The correlated band theory picture (LSDA+U) has been applied to UGe2, in which superconductivity has been found to coexist with robust ferromagnetism. Over a range of volumes (i.e. pressures), two nearly degenerate states are obtained, which differ most strikingly in their orbital character (on uranium). The calculated moment, and its separation into spin and orbital parts, is consistent with recent polarized neutron scattering data. These two states are strong candidates for the two ferromagnetic phases, one low-temperature -- low-pressure, the other higher-temperature -- higher pressure. Magnetic waves built from fluctuations between these uranium configurations provide a possible new mechanism of pairing in UGe2.