XTO Energy (XTO: sentiment, chart, options) shares are down about 10%, despite a stronger-than-expected second-quarter report. The company earned $575 million, or $1.11 per share, while revenue rose to $1.94 billion. Adjusted earnings came in at $1.07 per share. Analysts were expecting a profit of $1.03 per share on revenue of $1.84 billion. So, why is the stock dramatically lower?

A continued pullback in energy prices seems a likely culprit. Crude oil and natural gas are both on the decline, and are tugging energy-related issues down with them. Some of the selling pressure could also be attributed to debt-wary investors. XTO said it would spend $1.3 billion to buy more properties in key production areas, and pegged its 2009 development budget at $4.6 billion.

Analyst Dan Katzenberg of Oppenheimer & Co. noted, "They are kind of overextending themselves as far as the balance sheet -- and probably taking on a decent amount of debt to make these things happen, or at least diluting the shares."

On a more upbeat note, S&P Equity Research raised its opinion on XTO from "hold" to "buy."

Today's report has sparked some heavy put activity on the August 50 strike. This option has traded volume of 5,782 on open interest of 6,835. At last check, this put is out of the money by a couple of points.