From what I can tell, Chesapeake Energy's (NYSE:CHK) new CEO, Doug Lawler, is working hard to turn the company around. In mid-June, he launched a comprehensive review of the company's assets in an effort to determine the best way to unlock value for shareholders.

To achieve stronger returns, boost competitiveness, and improve Chesapeake's relative share-price performance, Lawler outlined two main priorities for the company: (1) financial discipline, and (2) profitable and efficient growth from captured resources. Let's take a closer look at what these goals mean and how Chesapeake plans to achieve them.

Chesapeake's key priorities
When Lawler says financial discipline, he's really talking about balancing the company's capital expenditures with its cash flow from operations. To achieve this goal, Chesapeake is allocating the bulk of its capital to its highest-quality and most profitable projects. At the same time, it will continue to raise additional cash through its ongoing asset sale program, while also reducing its financial and operational risk and complexity.

The second priority Lawler outlines -- profitable and efficient growth from captured resources -- simply means that the company is focusing on delivering the highest possible level of liquids production growth from its existing asset base, as opposed to acquiring new assets as it had done during Aubrey McClendon's time as CEO. Even after recent asset sales, Chesapeake still commands sizable positions and deep inventories in world-class plays such as the Eagle Ford shale and the Greater Anadarko Basin.

Chesapeake's progress in meeting its goals
Chesapeake's most recent quarterly performance highlights its commendable progress in working toward achieving these goals. On the cost reduction front, it slashed its drilling and completion costs by 35% year over year and its total leasehold and other capital expenditures by 75% year over year. For the full year, Chesapeake anticipates its capital expenditures to come in at roughly $7.2 billion, a 46% reduction from its 2012 capex of $13.4 billion.

As for oil production growth, the company increased its total oil output by an impressive 44% year over year, thanks largely to its solid operational performance in the Eagle Ford shale, where it pumped roughly 85,000 barrels of oil equivalent per day. That represents a whopping 135% year-over-year increase and cements the company's position as one of the most successful operators in the play.

Only ConocoPhillips (NYSE:COP), which pumped roughly 121,000 barrels per day from the Eagle Ford during the second quarter, and EOG Resources (NYSE:EOG), which produced a staggering 173,000 barrels of oil equivalent per day, bested Chesapeake. Marathon Oil (NYSE:MRO) came close, reporting daily net production of 80,000 barrels.

The combination of these cost-cutting measures and strong oil production growth helped deliver robust year-over-year improvements in both adjusted earnings, which jumped 77% to $1.424 billion, and operating cash flow, which increased 53% to $1.37 billion in the second quarter. As a result, the company expects to be able to fully fund its capital spending for the year through its cash flow -- a noteworthy achievement for a company that has a long history of outspending its cash flow.

The bottom line
As you can see, Chesapeake certainly appears to be on the right path to transforming into a more efficient, disciplined, and focused exploration and production firm. It is finally on track to balance its capital expenditures with cash flow from operations and finds itself in a much better financial position than at any time in recent memory.

Not only are near-term liquidity concerns fading, with the company reporting $4.7 billion of liquidity as of the end of the second quarter, but Chesapeake is also well hedged for the rest of the year and into 2014 -- a sharp contrast to its position just two years ago, when it entered 2012 without any natural gas hedges.

Fool contributor Arjun Sreekumar owns shares of Chesapeake 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.