Houston-based Crimson Exploration (Nasdaq: CXPO) posted a net loss of $8.5 million in the first quarter of this year, thanks to unrealized hedging losses of $4.2 million and an impairment charge of $5.4 million. Do these losses really matter? No. Not really.

The numbers
Total revenue stood at $27.8 million – a 23% jump from $22.6 million in the year-ago quarter. Average quarterly production grew to 47.7 million cubic feet equivalent per day (Mmcfe/d), which translates to a 51% increase over the first quarter of 2010. Together, it's clear to me that the business is operationally sound.

Oil and liquids production rose by 30% over the year-ago quarter. From the fundamentals point of view, the company has actually managed to push up sales through increased production, which is what I'm interested in as an energy analyst.

Like Continental Resources (NYSE: CLR) and Denbury Resources (NYSE: DNR), I'm not unduly worried about the bottom line being in the red. The derivatives losses that have weighed down this company with tons of paper losses may actually turn around for profits. So investors shouldn't make any hasty decisions.

A worry
All that said, with a debt-to-equity ratio in the 90s, the company has some work to do to ensure the safety of shareholders. Crimson's long debt stands at $168 million. While this should not be too worrying for an exploration and production company, Foolish investors must consider the risk of going forward with this investment.

Still, going by the fundamentals, the company looks promising with successful drilling operations in East Texas and the Eagle Ford shale play. This is a larger region that is bound to boost production. However, low natural gas prices might threaten to derail upcoming plans. In fact, the company plans to limit production in East Texas until natural gas prices start moving up.

Foolish bottom line
Crimson looks good, provided it manages to weather current hiccups due to volatile energy prices. Investors should keep an eye on production as well as depreciation and amortization rates, which might dent the company's bottom line again, going into the future.