Why Clayton Williams Energy's Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of independent oil and gas company Clayton Williams Energy (NYSE: CWEI  ) jumped 13% today after the company reported earnings.

So what: Third quarter revenue rose 3.2% from a year ago to $111.2 million, which may not sound impressive, but it crushed the $97.5 million consensus estimate. On the bottom line, earnings per share of $0.90 beat estimates of $0.69 in earnings.  

Now what: The company sold 95% of its oil and gas operations in Andres County, Texas, which makes the revenue comparison a little misleading. Despite the fact that production fell 12% from a year ago because of the sale, revenue increased because average realized oil prices increased to $103.75 from $89.48 per barrel a year ago. Gas prices also increased to $3.49 per Mcf from $3.29 a year ago. With oil prices down since then I think there will be pressure on earnings going forward, but Clayton Williams is on the right track operationally.

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