The energy industry is transforming under the AI tech boom, which relies on real-time, high-speed computing and vast databases. This demands large-scale data centers to support the necessary server stacks and databanks. This kind of infrastructure doesn’t come cheap, however, and the cost is measured in more than money. Data centers on this scale have notoriously high energy demands – and in fact, they are a major driver of increased energy consumption in recent years.
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Increased consumption will translate into increased opportunities for investors, as energy producers ramp up to meet higher demands. Now Bank of America’s energy analysts are laying out a bullish case particularly in the natural gas sector.
“While one can now argue that gas valuations appear fully baked, we believe AI and its derivatives are a multi-year theme that dovetails with a fundamental reset in US gas,” the analysts said in a recent note. “We believe 2H25 is framed by tight gas balances that sets up for a material shift higher the forward curve, creating momentum around gas E&P’s that could shift valuations higher to $4.00 NYMEX – the new baseline for our Gas E&P valuations.”
With this outlook in mind, the BofA analysts are bringing attention to two energy stocks they believe could emerge as key winners. Using the TipRanks database, we delved into these picks to see if the general Street view chimes with the BofA take.
Gulfport Energy(GPOR)
We’ll start with Gulfport Energy, one of the North American independent natural gas exploration and production companies. Gulfport, from its headquarters in Oklahoma City, has active operations in two widely separated but highly productive natural gas plays: the Marcellus and Utica shale formations in eastern Ohio, and the SCOOP Woodford and SCOOP Springer formations of its home state of Oklahoma.
Gulfport has 266,000 net reservoir acres between these regions, with 193,000 of that total in the Ohio holdings and 73,000 in Oklahoma. During the last quarter reported, 3Q24, Gulfport’s total production averaged 1,057.2 MMcfe per day. Of that total, 861.6 MMcfe per day came from the Utica and Marcellus shales, and 195.6 MMcfe per day came from the SCOOP activities. The company states that its production mix is composed of 91% natural gas and 6% natural gas liquids, with the remainder being oil and condensates.
On the financial side, Gulfport reported revenues of $253.9 million in Q3, up 15% compared to 3Q23 while reporting $178.1 million of adjusted EBITDA. Gulfport’s quarterly cash from operating activities came to $189.7 million, and the adjusted free cash flow was $72.6 million.
This stock has caught the attention of BofA’s Noah Hungness, who sees the firm’s combination of quality holdings and operational efficiency as key to its success. He says of Gulfport, “GPOR broke out at 3Q24 results with positive well results in the volatile oil window of the Utica and continuing to add to its liquid rich inventory that in our view leaves room for GPOR to beat on its liquids growth expectation. This plus increased operational efficiencies and an improving natural gas macro means GPOR has more to go.”
Hungness complements his Buy rating with a $227 price target that shows the analyst’s confidence in a 16% one-year upside potential. (To watch Hungness’ track record, click here)
There are 7 recent reviews on file for GPOR shares, including 6 Buys and 1 Hold for a Strong Buy consensus rating. The stock has a current trading price of $196.22 and an average target price of $216.86, together suggesting a gain of 10.5% on the one-year horizon. (See GPOR stock forecast)
Range Resources Corporation(RRC)
We’ll stay in the natural gas sector, where Range Resources has been working the Pennsylvania gas fields, particularly the Marcellus Shale. The company is one of the US gas industry’s independent producers, focusing on natural gas and natural gas liquids. Rage Resources currently operates on approximately 460,000 net acres of prime gas land holdings in southwest Pennsylvania, and its holdings include some 3,100 undrilled Marcellus wells. The company’s well inventory includes 2,600 liquids-rich wells and 500 dry gas wells.
Range Resources doesn’t just depend on scale and size in its operations – the company boasts that its holdings are high-quality. Range’s core inventory has the longest projected life expectancy among its Appalachian peers, of 16 years or more. The company also estimates that it has some 2,000 undrilled wells in the Marcellus with an estimated ultimate recovery (EUR) greater than 2 Bcfe per 1,000 feet of lateral distance. All of this makes Range Resources one of the strongest players currently operating in western Pennsylvania’s gas fields.
Turning to the company’s results, we find that in 3Q24 – the last period reported – Range Resources generated $680.17 million in adjusted non-GAAP revenues. This was up 5% from 3Q23, and beat the forecast by more than $52 million. At the bottom line, the company’s non-GAAP EPS came to 48 cents, beating the forecast by 3 cents per share. The company also saw $246 million in quarterly cash flow from operating activities, for a year-over-year increase of 63%.
These results were supported by solid production numbers. The company’s total production in the third quarter averaged 2.2 Bcfe per day, with some 68% of that total being natural gas and most of the rest being natural gas liquids.
For Bank of America’s Kalei Akamine, the key points here are quality and potential. He lays out the case for both in his recent note on Range Resources, saying, “RRC has always been a quality name with a low break even and deep inventory which has been reflected in its multiple… In 2025 we see an increased likelihood that RRC to utilizes some of its DUC capacity given the strong pricing we have seen in winter so far and progress at Plaquemines. In the first half of the year we continue to expect above trend NGL realizations before extra takeaway capacity at Mont Belvieu comes online in 2H25. We estimate capital will be similar to 2024 levels around.”
Along with a Buy rating, Akamine puts a $45 price target on RRC, suggesting a one-year upside potential of 10%. (To watch Akamine’s track record, click here)
Not all on the Street are quite as confident. The stock has a Hold rating from the analyst consensus, based on 19 recent reviews with a breakdown of 5 Buys, 12 Holds, and 2 Sells. The shares are priced at $41 and recent gains have pushed the stock 6% above its $38.44 average price target. (See RRC stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
