Continued volatility in the oil market has put pressure on most oil stocks. Among those walloped by all the movement in crude prices is Devon Energy (NYSE:DVN), which has lost nearly 50% of its value in the past year. The U.S.-focused oil producer, however, is working to reposition its portfolio so it can thrive in any oil price environment.

That strategy is paying dividends, which was evident in the company's second-quarter results. That led CEO Dave Hager to highlight five of Devon's "value-enhancing accomplishments" during the accompanying conference call, which showed that its plan is beginning to pay off.  

Several oil pumps in a row at dusk.

Image source: Getty Images.

1. Our oil production continues to outpace expectations

Hager started his highlight reel by stating: "First, oil growth continues to exceed our plan and we are now raising our full-year oil production outlook for the second time this year to a 19% growth rate. This represents a 400-basis point improvement compared to our original budget expectations heading into the year."

Devon's new strategy has been to transform into a U.S. oil growth company. That shift is going even better than planned given that the company is on track to grow its U.S. oil production at a much faster rate than the 15% it initially anticipated. The main driver has been exceptional well performance in the Delaware Basin, where it's drilling increasingly more productive wells. 

2. We're getting even more bang for our buck

Next, Hagar noted the following:

Importantly, the strong well productivity driving oil growth higher is complimented with a step-change in capital efficiency, resulting in a $50 million reduction in our 2019 capital outlook. Keep in mind our 2019 capital budget already had $200 million in efficiencies built into it compared to 2018. So far this year we have brought online 20% more wells for 10% less capital compared to 2018. Any way you slice it, these are outstanding results.

In addition to its stronger-than-expected well results, Devon is becoming an even more efficient driller. That's enabling it to produce more oil for less money so that it's earning a higher return on its investment.

3. Our cost-cutting initiatives are creating value

Hagar then pointed out:

We have also taken action to materially improve our corporate cost structure. Our operating and G&A cost-saving initiatives are exceeding the plan by a wide margin and now are on pace to achieve more than 70% of the $780 million annual savings target by year-end. The impact of this savings plan is massive with a PV10 benefit over the next decade of more than $4 billion. This is equivalent to roughly 25% of our current enterprise valuation.

Devon has also worked to drive down other costs so that it can improve its overall profitability. The company has quickly reduced spending so that it's well ahead of the pace of its targeted level. This plan should significantly increase its profitability at current oil prices, which will make it a much more valuable company.

A land drilling rig at sunset.

Image source: Getty Images.

4. Our strategy is enabling us to generate significant free cash flow

Hagar said next, "This capital and cost discipline translated into free cash flow in the quarter, and coupled with our accretive sale of Canada, we have achieved nearly $3 billion of excess cash inflows this year." By driving down costs, Devon has been able to generate free cash flow despite all the volatility in the oil market. That's giving it the funds to do several things that should benefit shareholders in the long run.

5. We're putting our money to good use

Hagar concluded by detailing how the company is allocating its cash flow. He said: "With these inflows, we are delivering on our promise to reduce leverage and return capital to shareholders. In fact, our leverage has now declined by 80% from peak levels and we have returned more than $4 billion of cash to our shareholders through dividends and buybacks." Devon has used its cash to enhance shareholder value. Not only has it paid off most of its debt, but it has also repurchased 24% of its outstanding stock since it instituted a buyback last year. That's the most in the oil sector on a percentage basis. That number should rise as the company completes the remaining $600 million left on its current authorization by year-end.

Devon's strategy appears to be working

Devon Energy has spent the past several years reshaping its portfolio so it can make more money at lower oil prices. That plan seems to be paying off, as its costs are going down while it enhances shareholder value with the cash flowing in. Eventually these efforts should help boost the company's stock price, which makes Devon an intriguing bounce-back candidate.