Energy-related earnings have been coming in much stronger than expected this quarter as several companies beat analysts’ estimates. Fueling these stronger-than-expected results has been a combination of strong production and much lower costs. Both were evident in Suncor Energy Inc.’s (TSX:SU)(NYSE:SU) results, as it delivered one of the strongest quarters among oil stocks.

Absolutely crushing it

Suncor’s earnings fell along with the price of oil, dropping from $1.1 billion, or $0.77 per share, in last year’s second quarter to $906 million, or $0.63 per share, this past quarter. However, the fall wasn’t anywhere near as steep as analysts were expecting as the company blew past the consensus estimate of $0.30 per share. Further, cash flow was strong at more than $2.1 billion, which wasn’t that far off last year’s second-quarter total of $2.4 billion.

Driving Suncor’s surprising quarter was strong production growth, which was up 45,000 barrels per day over last year’s second quarter to 423,000 barrels per day. That was despite the fact that the company had planned maintenance at its Firebag facility during the quarter.

The other big driver was the company’s cost-cutting initiatives, which resulted in its cash operating costs per barrel dropping from $34.10 in the year-ago quarter to $28 this past quarter. Meanwhile, capex costs are falling as well, which is why the company is pulling another $400 million out of this year’s budget.

Giving back while others take away

With strong cash flow, and a further slimming of its capex budget, Suncor Energy is now actually generating excess cash. That’s a rare feat in the energy industry these days. Not only did Suncor raise its dividend by a penny per share when many other energy dividends were being cut or eliminated, but it’s also restarting its stock buyback program.

The share buyback program had halted this past February. The company cited the lower crude price environment as the culprit. Crude prices, however, haven’t improved all that much since that time, and have grown weaker in recent weeks. What has improved, on the other hand, is the company’s cash flow as a result of its costs falling. Further, the company’s future visibility is much improved as there are signs on the horizon that the oil market is starting to stabilize as supply and demand are expected to be in balance later this year.

Investor takeaway

Suncor Energy Inc. delivered exceptional second-quarter results given the circumstances. The most impressive number was its cash flow, which barely budged year over year despite a significant drop in the oil price thanks to strong production and cost reductions. Because of this the company is in a position to boost its dividend and resume stock buybacks at a time when many of its peers are cutting or eliminating shareholder cash returns.

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Fool contributor Matt DiLallo has no position in any stocks mentioned.