Image source: ConocoPhillips. 

ConocoPhillips' (NYSE:COP) third-quarter financial results were clearly affected by lower oil prices. However, the company is making progress to right-size its business for the current environment. That was the clear message on the company's conference call discussing those results. CFO Jeff Sheets took the reins of this call, detailing five areas where the company had made significant progress.

1. The business is performing well
On operational performance, Sheets said:

The key theme for the quarter is the underlying business continues to perform very well. We produced 1.554 million BOE per day which is 4% growth year over year...We achieved first oil from our Surmont 2 megaproject, which should continue ramping up through 2017...We brought six major projects on line so far this year and we expect to deliver cargos from the seventh, our APLNG, project before year-end.

One of ConocoPhillips' main themes for 2015 is winding down several major projects that had been under development for the past several years. All of this year's projects have not only been delivered on time and on budget but are performing at or above expectations.

2. Our budget is flexible
Because the company is in the finishing stages on most of its major projects, it has a lot more capital flexibility going forward. COO Matt Fox chimed in on this one, noting:

We now expect our 2015 capital spending to come in at $10.2 billion. That's a 40% decrease from 2014, and an 11% decrease from our initial outlook for 2015.

Moreover, future spending could be a lot less, with Sheets pointing out that the capex budget will likely be a moving target:

It's hard to talk about that number without some context around what kind of environment we think we're in. If we had a continuation of the type of environment we've seen today we do think we'd be talking about a number that was lower than $8 billion. But it's in that same kind of range.

In other words, if oil prices stay in the range of $45-$50 per barrel, the company's spending could drop below $8 billion thanks to its flexibility going forward.

Overall, capex spending in the industry is well off its peak. One noteworthy example is French oil giant Total (NYSE:TOT), which is bringing spending down to $20 billion-$21 billion next year and to $17 billion-$19 billion in 2017 and beyond. Those levels are well below Total's peak spending of $28 billion in 2013 and $23 billion-$24 billion this year.

3. We've really made progress on our costs
As for progress made on reducing costs, Sheets pointed out that the "operating costs were down 18% when adjusted for special items." That's better than the expected performance for the company. In fact, COO Matt Fox noted that:

[...] We set a target to reduce operating costs in 2016 by $1 billion compared to 2014. And what our revised 2015 operating cost guidance represents is an acceleration of this effort. In fact, we've now exceeded our $1 billion target in half the time... And we're not done yet.

Not only is the company ahead of its cost reduction target, but it sees further operating cost cuts that can be achieved. This will offset more of the impact weak commodity prices are having on its margins.

One thing producers have discovered is that the longer oil prices stay low, the more cost deflation they can capture. That's why Total recently raised its operating cost reduction target by 50% and now expects to trim $3 billion from operating expenses by 2017.

4. We're in strong shape financially
On the balance sheet, Sheets said:

We believe we're in strong shape financially. Between cash on hand, debt capacity within a single-A credit rating, and expected asset sales proceeds we have the means to manage through the current period of low prices.

While weak prices have reduced the company's cash flow, it has other levers to pull to stay financially strong. One of the key points Sheets made is that ConocoPhillips can handle more debt on its balance sheet and still maintain a strong investment grade credit rating. That's a huge competitive advantage given that a lot of its peers are focused on reducing debt to stay afloat.

5. We're minding the gap
ConocoPhillips' ultimate goal is to be cash flow neutral in 2017 no matter the oil price. As Sheets reiterated:

[...] We have increasing levels of capital flexibility, increasing production levels to where we feel like we're going to be able to get [to cash flow neutrality] at a pretty broad range of commodity prices. So there's not really just kind of one commodity price number that we point out as what it takes for us to get to cash flow neutrality in 2017.

In other words, the company has clear line of sight that the gap between its cash flow and cash outflows for capex and the dividend will be fully closed by 2017. Furthermore, that gap can be closed under a range of commodity price scenarios, suggesting that it can be attained even if prices stay in the current range. That's a better scenario than at some rivals, with Total needing a $60 oil price to cover its dividend and capex in 2017, even with all the cost reductions.

Investor takeaway
While higher oil prices are not yet in sight, ConocoPhillips is facing the challenge head-on. The company is controlling what it can, which are its production, capital, and operating costs. This has it positioned for long-term sustainability even if oil prices stay lower for a lot longer.

Matt DiLallo owns shares of ConocoPhillips. The Motley Fool recommends Total (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.