Weather delays, third-party drilling contractor issues and continued midstream constraints challenged small-cap Denver-Julesburg player Synergy Energy Resources Corp. in fiscal 2Q2014, but it still almost doubled its production rate year/year.

The Plattville, CO explorer’s big focus is in the Rockies, where it began shifting to horizontal drilling just a few months ago. The shift has made all the difference, Co-CEO Ed Holloway said during a conference call with analysts Friday.

Synergy’s exploration and production (E&P) is concentrated in the Denver-Julesburg Basin, particularly the Wattenberg field in Colorado, as well as parts of Wyoming, Kansas and Nebraska.

“During the quarter, our oil and gas production increased 90% over last year, to over 352,000 boe,” Holloway said. “We also achieved a 22% production growth in the second quarter over the first quarter,” despite the fact that six horizontal wells completed on pad didn’t come online until the latter part of the period because of third-party issues.

Production in the three-month period climbed to 3,917 boe/d, nearly double the rate for fiscal 2Q2013, lifted by the accelerated horizontal drilling and pads.

“Encouraged by the early results and execution of our operated horizontal drilling program in January, we added a second rig to increase the pace of our leasehold development and growth,” Holloway said. “We are completing the six wells on our Phelps pad, which will average over 25 stage fractures (frack) per well that will cost significantly less than our original budget of $4.5 million per well previously estimated for standard leak horizontal wells with a 16-stage frack.”

In the few months in which Synergy has turned to unconventional drilling, well output has equaled production from the vertical wells drilled and acquired over the five-year period, Holloway noted. At the end of February Synergy was operating 11 horizontal wells and a non operating interest for another 26 producing wells (4.2 net) in the Wattenberg field. Eight new wells and 10 non operated wells (.75 net) were in the drilling process.

Net income increased 89% year/year to $5.2 million (7 cents/share) from five cents. Earnings were cut on one-time derivative losses of $1.8 million.

Record output led to an increase in revenue to $23 million, versus $10.9 million in the year-ago period. Operating income more than doubled to $9.5 million from $4.5 million. Production increases were enhanced by a 11% lift in realized average selling prices for oil ($86.82 versus $84.20) and natural gas ($5.93/Mcf versus $4.77).

Historically, Synergy has realized crude prices of $7.00-8.00 below West Texas Intermediate, noted Wunderlich Securities analyst Irene Haas. Because of limited local refining capacity, the discount widened this past winter to between $11.00 and $15.00. “But more recently, the basis narrowed and Synergy expects to realize on a stabilized basis, a discount of under $10.00/bbl going forward.”

Haas acknowledged the reasons for the slowdown in production, but she said she views the company favorably.

“We adjusted our estimates to reflect a softer growth ramp for fiscal 2014 but expect Synergy to catch up in fiscal 2015. Importantly, we still expect triple-digit production growth for the next two years…Synergy has a huge run-way, it is well run and has a strong balance sheet; it’s one of the best small-cap pure plays in the E&P space.”