What a nice rally energy investors have experienced since the lows that were printed in early February. It seems almost funny in retrospect that with oil at $26 there were skeptics calling for a move to $20 or lower, when as we now know it has almost doubled to the $50 mark. However, with that big move in the spot price, there have been some big moves in stock prices, and some are now getting more expensive than others.
A new RBC research report makes the interesting point that the senior exploration and production (E&P), or larger cap, companies are currently trading at an average debt-adjusted cash flow multiple of 14 times, versus 13.2 times for the smaller intermediate E&Ps. It makes sense that investors looking for value may want to go smaller.
We screened the RBC intermediate E&P universe and found four rated Outperform that look good now.
This is one of the favorites around Wall Street among the smaller more nimble companies, and it is also a member of the Jefferies Franchise Picks portfolio. Gulfport Energy Corp. (NASDAQ: GPOR) is an independent oil and natural gas exploration and production company with its principal producing properties located in the Utica Shale of eastern Ohio and along the Louisiana Gulf Coast. In addition, Gulfport holds a sizable acreage position in the Alberta Oil Sands in Canada through its 24.9% interest in Grizzly Oil Sands.
Gulfport is a favorite of hedge fund managers. In fact, according to Insider Monkey, 36 hedge funds owned positions in the stock late last year. The shares hit some weakness on gas prices and a lower growth outlook, a move lower many believe is overdone and recent stock movement seems to have confirmed. With a multiple in line with peers and an expected ramp-up in production this year, the stock may be a great value at current levels, despite last week’s big rally.
The RBC price target for the stock is $34, and the Thomson/First Call consensus price target is $34.43. The stock closed Friday at $32.69 per share.