The most common and most likely answer to this crossword clue is the 6 letter word ARROYO
I've seen this crossword clue in Financial Times
A
R
R
O
Y
O
Buddy explains!

The straight part
We know that "gully" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case gully = arroyo.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does ARROYO mean?
ARROYO noun- A dry creek or streambed, a gulch which temporarily or seasonally fills and flows (after sufficient rain).
- Any watercourse; any rivulet (whether it flows year-round or only seasonally).