11. SUBSEQUENT EVENTS:

The Company has evaluated the period subsequent to September 30, 2018 for events that did not exist at the balance sheet date but arose after that date and determined that no subsequent events arose that should be disclosed in order to keep the financial statements from being misleading, except as set forth below:

•

On October 16, 2018, the Company reached a settlement agreement with SPMT. Under the terms of the agreement, the Company will pay SPMT a total of $2.0 million. Refer to Note 9 for additional details.

•

On October 17, 2018, the Company entered into an agreement (the “Exchange Agreement”) with holders (the “Supporting Noteholders”) of (i) approximately $556.4 million aggregate principal amount, or 79.5%, of the 2022 Notes and (ii) approximately $267.1 million aggregate principal amount, or 53.4%, of the 2025 Notes of Ultra Resources, pursuant to which the Supporting Noteholders have agreed to exchange all of the Unsecured Notes held by each such Supporting Noteholder for (a) new 9.00% Cash / 2.00% PIK Senior Secured Second Lien Notes due July 2024 of Ultra Resources (the “New Notes”) and (b) new warrants of the Company entitling each holder thereof to purchase one common share of the Company at a price of $0.01 per share (the “Warrants”).

For each $1,000 aggregate principal amount of 2022 Notes validly exchanged pursuant to the Exchange Agreement, the Supporting Noteholders will receive (i) $720 aggregate principal amount of New Notes issued by Ultra Resources and (ii) 14.0 Warrants issued by the Company; and, for each $1,000 aggregate principal amount of 2025 Notes validly exchanged pursuant to the Exchange Agreement, the Supporting Noteholders will receive (i) $660 aggregate principal amount of New Notes issued by Ultra Resources and (ii) 14.0 Warrants issued by the Company.

Each Warrant will be exercisable at the option of the holders thereof for one common share of the Company, at any time following the date on which the volume-weighted average price of the common shares is at least $2.50 for 30 consecutive trading days. In the aggregate, if all Warrants are exercised, total shareholder dilution will be approximately 6%.

The obligations of the Supporting Noteholders under the Exchange Agreement, including their obligation to exchange their 2022 Notes and 2025 Notes pursuant to the exchange transaction, are subject to the conditions set forth in the Exchange Agreement, including: (a) the Company receiving a consent of the requisite lenders under the Credit Agreement to the consummation of the transactions contemplated by the Exchange Agreement; (b) the Company receiving a consent of the requisite lenders under the Term Loan Agreement to the consummation of the transactions contemplated by the Exchange Agreement; (c) entry into a customary intercreditor agreement between the agent for the Credit Agreement, the agent for the Term Loan Agreement and trustee collateral agent for the New Notes; and (d) the execution and delivery of an indenture pursuant to which the New Notes will be governed and other definitive documentation. Accordingly, there can be no assurance if or when the Company will consummate the exchange transaction and the other transactions contemplated by the Exchange Agreement.

The Exchange Agreement may be terminated by the Company, on the one hand, or the Supporting Noteholders owning at least a majority in aggregate principal amount of each series of the 2022 Notes and the 2025 Notes, on the other hand, on behalf of the Supporting Noteholders, upon written notice of termination to the other parties, if the closing of the exchange transaction has not occurred on or before November 15, 2018 or by any single Supporting Noteholder, solely with respect to itself, if the closing of the exchange transaction has not occurred on or before December 15, 2018.

•

Subsequent to September 30, 2018, the Company entered into settlement agreements (collectively, the “Settlement Agreements”) with holders of certain claims related to Ultra Resources’ prepetition indebtedness (the “Claimants”) pursuant to which the parties agreed to settle the pending disputes between the Claimants and the Company. Under the terms of the Settlement Agreements, the Claimants collectively agreed to pay approximately $13.2 million to the Company. The Company will continue to pursue its appeal against all non-settled parties. See Note 9 for additional information.

•

In November 2018, the Company announced the appointment of David Honeyfield as Chief Financial Officer, and Andrew Kidd as Senior Vice President and General Counsel. Mr. Honeyfield and Mr. Kidd succeed Garland Shaw and Garrett Smith respectively, who both did not relocate from Houston following the move of the Company’s headquarters to Englewood, Colorado.