Ultra Petroleum Corp (OTCMKTS:UPLMQ) Squeezes The Shorts

Ultra Petroleum Corp (OTCMKTS:UPLMQ) has been the biggest winner for us at Insider Financial this year. Shares are now up 3887% off the 52 week lows. For investors wondering why, there are three main reasons why UPLMQ is higher. For those asking if this epic run can continue, well we think UPLMQ has a perfect storm brewing that can keep this rally going.First up, a little background on the company. Ultra Petroleum Corp is an independent oil and gas company that engages in the acquisition, exploration, development, operation, and production of oil and natural gas properties. The company’s principal business activities are developing its natural gas reserves in the Green River Basin of southwest Wyoming, —the Pinedale and Jonah fields; its oil reserves in the Uinta Basin in northeast Utah; and its natural gas reserves in the north-central Pennsylvania area of the Appalachian Basin.As of December 31, 2015, it owned interests in approximately 104,000 gross acres in Wyoming; and approximately 150,000 gross acres in Pennsylvania. The company also owns approximately 9,000 net acres in the Uinta Basin in Utah. Ultra Petroleum Corp. was founded in 1979 and is headquartered in Houston, Texas. On April 29, 2016, Ultra Petroleum Corp., along with its affiliates, filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas.As we said above, there are three primary reasons why UPLMQ is running. First is the fact that there are no secured creditors in the Ultra Petroleum bankruptcy. Normally, there’s a group of creditors with debt backed by collateral. In the Ultra Petroleum, no one is first. Ultra Petroleum filed for Chapter 11 in April listing $3.76 billion in funded debt, none of it secured by the driller’s assets. Because of no secured creditors, the Judge allowed for an equity committee to represent common shareholders. The Ad Hoc Equity Committee is being represented by Attorney Edward Weisfelner from Brown Rudnick LLP in New York. The committee members own over 30.4% of the outstanding shares. David Tepper protege Eric Cole’s Warlander Asset Management is the largest holder with 17,000,000 common shares.Second, oil and natural gas prices have greatly improved. In the second quarter, Ultra Petroleum’s average realized natural gas price was $1.76 per thousand cubic feet (Mcf) and the company’s average realized oil and condensate price was $40.54 per barrel (Bbl). Now prices are much higher and we believe they will continue trending higher. For natural gas, exports and the coming winter months will eat into supply. For oil, U.S. inventories have dropped in six out of the last seven weeks. There's also expectations that OPEC will cut production at its meeting next month creating a bullish view in the oil patch.The third reason UPLMQ has been running is an epic short squeeze. Last month, there were 36 million shares shorted. Now that number has come to 30 million, but the shorts have been squeezed and had to buyback 6 million shares. Just over 20% of the float has been sold short. If UPLMQ keeps rising, the shorts will be forced to keep covering and allow UPLMQ to keep running. The company is due to report earnings on October 27 and we believe they'll come in better than expectations. If this is the case, this will be another catalyst to push prices higher further squeezing the shorts.Currently trading with a market cap of $978 million, Ultra’s reserves totaled 14.3 trillion cubic feet equivalent and present value discounted at 10% totals between $7.2 billion and $8.7 billion. Ultra’s total debt stood at about $3.9 billion as of March 31, according to its quarterly filing. With oil and natural gas prices rising, it makes it all the more likely that common shareholders will be rewarded at the end of the Bankruptcy process. We will be covering UPLMQ's third quarter earnings report next week and updating our subscribers. For the latest updates on UPLMQ, sign up below!Disclosure: We are LONG shares of UPLMQ. We have not been compensated for this article.