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: Legacy Reserves (Nasdaq: LGCY) dropped 11% in intraday trading today after missing earnings expectations.

So what: Non-GAAP EPS of $0.41 grew 46% from the year-ago quarter but fell short of the consensus estimate of $0.43. Operating income more than tripled as higher volumes and prices more than offset an increase in expenses. GAAP earnings per share of -$1.39 reflected massive and increasing unrealized losses on commodity derivatives.  

Now what: Cold weather and power blackouts reduced production by roughly 5% below potential levels but caused an inventory buildup that could help the current quarter's sales volume. The business is showing nice fundamental improvement, but there's a risk that the losses on commodity derivatives will go from paper to real losses. Today's hit on oil prices also casts a negative pall on the revenue outlook. 

Interested in more info on Legacy Reserves? Add it to My Watchlist.