"Producing more oil is good but you still need to make a profit."
They hedged ~1/2 of their production over a period of time, and must mark these contracts to market at the end of every accounting period. Given the volatility in oil prices the value of these contracts can be substantial. They had an unrealized loss of $4.319 million on these contracts this quarter. Take this out and they made $.02, per share, for the quarter. They also acquired a significant property late in the quarter and thereby received little revenue but had to expense certain costs. Over a nine month period the company has made $.04, per share as it became profitable for the first time. They have also commenced selling oil by rail to increase margins. The gains from their investment also look skewed to December when production is anticipated to average about 2,750, per day.
This company is also still in the proving up, and optimization stage for High Volume Lift. It looks like the concept works given its steady production increases over 3 1/2 years. That is a major development. It looks like they have control of production costs as this is the second quarter around $22, and it looks to be trending lower with scale, and the new property acquisition given its costs and location. The news release also points to further gains in efficiency to come as they optimize production:
"The Company has also developed well past the basic HVL 'pod' model. Numerous 'pods' have multiple salt water disposal wells per facility, with the largest 'pod' currently having 11 producing wells, with salt water disposal through one central facility."
More wells per salt water disposal facility should significantly enhance efficiency.