Here's a fairly common theme: An energy company reports lower production volumes but higher revenue, thanks to higher crude oil and natural gas prices. That was the case for Canada's large independent energy company Nexen (NYSE:NXY) in the third quarter, though with a bit of a twist.

Production fell 5% as reported, but those figures were hurt by the impact of some asset sales and Hurricanes Katrina and Rita. If you add back the shortfalls, production was actually up slightly, though I'll be the first to admit that the "if" game can get out of hand. Still, a more than 40% rise in oil prices allowed the company to post revenue growth of about 34%.

Below the top line, things get pretty messy, making it easy to miss the signs of a decent quarter. Reported earnings are confounded by a loss in the marketing business tied to derivatives, stock compensation expenses, and a significant asset sale. Looking at things from a cash flow perspective is also tricky, since the company's definition of operating cash flow doesn't include non-cash changes in working capital. But if you clean out stock compensation and unrecognized earnings from the marketing business, adjusted cash flows rose about 50%.

Beyond this quarter's financial rigmarole, there's a fair bit to like. The company has worked to clean up its balance sheet and should see some significant production increases from new projects like Buzzard and Long Lake. Best of all, the success of those projects depends more on how well the company executes these opportunities than on successful exploration. In addition, projects like coal-bed methane and oil sands give this company an "alternative energy" allure (although how oil from oil sands qualifies as "alternative" is beyond me).

Looking again at the stock, it's pretty clear that the market has soured on energy shares for now. Investors have pretty much indiscriminately sold anything energy-related; the conventional wisdom has energy prices leading to an economic slowdown and lower demand for energy. Yeah, whatever.

The long-term picture on energy hasn't really changed. More people need more energy every day, and there's not much new production to meet those needs. I believe Nexen's worth a look, along with producers like Apache (NYSE:APA), Ultra Petroleum (AMEX:UPL), Chesapeake (NYSE:CHK), and the high-quality drillers and service companies that are getting smacked around today.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).