Wells Fargo: Time To Buy Gulfport Energy

In a report published Monday, Wells Fargo analyst Gordon Douthat upgraded the rating on Gulfport Energy Corporation GPOR from Market Perform to Outperform. The analyst believes that the company's dry gas window potential is not fully reflected in its share price.

"We believe GPOR is reaching an inflection point in the development of its Utica asset as it transitions more heavily toward the high impact dry gas window which should drive strong production growth and capital efficiency gains going forward," Douthat stated.

The strong initial results from the dry gas well, both for Gulfport and its peers, indicate that the dry gas play could lead to additional upside. The analyst believes that with the industry recovering from the commodity sell off in 2H14, investors will become increasingly discerning about companies that can grow without stretching their sheet.

"We believe Gulfport's assets, improving operational track record, and reasonable valuation present an opportunity for share outperformance," the Wells Fargo report said.

In addition, the analyst expects the 2015 guidance to prove conservative, given the robust production results for Q1. Although the company has not yet announced its 2016 guidance, Gulfport has indicated that it intends to add a fourth rig on its Paloma properties, following the completion of the Paloma acquisition in 3Q15. The analyst expects this program to lead to nearly 50 percent year on year growth in 2016.

The EPS estimates for 2015 and 2016 have been raised from -$0.64 and -$0.57 to -$0.62 and -0.62, respectively.