ConocoPhillips (COP 1.46%) has been one of the best-performing oil stocks of 2018, up nearly 30% year to date, easily outpacing the less than 4% return of the S&P 500. Meanwhile, shares are up almost 64% in the past year, smashing the 14% gain by the broader market. And despite its impressive outperformance, we "still see upside potential for our shares," according to CEO Ryan Lance. The company is backing up that statement, too, by significantly expanding its share buyback program. Those buybacks could give the oil giant's stock the fuel it needs to continue its market-crushing run.

Raising the ante once again

With oil prices recently in the mid-$70s, ConocoPhillips is generating a gusher of cash flow, since its budget is set to run on $50 crude. The company used a portion of its oil-fueled windfall to pay off debt, which allowed it to achieve its debt reduction target a year and a half ahead of schedule. Now that it has checked off that goal, the company can return even more of its growing stream of excess cash to shareholders.

A man in a suit with a fan of $100 bills in his hands.

ConocoPhillips is returning even more cash to shareholders. Image source: Getty Images.

That's why it recently announced an increase in its share buyback program up to $3 billion for 2018. That's 50% more than the prior authorization and double its initial plan. Furthermore, the company authorized an additional $9 billion for future share repurchases, bringing the total to $15 billion when factoring in the $3 billion it spent last year. That's enough cash to retire 20% of its outstanding shares from the starting point in late 2016.

This increase is just the latest one from the company, which initially unveiled a $3 billion repurchase program in late 2016 that it intended to finance with asset sales. The company would go on to double that authorization early last year after selling several assets in Canada, which allowed it to buy back $3 billion in shares by the end of 2017. It then extended the plan to $7.5 billion late last year, which will enable it to repurchase $1.5 billion in stock per year through 2020. However, with higher oil prices in 2018, the company added $500 million to its plan for this year in February before raising the ante once again with its most recent announcement.

Raising the bar again and again

ConocoPhillips is just the latest oil producer to announce a further expansion of its share buyback program thanks to higher oil prices this year. Earlier this month, Anadarko Petroleum (APC) added another $1 billion to its share repurchase program. That marked Anadarko's third buyback-related announcement in the past few months. The oil giant initially authorized a $2.5 billion share repurchase program last fall -- enough to retire 10% of its outstanding stock at the time -- before adding $500 million to it earlier this year.

Meanwhile, Devon Energy (DVN 1.58%) and Hess (HES 0.44%) both started with smaller authorizations that they've since expanded. In Devon Energy's case, it initially set a $1 billion buyback program, which at the time was enough to retire 6% of its outstanding stock. However, after selling its midstream business, Devon added $3 billion to its authorization, giving it the cash to buy back 20% of its shares. Hess, meanwhile, started off with a $500 million buyback program last fall, which it boosted by $1 billion earlier this year, enough to retire about 10% of its shares at the time.

These buyback programs have fueled big-time gains for investors, with both Anadarko and Hess up more than 35% already this year, while Devon's stock has gained 30% since it authorized its repurchase program a few months ago.

More upside ahead

Despite ferocious gains since starting its buyback program, ConocoPhillips firmly believes the market has undervalued its stock given the cash flow it can produce at higher oil prices. That's why it's redirecting more of its growing stream of excess cash toward repurchasing shares. Many of its peers feel the same way, which is why they're also buying back more and more shares. These buybacks, when combined with the potential for even higher oil prices in the future, could send these oil stocks much higher in the coming years.