Earlier this month, the company reported its second-quarter earnings, which missed the Street analysts' estimates. However, the analyst believes PDC Energy required a re-rating after the company disclosed its intention to buy 57,000 net acres for $1.5 billion.
The brokerage sees enough room for expansion in the upcoming quarters citing the scope the Delaware Basin provides to the company. The analyst advised investors to create or add positions due to its multiple expansions offering over 24 percent upside reward potential to the conservative price objective.
"At this early stage, PDCE has conservatively identified 710 drilling locations, which lends itself to 15–20 years of inventory at initial drilling plans. Ultimately, this acreage position has the potential for over 3,200 gross locations across the Wolfcamp and Bone Spring zones," the analyst told clients in a recent research note.
The Williams Capital analyst believes PDC Energy is well hedged, ensuring that any impact due to weak pricing will not have a big impact on financials. The company also stands to gain from RNAV, which has an upward bias. This includes an increased percentage of longer lateral wells particularly in its extended reach laterals.
At time of writing, PDC was up 1.59 percent on the day at $68.57.
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