Encana (NYSE:OVV) recently reported blowout second-quarter results. Heading into the quarter, analysts expected that it would earn $0.04 per share. However, it blew past that estimate by posting a $0.34-per-share profit thanks to robust growth in higher-margin liquids production and lower costs. As a result, the company is already well ahead of pace for its five-year plan after just a couple of quarters.

Those results led CEO Doug Suttles to point out during the earnings call several notable achievements that demonstrate the company's ability to thrive at lower oil and gas prices. Here are five things he said that prove this point.

An onshore drilling rig in a green field.

Image source: Getty Images.

1. Margin is improving

Suttles led off his prepared remarks by zooming in on margin improvement:

Our results highlight our ability to generate quality corporate returns through the commodity cycle. Our margin was up 25% from the first quarter despite lower benchmark commodity prices. This was driven by more oil and condensate in our production mix and lower cost.

As Suttles noted, Encana's margin was up an impressive 25% from the first quarter to $12.19 per barrel of oil equivalent (BOE). That's remarkable considering that its first-quarter margin hit $9.72 per BOE, which was up $2.92 per BOE versus the year-ago quarter. The company has accomplished this massive margin improvement by drilling higher-margin oil and natural gas liquids wells while at the same time allowing its gas production to fall via asset sales and underinvestment. This margin improvement is crucial to the company's long-term goal because it will provide the additional cash flow needed to fuel growth at lower commodity prices.

2. Production is back on a growth trajectory

Regarding growth, Suttles had this to say:

Our core assets have returned to growth, delivering our planned mid-year production bounce ahead of schedule. We continue to increase well productivity, and as a result we now expect that the core assets will deliver 25% to 30% growth in the fourth quarter of 2017, when compared to the fourth quarter of 2016.

Overall, production from the company's core assets rose 9,200 BOE per day (BOE/d) from the first quarter to 246,500 BOE/d, which was an ahead-of-schedule reversal of the declines that had been going on for several quarters. That puts the company on pace to deliver more production by year-end than initially expected.

3. The company is doing more for less

Because of this trend, Suttles stated that "based on our strong year-to-date performance, we have increased production and lowered costs in our updated 2017 guidance." As a result, Encana should generate more earnings and cash flow this year, as long as oil prices cooperate.

It's worth noting that Encana isn't the only shale producer that's on pace to do more for less this year. Fellow diversified driller Devon Energy (NYSE:DVN), for example, also boosted its full-year outlook for U.S. oil production, and now expects to exit the year producing 18% to 23% more than the fourth quarter of last year; an initial forecast called for 13% to 17% higher output. Likewise, Devon's costs came in below expectations, which leads management to believe that full-year costs will continue coming down. The factors driving this improvement in production and expenses in the industry are continued innovation and efficiency gains. 

A pumpjack in the middle of a cornfield.

Image source: Getty Images.

4. Innovation is coming fast and furious

Suttles touched on those factors and their effect on various activities:

The rapid application of technical innovation across the company has been impressive, and has driven significant improvement in each of our programs. As a result, we have increased our type curve substantially, and expanded our total premium well inventory by 20%.

Encana is deploying several innovative drilling and well completion methods that are delivering better results than expected. For example, the company's cube development in the Permian Basin boosted initial production rates 20% to 45% above type curve expectations. Because of that, the company not only increased its expectations for future wells but now believes it has more than 1,000 additional drillable locations in its inventory that can achieve premium returns of 35% at $50 oil.

Innovation has been the key to boosting peer EOG Resources' (NYSE:EOG) premium well inventory. In the first quarter, EOG Resources added 1,200 more locations to its premium-return stockpile thanks to several innovations -- such as drilling longer wells and using more sand when fracking -- that are helping the company get more production out of these sites for less money, which is instrumental to achieving higher premium returns.

5. The balance sheet keeps getting better

Finally, Suttles pointed out that "for the third consecutive year we continue to strengthen our financial position. By year-end, we expect net debt to adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] to be approximately two times." That improvement in its leverage ratio will put the company right around its peer group average, which is a remarkable feat for a company that was inundated with debt just a few years ago.

Creating value even though the market doesn't see it just yet

Suttles concluded his prepared remarks by saying that "the combination of innovative operations, commercial ingenuity, and preserving optionality is creating value and managing risk." However, while the company is clearly firing on all cylinders and able to create value even at lower oil prices, the market hasn't been giving it any credit for this achievement. That's evident by the fact that its stock price has fallen about 10% since the unveiling of its bold growth plan last fall, including slumping more than 17% so far this year. At some point, the market needs to realize its mistake and give Encana more credit for its ability to thrive at lower oil prices.

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.