ConocoPhillips (NYSE:COP) continued its strong operating and financial performance in the second quarter, once again posting expectation-beating results. Accordingly, one of the main themes running through the accompanying conference call was how much the company was outpacing its targets. Here are four areas management pointed out where the oil giant is vastly outperforming its expectations.

We already achieved our debt reduction target

CFO Don Wallette led off the call by outlining the company's progress on its strategic priorities. He stated:

During the quarter, we completed our debt reduction program and achieved our $15 billion debt target. We've reduced balance sheet debt by nearly half since 2016. We're in a strong financial position now and we're happy with our balance sheet, so we don't plan to reduce debt any further.

ConocoPhillips initially set a target in late 2016 to get debt below $20 billion but revised that goal last year after selling several assets, with its new aim to get debt to $15 billion by the end of 2019. However, thanks to its strong performance and higher oil prices, it hit that goal 18 months ahead of schedule. As a result, the company has a strong balance sheet with a net debt-to-cash flow from operations ratio of "a little under 1" according to the CFO, which is one of the lowest in the sector.

Multiple oil pumps at sunrise.

Image source: Getty Images.

We're ramping up our stock buyback program

The CFO continued with the highlight reel, stating:

Achieving the debt target allowed us to consider additional shareholder distributions, and you've seen our recent announcement where we plan to increase our buybacks this year to $3 billion. And going into 2019, we'll have a remaining authorization to repurchase up to $9 billion of shares over the coming years. This highlights our expectation that buybacks will continue to be an important component in addition to dividends of our shareholder distribution philosophy.

When combined with the $3 billion in stock ConocoPhillips bought back last year, it now has the authorization to retire roughly 20% of the shares it had outstanding when it started the buyback program in late 2016, which is a needle-moving amount. The company has already repurchased $4.1 billion in stock, which has helped drive shares up nearly 60% since the initial announcement, enabling it to vastly outperform most other energy stocks considering that the average one in the S&P 500 is only up 8% over that time frame.

We're generating more cash than we thought

Aside from achieving its debt reduction target ahead of schedule, the other reason ConocoPhillips is ramping up its buyback program is that the company is generating more cash than anticipated this year. Wallette noted that it initially expected to produce $7 billion in cash flow from operations this year assuming $50 oil, which put it on pace to generate $10 billion in cash at $65 oil.

However, he said, "That's turned out to be too low, so we've recalibrated in light of our current outlook. The new reference point I'd give you is that at $65 [a barrel], we'd expect to generate cash flow from operations between $11.5 billion and $12 billion" and over $12 billion at current prices closer to $70 a barrel. With the company only needing $6 billion to fund its capital program, and another roughly $1.2 billion to pay dividends, it's on pace to produce a gusher of excess cash this year, which is why it boosted its buyback again.

A drilling rig with a sunset in the background.

Image source: Getty Images.

We're growing at a healthy clip

ConocoPhillips initially expected to spend about $5.5 billion on capital expenditures this year but boosted its budget to $6 billion due in part to increased activity levels from its operating partners as a result of higher oil prices, which means the company needs to raise its contribution. One of the benefits of that activity increase is that it will see some incremental production from those wells. Add that to its stronger-than-expected production so far, and the company "expect[s] to deliver 6% underlying production growth in 2018," according to Al Hirshberg, the EVP of production, drilling, and projects, up from its initial forecast of 5% growth. 

Production, however, is growing at an even faster pace when including the impact of share repurchases and debt repayment. Hirshberg stated that it "translates to 9% production growth per share and about 20% production growth per debt-adjusted share" for 2018. That's an excellent growth rate for a company of its size.

This oil stock is firing on all cylinders

The one thing ConocoPhillips' management team made clear on the second-quarter call is that the company continues to outperform the expectations of its strategic plan. The reason they pointed this out is that while shares have come up sharply in the past year, the "market hasn't yet fully appreciated the cash-generating capability of our assets," according to Wallette. As a result, they plan to continue plowing their growing free cash into buying back stock until the market gives the company the credit they believe it deserves. That upside potential makes ConocoPhillips one of the top energy stocks to buy right now.

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.