SandRidge Energy (NYSE:SD) is expected to release its third-quarter results on Tuesday. While the oil and gas producer focused on the Mississippi Lime will update investors on a lot of numbers, there are three that need to be watched closely.

Mississippian oil growth
SandRidge Energy last quarter increased its production guidance for the full year by 4% in the Mississippian and 2% overall. Investors will want to make sure the company will hit those targets or, better yet, exceed projections.

Investors will want to pay particular attention to how much oil SandRidge is able to produce as that's where 80% of its Mississippian cash flow comes from. Because of this the company is focusing on the oilier portions of the play. Current guidance for the year has the company growing its Mississippian oil production by 76%, while its associated natural gas production rises by 66%. Bottom line, we want to see oil production growing faster than natural gas production as any shortfalls in oil production growth will hit the stock.

Mississippian well costs and performance
SandRidge was able to cut its Mississippian well costs from $3.1 million to $2.95 million last quarter. This boosts returns and enables the company to drill more wells with less capital. We want to see SandRidge keep its well costs under $3 million apiece.

SandRidge is one of the few companies that has found success in the Mississippian. We learned earlier this quarter that Royal Dutch Shell (NYSE:RDS-A) was exiting the Mississippian after the 45 wells it drilled didn't produce desirable economic returns. Shell encountered spotty results, with some wells producing a few hundred barrels of oil per day while others produced just a few dozen barrels.

Uneven results like those encountered by Shell and others is one reason why SandRidge has narrowed its focus on what it sees as the best portions of the play. This is evidenced by the fact that last quarter the 30-day initial production rates of its wells were up 14% to an average of 377 barrels of oil equivalent per day. We want to see this number growing over time because it means SandRidge's economics are improving as it continues to drill.

Stacked pay potential
SandRidge Energy is just starting to look at the stacked pay potential that it possesses. The company drilled a handful of wells last quarter in additional zones that yielded encouraging results. Investors want to see what the company has to say about additional zones it tested in the quarter. One thing to watch is the results, expected this quarter, from the Chester well that was drilled in Woods County. In addition, the company also began testing the Woodford. Positive results signal that SandRidge is sitting on a whole lot more oil and gas than first thought.

A perfect example of this is found in the Williston Basin of North Dakota. The initial target of drillers like Continental Resources (NYSE:CLR) was the Bakken shale. However, the Three Forks formation is proving to be just as valuable to producers. Continental Resources is one of the companies leading the charge to unlock this formation, and because of this the Three Forks has the potential to nearly double the company's reserves in the Williston Basin. 

Final thoughts
SandRidge Energy's future is tied to its ability to get as much oil as possible out of its acreage in Oklahoma and Kansas. While the Mississippian isn't turning out to be as oil rich as the Bakken, it still can drive returns for SandRidge's investors. That's why we'll want to make sure that story remains intact when the company reports earnings.

 

Fool contributor Matt DiLallo owns shares of SandRidge Energy. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.