SandRidge Energy's (NYSE:SD) second-quarter report was full of surprises. However, none of them had to do with addressing the company's massive debt, which has obliterated its stock price over the past year. That said, the company did have some surprisingly good news for investors.

1. Surprise: We beat the estimates
While SandRidge Energy reported an adjusted loss of $17.8 million, or $0.03 per share, that was a nickel better than analysts were expecting. Still, it's well off the $25.7 million, or $0.04 per share in earnings from the year-ago quarter. Meanwhile, adjusted operating cash flow came in at $111 million for the quarter, which is down from $179 million from the year-ago quarter.

The reason SandRidge's loss wasn't as bad as analysts were expecting is because of the company's cost improvements. It shaved 4% off its lease operating expenses during the quarter, which mitigated some of the impact of weaker oil and gas prices on its profitability and cash flow. Looking ahead, the company expects to further improve its costs, as SandRidge is lowering its full-year cost outlook per barrel of oil equivalent, or BOE. It now projects that lifting costs will be in a range of $11.50-$12.50 per BOE, which is down from its previous guidance of $12.25-$13.00 per BOE.

2. Surprise: We hit our well cost target and are pushing for more
One of SandRidge's goals for 2015 was to get its per lateral well cost down to $2.4 million by the end of the year. The company surprisingly hit that target during the second quarter, as its well costs are down 20% year to date. SandRidge isn't stopping there, as it's now targeting to slice another $100,000 off of its well costs before the end of the year. This will help the company drive its returns back to the level it was enjoying when oil was closer to $80 per barrel.

3. Surprise: We're raising the low end of our production forecast
The final surprise is that the company is increasing the lower end of its production guidance range for the full year, without boosting capex spending. Its new guidance is for production of 29 million to 30.5 million BOE for the full year, which is up from its previous guidance of 28 million to 30.5 million BOE. Driving this increase is the aforementioned improvement in well costs, as it can now invest to drill more wells for the same amount of money to drive higher production.

The one surprise that was missing
While these were all pleasant surprises, the company has yet to address its core issue, which is its debt. As of the end of the quarter, net debt was $3.4 billion, up from $3 billion in the year-ago quarter. That said, the company did receive a favorable ruling from the IRS that CEBA Midstream, which is its wholly owned saltwater gathering and midstream subsidiary, does qualify as an MLP. This suggests that an IPO of the subsidiary is on the horizon, which could provide some improvement to its balance sheet. That said, the company has a whole lot of work to do, and it's running out of time since oil remains weak and has been growing weaker over the past month.

 

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.