Devon Energy (NYSE:DVN) recently reported unexpectedly mixed second-quarter results. While production was toward the high-end of its guidance range, earnings missed analysts' expectations due to higher costs. However, overall the "second quarter was another strong one for Devon" according to comments by CEO Dave Hager on the accompanying conference call. He would go on to point out several reasons why the company's progress during the quarter has it even more optimistic about what lies ahead.

1. We're running ahead of schedule

One of the highlights during the quarter was the "outstanding performance of our U.S. resource plays," which Hager noted have "consistently delivered light-oil production results above our base plan year to date." Driving this performance has been "the record-setting well productivity we have achieved across our franchise assets in the Delaware Basin and STACK," Hager said. Hager noted the production from several high-rate wells helped catapult its U.S. oil output 12% from the first quarter, "exceeding guidance by a wide margin." Because of that, Devon is on pace to grow faster than expected this year while living "within the confines of our original capital budget guidance range," according to Hager.

A row of oil pumps reflecting on the water as the sun sets behind them.

Image source: Getty Images.

2. We expect to exceed our asset sale target by year-end

One of the critical components of Devon Energy's growth plan, dubbed its 2020 Vision, is to sell non-core assets so that the company can sharpen its focus, improve its balance sheet, and return capital to shareholders. Devon "took a significant step forward with this strategic objective" in the second quarter, according to Hager, after it agreed to sell its interest in EnLink Midstream for $3.125 billion. That pushed the company's asset sale total to $4.2 billion. Hager noted that the "next step in this program is to monetize an additional $1 billion of minor, non-core assets across the U.S. by around year-end." That would push the company's proceeds from this program above its $5 billion target.

3. We are returning industry-leading amounts of cash to our shareholders

With Devon's operating cash flow currently funding its drilling plan, it has little need for this money. Because of that "we are returning these divestiture proceeds to our shareholders in the form of a share repurchase program," Hager said. He noted that the board has "authorized an increase in our share repurchase program to an industry-leading $4 billion." That's enough cash to retire about 20% of its outstanding shares, which rivals the program of ConocoPhillips (NYSE:COP). However, while ConocoPhillips' $15 billion buyback could retire 20% of its outstanding stock when it finishes the program in a few years, Devon Energy expects to complete its needle-moving buyback during the first half of 2019.

4. We're not resting on our laurels

While Devon Energy has made excellent progress on its 2020 Vision this year, Hager said, "I do want to be clear, we are not content with the substantial progress we have made to date." He continued by saying "the management team at Devon is laser-focused on optimizing returns and ensuring capital efficiency for our shareholders." Because of that, he said the company would:

Continue to attack costs and transition our product mix toward higher-margin barrels ... be disciplined with our capital allocation and generate significant free cash flow ... continue to evaluate strategic opportunities to high-grade the portfolio ... [and] continue to prioritize returning increasing amounts of cash to our shareholders.

A drilling rig at sunset.

Image source: Getty Images.

5. We still believe that the Eagle Ford Shale will be an important part of our future

One other item the CEO addressed on the call was the future of its position in the Eagle Ford Shale. With the STACK and Delaware Basin becoming Devon's main growth drivers, there's some question of what the company might do with this position, especially since its drilling partner, BHP Billiton (NYSE:BHP) recently agreed to sell its position to BP (NYSE:BP). Hager noted that the company has "fielded a lot of questions" on the deal and wanted to provide its "thoughts on BHP's announced sale of its Eagle Ford position." He said, "Overall, it is good to see a quality operator like BP acquire this position." He noted that "we have had extensive experience working with BP in the past, both as partners in projects and on multiple asset sales as well." He said that while the company hasn't had any deep conversations with BP about its position, Devon doesn't see any near-term changes. Further, he said that "from a portfolio perspective, we do like our Eagle Ford position," which he pointed out is in "the economic heart of the play and we have a multi-year drilling inventory that can generate outstanding returns, a stable production profile, and significant free cash flow for Devon." Because of that, it appears as if the Eagle Ford will remain an important part of the company's portfolio.

Devon's vision continues coming into focus

While Devon Energy's earnings underwhelmed in the second quarter, the company performed well on both an operational and strategic front. That positions the oil and gas driller to grow production at a stronger-than-expected pace while sticking to its budget even as it returns a boatload of cash to investors. Those fuels could enable the company to deliver strong returns for investors, which makes it an excellent oil stock to consider buying for 2018 and beyond.

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