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[hercules16]

It should also be noted that the UPL 2006 EPS estimate is about $1.93 (not 1.38) up from $1.35 in 2005. The ability to consistently grow production (organically rather than buying it like CHK and building up a lot of debt) is a reason that UPL commands a premium valuation.

http://www.smartmoney.com/eqsnaps/index.cfm?story=earningsforecast&symbol=UPL

I think UPL is also very conservative in booking reserves relative to say CHK and that on a EV to actual BCF reserves basis UPL may be the superior investment (although CHK looks to have a significant advantage if you compare EV to proved reserves).

That said a strategy of shorting UPL and buying an equal amount of CHK would likely pay off if natural gas prices stay > $8/mcf for the forseeable future. Even in this scenario you would likely get better results by buying CHK and not hedging IMO.