If you're a U.S. natural gas producer, the fittingly named Rockies are about as inhospitable an operating region as they come. Chesapeake Energy (NYSE: CHK) avoids the area as if it were a Mexican pig farm, noting the political and environmental hassles. Another big issue has historically been limited takeaway capacity, though Kinder Morgan (NYSE: KMP) and ConocoPhillips (NYSE: COP) are working to address that with a fat new pipeline.

Despite the geographic odds, Pinedale player Ultra Petroleum (NYSE: UPL) remains one of the premier exploration and production companies in this country. The firm's first-quarter results are further confirmation of that.

At this time last year, I said that "it would take a nat-gas nuclear meltdown to take Ultra out of the gas game." Little did I know that we'd see something pretty close to this worst-case scenario unfold over the ensuing 12 months. Before the impact of hedges, Ultra saw its natural gas price realizations drop from $7.66 per thousand cubic feet (mcf) to a touch below $4. Given the steep discounts we've observed on Rockies gas over the past few quarters -- more like years, actually -- I'm surprised the number wasn't quite a bit lower.

Ultra's hedging impact was very modest, boosting price realizations by just 13%, to $4.46/mcf. Compare that to EnCana (NYSE: ECA), whose hedges were truly something to behold. Still, if anyone's going to get by on mid-$4 gas, it's Ultra. The firm's all-in cost structure dropped below $3/mcfe this quarter, which compares very favorably to Range Resources (NYSE: RRC), a firm I just praised for its cost profile.

On the conference call, in addition to identifying an operating breakeven level of about $1/mcf, management suggested that theirs is "probably the lowest cost in the industry." I think Contango Oil & Gas (AMEX: MCF) currently edges them out on that front, but not by much.

Fools, don't let Ultra's $673 million non-cash ceiling test writedown distract you. With a 66% cash flow margin this quarter, Ultra remains a supremely low-cost company with plenty of incentives to keep creating value for shareholders, wherever natural gas may trade in the short term.