Whiting Petroleum (WLL) is probably among the most underrated oil producers in the Bakken. The Denver-based exploration and production company has missed Street estimates for the past three quarters, and the stock is down 15% since the beginning of the year.

Missed expectations: Does it matter?
For the third quarter, Whiting missed analysts' expectations, clocking an adjusted EPS of $0.73 per share against estimates of $0.78  per share. (Fellow Fool Seth Jayson has given a lowdown of the latest results here.)

While all of these speak a significant deal about the company, the question investors should be asking is this: Should these developments be the yardstick to measure Whiting's future performance, both immediate and long term? The answer, I believe, is "not necessarily."

In terms of production volumes, Whiting's progress has been impressive. Average third-quarter production grew a solid 17% from last year's third quarter and stood at 82,615 barrels of oil equivalent per day (BOE/D). Additionally, the exit rate for Q3 -- that is, production by the end of September -- had been further upped to 84,550 BOE/D. Again, for the first nine months of the year, average production was up 22% compared with the corresponding period for last year.

Efficiency, the middle name
So how did the company ensure such a growth? It's a combination of efficiency and excellent well results. The Bakken and Three Forks regions continue to impress without fail, with the newer wells clocking some excellent initial production rates. Net production from the Sanish field averaged 31,400 BOE/D, and drilling operations are now moving into the central and western portions of the field. During the earnings call, management had indicated  that Whiting has drilled more wells than expected. Now that is exactly what I'd call being efficient.

Complementing the efficiency has been great well performance. One of the wells in the Middle Bakken -- the Kannianen 22-32XH -- had a phenomenal initial flow rate of 3,462 BOE/D  At least three other wells started off with flow rates above 2,000 BOE/D this quarter. Obviously, the rates will come down as the wells mature, but one can see that Whiting is drilling right off the sweet spot. The Lewis & Clark/Pronghorn and the Hidden Bench prospects -- with higher average production rates -- are the next upcoming regions that should nicely compliment the company's Sanish field production.

Bakken, consolidating
Not surprisingly, competition is heating up in the Bakken. Whiting's new neighbors happen to be Apache (APA -0.74%), which bought 300,000 net acres in Daniels County, Mont., in June. In the last three months, a couple of significant acquisitions took place as well. QEP Resources (QEP) and ExxonMobil (XOM -0.05%) spent $1.4 billion and $2 billion, respectively, to acquire a substantial chunk in the Bakken. Clearly, Bakken is still in the radar E&P majors.

So why did Whiting miss estimates?
These acquisitions and huge demand for Bakken properties should give us a clue why Whiting couldn't meet analyst estimates. Rising costs, no doubt. While revenue did go up year on year, so did lease operating expenses, production taxes, and depletion expenses -- all thanks to higher production volumes. Additionally, sales price for oil, natural gas, and NGLs were a tad lower than last year's third quarter. The Libyan crisis was still driving up oil prices 12 months back.

Rather than figuring out some intrinsic fault with the company, I suspect analysts might not have completely factored in all possible situations that a Bakken operator could face. On the contrary, Whiting's promising future could make it an acquisition candidate for the bigger companies wanting to get a foothold or expand in the Bakken. Statoil's (EQNR -1.87%) acquisition of Brigham Exploration last year is just another ideal example.

The Foolish bottom line
With Bakken crude trading at a slight premium to the NYMEX crude prices, there's an additional advantage for Whiting. All in all, this company looks to gain in the long run. To get the latest updates on Whiting Petroleum, add the company to your free watchlist.