When fundamentals improve, results are bound to follow. Anadarko Petroleum's (NYSE: APC) quarterly results have confirmed just that. Despite issues that the company has been facing with regards to last year's Gulf oil spill, a fantastic improvement in sales has ensured a bright second quarter.

Net income stood at $544 million, compared to the year-ago quarter's net loss of $40 million. Thanks to record liquids sales of 297,000 barrels per day (bpd) and high oil prices, things couldn't have been better for Anadarko. For the record, this is a huge 34,000-bpd increase from the corresponding quarter last year.

Big plans
Acquisitions worth $880 million in the quarter mirror management's ambitious intentions. Future plans look even more promising. The Gulf of Mexico is where the action is going to be.

Deepwater exploration figures right at the top of the agenda. By the end of this year, management expects to discover more than half a billion barrels of oil equivalent (BOE) from this region. That is huge. Competition with the Big Oil companies is definitely going to heat up. McMoRan Exploration (NYSE: MMR) is yet another example of a company that maintains a stubborn belief in the Gulf.

Anadarko has already signed long-term contracts with Diamond Offshore (NYSE: DO) to build two drillships in the region. With delivery scheduled to begin in late 2013, production should go up substantially over the next few years.

International operations have already been scaled up. Offshore Ghana is currently producing 50,000 bpd, and the company is expecting further ramp-up.

Not a major worry
Still, it would be wise to confirm whether Anadarko's free cash flow will allow further spending on these huge projects. This quarter, it generated a negative FCF of $593 million; the past four quarters have collectively generated a negative FCF of $1.4 billion.

In other words, the company has invested more than it could generate in the past 12 months. However, I don't think this should be a major cause for worry. Operations look pretty sound and capable of generating higher cash flows. With cash balances of $3.4 billion, the balance sheet also looks healthy.

Still, last year's Macondo well blowout is yet to rest peacefully with many oil firms. BP (NYSE: BP) has billed the company for $5.2 billion in damage claims. While a settlement is yet to be reached, I doubt Anadarko will come out the loser. Holding a nonoperating interest in the Macondo well should work in Anadarko's favor as far as operational damage claims are concerned.

Foolish bottom line
Owners of this stock only have reasons to rejoice. In the past 12 months, the stock has returned a brilliant 69% while the S&P has returned just about 18%. Overall, I consider Anadarko to be a pretty safe stock with huge growth potential. While overall market conditions did contribute to a chunk of the cash flows, management was smart enough to exploit the situation by increasing production. Fools should be happy about the entire second-quarter results and the potential of this stock.