What happened 

Shares of oil and gas producer Parsley Energy (NYSE:PE) are up 15.3% as of 11:30 a.m. EDT today. That bump comes after management announced better-than-expected earnings results.

So what

Parsley Energy posted second-quarter results today that showed a $0.41-per-share gain compared to net income of $0.44 per share this time last year. Adjusting for a one-time tax-related gain, EPS was $0.32 for the quarter. Even though this was well below this time last year, it was in line with Wall Street expectations and it was able to accomplish this with lower realized oil and gas prices.

Drilling rig in a green field.

Image source: Getty Images.

Falling more or less in line with earnings expectations isn't impressive enough to merit a 10% jump, though. What got Wall Street more excited was the fact that the company was able to generate free cash flow in the quarter, narrowed its capital spending budget projection for the year, and anticipates higher production than initially forecasted.

The thing that stands out among those three things is that the company was able to generate free cash flow. For years, oil and gas producers have been running cash deficits and there is a lot of investor frustration around their management teams' ability to budget for free cash flow. It wasn't much -- about $14 million -- but free cash flow has to start somewhere. CEO Matt Gallagher noted in Parsley Energy's press release that it expects to remain free cash flow positive for the year.

Now what

Considering how much cash oil and gas producers have burned through over the past several years, seeing a positive cash number and a promise to generate more is encouraging, but let's put this into perspective here. It took $388 million in capital expenditures to produce $14 million in free cash flow. What's more, it is still running a cash deficit for the year after its first-quarter results. 

While some may see this as a sign that Parsley Energy is headed in a direction that makes it a more appealing acquisition target, there is still a long, long way to go before any long-term investor will want to consider this stock.