Last November, ConocoPhillips (NYSE:COP) unveiled its value proposition for investors as it transitioned to a disciplined, returns-focused exploration and production company. The U.S. oil giant outlined three principles that would, in turn, drive five capital allocation priorities, which the company believed would allow it to generate healthy total annual returns for investors.

In addition to those overarching principles and priorities, the company announced several accelerated actions to give it a jump-start on this new strategy. These included selling $5 billion to $8 billion in assets over the following three years and using the cash to repurchase $3 billion in stock and strengthening its balance sheet by getting debt below $20 billion. With several months having passed since it unveiled this strategy, CFO Don Wallette updated investors on the progress the company had made on these and its other objectives during the second-quarter conference call. 

Oil pumps on a foggy morning.

Image source: Getty Images.

Well, that was fast

After recapping the company's impressive second-quarter results, Wallette turned his attention to the plan to create value for investors. He said:

Let me recap the rapid progress we've made on executing our strategy. We've exceeded our asset sale, debt reduction, and share repurchase targets. We've demonstrated the ability to generate both free cash flow and profits at $50 Brent. We've improved our outlook for high-margin per-share growth and we're doing it for less capital. We're exceeding every expectation that was communicated at last year's November Investor Day. And we believe we're strongly positioned to continue executing this differential strategy, one that is focused on discipline through the cycles, financial strength, free cash flow generation and high-return per-share growth.

As Wallette points out, the company has already exceeded every single one of the targets it laid out last November, which is several years ahead of schedule. First, the company is on pace to sell more than $16 billion of assets this year alone. It accomplished that in part by the surprising decision to sell the bulk of its Canadian assets to Cenovus Energy (NYSE:CVE) for $10.6 billion in cash plus $2.7 billion of Cenovus stock. The company also sold its San Juan Basin assets, its Barnett shale assets, and is in the process of selling some of its Mid-Continent assets.

ConocoPhillips has already put some of that cash infusion from Cenovus Energy to work on accomplishing two of its other capital priorities. First of all, it has paid down $3 billion in debt, and it expects to hit its $20 billion goal by year-end. Because of that, the company set a new target to get debt below $15 billion by 2019. Meanwhile, the company has already repurchased $1 billion in stock and expects to buy back another $2 billion by the end of the year. Given its asset sale success, it now plans to buy back $6 billion in stock by the end of 2019.

Oil pump with a rocky foreground.

Image source: Getty Images.

A well-oiled machine

Not only is ConocoPhillips on pace to meet or exceed its three capital allocation priorities this year, but it's also ahead of the game on its three operational targets. That was evident during the second quarter, when the company demonstrated its ability to generate profits and free cash flow despite lower oil prices. In fact, after financing $1.1 billion in capital expenses and paying $331 million in dividends, the company produced more than $300 million in excess cash.

At the same time, its drilling program is running exceptionally well. As a result, it's on pace to deliver 25,000 barrels of oil equivalent per day more this year from its retained assets than expected. That will push production up 3% versus last year from those assets. Meanwhile, thanks to the impact of its share repurchase program, its adjusted production on a per-share basis will be up 8% from last year. Finally, it can achieve that higher rate of production even after cutting $200 million out of its $5 billion capital expenditure budget, which shows that it can indeed do more with less capital. 

Waiting for the market to wake up

As Wallette pointed out on the call, ConocoPhillips has done everything it said it would, and then some, several years early. However, despite all this progress, the stock has barely budged this year even though crude prices are up nearly 20% since it unveiled its plan. At some point, the market needs to give the company credit for all the progress it made by awarding it a higher valuation. This situation suggests that investors who buy now can pick up that upside with less risk since the company has already accomplished everything it said it would do.

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.