There are times when the very things we use to protect ourselves turn out to be our bane. Noble Energy (NYSE: NBL) probably found this out the hard way. While revenues for the fiscal first quarter rose by almost 40% -- to $569 million from $407 million in the corresponding quarter last year -- net profits nosedived 94% from a year ago. What the heck happened?

It looks like this ...
Thanks to hedging tools in the form of commodity derivatives instruments, market volatility has turned out to be a great leveler for Noble. The company faced losses worth $285 million due to derivatives instruments; the irony is that Noble had profited last year out of these same derivatives. However, the good news is that a total of $303 million is still unrealized. In other words, these losses are notional and not actual, which means that cash hasn't actually left the building ... yet.

... but the real story is this
This particularly interests me as it prompts me to check the actual operating income during the corresponding periods. Operating income, in fact, rose to $347 million from $218 million -- an impressive growth of 59%.

Adjusted earnings also grew, by a whopping 74%, to $240 million, versus $138 million a year ago. This should augur well for Foolish investors in this stock. The company has not inflated its earnings from questionable sources, but has shown solid growth via operations. This shows that the company has managed to effectively increase its cash inflow even though the accounting measure in question (net income) has not revealed that. Quarter-over-quarter cash and cash equivalents rose from $1.1 billion to $1.4 billion.

The future
Being the first company to receive a drilling permit in the Gulf of Mexico since the disaster last April at BP's (NYSE: BP) Macondo well, this will give Noble a head start in operations over rivals in this region. The company will use a well containment system provided by Helix Energy Solutions (NYSE: HLX) to cap any possible blowout. Foolish investors must also note that there is still no sign of drilling activity across the industry returning to preblowout levels.  Noble will nobly try to take advantage of that factor and try to drink everyone's milkshake in the meantime.

In short, I consider this a safe sock to invest in with long-term growth prospects on the horizon. As Warren Buffett said, derivatives are weapons of financial mass destruction. They can work for you or against you. In this case, they hurt pretty bad, but I think this three-star CAPS stock probably deserves more than what its rating suggests. I think it could be a long-term winner.

Isac Simon does not own shares of any of the companies mentioned in this article. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.