Devon Energy's (NYSE:DVN) year was off to a strong start by posting expectation-beating first-quarter results about three months ago. Because of that, the company anticipates that 2018 will be a good year, especially since oil prices are currently well above the $60-a-barrel baseline it set for its budget. We'll know if that's still the case when it reports second-quarter results later this week. Here are a few things to keep an eye on when looking over that report.

1. See if production met expectations

Devon Energy experienced some production problems at the end of 2017, which caused output and earnings to miss the mark. However, thanks to record-setting drilling results in the Permian Basin, Devon's oil production averaged 122,000 barrels per day (BPD) in the first quarter to hit the high end of its guidance range. The company expects that upward trajectory to continue in the second quarter given its forecast that oil output will average between 129,000 to 134,000 BPD.

An oil pump at dusk.

Image source: Getty Images.

Investors should see if the company hit that goal since that would keep it on pace to achieve its full-year outlook for production to average 130,000 to 135,000 BPD, which would be 16% higher than 2017 at the midpoint. That growth rate would position the company to increase quarterly cash flow by an impressive 35% from the first quarter's level, assuming oil averages around $65 per barrel.

2. Keep an eye on the Permian pipeline issues

One issue that started developing during the second quarter was a concern about pipeline capacity in the Permian Basin. Due to the region's fast-paced growth, pipelines moving crude out of the area are quickly filling up. According to an estimate by Pioneer Natural Resources (NYSE:PXD) in late June, pipes could reach their limit in three to four months, causing some companies to shut off producing wells while others could leave recently drilled ones unfinished. While that's not an issue for Pioneer Natural Resources since it has contracted space for 95% of its production, it could be a problem for others in the region.

This issue already led at least one driller, Halcon Resources (NYSE:HK), to slow its drilling pace. In Halcon's case, it slashed its drilling fleet by 25%, which will likely cause production to miss expectations this year.

The concern is that Devon might also need to slow its pace. While the company pointed out in a recent investor presentation that it has contracts in place to protect pricing and assure the flow of 90% of its oil, Devon only has agreements to get 40% of its oil out of the region via pipelines. Because of that, investors should watch for any changes to the company's drilling plans.

Sunset through the twists of a pipeline system.

Image source: Getty Images.

3. Check out the company's share repurchase plans

In March, Devon Energy announced that it would start returning more cash to investors by increasing its dividend 33% and authorizing a $1 billion share repurchase program. However, after agreeing to sell its midstream business for $3.125 billion in June, Devon boosted its buyback to $4 billion, which is enough to retire about 20% of its outstanding stock.

When the midstream deal closed in mid-July, Devon said that it would use an accelerated share repurchase (ASR) program to complete its buyback faster and that it would detail the plan in its second-quarter report. That process is worth noting because fellow oil and gas giant Anadarko Petroleum (NYSE:APC) recently utilized an ASR to wrap up its $3 billion repurchase program, which it completed in just nine months. Those fast-paced repurchases helped drive Anadarko's stock up about 60% since it first announced its buyback last fall, more than doubling the return of Devon over that time frame. Given that outperformance, investors should check out the timing and size of Devon's ASR since a lightning-speed pace of the entire authorization could quickly drive its stock higher.

Lots of moving parts this quarter

Devon fully expects its drilling machine to deliver a gusher of new oil in the second quarter, which would keep it on track for a strong year unless pipeline constraints in the Permian slow it down. If that happens, shares could take a hit. However, that sell-off might be short-lived since the company could quickly scoop a significant chunk of its stock via its needle-moving buyback. As a result, any post-earnings sell-off could be a great opportunity to buy shares of this top-tier oil stock.