Here's Why These 2 Energy Giants Can Support Your Portfolio

It may seem contradictory to say that ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) are pillars of stability, especially considering the volatility of their profits over the past year. By now, it's no doubt that these integrated oil and gas companies are suffering. Their earnings got walloped last year, due to a combination of poor performance across both sides of the upstream and downstream spectrum.

On the upstream side, disappointing production was exacerbated by field declines. And, on the downstream end, deteriorating margins on refined products caused a huge drop-off in profitability. That's why it might sound absurd to consider any integrated oil and gas stock stable right now. But for Foolish investors who focus on the long term and don't get overly fixated on short-term trends, the truth is, ExxonMobil and Chevron are just that.

Take the long view
ExxonMobil and Chevron both saw profits fall significantly last year, which might give investors cause for concern. ExxonMobil's diluted earnings per share fell 24% last year. Its performance was especially bad on the downstream side, where collapsing refining margins between domestic crude and the international benchmark led to a severe earnings decline in that segment.

Downstream profits fell by 73% last year, but the true business performance wasn't nearly as bad as that figure suggests. The prior year was benefited by a $5.3 billion gain associated with a restructuring in Japan. It's a similar story for Chevron, whose profits fell 18% last year, due to many of the same factors.

However, it's important for investors to look past the near-term struggles the integrated majors face to realize their true long-term promise. Each company has several projects coming on-line over the next few years which will get production growth going again.

This year, ExxonMobil plans to start production at a record 10 major projects to add capacity of 300,000 barrels of oil equivalents per day this year. These new projects could immediately increase production by approximately 13% based on the company's average daily fourth-quarter production.

Chevron's upstream lineup is headlined by its two liquefied natural gas projects in Australia known as Gorgon and Wheatstone. Gorgon is 75% complete and Wheatstone has reached important construction and marketing milestones. Once they're online, they are perfectly suited to service the emerging markets in Asia, which are seeing high demand for energy thanks to strong economic growth and rising standards of living.

Fantastic shareholder rewards intact
There's perhaps no better indication of a company's track record of success than its history of paying dividends. ExxonMobil and Chevron have been around so long that they're literally seen it all. They've gone through recessions, wars, and other extended periods of concerns. And yet, they've sailed through each period, continuing to reward their loyal shareholders along the way.

ExxonMobil distributed $26 billion to shareholders last year in share repurchases and dividends. In 2013, ExxonMobil and Chevron both increased their dividends, despite the pressure on underlying earnings. ExxonMobil raised its dividend for the 31st year in a row, while Chevron upped its own payout for the 26th consecutive year. These types of track record convey just how stable and reliable both companies have been for shareholders over the long term.

The bottom line
It might seem scary to invest in ExxonMobil and Chevron considering how poorly each company performed last year. Indeed, their earnings got crushed due to a dip in production and severely tightening refining margins. At the same time, the age-old saying 'this too shall pass' seems to apply to the integrated majors right now.

The tough operating conditions that have weighed on their results over the past year won't last forever. Both companies see global refining conditions improving, and have some major upstream projects designed to get production growth going once again. This should make their underlying results look much better this year and beyond. In the meantime, investors are receiving strong dividend yields that serve as valuable downside protection in these tough times. That's why investors should continue to feel good about owning ExxonMobil and Chevron.

These companies exist to service the likes of Exxon and Chevron
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