the Consenting RBL Lenders, the Consenting Term Lenders and the Consenting Noteholders (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on May 15, 2020).
10.3		~~Tripartite~~First Amendment to Restructuring Support Agreement, dated as of ~~May~~June 1226, 2020, bybetween ~~and~~the ~~among~~Debtors ~~Ultra Resources, UMB Bank, N.A.~~ and ~~Wilmington~~the ~~Trust,~~Consenting ~~National~~Stakeholders ~~Association~~party thereto (incorporated by reference to Exhibit 10.21 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on ~~May~~July 152, 2020).
10.4		Tripartite Agreement, dated as of May 12, 2020, by and among Ultra Resources, ~~U.S.~~UMB Bank, N.A. and Wilmington Trust, National Association (incorporated by reference to Exhibit 10.32 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on May 15, 2020).
10.5		~~Agency~~Tripartite ~~Succession~~ Agreement, dated as of May 1312, 2020, by and among ~~Barclays~~Ultra ~~Bank~~Resources, ~~PLC~~U.S. asBank ~~original~~and ~~agent,~~ Wilmington Trust, National Association ~~as successor agent, the lender parties thereto and Ultra Resources Inc.~~ (incorporated by reference to Exhibit 10.43 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on May 15, 2020).
10.6		~~Senior~~Agency ~~Secured~~Succession ~~Superpriority Debtor-in-Possession Credit~~ Agreement, dated as of May 1913, 2020, by and among ~~Ultra~~Barclays ~~Resources~~Bank PLC as original agent, ~~Inc.~~Wilmington Trust, UPNational ~~Energy~~Association ~~Corporation~~as successor agent, the ~~lenders~~lender ~~party~~parties thereto and ~~Wilmington~~Ultra ~~Trust,~~Resources ~~National~~Inc. ~~Association~~ (incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on May 2115, 2020).
10.7		Senior Secured Superpriority Debtor-in-Possession Credit Agreement, dated as of May 19, 2020, by and among Ultra ~~Petroleum~~Resources, ~~Corp~~Inc., ~~Annual~~UP ~~Incentive~~Energy ~~Plan~~Corporation, the lenders party thereto and Wilmington Trust, National Association (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on ~~July~~May 1221, ~~2018~~2020).
10.8		~~Form~~First ofAmendment ~~Restricted~~to ~~Stock~~Senior ~~Unit~~Secured Superpriority Debtor-in-Possession Credit Agreement, dated as of June 16, 2020, by and among Ultra Resources, Inc., the lenders party thereto, Wilmington Trust, National Association, as Administrative and Collateral Agent, and the other parties party thereto (incorporated by reference to Exhibit 10.41 to the Current Report on Form 108-QK filed by Ultra Petroleum Corp. on ~~May~~June 919, ~~2019~~2020).
10.9		~~Form~~Ultra ofPetroleum ~~Restricted~~Corp. ~~Stock~~Annual ~~Unit~~Incentive ~~Agreement~~Plan (incorporated by reference to Exhibit 10.51 to the Current Report on Form 108-QK filed by Ultra Petroleum Corp. on ~~May~~July 912, ~~2019~~2018).
10.10		~~Amendment~~Form ~~No.~~of 1Restricted toStock ~~Employment~~Unit Agreement ~~of Brad Johnson, dated as of March 1, 2020~~ (incorporated by reference to Exhibit 10.14 to the ~~Current Report on~~ Form 810-KQ filed by Ultra Petroleum Corp. on ~~March~~May 129, ~~2020~~2019).
10.11		Amendment No. 1 to Employment Agreement of David W. Honeyfield, dated as of March 1, 2020 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).

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10.12		Amendment No. 1 to Employment Agreement of Jerald J. Stratton, Jr., dated as of March 1, 2020 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.11		Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.5 to the Form 10-Q filed by Ultra Petroleum Corp. on May 9, 2019).
10.13		Amendment No. 1 to Employment Agreement of Kason D. Kerr, dated as of March 1, 2020 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.12		Amendment No. 1 to Employment Agreement of Brad Johnson, dated as of March 1, 2020 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.14		Amendment No. 1 to Employment Agreement of James N. Whyte, dated as of March 1, 2020 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.13		Amendment No. 1 to Employment Agreement of David W. Honeyfield, dated as of March 1, 2020 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.15		Amendment No. 1 to Employment Agreement of Mark T. Solomon, dated as of March 1, 2020 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.14		Amendment No. 1 to Employment Agreement of Jerald J. Stratton, Jr., dated as of March 1, 2020 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.15		Amendment No. 1 to Employment Agreement of Kason D. Kerr, dated as of March 1, 2020 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.16		Amendment No. 1 to Employment Agreement of James N. Whyte, dated as of March 1, 2020 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.17		Amendment No. 1 to Employment Agreement of Mark T. Solomon, dated as of March 1, 2020 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on March 12, 2020).
10.18		Purchase and Sale Agreement, dated as of June 28, 2020, between Ultra Wyoming, LLC and Pinedale Corridor, LP (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on July 2, 2020).
10.19		Backstop Purchase Agreement dated as of July 27, 2020 by and among the Debtors and the Backstop Parties (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Ultra Petroleum Corp. on July 29, 2020).
*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.
**101.INS		XBRL Instance Document.
**101.SCH		XBRL Taxonomy Extension Schema Document.
**101.CAL		XBRL Taxonomy Calculation Linkbase Document.
**101.LAB		XBRL Label Linkbase Document.
**101.PRE		XBRL Presentation Linkbase Document.
**101.DEF		XBRL Taxonomy Extension Definition.

*	Filed herewith

**	Furnished herewith

#	Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-Q pursuant to Item 15(b)

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SIGNATURES

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

	ULTRA PETROLEUM CORP.
	By:	/s/ Brad Johnson
		Name:	Brad Johnson
		Title:	President and Chief Executive Officer
Date: June 4, 2020
Date: August 7, 2020
	By:	/s/ David W. Honeyfield
		Name:	David W. Honeyfield
		Title:	Senior Vice President and Chief Financial Officer
Date: June 4, 2020
Date: August 7, 2020
	By:	/s/ Mark T. Solomon
		Name:	Mark T. Solomon
		Title:	Vice President – Controller and Chief Accounting Officer
Date: June 4, 2020
Date: August 7, 2020

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Filing Compare · ULTRA PETROLEUM CORP