U.S. oil giant ConocoPhillips (NYSE:COP) has undergone a dramatic transformation over the past year, jettisoning a slew of assets, which has given it the cash to pay down debt and repurchase stock. As a result, the company's stock has vastly outperformed BP (NYSE:BP) since I pitted them against each other around this time last year.

That said, while ConocoPhillips has outperformed over the past year, the primary reason I chose BP was due to its more visible long-term growth prospects since ConocoPhillips lacked a clearly defined plan at the time. Since so much has changed since I made that call, I thought that now was an excellent opportunity to review and see if BP still has what it takes to outperform over the next few years.

A quick look under the hood

BP and ConocoPhillips are financially strong oil companies. As the following table shows, both have top-notch credit ratings, low leverage metrics, and ample cash:

Company

Credit Rating

Total Debt

Debt/Enterprise Value

Cash on Hand

BP

A-/A/A1

$63.0 billion

39%

$23.3 billion

ConocoPhillips

A-/Baa2

$23.5 billion

34%

$7.5 billion

Data source: BP, ConocoPhillips, Moody's, Fitch, and S&P Global Market Intelligence.

A year ago, BP had a much better balance sheet given its robust cash position and stronger credit rating. However, ConocoPhillips has closed the gap by selling $16 billion of assets, using those proceeds to reduce debt by $5 billion and more than double its cash position. Meanwhile, the company plans to continue strengthening its financial situation over the next two years by selling additional assets, which when combined with its expected excess cash flow should get debt below $15 billion by 2019. BP, on the other hand, has allowed its debt to creep up over that past year because its expansion spending outpaced cash flow. Leverage remains within its target range, though it's now at the upper end.

An offshore oil and gas platform at sunset.

Image source: Getty Images.

A look at where they're going

At this time last year, ConocoPhillips lacked a clear direction. The company was still working on reducing costs so that it could run on lower oil prices. However, last November the oil giant unveiled its new go-forward plan to allocate capital across five priorities, which it believed would fuel double-digit total annual returns to shareholders.

What's unique about that strategy is that, unlike most oil companies, ConocoPhillips isn't targeting an absolute production growth rate. Instead, it aims to increase production on a per-share basis by using buybacks to boost that metric. For 2017, the company estimates that this plan will fuel 8% asset sale adjusted production growth on a per-share basis versus the 3% it would achieve without the buyback. Meanwhile, thanks to the flexibility of its asset base, its go-forward plan has the potential to deliver the following production growth rates depending on oil prices and repurchase activity:

Average Oil Price

Potential Production Growth Rate

Total Annual Return

$50 oil

up to 2%

5% to 10%

$60 oil

up to 4%

10% to 15%

$70 oil

up to 8%

15% to 20%

Data source: ConocoPhillips.

BP, on the other hand, continues to press on with an ambitious plan to bring 800,000 barrels of oil equivalent per day (BOE/d) of new production on line by 2020. That represents a 5% compound annual growth rate through 2021. Furthermore, this is high-return growth that should deliver 35% higher margins than its base portfolio in 2015, which the company believes will fuel $13 billion to $14 billion in annual free cash flow by 2021 at $55 oil, with exponential upside at higher prices.

It's a tough choice

BP and ConocoPhillips offer investors two dramatically different ways to invest in the oil market. While both have similarly strong balance sheets, BP has clearly visible growth on the horizon given the significant supply of new oil it expects to bring on line over the next few years. Meanwhile, ConocoPhillips' plan adjusts with prices, which enables the company to accelerate output as oil improves. Also, its primary focus is to grow on a per-share basis instead of setting an absolute rate.

While this one could go either way, I still think BP is in a stronger position to outperform ConocoPhillips over the next few years because it has the high-return projects already in motion to deliver robust production and cash flow growth. While that doesn't mean I think ConocoPhillips' plan won't create tremendous value for its investors -- which is why I'll continue to hold my shares -- its plan is more reactive to oil prices while BP is agnostic to prices, putting it in a better position to outperform.

Matthew DiLallo owns shares of ConocoPhillips. The Motley Fool owns shares of and recommends Moody's. The Motley Fool has a disclosure policy.