The oil and gas sector has been one of the market's best performing sectors this year. And leading the charge is independent exploration and production company ConocoPhillips (COP 1.23%).

Up just over 21% year to date, ConocoPhillips has outperformed the S&P 500 by around 14% this year, an impressive return for a company of its size.

How much longer can this performance continue? Is ConocoPhillips now overvalued?

Destined for growth
Conoco's recent gains can be traced back to one event: The revelation by the company's management that it would be targeting double-digit annual returns for shareholders over the next few years.

Management set out the way the company was going to meet this target earlier in the year at a shareholder conference. Firstly, the company is targeting production growth of 3% to 5% per annum. Secondly, in addition to this production growth, Conoco's management is looking to cut costs and develop higher-margin assets, in order to achieve 3% to 5% per annum in margin expansion.

What's more, in addition to these operational improvements, ConocoPhillips is committed to offering a compelling dividend yield, increasing every year. 

So, for the next few years, Conoco's management is targeting a minimum earnings growth of 6% per annum, 10% maximum. Include the dividend, and investors should see 9% to 13% growth per annum.

These are some impressive targets, and with them, ConocoPhillips has attracted the attention of Wall Street. Despite recent gains, Conoco still appears to be undervalued in comparison to its smaller peers.

Valuation
Two of Conoco's closest peers in the independent, international exploration, and production sector are Anadarko Petroleum (APC) and Occidental Petroleum (OXY 0.89%).

Right now, Anadarko trades at a forward P/E of 19.1, and Occidental trades at a forward P/E of 14.3. Conoco, meanwhile, trades at a forward P/E of 13.6. 

These higher valuations would be understandable if both Anadarko and Occidental were forecasting higher rates of growth, but they're not.

Occidental is targeting 5% to 8% annual output growth, similar to Conoco's target. Include the dividend payout -- a yield of 2.8% -- and Occidental's total return would fall in the region of 7.8% to 10.8%. 

Anadarko is also targeting high single-digit annual output growth. Anadarko is targeting 5% to 7% annual output growth, building on a five-year record of 7% per annum output growth. Once again, add in Anadarko's dividend yield of 1%, and Anadarko's total return would fall in the region of 6% to 8%.

So then, it would appear based on production growth and future earnings multiples, Conoco has room to run compared to its smaller independent E&P sector peers.

History of success
In addition to Conoco's lofty growth targets and compelling investment case, investors have been able to take solace in the fact that the company has a history of making good on its promises.

Specifically, during 2012 and 2013, ConocoPhillips divested $12.4 billion of non-core assets, drove cash margins higher by 11%, achieved a reserve replacement ratio of 167%, and hiked the dividend by 4.5%. All in all, the company achieved a total shareholder return of 23% during the period between April 30, 2012 to December 31, 2013, beating the peer average of 13% and the S&P 500's total return of 21%.

What's more, as the price of oil rises, Conoco's investors could be in for a surprise. The company has stated that for every $1 rise in the price of Brent, it will earn an additional $80 to $90 million. 

Foolish summary
It would appear Conoco does have further to run. The company's growth plans are impressive -- annual earnings growth of 10% is nothing to sneeze at -- and Conoco's total returns are some of the highest in the sector.

Moreover, at present values, Conoco is currently undervalued in comparison to its smaller independent E&P peers. Conoco's run is not over yet.