NEW YORK (TheStreet) -- Devon Energy (DVN), after significantly outperforming the SIG Oil Exploration & Production Index in the first half of 2014, continues to find favor on Wall Street, with investors and analysts convinced a turnaround is taking hold at the independent oil and gas driller.

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Still, that optimism may be surprising given the company's struggle in recent years to deal with a glut of natural gas and an overstretched portfolio of drilling assets onshore and offshore in the U.S. and internationally.

But positive trends are becoming evident under Devon Energy CEO John Richels, according to a Tuesday upgrade of the company's shares to "outperform" from Wells Fargo analysts. They believe the company will soon wrap up its "transition era" and move into a growth phase as it drills acreage in U.S. shale basins such as the Eagle Ford and Permian.

Earlier in 2014, TheStreet flagged Devon Energy as the type of restructuring driller that might present an opportunity for stock investors. CEO Richels has been a savvy dealmaker when shedding the company's non-core drilling assets, generally achieving higher sale and spinoff values than the market had expected. Devon's acquisition of GeoSouthern Energy for $6 billion was also seen as a strategic move, something rare in the energy sector.

But in spite of good portfolio management -- a highlight so far in 2014 -- Devon Energy has been plagued by weak operating results.

Investors who have followed Devon Energy's turnaround know that the company has fallen short on production guidance in recent years. Those poor operating results would likely prove unsustainable for current management, as TheStreet noted, and could catch the eye of activist investors who have taken on drillers as large as Hess (HES), Marathon (MRO) and Occidental Petroleum (OXY). 

Perhaps, Devon Energy can cement its status as an unusual driller that is able to restructure without the prodding of angry hedge fund shareholders.

Wells Fargo, on Tuesday, expressed confidence that Devon Energy will finally hit its production targets. "With identified lower risk reinvestment opportunities in Eagle Ford, Permian, and Canada, this provides Devon the best production visibility it has had in years," they write, while forecasting the company will grow crude production by 25% in 2014, 17% in 2015 and 15% in 2016.

That production growth, if Devon can achieve it, would translate into one of the highest rates of earnings growth in the industry.

Specifically, Wells Fargo points to the GeoSouthern deal as a driver of improving performance. After closing the deal with GeoSouthern assets in the Eagle Ford on Feb. 28, the pace of production has accelerated from 53 million barrels of oil equivalent a day (MBoe/d) to 64 MBoe/d. That acceleration makes Devon's second half guidance of 80-to-85 MBoe/d achievable, according to Wells Fargo.

Is There Another 20% Left?

So is there really opportunity for investors in Devon after a 20% year-to-date rise in 2014? Wells Fargo believes so.

"There is a lingering perception about Devon's assets, and we think outside of the dedicated energy funds, some of the long-only's and generalists are still catching up to its revamped portfolio," they state of the company's turnaround. Wells Fargo holds out a valuation range of between $85 and $90 a share for Devon Energy, an about 20% premium to current prices.

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-- Written by Antoine Gara in New York.

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