Ultra Petroleum Corp., Wyoming's largest natural gas producer in 2019, agreed to additional one-time bonuses to six executives totaling $1,561,250.
An SEC filing on March 12 shows the Board of Directors approved amendments to its employee agreement. The incentives to keep executives around will be doled out in two parts: one-third on March 1, 2021 and the remaining two-thirds on September 21, 2021. Executives will receive the remainder of the bonus if terminated or if they resign with good reason.
It comes as Ultra's share price drops to 89 percent of its value last March 20 and as it works to reduce its long-term debt. To that end, the company filed an 8-K on March 5 saying it's engaged in negotiations with third-party holders of its debt.
Executive bonuses aren't new in the energy world as companies face challenges. In 2016, a bankruptcy judge authorized $12 million in bonuses for Alpha Natural Resources executives. In 2018, the bankrupt Westmoreland Coal Company offered bonuses. The same year, Cloud Peak Energy offered bonuses; the company went bankrupt several months later.
Currently, Ultra has no new drilling underway. Last September, the company suspended new drilling in the Pinedale field in southwestern Wyoming due to multi-year low prices. At the time, Ultra said its producing reserve and low base decline with generate "substantial free cash flow for the foreseeable future."
Debtwire reported the third-party note-holders engaged in negotiations earlier this month are now working with law firm Akin Gump regarding potential liability management transactions.
Clark Williams-Derry, energy finance analyst for the Institute of Energy Economics and Financial Analysis, explains in plain English: investors may be looking to turn their unsecured funds into secured funds, at a lower value, to ensure some return in a bankruptcy situation.
"It seems as if Ultra's investors see bankruptcy risks skyrocketing, and they're starting to position themselves accordingly," he said.
Ultra did not respond to comment on the bonuses, though a Wyoming representative did respond to a question regarding COVID-19 concerns. On March 16, Ultra closed its physical offices in Pinedale and Denver, issuing a work-from-home (or field) mandate to all employees.
Have a question about this story? Contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.
