ConocoPhillips (NYSE:COP) ended 2017 on a high note, delivering its best financial performance of the year. Those results were further proof that the company's strategy to put investors first is working. Another evidence is the fact that its stock price has rocketed 26% over the past six months, vastly outperforming both the red-hot S&P 500 and its peer group.

However, one thing ConocoPhillips CEO Ryan Lance made clear on the accompanying conference call is that the best is yet to come. Here are three things he wanted investors to know that show why he believes this to be true.

Group of pump-jacks drilling in silhouette.

Image source: Getty Images.

Our strategy is working better than planned

Lance spent some time on the call reminding investors of all the progress the company made last year:

As you know, we had a very significant portfolio reset in 2017. We substantially reduced our exposure to North American gas and oil sands, with dispositions that generated about $16 billion of proceeds. ... We turned the corner on profitability with full-year adjusted earnings of more than $700 million. And more importantly, we're in a much stronger position to deliver improved cash and financial returns even at crude prices of $50 per barrel or less. We reduced our debt by almost 30% to less than $20 billion and improved our credit rating. We returned 61% of our cash flow from operations to shareholders via our dividend and buybacks. Last year, we grew the dividend 6% and repurchased $3 billion or about 5% of our shares. Underlying production grew on a per debt-adjusted share basis by 19%, and we continue to emphasize CFO (cash flow from operations) expansion not production growth for growth's sake.

As Lance notes, ConocoPhillips transformed itself into an ultra-low-cost oil company in the past year. Because of that, it's starting to generate an increasing supply of cash flow, which it's allocating on things that grow shareholder value, such as sending billions of dollars back their way through buybacks and dividends, while also strengthening its balance sheet even as it increases production from a reset base.

Oil prices have changed, but our strategy hasn't

That plan put the company on pace to produce significant cash flow in the coming years at $50 oil. However, with crude now in the mid-$60s, cash flow is on pace to be well above those expectations this year. That led Lance to answer the question on investors' minds:

So the obvious question is, will our plan change? The answer is no, not with respect to our organic investment plan. Our $5.5 billion capital plan is unchanged from what we outlined in November. ... Even with the higher prices today, we believe it's critical to maintain discipline on our capital program. Why? Because that's the key to free cash flow generation and through cycle returns. While we would expect 2018 cash flows to be significantly higher at current prices, we are not increasing capital activity.

In other words, even though oil prices have risen, that's not going to cause ConocoPhillips to adjust its operating plan, since its strategy isn't to grow production but cash flow. That's because the company can do much more to create value for investors with that cash than simply reinvesting it into more wells. 

Two oil barrels on top of U.S. currency.

Image source: Getty Images.

Here's what we're doing with our cash flow gusher

"Instead of increasing capex," Lance stated:

We're following our priorities by allocating excess cash flow toward our dividend, our balance sheet, and our share buybacks. We have already paid down an additional $2.25 billion of debt this year. We just announced a 7.5% increase in our quarterly dividend, and we're upsizing our planned 2018 share repurchases by over 30% to $2 billion. By the way, this represents a total of $5 billion in buybacks when combined with our 2017 repurchases.

ConocoPhillips remains steadfast in its strategy to allocate cash on things that will create value for investors on a per-share basis. That's why it's paying down more debt, which should reduce interest expenses and give it even more cash flow in the future to allocate on behalf of investors. It's also buying back more stock so it can continue chipping away at the share count. These initiatives have already started to pay literal dividends, as evidenced by the company's ability to accelerate the dividend growth rate from 6% last year to 7.5% this year.

No longer just an oil company

The overarching theme of Lance's comments is that ConocoPhillips is becoming a cash flow machine. However, instead of using that money just to grow production, it's allocating it to increase the value of each share. That strategy has paid dividends over the past few months and should continue doing so for those to come. 

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.