An investment in our common stock involves certain risks.  If any of the following key risks were to occur, it could have a material adverse effect on our financial position, results of operations, and cash flows.  In any such circumstance and others described below, the trading price of our securities could decline and investors could lose part or all of their investment.

We have significant indebtedness. Our level of indebtedness could adversely affect our business, results of operations, and financial condition. If we are unable to comply with the financial and non-financial covenants governing our indebtedness or obtain waivers of any defaults that occur with respect to our indebtedness, or amend, replace or refinance any or all of the agreements governing our indebtedness and/or otherwise secure additional capital, we may be unable to meet our expenses and debt obligations.

At February 28, 2019, we had the following obligations outstanding under our Revolving Credit Facility, our Term Loan Facility (as defined in Note 6), our Second Lien Notes, 2022 Notes and our 2025 Notes:

Our indebtedness affects our operations in several ways, including:

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Our ability to meet our expenses and debt service obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors. We will not be able to control many of these factors, such as economic conditions and governmental regulation. We depend on our Revolving Credit Facility for future capital and liquidity needs, because we use operating cash flows for investing activities and borrow as needed. We cannot be certain that our cash flow or liquidity will be sufficient to allow us to pay the principal and interest on our outstanding indebtedness and meet our other obligations. If we do not have enough money, we may be required to refinance all or part of our existing indebtedness, sell assets, borrow more money or raise equity. We may not be able to refinance our existing indebtedness, sell assets, borrow more m oney or raise equity on terms acceptable to us, if at all. Our ability to comply with the financial and other restrictive covenants in our indebtedness will be affected by the levels of cash flow from our operations and future events and circumstances beyo nd our control. Failure to comply with these covenants would result in an event of default under our indebtedness, and such an event of default could materially and adversely affect our business, financial condition and results of operations.

There are covenants in the agreements governing our indebtedness. In many instances, a default under one of the agreements governing our indebtedness can, if not cured or waived, result in a default under certain of our other indebtedness agreements. A default on our obligations and/or an acceleration of our indebtedness by our lenders or noteholders, as applicable, would have a material adverse impact on our business, financial condition, results of operations, cash flows, and the trading price of our securities.

Under the Fourth Amendment to the Revolving Credit Facility, Ultra Resources is required to maintain (i) an interest coverage ratio of 2.50 to 1.00; (ii) a current ratio, including the unused portion of the Revolving Credit Facility, of 1.00 to 1.00; (iii) a net leverage ratio of 4.50 to 1.00 as of December 31, 2018, 4.75 to 1.00 as of March 31, 2019 through June 30, 2019, 4.90 to 1.00 as of September 30, 2019 through June 30, 2020, 4.50 to 1.00 as of September 30, 2020, and 4.25 to 1.00 as of December 31, 2020 and each other fiscal quarter end thereafter; and (iv) after the Company has obtained investment grade rating, an asset coverage ratio of 1.50 to 1.00. At December 31, 2018, we were in compliance with all of our debt covenants under our Revolving Credit Facility. Should the independent auditor conclude that a going concern modification explanatory paragraph would be required as of an annual audit period, such an item would be deemed a covenant violation under the Revolving Credit Facility and the Term Loan Facility.  A violation of this covenant can become an event of default under our debt agreements and result in the acceleration of all of our indebtedness.

If our lenders or our noteholders accelerate the payment of amounts outstanding under our Revolving Credit Facility, the Term Loan Facility, the Second Lien Notes or the Unsecured Notes, respectively, we do not currently have sufficient liquidity to repay such indebtedness and would need additional sources of capital to do so. We could attempt to obtain additional sources of capital from asset sales, public or private issuances of debt, equity or equity-linked securities, debt for equity swaps, or any combination thereof. However, we cannot provide any assurances that we will be successful in obtaining capital from such transactions on acceptable terms, or at all, and if we were unable to obtain sufficient additional capital to repay the outstanding indebtedness and sufficient liquidity to meet our operating needs, it may be necessary for us to seek protection from creditors under chapter 11 or the Canadian Bankruptcy and Insolvency Act, or an involuntary petition for bankruptcy may be filed against us in the U.S. or in Canada.

The borrowing base under our Revolving Credit Facility may be reduced, which could limit us in the future. In addition, the liquidity under our Revolving Credit Facility may be more limited than the borrowing base availability due to the consolidated net leverage financial covenant.

The borrowing base under our Revolving Credit Facility is currently $1.3 billion, and lender commitments under our Revolving Credit Facility are $325.0 million based on the recent borrowing base redetermination.  The borrowing base is redetermined semi-annually under the terms of our Revolving Credit Facility on April 1 and October 1.  The April 1, 2019 redetermination was accelerated by the Company and has been completed as of the date of this filing. The next regularly scheduled redetermination is October 1, 2019.  In addition, either we or the lenders may request an interim redetermination twice a year or in conjunction with certain acquisitions or sales of oil and gas properties.  Our borrowing base may decrease as a result of lower commodity prices, operating difficulties, declines in reserves, lending requirements or regulations, the issuance of new indebtedness, or for any other reason.  In the event of a decrease in our borrowing based due to declines in commodity prices or otherwise, our ability to borrow under the Revolving Credit Facility may be limited and we could be required to pay indebtedness in excess of the redetermined borrowing base.  In addition, we may be unable to access the equity or debt capital markets, including the market for senior unsecured notes, to meet our obligations, including any such debt repayment obligations.

Moreover, while our current borrowing base and the amount outstanding under the Revolving Credit Facility may indicate sufficient liquidity, the amount that we may borrow under the Revolving Credit Facility is governed by compliance with the consolidated net leverage covenant as discussed above.  The calculation of this covenant may result in the Company having less effective liquidity, thereby negatively impacting the Company’s ability to operate in an unencumbered manner and may create a risk of continuing as a going concern.

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Failure to maintain the continued listing standards of NASDAQ could result in delisting of our common shares, which could negatively impact the market price and liquidity of our commo n shares and our ability to access the capital markets.

Our common shares are listed on the NASDAQ Global Select Market (“NASDAQ”) and the continued listing of our common shares on NASDAQ is subject to our ability to comply with NASDAQ’s continued listing requirements, including, among other things, the requirement to hold an annual shareholders’ meeting and the minimum closing bid price requirement of $1.00 per common share.

On January 2, 2019, we received written notice from the Listing Qualifications Department of NASDAQ notifying us that we no longer comply with NASDAQ Listing Rule 5620(a) due to the Company’s failure to hold an annual meeting of shareholders within twelve months of the end of the Company’s fiscal year ended December 31, 2017. On February 1, 2019, we submitted to NASDAQ a plan to regain compliance with the annual shareholders meeting requirement by holding a combined annual meeting of shareholders for 2018 and 2019 on May 22, 2019, and NASDAQ accepted our plan of compliance.

In addition, on January 29, 2019, we received written notice from the Listing Qualifications Department of NASDAQ notifying us that our common shares closed below the $1.00 per share minimum bid price required by NASDAQ Listing Rule 5450(a)(1) for 30 consecutive business days and that we have a period of 180 calendar days in which to regain compliance.

We are actively monitoring the bid price of our common shares and considering options to regain compliance with the minimum bid price requirement. If we are unable to regain compliance, however, any delisting from NASDAQ could result in even further reductions in our price per common share, substantially limit the liquidity of our common shares, and materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all. Delisting from the NASDAQ could also have other negative results, including the potential loss of institutional investor interest and fewer business development opportunities.

There is no assurance that we will continue to maintain compliance with NASDAQ continued listing standards. Our business has been and may continue to be affected by worldwide macroeconomic factors, which include uncertainties in the credit and capital markets as well as with respect to commodity prices. External factors that affect our share price, such as liquidity requirements of our investors, as well as our performance, could impact our market capitalization, revenue and operating results, which, in turn, affect our ability to comply with the NASDAQ’s listing standards. The NASDAQ has the ability to suspend trading in our common shares or remove our common shares from listing on the NASDAQ if, in the opinion of NASDAQ: (a) our financial condition and/or operating results appear to be unsatisfactory; (b) it appears that the extent of public distribution or the aggregate market value of our common shares has become so reduced as to make further dealings on the exchange inadvisable; (c) we have sold or otherwise disposed of our principal operating assets, or have ceased to be an operating company; (d) we have failed to comply with our listing agreements with the exchange; or (e) any other event shall occur or any condition shall exist which makes further dealings on the exchange unwarranted.

If we cannot obtain sufficient capital when needed, we will not be able to continue with our business strategy.

Our business strategy has historically included maintaining a portfolio of properties that provide long-term, profitable growth through development in areas that support sustainable, lower-risk, repeatable, high-return drilling projects. In the future, we may not be able to obtain financing in sufficient amounts or on acceptable terms when needed, which could adversely affect our operating results and prospects. If we cannot raise the capital required to implement our historical business strategy, we may be required to curtail operations, which could adversely affect our financial condition and results of operations.

Our substantial indebtedness, liquidity concerns, the credit ratings assigned to our debt by independent credit rating agencies and historical emergence from bankruptcy in 2017 could adversely affect our business and relationships.

Our substantial indebtedness, liquidity concerns, the credit ratings assigned to our debt by independent credit rating agencies and our historical emergence from chapter 11 bankruptcy proceedings in 2017 could adversely affect our business and relationships with customers, employees, and suppliers.  Due to uncertainties, many risks exist, including the following:

The occurrence of one or more of these events could have a material and adverse effect on our operations, financial conditions, and reputation.  We cannot assure you that having been subject to bankruptcy protections will not adversely affect our operations in the future.

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Transfers or issuances of o ur equity may impair our ability to utilize our income tax net operating loss carryforwards in future years.

Under federal income tax law, a corporation is generally permitted to deduct from taxable income net operating losses carried forward from prior years. We have U.S. federal net operating loss carryforwards of approximately $2.2 billion as of December 31, 2018. Our ability to utilize our net operating loss carryforwards to offset future taxable income and to reduce federal income tax liability may be substantially limited if we experience an “ownership change,” as defined in section 382 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), which could have a negative impact on our financial position and results of operations. Generally, there is an “ownership change” if one or more shareholders owning 5% or more of a corporation’s common stock have aggregate increases in their ownership of such stock of more than 50 percentage points over the prior three-year period. An “ownership change” occurred when our chapter 11 plan of reorganization became effective. A further “ownership change” is possible now that we have emerged from chapter 11. Under section 382 of the Code, absent an applicable exception, if a corporation undergoes an “ownership change,” the amount of its pre-ownership change net operating losses that may be utilized to offset future taxable income generally will be subject to an annual limitation equal to the value of its stock immediately prior to the ownership change multiplied by the long-term tax-exempt rate, plus an additional amount calculated based on certain “built in gains” in our assets that may be deemed to be realized within a 5-year period following any ownership change. The ownership change that occurred as a result of our exit from chapter 11 proceedings should not materially limit our ability to utilize our net operating loss carryforwards, but it may be affected by future ownership changes, if any. In addition, under the tax reform bill commonly known as Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law on December 22, 2017, (i) the amount of post-2017 net operating losses that we are permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the net operating loss deduction itself, and (ii) post-2017 net operating losses cannot be carried back to prior taxable years.   There can be no assurance that we will be able to utilize our federal income tax net operating loss carry-forwards to offset future taxable income.

Our operations could be adversely affected if we fail to maintain required bonds.

Federal and state laws require bonds or cash deposits to secure our obligations with respect to various parts of our operations. Our failure to maintain, or inability to acquire, bonds that are required by state and federal law would have a material adverse effect on us. That failure could result from a variety of factors including: (i) our failure to comply with rules and regulations of federal and state governmental agencies, including the BLM, (ii) the lack of availability of bonding, higher expense or unfavorable market terms of new bonds; (iii) and the exercise by third-party bond issuers of their right to refuse to renew the bonds. If we fail to maintain required bonds, our production may significantly decrease, which would significantly decrease our already constrained cash flow.

Liquidity concerns could result in a downgrade in our debt ratings which could restrict our access to, and negatively impact the terms of, current or future financings or trade credit.

Our ability to obtain financings and trade credit and the terms of any financings or trade credit is, in part, dependent on the credit ratings assigned to our debt by independent credit rating agencies. We cannot provide assurance that any of our current ratings will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances so warrant. Factors that may impact our credit ratings include debt levels, planned asset purchases or sales and near-term and long-term production growth opportunities, liquidity, asset quality, cost structure, product mix and commodity pricing levels. A ratings downgrade could adversely impact our ability to access financings or trade credit, increase our borrowing costs and potentially require us to post letters of credit for certain obligations.

We cannot control the future price of oil and natural gas and sustained periods of low prices could hurt our profitability and financial condition and could impair our ability to grow our business or to perform the obligations in our agreements, including the agreements governing our indebtedness.

Sustained periods of low commodity prices will adversely affect our operations and financial condition. Our revenues, profitability, liquidity, ability to raise capital for our business, future growth, ability to operate, develop and explore our properties, and the carrying value of our properties depend heavily on prevailing prices for oil and natural gas.

Natural gas comprised approximately 95% of our total production and 81% of our consolidated revenue for the year ended December 31, 2018 and represented 95% of our total proved reserves as of December 31, 2018. Historically, natural gas prices have been highly volatile, including in the Rocky Mountain region of the United States where the vast majority of our natural gas is produced. Prices have been affected by actions of federal, state and local governments and agencies, foreign governments, national and international economic and political conditions, levels of consumer demand, weather conditions, domestic and foreign supply of oil and natural gas, proximity and capacity of gas pipelines and other transportation facilities, the price and availability of equipment, materials and personnel to conduct operations, and the price and availability of alternative fuels. These external factors and the volatile nature of the energy markets make it difficult to estimate future prices of natural gas. Any substantial or extended decline in the price of natural gas will have a material adverse effect on our financial condition and results of operations, including reduced cash flow and borrowing capacity, and lower proved reserves. Price volatility also makes it difficult to budget for and project the return on potential acquisitions and development and exploration projects, and sustained lower gas prices have caused and may, in the future continue to cause, us or the operators of properties in which we have ownership interests to curtail projects and limit or suspend drilling, completion or even production activities.

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Crude oil comprised approximately 5% of our total prod uction and 17% of our consolidated revenue for the year ended December 31, 2018 and represented 5% of our total proved reserves as of December 31, 2018. Crude oil prices declined substantially in the second half of 2014 , with sustained lower prices continu ing throughout 2015, 2016, and 2017, and prices remaining volatile during the year ended December 31, 2018. In the future, crude oil prices may remain at current levels or fall to lower levels. If crude oil prices remain at current levels or fall to lower levels, this will adversely affect our crude oil operations and our financial condition. Most of the production from our Uinta Basin properties was crude oil.

In addition, because we are significantly leveraged, a substantial decrease in our revenue due to low commodity prices is currently impairing and may in the future continue to impair our ability to satisfy payment obligations on our indebtedness and reduce funds available for operations and future business opportunities.

A substantial or extended decline in oil and natural gas prices may continue indefinitely, and may adversely affect our business, financial condition or results of operations and our ability to meet our capital expenditure obligations, our debt repayment and service obligations, and our financial commitments.

The price we receive for our oil and natural gas heavily influences our revenue, profitability, access to capital and future rate of growth. Oil and natural gas are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the markets for oil and natural gas have been volatile and we expect this volatility to continue for the foreseeable future. For example, during the period from January 1, 2014 to December 31, 2018, NYMEX West Texas Intermediate oil prices ranged from a high of $107.31 per Bbl to a low of $27.57 per Bbl. Average daily prices for NYMEX Henry Hub gas ranged from a high of $5.30 per MMBtu to a low of $1.65 per MMBtu during the same period. Additionally, the price differential for natural gas can also vary significantly. Over this same period, average monthly prices for NwRox ranged from a high of $6.92 per Mmbtu to a low of $1.50 per Mmbtu. This near-term volatility may affect future prices in 2019 and beyond. The volatility of the energy markets makes it difficult to predict future oil and natural gas price movements with any certainty.

The prices we receive for our production and the levels of our production depend on numerous factors beyond our control. These factors include the following:

Substantially all of our production is currently sold at market-based prices. Lower oil and natural gas prices will reduce our cash flows, borrowing ability and the present value of our reserves. Lower oil and natural gas prices will reduce the amount of oil and natural gas that we can produce economically. Substantial decreases in oil and natural gas prices could render uneconomic a significant portion of our identified drilling locations, and, may cause us to make significant downward adjustments to our estimated proved reserves or to be unable to claim proved undeveloped reserves at all. If oil and natural gas prices remain at current levels or experience a substantial or extended decline from current levels, our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures will be materially and adversely affected.

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Our reserve estimates may turn out to be incorrect if the assumptions upon which these estimates are based are inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.

There are numerous uncertainties inherent in estimating quantities of proved reserves and projected future rates of production and timing of development expenditures, including many factors beyond our control. The reserve data and standardized measures set forth herein represent only estimates. Reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, estimates of different engineers often vary. In addition, drilling, testing and production data acquired subsequent to the date of an estimate may justify revising such estimates. Accordingly, reserve estimates are often different from the quantities of oil, natural gas and NGLs that are ultimately recovered. Further, the estimated future net revenues from proved reserves and the present value thereof are based upon certain assumptions, including geologic success, the timing and identification of future drilling locations, commodity prices, future production levels, costs and the ability to finance future development that may not prove correct over time. Predictions of future production levels, development schedules (particularly with regard to non-operated properties), participation of joint working interest owners on projects, commodity prices and future operating costs are subject to great uncertainty, and the meaningfulness of such estimates is highly dependent upon the accuracy of the assumptions upon which they are based.

The present value of net proved reserves included in this report should not be considered as the market value of the reserves attributable to our properties. In accordance with SEC requirements, we base the present value, discounted at 10%, of the pre-tax future net cash flows attributable to our net proved reserves on the average oil and natural gas prices during the 12-month period before the ending date of the period covered by this report determined as an un-weighted, arithmetic average of the first-day-of-the-month price for each month within such period, adjusted for quality and transportation fees. The costs to produce the reserves remain constant at the costs prevailing on the date of the estimate. Actual current and future commodity prices and costs may be materially higher or lower, and higher future costs and/or lower future commodity prices may impact whether development of our reserves in the future occurs as scheduled or at all. In addition, the 10% discount factor, which the SEC requires us to use in calculating our discounted future net revenues for reporting purposes, may not be the most appropriate discount factor based on our cost of capital from time to time and/or the risks associated with our business.

Our producing properties are located in the Green River Basin in southwest Wyoming, making us vulnerable to risks associated with operating in a single geographic area.

All of our producing properties are geographically concentrated in the Green River Basin in southwest Wyoming. At December 31, 2018, all of our total estimated proved reserves were attributable to properties located in this area. As a result of this concentration, we are disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, processing or transportation capacity constraints, market limitations, availability of equipment and personnel, water shortages or other drought-related conditions or interruption of the processing or transportation of oil, natural gas or NGLs.

Competitive industry conditions may negatively affect our ability to conduct operations.

We compete with numerous other companies in virtually all facets of our business. Our competitors in development, exploration, acquisitions and production include major integrated oil and natural gas companies as well as numerous independents, including many that have significantly greater resources. Therefore, competitors may be able to pay more for desirable leases and evaluate, bid for and purchase a greater number of properties or prospects than our financial or personnel resources permit. We also compete for the materials, equipment and services that are necessary for the exploration, development and operation of our properties. Our ability to increase reserves in the future will be dependent on our ability to select and acquire suitable prospects for future exploration and development.

Factors that affect our ability to compete in the marketplace include:

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Factors beyond our control affect our ability to effectively market production and may ultimately affect our financial results.

The ability to market oil and natural gas depends on numerous factors beyond our control. These factors include:

Because of these factors and other factors beyond our control, we may be unable to market all of the oil and natural gas that we produce or obtain favorable prices for such production.

Our business relies on certain key personnel.

Our management believes that our continued success will depend to a significant extent upon the efforts and abilities of certain of our key personnel. The loss of the services of any of these key personnel could have a material adverse effect on our business. We do not maintain “key man” life insurance on any of our officers or other employees.

Any derivative transactions we enter into may limit our gains and expose us to other risks such as taxes and royalties.

We may enter into financial derivative transactions from time to time to manage our exposure to commodity price risks. These transactions limit our potential gains if commodity prices rise above the levels established by our derivative transactions. These transactions may also expose us to other risks of financial losses, for example, if our production is less than we anticipated at the time we entered into a derivative instrument or if a counterparty to our derivative instruments fails to perform its obligations under a derivatives transaction.  We pay royalties and taxes based on physical production; therefore, if we have utilized derivative transactions on a high percentage of our forecast production, we may have royalty and tax burdens that are significantly higher than the derivative price settled for that month’s production.  

Legislation and regulations related to derivative contracts could have an adverse impact on our ability to hedge risks associated with our business.

Title VII of the Dodd–Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) establishes federal oversight and regulation of over-the-counter (“OTC”) derivatives and requires the U.S. Commodity Futures Trading Commission (the “CFTC”) and the SEC to enact further regulations affecting derivative contracts, including the derivative contracts we use to hedge our exposure to price volatility through the OTC market.

Although the CFTC and the SEC have issued final regulations in certain areas, final rules in other areas and the scope of relevant definitions and/or exemptions still remain to be finalized. In one of its rulemaking proceedings still pending under the Dodd-Frank Act, the CFTC issued on November 5, 2013, a proposed rule imposing position limits for certain futures and option contracts in various commodities (including natural gas) and for swaps that are their economic equivalents. Certain specified types of hedging transactions are exempt from these position limits, provided that such hedging transactions satisfy the CFTC’s requirements for “bona fide hedging” transactions or positions. Similarly, the CFTC has issued a proposed rule on margin requirements for swap transactions, which proposes an exemption for commercial end-users, entering into uncleared swaps in order to hedge commercial risks affecting their business, from any requirement to post margin to secure such swap transactions. In addition, the CFTC has issued a final rule authorizing an exception for commercial end-users using swaps to hedge their commercial risks from the otherwise applicable mandatory obligation under the Dodd-Frank Act to clear all swap transactions through a registered derivatives clearing organization and to trade all such swaps on a registered exchange. The Dodd-Frank Act also imposes recordkeeping and reporting obligations on counterparties to swap transactions and other regulatory compliance obligations. All of the above regulations could increase the costs to us of entering into financial derivative transactions to hedge or mitigate our exposure to commodity price volatility and other commercial risks affecting our business.

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While it is not possible at this time to predict when the CFTC will issue final rules applicable to position limits or margin requirements, depending on the Company’s ability to satisfy the C FTC’s requirements for the various exemptions available for a commercial end-user using swaps to hedge or mitigate its commercial risks, these rules and regulations may require us to comply with position limits, margin requirements and with certain clearin g and trade-execution requirements in connection with our financial derivative activities. The Dodd-Frank Act may require our current counterparties to post additional capital as a result of entering into uncleared financial derivatives with us, which coul d increase the cost to us of entering into such derivatives. The Dodd-Frank Act may also require our current counterparties to financial derivative transactions to spin off some of their derivatives activities to separate entities, which may not be as cred itworthy as the current counterparties, and may cause some entities to cease their current business as hedge providers. These changes could reduce the liquidity of the financial derivatives markets thereby reducing the ability of commercial end-users to ha ve access to financial derivatives to hedge or mitigate their exposure to commodity price volatility. The Dodd-Frank Act and any new regulations could significantly increase the cost of derivative contracts (including through requirements to post collatera l which could adversely affect our available capital for other commercial operations purposes), materially alter the terms of future swaps relative to the terms of our existing bilaterally negotiated financial derivative contracts, and reduce the availabil ity of derivatives to protect against commercial risks we encounter.

Compliance with environmental and occupational safety and health laws and other government regulations could be costly and could negatively impact our production.

Our operations are subject to numerous and complex laws and regulations relating to environmental and occupational protection. These laws and regulations, which are continuously being reviewed for amendment and/or expansion, may:

Under these laws and regulations or under the common law, we could be liable for personal injury and clean-up costs and other environmental, natural resource and property damages, as well as administrative, civil and criminal penalties or injunctions. Failure to comply with these laws and regulations could also result in the occurrence of delays or restrictions in permitting or performance of projects, or the issuance of orders and injunctions limiting or preventing operations relating to our properties in some areas. Under certain environmental laws and regulations, an owner or operator of our properties could be subject to strict, joint and several strict liability for the investigation, removal or remediation of previously released materials or property contamination, regardless of whether the owner or operator was responsible for the release or contamination or whether the operations were in compliance with all applicable laws at the time the release or contamination occurred. Private parties, including the owners of properties upon which wells are drilled or facilities where petroleum hydrocarbons or wastes are taken for reclamation or disposal may also have the right to pursue legal actions to enforce compliance, to seek damages for contamination or for personal injury or property damage. We maintain limited insurance coverage for sudden and accidental environmental damages, but do not maintain insurance coverage for the full potential liability that could be caused by accidental environmental damages. Accordingly, we may be subject to liability in excess of our insurance coverage or may be required to cease production from properties in the event of material environmental damages.

We could also be affected by more stringent laws and regulations adopted in the future, including any related to climate change, engine and other equipment emissions, greenhouse gases and hydraulic fracturing. Changes in environmental laws and regulations occur frequently, and any changes that result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management, or completion activities or waste handling, storage, transport, remediation or disposal, emission or discharge requirements could require significant expenditures by Ultra or other operators of the properties to attain and maintain compliance and may otherwise have a material adverse effect on the results of operations, competitive position or financial condition of Ultra or such other operators. Increased scrutiny of the oil and natural gas industry may occur as a result of the EPA’s FY 2017-2019 National Enforcement Initiatives, through which the EPA will purportedly address incidences of noncompliance from natural gas extraction and production activities that may cause or contribute to significant harm to public health and/or the environment. In addition, government disruptions, such as an extended federal government shutdown resulting from the failure to pass budget appropriations, adopt continuing funding resolutions or raise the debt ceiling, could delay or halt the granting and renewal of such permits, approvals, and certificates required to conduct our operations.

A significant percentage of our operations are conducted on federal and state lands. These operations are subject to a wide variety of regulations as well as other permits and authorizations which must be obtained from and issued by state and federal agencies. To conduct these operations, we may be required to file applications for permits, seek agency authorizations and comply with various other statutory and regulatory requirements. Complying with any of these requirements may adversely affect our ability to complete our drilling programs at the costs and in the time periods anticipated.

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Climate change legislation or regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the oil and gas we produce.

More stringent laws and regulations relating to climate change and GHGs may be adopted and could cause us to incur material expenses to comply with such laws and regulations. In the absence of comprehensive federal legislation on GHG emission control, the EPA requires the permitting of GHG emissions for certain sources that require permits due to emissions of other pollutants. The EPA also requires the reporting of GHG emissions from specified large GHG emission sources including onshore and offshore oil and natural gas production facilities and onshore oil and natural gas processing, transmission, storage and distribution facilities, which may include facilities we operate. Reporting of GHG emissions from such facilities is required on an annual basis. We will continue to incur costs associated with this reporting obligation.

In May 2016, the EPA finalized rules to reduce methane emissions and VOC from new, modified or reconstructed sources in the oil and natural gas sector; however, in September 2018, under a new administration, the EPA proposed amendments that would relax requirements of the rules. Similarly, in September 2018, the BLM issued a rule that relaxes or rescinds certain requirements of regulations it previously enacted to reduce methane emissions from venting, flaring, and leaks during oil and gas operations on public lands; California and New Mexico have challenged the new rule in ongoing litigation.  In addition, in April 2018, a coalition of states filed a lawsuit in federal district court aiming to force the EPA to establish guidelines for limiting methane emissions from existing sources in the oil and natural gas sector; that lawsuit is pending. Several states are pursuing similar measures to regulate emissions of methane from new and existing sources within the oil and natural gas source category.  

In addition, the United States Congress has considered legislation to reduce emissions of GHGs and many states and regions have already taken legal measures to reduce or measure GHG emission levels, often involving the planned development of GHG emission inventories and/or regional cap and trade programs. Most of these cap and trade programs require major sources of emissions or major producers of fuels to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to reduce overall GHG emissions. The cost of these allowances could escalate significantly over time. On an international level, almost 200 nations agreed in December 2015 to an international climate change agreement in Paris, France that calls for countries to set their own GHG emissions targets and be transparent about the measures each country will use to achieve its GHG emissions targets. Although the present administration has announced its intention to withdraw from the Paris accord, several states and local governments remain committed to its principles in their effectuation of policy and regulations.  It is not possible at this time to predict if, how or when the United States or states might impose restrictions on GHGs as a result of the international climate change agreement. The adoption and implementation of any legislation or regulatory programs imposing GHG reporting obligations on, or limiting emissions of GHGs from, our equipment and operations could require us to incur costs to reduce emissions of GHGs associated with our operations or could adversely affect demand for the oil and natural gas that we produce.  Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for the oil and natural gas we produce. In addition, parties concerned about the potential effects of climate change have directed their attention at sources of funding for energy companies, which has resulted in certain financial institutions, funds and other sources of capital, restricting or eliminating their investment in oil and natural gas activities.

Potential physical effects of climate change could adversely affect our operations and cause us to incur significant costs in preparing for or responding to those effects.

In an interpretative guidance on climate change disclosures, the SEC indicates that climate change could have an effect on the severity of weather (including hurricanes and floods), sea levels, the arability of farmland, and water availability and quality. If such effects were to occur, our exploration and production operations, including the hydraulic fracturing of our wells, have the potential to be adversely affected. Potential adverse effects could include disruption of our production activities, including, for example, damages to our facilities from powerful winds or floods, or increases in our costs of operation or reductions in the efficiency of our operations, as well as potentially increased costs for insurance coverages in the aftermath of such effects. Significant physical effects of climate change could also have an indirect effect on our financing and operations by disrupting the transportation or process related services provided by midstream companies, service companies or suppliers with whom we have a business relationship. We may not be able to recover through insurance some or any of the damages, losses or costs that may result from potential physical effects of climate change.

Federal and state legislative and regulatory initiatives relating to hydraulic fracturing, including with respect to water use and waste disposal, could result in increased costs and additional operating restrictions or delays.

Hydraulic fracturing is used to stimulate production of hydrocarbons, particularly natural gas, from tight formations. The process involves the injection of water, sand and chemicals under pressure into formations to fracture the surrounding rock and stimulate production. The process is typically regulated by state oil and gas commissions; however, the EPA has taken certain actions with respect to regulating hydraulic fracturing. For example, the EPA published permitting guidance in February 2014 addressing the use of diesel fuel in fracturing operations; issued CAA final regulations in 2012 and additional CAA regulations in May 2016 governing performance standards for the oil and natural gas industry, for which the EPA in September 2018 has proposed amendments that would relax requirements of the regulations; issued in June 2016 final effluent limitations guidelines under the CWA that waste water from shale natural gas extraction operations must meet before discharging to a publicly-owned treatment plant; and issued in 2014 a prepublication of its Advance Notice of Proposed Rulemaking regarding Toxic Substances Control Act reporting of the chemical substances and mixtures used in hydraulic fracturing. Also, the BLM published a final rule in March 2015 that established new or more stringent standards for performing hydraulic fracturing on federal and Indian lands. However,

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following years of litigation, the BLM rescinded the rule in December 2017; a lawsuit challenging the rule rescission is pending . The BLM also issued rules in November 2016 which seek to limit methane emissions from ne w and existing oil and gas operations on federal lands, although the present administration is proposing to delay the implementation dates applicable to the requirements under these rules.    The BLM also issued rules in November 2016 to limit methane emiss ions from new and existing oil and gas operations on federal lands, but subsequently relaxed and rescinded certain requirements of the rules in September 2018; a lawsuit challenging the September 2018 rule revision is pending.

From time to time, the U.S. Congress has considered adopting legislation intended to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process. In addition, some states have adopted, and other states are considering adopting, regulations that could restrict hydraulic fracturing in certain circumstances. Wyoming has adopted regulations requiring producers to provide detailed information about wells they hydraulically fracture in that state. Some states have adopted or are considering adopting regulations requiring disclosure of chemicals in fluids used in hydraulic fracturing or other restrictions on drilling and completion operations, including requirements regarding casing and cementing of wells; testing of nearby water wells; restrictions on access to, and usage of, water; and restrictions on the type of chemical additives that may be used in hydraulic fracturing operations. Any other new laws or regulations that significantly restrict hydraulic fracturing could make it more difficult or costly for us to perform hydraulic fracturing activities and thereby affect our determination of whether a well is commercially viable. In addition, if hydraulic fracturing is regulated at the federal level, our fracturing activities could become subject to additional permit requirements or operational restrictions and also to associated permitting delays and potential increases in costs. We have conducted hydraulic fracturing operations on most of our existing wells, and we anticipate conducting hydraulic fracturing operations on substantially all of our future wells. As a result, restrictions on hydraulic fracturing could reduce the amount of oil and natural gas that we are ultimately able to produce in commercial quantities and adversely affect our operations and financial condition.

In addition, hydraulic fracturing operations require the use of a significant amount of water.  The inability to locate sufficient amounts of water, or dispose of or recycle water used in drilling and production operations, could adversely impact our operations.  Moreover, new environmental initiatives and regulations could include restrictions on the ability to conduct certain operations such as hydraulic fracturing or disposal of waste, including, but not limited to, produced water, drilling fluids and other wastes associated with the development or production of natural gas.

Finally, in some instances, the operation of underground injection wells for the disposal of waste has been alleged to cause earthquakes.  In Oklahoma, for example, such issues have led to orders prohibiting continued injection or the suspension of drilling in certain wells identified as possible sources of seismic activity.  Such concerns also have resulted in stricter regulatory requirements in some jurisdictions relating to the location and operation of underground injection wells.  Although our operations are not located in those jurisdictions, any future orders or regulations addressing concerns about seismic activity from well injection in jurisdictions where we operate could affect our operations.

Changes in tax laws and regulations, including interpretations thereof, or in our operations may impact our effective tax rate and may adversely affect our business, financial condition and operating results.

Tax interpretations, regulations, and legislation in the various jurisdictions in which we and our affiliates operate are subject to measurement uncertainty and the interpretations can impact net income, income tax expense or recovery, and deferred income tax assets or liabilities.  In addition, tax rules and regulations, including those relating to foreign jurisdictions, are subject to interpretation and require judgment by us that may be challenged by the taxation authorities upon audit.  In past years, legislation has been proposed that would, if enacted into law, make significant changes to U.S. tax laws, including certain key U.S. federal income tax provisions currently available to oil and gas companies. Such legislative changes have included, but not been limited to, (i) the repeal of the percentage depletion allowance for natural gas and oil properties, (ii) the elimination of current deductions for intangible drilling and development costs, and (iii) an extension of the amortization period for certain geological and geophysical expenditures. Although these provisions were largely unchanged in the Tax Act, Congress could consider, and could include, some or all of these proposals as part of future tax reform legislation. Moreover, other more general features of any additional tax reform legislation, including changes to cost recovery rules, may be developed that also would change the taxation of oil and gas companies. It is unclear whether these or similar changes will be enacted in future legislation and, if enacted, how soon any such changes could take effect. Changes in tax laws in any of the multiple jurisdictions in which we operate could result in an unfavorable change in our effective tax rate, which could adversely affect our business, financial condition, and operating results.

The effects of the Tax Act on our business could have an adverse effect on our net income.

On December 22, 2017, the Tax Act was enacted and made significant changes to the Code.  Such changes include a reduction in the corporate tax rates and limitation on certain deductions and credits, among other changes.  In addition, adverse changes in the underlying profitability and financial outlook of our operations and changes in tax law could lead to changes in our valuation allowance against deferred tax assets on our balance sheets, which could materially affect our results of operations.  While we believe that the Tax Act will not impact the ability of our deferred tax assets, as re-measured, including our significant U.S. federal net operating loss carryover, to reduce the amount or cash income taxes payable in the future, we continue to monitor clarifications and new regulations related to the Tax Act that could impact the Company.

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Cyber-attacks targeting systems and infrastructure used by the oil and gas industry may adversely impact our operations.

Our business has become increasingly dependent on digital technologies, including technologies operated by or under the control of third parties, to conduct certain exploration, development, production and financial activities. We depend on digital technology to estimate quantities of oil and gas reserves, process and record financial and operating data, analyze seismic and drilling information, and communicate with our employees and third-party partners. Unauthorized access to (or the loss of Company access to) our seismic data, reserves information or other proprietary information could lead to data corruption, communication interruption, or other operational disruptions in our exploration or production operations. Also, computers control nearly all of the oil and gas distribution systems in the United States and abroad, which are necessary to transport our production to market. A cyber-attack directed at oil and gas distribution systems could damage critical distribution and storage assets or the environment, delay or prevent delivery of production to markets and make it difficult or impossible to accurately account for production and settle transactions.

While our operations and financial condition have not been materially and adversely affected by cyber-attacks, there is no assurance that we will not suffer such attacks and resulting losses in the future. Further, as cyber-attacks continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber-attacks.

Our business and the trading prices of our securities could be negatively impacted by the actions of so-called “activist” stockholders.

If we become the subject of activity by activist shareholders, this could disrupt our business, distract our management and Board of Directors, and negatively impact our business and the trading prices of our securities, including our common stock. Responding to shareholder activism can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees from our strategic initiatives. Furthermore, activist campaigns can create perceived uncertainties as to our future direction, strategy, or leadership and may result in the loss of potential business opportunities, harm our ability to attract new employees, investors, customers, and joint venture partners, and cause our stock price to experience periods of volatility.

If a sustained financial or economic downturn occurs domestically or internationally, capital market conditions and commodity prices may deteriorate, which could materially and adversely affect our liquidity, results of operations and ability to execute our business.

Global and domestic economic conditions are difficult for us to forecast and impossible for us to control.  Similarly, conditions in global and domestic capital markets, including debt and equity markets, are difficult for us to forecast and impossible for us to control. Adverse changes, even material adverse changes, in global and domestic economic conditions and in domestic and international capital markets may occur without warning. Although there are steps we can take to anticipate and mitigate such changes, we may fail to do so. If we fail to successfully anticipate or mitigate such matters, adverse changes in global or domestic economic conditions or capital markets, especially materially adverse changes, could increase our costs, limit our financial flexibility, and materially and adversely affect our business, results of operations, and liquidity.  

Unless we are able to replace reserves that we have produced, our cash flows and production will decrease over time.

Our future success depends on our ability to find, acquire, develop and produce additional oil and gas reserves that are economically recoverable. Without successful exploration, development or acquisition activities, our reserves and production will decline. We can give no assurance that we will be able to find, develop or acquire additional reserves at acceptable costs.

We may not be able to replace our reserves or generate cash flows if we are unable to raise capital. We will be required to make substantial capital expenditures to develop our existing reserves and to discover new oil and gas reserves.

Our ability to continue exploration and development of our properties and to replace reserves depends upon our ability to comply with our debt covenants, renegotiate our debt agreements, raise significant additional financing, or to seek and obtain other arrangements with industry participants in lieu of raising additional financing. Any arrangements that may be entered into could be expensive to us if such arrangements can be made at all. There can be no assurance that we will be able to raise additional capital in light of factors such as our financial condition, the market demand for our securities, the general condition of financial markets for independent oil and gas companies (including the markets for debt), oil and natural gas prices and general market conditions. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for a discussion of our capital budget. Continued periods of depressed commodity prices or further commodity price decreases could have a material adverse effect on our ability to fund capital expenditures. Without the ability to fund capital expenditures, we would be unable to replace reserves and production. There can also be no assurance that we will be able to obtain other satisfactory arrangements to allow further exploration and development of our properties if we are unable to raise additional capital.

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We expect to use our cash from op erations, cash from draws on the Revolving Credit Facility and cash on hand to fund our capital budget , our operating costs and our interest service obligations during 2019.  The loan commitment and the aggregate amount of money that we can borrow under th e Revolving Credit Facility and from other sources is revised from time to time based on certain restrictive covenants.  A change in our ability to meet the restrictive covenants may limit our ability to borrow.  If this occurred, we may have to sell asset s or seek substitute financing.  We can make no assurances that we would be successful in selling assets or arranging substitute financing. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidi ty and Capital Resources” for information about our liquidity, available cash on hand, and the description of the current debt agreements.

Our operations may be interrupted by severe weather or drilling restrictions.

Our operations are conducted exclusively in the Rocky Mountain region of the United States. The weather in this area can be extreme and can cause interruption in our exploration and production operations. Severe weather can result in damage to our facilities entailing longer operational interruptions and significant capital investment. Likewise, our operations are subject to disruption from winter storms and severe cold, which can limit operations involving fluids and impair access to our facilities.

We are exposed to operating hazards and uninsured risks that could adversely impact our results of operations and cash flow.

The oil and natural gas business involves a variety of operating risks, including blowouts, fire, explosion, pipe failure, casing collapse, abnormally pressured formations, and environmental hazards such as oil spills, natural gas leaks, discharges of toxic gases, underground migration and surface spills or mishandling of fracture fluids, including chemical additives. The occurrence of any of these events with respect to any property we own or operate (in whole or in part) could have a material adverse impact on us. We and the operators of our properties maintain insurance in accordance with customary industry practices and in amounts that management believes to be reasonable. However, insurance coverage is not always economically feasible and is not obtained to cover all types of operational risks. The occurrence of a significant event that is not fully insured could have a material adverse effect on our financial condition.

There are risks associated with our drilling activity that could impact our results of operations.

Our oil and natural gas operations are subject to all of the risks and hazards typically associated with drilling, completion, production and transportation of, oil and natural gas. These risks include the necessity of spending large amounts of money for identification and acquisition of properties and for drilling and completion of wells. In the drilling and completing of wells, failures and losses may occur before any deposits of oil or natural gas are found and produced. The presence of unanticipated pressure or irregularities in formations, blow-outs or accidents may cause such activity to be unsuccessful, resulting in a loss of our investment in such activity and possible liabilities. If oil or natural gas is encountered, there can be no assurance that it can be produced in quantities sufficient to justify the cost of continuing such operations or that it can be marketed satisfactorily.

Our decision to drill a prospect is subject to a number of factors which may alter our drilling schedule or our plans to drill at all.

A prospect is an area in which our geoscientists have identified what they believe, based on available seismic and geological information, to be indications of hydrocarbons. Our prospects are in various stages of review. Whether or not we ultimately drill our prospects depends on many factors, including but not limited to: the availability and cost of capital; receipt of additional seismic data or reprocessing of existing data; material changes in current of future expected oil or natural gas prices; the costs and availability of drilling and completion equipment; the success or failure of wells drilled in similar formations or which would use the same production facilities and equipment; changes in the estimates of costs to drill or complete wells; decisions of our joint working interest owners; and regulatory, permitting and other governmental requirements. It is possible these factors and others may cause us to alter our drilling schedule or determine that a prospect should not be pursued at all.

We have limited control over activities conducted on properties we do not operate.

We own interests in properties that are operated by third parties. The success, timing and costs of drilling, completion, and other development activities on our non-operated properties depend on a number of factors that are beyond our control. Because we have only a limited ability to influence and control the operations of our non-operated properties, we can give no assurances that we will realize our targeted returns with respect to those properties.

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Our business depends on gathering and transportation facilities owned by others. Any limitation in the availability of those facilities would interfere with our ability to market the oil and natural gas that we produce.

The marketability of our oil and natural gas production will depend in part on the availability, proximity and capacity of gathering and pipeline systems owned by third parties. The amount of oil and natural gas that can be produced and sold is subject to curtailment in certain circumstances, such as pipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage to the gathering or transportation system, or lack of contracted capacity on such systems. The curtailments arising from these and similar circumstances may last from a few days to several months. In many cases, we are provided only with limited, if any, notice as to when these circumstances will arise and their duration. Any significant curtailment in gathering system or pipeline capacity, or significant delay in the construction of necessary gathering and transportation facilities, could adversely affect our business, results of operations, financial condition and prospects.

We may fail to fully identify problems with any properties we acquire.

We acquired a portion of our acreage position through property acquisitions and acreage trades, and we may acquire additional acreage in these or other regions in the future. Although we conduct a review of properties we acquire which we believe is consistent with industry practices, we can give no assurance that we have identified or will identify all existing or potential problems associated with such properties or that we will be able to mitigate any problems we do identify.

Our acquisitions may perform worse than we expected or prove to be worth less than what we paid because of uncertain factors and matters beyond our control. In addition, our acquisitions could expose us to potentially significant liabilities.

When we make acquisitions of oil and gas properties, we make assumptions about many uncertain factors, including estimates of recoverable reserves, expected timing of recovering acquired reserves, future commodity prices, expected development and operating costs, and other matters, many of which are beyond our control. Assumptions about uncertain factors may be wrong, and the properties we acquire may perform worse than we expect, materially and adversely affecting our operations and financial condition.

Improvements in or new discoveries of alternative energy technologies could have a material adverse effect on our financial condition and results of operations.

Since our business depends on the level of activity in the oil and natural gas industry, any improvement in or new discoveries of alternative energy technologies that increase the use of alternative forms of energy and reduce the demand for oil and natural gas could have a material adverse effect on our business, financial condition, and operations.

Any future implementation of price controls on oil and natural gas would affect our operations.

The United States Congress may in the future impose some form of price controls on either oil, natural gas, or both.  Any future limits on the price of oil or natural gas could negatively affect the demand for our services and consequently, have a material adverse effect on our business, financial condition, and results of operations.

Damage to our reputation could damage our business.

Our reputation is a critical factor in our relationships with employees, investors, customers, suppliers and joint venture partners. If we fail to address, or appear to fail to address, issues that give rise to reputational risk, including those described throughout this “Risk Factors” section, we could significantly harm our reputation. Our reputation may also be damaged by how we respond to corporate crises. Corporate crises can arise from catastrophic events as well as from incidents involving unethical behavior or misconduct; allegations of legal noncompliance; internal control failures; corporate governance issues; data breaches; workplace safety incidents; environmental incidents; media statements; the conduct of our suppliers or representatives; and other issues or incidents that, whether actual or perceived, result in adverse publicity. If we fail to respond quickly and effectively to address such crises, the ensuing negative public reaction could significantly harm our reputation and could lead to increases in litigation claims and asserted damages or subject us to regulatory actions or restrictions.

Damage to our reputation could negatively affect the demand for our services and consequently, have a material adverse effect on our business, financial condition, and results of operations. It could also reduce investor confidence in us, adversely affecting our stock price. Moreover, repairing our reputation may be difficult, time-consuming and expensive.

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 Exchange Act, and the Private Securities Litigation Reform Act of 1995. Except for statements of historical facts, all statements included in this document, including 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.

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Forward-looking statements include statements regarding:

Some of the risks which could affect our future results and could cause results to differ materially from those expressed in our forward-looking statements include:

The information contained in this report, including the information set forth under the heading “Risk Factors,” identifies additional factors that could affect our operating results and performance. We urge you to carefully consider these factors and the other cautionary statements in this report. Our forward-looking statements speak only as of the date made, and we have no obligation to update these forward-looking statements.

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