Image source: ConocoPhillips.

ConocoPhillips (NYSE:COP) recently reported mixed second-quarter results. Financially, the quarter was awful after weak oil and gas prices caused the company to report a whopping $1.1 billion loss. That said, CEO Ryan Lance wanted investors to know that despite the harsh operating conditions the company was making progress. He led off the company's second-quarter conference call saying that the key messages from the quarter were that: "we delivered strong operational performance, our financial performance is improving, and we're making progress strategically to position ourselves for a world of lower and more volatile prices." He then spent some time on the call drilling down a bit deeper into each item.

1. Strong operational performance

Lance went through the company's operations by noting:

Production grew year over year by 3%. Our second-quarter performance exceeded guidance, despite a busy season of turnarounds and over a month of downtime at Surmont due to the wildfires. Based on our strong year-to-date performance, we're raising the midpoint of our 2016 production guidance by 2%. We're also lowering our 2016 capex from $5.7 billion to $5.5 billion based on efficiency improvements, really across all business lines. Our major projects across our portfolio are on track for start-up as planned.

ConocoPhillips' production was surprisingly strong during the quarter at 1.546 million barrels of oil equivalent per day (BOE/D), which was well above its guidance range of 1.5 million to 1.54 million BOE/D. This outperformance came despite the fact that its Surmont facility in Canada, which is a 50-50 joint venture with French oil giant Total SA (NYSE:TTE), was shut down for more than a month. That is worth noting because Surmont was producing 60,000 barrels per day before the wildfires, with that production split evenly between ConocoPhillips and Total. The company was able to overcome the lost production and beat guidance due to stronger production from its North American shale plays.

Because of that strong result, the company is raising its full-year guidance while at the same time reducing its capital expenditures budget. In other words, the company expects to deliver more production for less money, which is what investors want to see in the current environment.

2. Improving financial performance

Lance continued by saying that:

Our financial performance was challenged, like the rest of [the] industry, but did improve sequentially in line with prices. Three of five of our producing segments were profitable this quarter, and I think this highlights the benefits of having high-quality legacy assets in our portfolio. Cash flows were in line with expectations, and we ended the quarter with over $4 billion of cash and short-term investments on hand. We're continuing to make progress on our asset sale program and expect to achieve our goal of about $1 billion of proceeds this year. We reduced debt by $800 million in the second quarter, so we're making progress on improving our balance sheet.

While the company reported a steep operating loss, Lance wanted to hammer home the point that the company's underlying financials are improving. During the quarter the company generated $1.26 billion in cash flow, which it used to fund capex and improve its balance sheet by paying down $800 million in debt. That brings debt down to $28.7 billion, which is still ahead of the company's $25 billion target, though the company is sitting on well over $4 billion in cash.

3. Making progress strategically

Lance concluded by explaining that the company's primary strategic focus is the phased exit of its deepwater exploration business. It made progress on that plan during the quarter by finding a buyer for its assets in Senegal. Further, it finished up drilling in the Gulf of Mexico, which included a successful appraisal well at Shenandoah and dry holes at Gibson and Tiber. With this drilling complete, the company now has enough data for prospective buyers to evaluate so that it can move forward with the next phase of its exit strategy.

Investor takeaway

ConocoPhillips' CEO wants investors to know that the company is making progress strategically, financially, and operationally. Its operations have been exceptionally strong, evidenced by its above guidance production and continued reduction in capex costs. That said, the company has more work to do, both strategically and financially, to put it in an even stronger position to meet the challenges of the current oil market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.