We’ve been circling Penn Virginia (NYSE: PVA) for much of this year and never did get the hoped-for discount. As recently as May 19 the stock’s 2014 gain was down to 52 percent, but that’s back up to 72 percent by now.

No matter. We make picks based on their expected returns in the future rather than past performance. And Penn Virginia retains plenty of upside as a focused Eagle Ford producer pumping growing volumes of crude from the core of the most prolific tight oil basin in the US.

The company’s first-quarter revenue was up 14 percent from the fourth quarter and 62 percent year-over-year. Cash margin improved to $54 per barrel of oil equivalent from $48 in the fourth quarter of 2013.

Source: company presentation

Despite such rich rewards, Penn Virginia remains partly dependent on asset disposals and its credit line to finance development, and expects to remain so for another three years.

PVA controls an inventory of more than 1,100 drilling locations, good for 10 years at the current aggressive development pace by the six Eagle Ford rigs it employs. That number is likely to grow as the company continues to add acreage and should subsequent test results conform early indications that the so-called “upper Eagle Ford” rock layer  overlaying 50 percent of PVA’s land is a separate reservoir.

The scale of the looming opportunities is large relative to Penn Virginia’s current means, fueling speculation that the company could find a partner or else sell itself, as suggested by Soros Fund Management, an activist investment fund with a recently disclosed 9.2 percent stake in the company. At least one estimate has used the price paid by Devon Energy (NYSE: DVN) for GeoSouthern’s acreage in the Eagle Ford to estimate that PVA could fetch $25 a share in a buyout. 

Source: company presentation

Whether or not a suitor comes along, Penn Virginia is the owner of increasingly efficient and prolific oil wells advantageously located close to the Gulf Coast refining hubs. Debt leverage is manageable, and 70 percent of this year’s estimated crude output is hedged at a minimum of $93 per barrel, while 43 percent of next year’s likely crude production is already guaranteed at least $89/bbl.

Despite the strong growth profile and attractive return trends, the stock’s enterprise value, including debt that exceeds its market capitalization, now equals barely more than 5 times this year’s forecast EBITDA. That’s a significant discount to the industry that’s unlikely to last, all the more so given the high short interest on stock, recently at more than 27 percent of the float.

We’re adding Penn Virginia to our Growth Portfolio. Buy PVA below $20.