ConocoPhillips (NYSE:COP) laid out a clear blueprint a few years ago to create value for its shareholders. That strategy has worked better than the company anticipated, which was evident in its second-quarter earnings report, where it posted excellent results once again. Here are three pleasantly surprising numbers from that report:

1. Production: 1.211 million barrels of oil equivalent per day 

Heading into the second quarter, ConocoPhillips anticipated that it would produce between 1.17 million to 1.21 million barrels of oil equivalent per day (BOE/D), which would be down from the first quarter's average of 1.224 million BOE/D due to scheduled maintenance. However, the company's production for the quarter surprised on the upside, coming in just above the high end of its range. That was thanks to strong results from its big-three shale plays (Bakken, Eagle Ford, and the Permian Basin), where output surged 37% year over year. Overall, production from those three regions averaged 300,000 BOE/D, which was "significantly ahead of schedule," according to the company, thanks to strong drilling results.

An oil pump with the sun bursting behind it.

Image source: Getty Images.

By producing at the high end of its range, ConocoPhillips was able to increase output 5% year over year after adjusting for asset sales. Meanwhile, on a debt-adjusted share basis, which takes into account changes in its debt level and the share count, production rose a stunning 34% year over year thanks to the impact of its stock buyback and debt repayment.

2. Adjusted earnings: $1.09 per share

Given ConocoPhillips' production guidance range heading into the quarter, analysts expected the company to earn an adjusted $1.08 per share, which would have been an improvement from its strong first-quarter showing even though it expected production to slip. The company, however, unveiled a pleasant surprise by posting $1.09 in adjusted EPS, and $1.3 billion in total.

Three factors powered the company's expectation-beating result: Production came in just above the high end of its guidance range, it kept a tight lid on costs even though oil prices rose sharply during the quarter, and it repurchased $600 million in shares (about $100 million more than the first quarter).

Just as impressive was cash flow, which came in at $3.16 billion during the quarter. That provided the company with enough to fund $2 billion in capital expenditures, pay about $300 million in dividends, and repurchase $600 million in stock, with room to spare. The company used that excess, along with cash on its balance sheet, to pay off $2.1 billion in debt, enabling the oil giant to achieve its target level 18 months ahead of schedule.

oil rig at night

Image source: Getty Images.

3. Full-year production guidance: 1.225 million to 1.255 million BOE/D

Last fall, ConocoPhillips unveiled its three-year operating plan. The company said that it would invest $5.5 billion per year on developing new oil and gas projects, which it could fund, along with its dividend, with the cash flows generated on $50 oil. But with crude oil currently above $65 a barrel, the company is adjusting that plan, and now expects to spend $6 billion on capex this year. Driving the boost is higher-than-budgeted activity from some of its partners, thanks to higher oil prices.

One of the benefits of the budget increase is that ConocoPhillips now expects production to average between 1.225 million and 1.255 million BOE/D, up from its initial forecast of 1.2 million to 1.24 million BOE/D this year. Also factoring into the increased production outlook is the stronger performance across several of its operating areas -- including the big three -- as well as the acquisition of Anadarko Petroleum's (NYSE:APC) interest in the Western North Slope of Alaska. That puts the company on pace to boost output by 5.5% at the midpoint of its guidance range versus last year's average, after adjusting for asset sales.

Meanwhile, it's possible that output could come in even higher because the company recently announced an asset swap with BP (NYSE:BP). Under the terms of the deal, ConocoPhillips will sell its 16.5% interest in the Clair field in the North Sea to BP in exchange for its 39.2% interest in the Greater Kuparuk area of Alaska. With the Clair interest only producing 3,000 BOE/D in 2017, while Kuparuk's output averaged 38,000 BOE/D, ConocoPhillips stands to see a small uptick from this deal when it closes.

All set to keep growing value

ConocoPhillips has been one of the hottest oil stocks in the S&P 500 this year thanks to its strategy to increase shareholder value over production. That outperformance appears ready to continue, given the company's brighter outlook and the fact that it expects to buy back even more stock in the coming years. Those factors make it one of the top oil stocks to buy these days.

 

Matthew DiLallo owns shares of ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.