Meet Gulfport Energy, Canaccord's Latest Buy Target

• Canaccord initiated coverage of Gulfport Energy Corporation GPOR with a Buy rating and $48.00 price target on Wednesday.
• Shares of Gulfport are down roughly 2.5 percent on Wednesday trading.

In a report issued Wednesday, Canaccord analyst Stephen Berman initiated coverage of Gulfport Energy with a Buy rating and $48.00 price target, arguing that it is “the most levered company to the core of the Utica Shale in eastern Ohio with ~243K net acres.”

The expert assured that the company’s high-quality asset base should drive “more than a doubling in production in 2015 on top of a 255% increase in 2014.” Moreover, he noticed, optionality with exposure to more than 762 million barrels of resource potential are provided by the Canadian oil sands. In addition, legacy assets in South Louisiana offer reliable premium-priced crude production. Finally, Berman points out that a robust balance sheet “with an undrawn borrowing base helps underpin the growth outlook.”

Investment Highlights

The report highlighted a few points that are central to the firm’s investment thesis.

For starters, the expert highlighted Gulfport’s high exposure to the Utica Shale in Ohio, its unique positioning in terms of “infrastructure access to premium markets,” and the consistency of this play. He also mentioned the company’s five Utica rigs (four operated), and its plans to drill 50 to 56 gross (32 to 36 net) operated wells in 2015, “while turning 49 to 53 gross (42 to 46 net) wells to sales.”

Growth At A Discount

To conclude, let’s take a look at Canaccord’s model, which anticipates production growth of ~120 percent in 2015 and 46 percent in 2016 – substantially above average. “Despite its growth profile and strong financial position, GPOR trades at a discount to its Appalachian peers on 2016E EV/EBITDA, (8.0x vs. 9.8x), which we believe is unwarranted,” the report concluded.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.