The Bakken Reserves are playing true to expectations in terms of production. And Brigham Exploration (Nasdaq: BEXP), which holds substantial acreage in the area, is reaping the benefits. And I doubt if it's got anything to do with luck.

With advanced technology and an experienced exploration team to boot, the company has more than doubled its average daily production volumes for the first quarter of this year to 11,314 barrels of oil equivalent per day (Boe/d) -- a sharp 109% jump from the year-ago quarter.

Revenues grew by 25% this quarter to $40.6 million. However, one must also account for unrealized hedging losses to the tune of $36 million. In other words, if we are to discount these unrealized losses, revenues from crude oil and natural gas sales alone shot up by 162% on a year-over-year basis, to $76 million.

Not surprisingly and thanks to these derivative investments, net income fell to $1.5 million this quarter versus $11.3 million in the year-ago quarter. Yet, I believe it makes more sense to consider earnings from a purely operational point of view. If we reconcile the GAAP net income with a non-GAAP measure -- that is, add back the unrealized hedging losses -- after-tax earnings stood at $33.8 million, a four-fold increase from the first quarter of 2010.

This is exactly why I've got little but praise for the company. The Bakken Reserves being a relatively recent prospect, it's hardly surprising that the company would resort to hedging measures in order to protect itself from any potential loss arising out from hitting dry wells and volatile energy prices. Noble Energy (NYSE: NBL) and Anadarko Petroleum (NYSE: APC) faced the same situation this quarter because of losses arising from hedging instruments.

So is something really wrong?
Hedging instruments are around to protect a company from losses arising out of unforeseen circumstances and a small price it has to pay is a limitation of upside. I would not worry too much if an exploration and production company misses targeted results simply because of hedging activities.

Operational efficiency will gradually show why hedging losses will be offset in the long run. While investors pulled the plug on Brigham on Wednesday, causing its share prices to plunge by 10%, I sense an opportunity for Fools to take capitalize on this and grab a few shares. For the record, this stock has grown by 44% in the past year!

A Foolish takeaway
Bakken continues to hold fort as the largest shale play in North America. Foolish investors should take note of investing opportunities in companies operating here. Kodiak Oil and Gas (NYSE: KOG) and Continental Resources (NYSE: CLR) will be closely watched for this reason. With Brigham more than doubling its capital expenditures this quarter over last year's first quarter, I believe the efforts will translate into higher production and better fundamentals in the near future. Foolish investors have a lot to gain from this stock.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.