The price of oil went on a wild ride in 2018, surging 30% before collapsing 40% from the peak, ending the year down 20%. That late-year sell-off took most oil stocks down with it, with the average one losing 28.6% of its value, as measured by the performance of the S&P Oil & Gas Exploration & Production Select Industry index, which tracks the movements of nearly 70 U.S.-listed oil and gas producers.

One oil stock, however, managed to go against that tide and deliver superior performance. That standout was ConocoPhillips (NYSE:COP), which generated a market-smashing total return of 15.6% last year. It was the second straight year that ConocoPhillips vastly outperformed peers, which the company attributes to a strategy shift it set in motion in late 2016. The oil giant firmly believes its plan will continue to pay dividends for investors, which was evident by the comments of CEO Ryan Lance on the fourth-quarter conference call, where he laid out why he expects the company to continue prospering.

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A formula for success

After running through the highlights of 2018 on the call, Lance shifted gears and started discussing what's next. He noted that the company laid out its operating plan for 2019 in early December, which "we believe can and will sustain our success." He stated:

It's a plan that's resilient to lower prices, while offering investors virtually uncapped upside to higher prices. This is an intentional and sometimes overlooked aspect of how we've positioned ConocoPhillips. We play both ends of the field, offense and defense.

On the defensive side, the company plans to cap capital spending at $6.1 billion, which is flat with last year's level. It's a conservative budget, as the company can fund it on the cash flows produced at oil prices as low as $40 a barrel. Add to that the fact ConocoPhillips has a strong balance sheet since it achieved its debt target 18 months ahead of schedule and ended the year with $6.4 billion of cash on hand, and the company can navigate lower oil prices with ease.

Meanwhile, on the offensive side, ConocoPhillips' spending plan will enable it to grow production by 5% to 10% on a debt-adjusted share basis, which takes into account the company's plan to buy back another $3 billion in stock this year, "consistent with our dollar-cost average approach to repurchases," according to Lance. The plan also generates increasing free cash flow at higher oil prices, which could enable the company to buy back even more shares than initially planned this year, as was the case in both 2017 and 2018.

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Drilling down deeper into what's ahead

Another overlooked aspect of ConocoPhillips' strategy is that the company is making several potentially impactful long-term investments that could start paying dividends in 2019. Lance ran through a list of the projects the company has underway. In Alaska, for example, ConocoPhillips will begin construction on a new oil project that sets it up for a big payday when it comes on line in 2021. In addition to that, the company plans to continue its successful exploration program, which has already enabled it to discover as much as 1.1 billion barrels of recoverable oil and gas resources.

Meanwhile, in the U.S., the company expects its three big shale plays (Bakken, Eagle Ford, and Permian Basin) to continue delivering high-octane growth. Lance stated that "we expect to grow production by about 19%." He also noted that "we're focusing our activities in the early part of the year on testing potential resource enhancing programs" that could yield better returns and results in the future. In addition to that, the company is testing the Louisiana Austin Chalk, and "expect[s] to have results later this year." If successful, this area could one day turn into a new growth driver. ConocoPhillips' aim with these activities is to capture opportunities that "add low cost of supply resource, strengthen our portfolio, and create optionality for the future." Furthermore, the CEO noted that "as we see results on these opportunities, we'll retain flexibility on how and when we invest in most of these projects. You should expect us to prioritize and phase these investments in a way that's aligned with our value proposition."

Lance concluded his overview of the company's 2019 plan with this statement:

We're excited to get another year underway. We believe our 2019 operating plan reflects what you've come to expect from us. It's consistent with our priorities, focused on growing long-term value and underpinned by our commitment to strong execution. This is our formula for delivering superior returns to shareholders through the cycles and for many years. It's a formula we believe works, and we're sticking to it.