After a tough year that saw upstream production drop 1.5% and downstream profits collapse a whopping 72%, ExxonMobil (XOM 0.02%) and its investors are hoping for a turnaround. For this to materialize, several things need to work out in the company's favor.

On the downstream side, margins on refined product sales need to improve. For this to happen the spread needs to widen between the U.S. and international crude benchmarks. To this end, ExxonMobil expects modest improvement.

On the upstream side, ExxonMobil will need to maximize its existing projects, especially since it will cut capital spending plans for this year. Fortunately, management outlined its upstream portfolio lineup for this year at the company's 2014 analyst meeting. Overall, management is actually quite optimistic about its production potential, which may be a surprise given its focus on fiscal discipline.

Why 2014 may turn out to be a record year
As an investor, you're probably concerned that ExxonMobil might not see a turnaround this year. That's because management plans to reduce capital expenditures from $42.5 billion last year to $39.8 billion this year. On the other hand, ExxonMobil points to the fact that the company has a record number of new oil and gas projects set for 2014.

And while a nearly $3 billion reduction in capital expenditures appears prohibitive to future growth, it's nothing compared what Royal Dutch Shell (RDS.B) is doing to its own budget. Royal Dutch Shell warned investors it would reduce capital expenditures by nearly 20% this year, to $37 billion from $46 billion last year.

This makes effective investment allocation hugely important. Integrated oil majors such as ExxonMobil and Royal Dutch Shell will have to do more with less, so to speak. On that front, ExxonMobil investors have little to worry about. ExxonMobil has long been an effective allocator of capital, much more so than its peers.

Consider that ExxonMobil's return on capital employed, which measures how much a company profits when compared to the investments made, stood at 17% last year. By comparison, Royal Dutch Shell's clocked in at just 7.9% at the end of 2013. It's true that ExxonMobil won't invest as much this year, but at the same time, the massive investments over the past several years are set to come on-line and should start contributing positively to the company.

In all, ExxonMobil expects to begin production on a company record, 10 major projects this year, with a combined capacity of approximately 300,000 barrels of oil equivalents per day. That represents 13% growth from the 2.2 million barrels of equivalents produced per day in the fourth quarter. Not only will this boost production on an absolute basis, but ExxonMobil CEO Rex Tillerson was quick to point out to analysts that profitability stands to improve from the company's lower expenditures.

The longer-term outlook is even more promising from a production perspective. That's because ExxonMobil has several projects set to come on-line over the next few years across the globe, in regions which include Australia, Indonesia, Canada, Nigeria, and the United States. Collectively, these projects are expected to add 1 million barrels of oil per day by 2017.

Focus on high-margin resources
ExxonMobil's profits stand to improve considerably as a result of simultaneous efforts to trim costs and focus on higher-margin liquids. Relatively, liquids present a lower risk than other resource types. ExxonMobil is specifically targeting growth in its liquids operations in North America.

ExxonMobil projects flat production growth this year and 2% to 3% annual production growth between 2015 to 2017. Liquids will lead the way. While gas production is expected to decline by 2% this year and up just 1% for 2015 to 2017, liquids production will increase 2% this year and by 4% per year from 2015 through 2017.

Management acknowledges it won't be spending as much going forward, but it believes that shouldn't necessarily be viewed as a bad thing. It's reaping the benefits of huge investments placed over the past several years. And, it's placing focus on improving the profitability mix of its operations, increasing production of higher-margin liquids. As a result, ExxonMobil's free cash flow is likely to improve substantially this year.

Luckily, ExxonMobil offers a nice yield, much like these 9 companies