Energy booms are making headlines today, with everything from America's resurgent oil and gas production to Canadian tar sands to huge offshore oilfield discoveries tantalizing investors with the prospect of striking it rich on the back of black gold. A few weeks ago, I wrote about two of my favorite major oil companies, Chevron (CVX -0.06%) and Suncor Energy (SU -0.27%).

In my article on Chevron, I explained why it was the best of the major integrated oil companies, with superior margins, operational efficiencies, and a higher yield than competitors such as ExxonMobil. In my article on Suncor, I explained why this highly undervalued play on Canadian tar sands was a dividend growth investor's dream stock, with a five-year dividend growth rate of 35% and plans for large-scale production growth over the next several years.

Since those articles were written both companies have announced their earnings and provided updates to their growth initiatives. This article will highlight how both companies are doing and examine whether the original investment theses still hold. 

Chevron's terrible quarter: why it doesn't matter
Investors in Chevron may have been surprised at the company's most recent results, and not in a good way:

  • Q1 earnings down 27%.
  • U.S. upstream earnings down 19.5%.
  • International upstream earnings down 29.5%.
  • U.S. refining earnings up 213%.
  • International refining earnings down 49%.
  • Dividend raised 7%.
  • $1.25 billion in share buybacks during the quarter.

How can I claim that Chevron's quarter is a buying opportunity when on its face the results appear terrible, with decreasing production, lower oil prices, and major production snags in Kazakhstan?

For the same reason why management felt confident enough to buy back over $1 billion in stock and raise the dividend; the long-term growth story remains intact. 

The key to Chevron's investment thesis is two-fold: its great track record as a high-yielding dividend growth stock (25 consecutive years of increasing dividends) and management's plan to raise production by 20% through 2017 while keeping production costs flat. This will increase the company's already industry-crushing margins (it has a net margin 50% better than the industry average at 9.4% compared to 6.1%) and allow it to grow its dividend at 8%-10%, slightly faster than its 20-year dividend CAGR of 7.26%.

Several upcoming projects are key to management's growth goals, and they take advantage of three major energy megatrends: offshore production in the Gulf of Mexico, oil shale, and LNG (liquefied natural gas) exports.

Estimates place the recoverable oil in the Gulf of Mexico at 38 billion barrels -- of which nine billion have been extracted.

Into this remaining 29 billion barrel potential steps Chevron with three new rigs coming online through 2015. These rigs will produce 300,000 barrels/day, of which Chevron owns the rights to half -- a 5.7% production increase from its current 2.6 billion barrels/day.

Chevron's other major project includes LNG exports, forecast to double by 2025, which will require an additional 100 MTPA (million tons/year) in global gas capacity. The company's Gorgon project (located in Australia) is expected to produce 15.6 MTPA, the equivalent of 400,000 barrels of oil/day (bpd). With several major international shale projects in progress as well, management is confident about achieving its stated 20% production expansion by 2017.

Suncor: record quarter, excellent growth prospects
Suncor is the largest oil producer of Alberta Tar sands (it currently produces 24% of total tar sand oil), which are the largest petroleum deposits on earth: 2.5 trillion barrels of oil sands, 170 billion of which are currently economically recoverable with today's technology. The company recently crushed analysts' earnings expectations by 33% (the highest in the company's history). On a trailing-12-month basis, earnings were up 50% year-over-year, primarily due to soaring West Canadian Select, or WCS, prices. Increases in available pipeline and rail cars for shipping Canadian oil have reduced a major glut and caused the price of WCS to increase by 21% recently (and 60% since November). 

Oil production was down 10% from last quarter, though oil sands production was up 8.8% year over year. However, management did reaffirm its guidance, which calls for capital costs to decrease in the coming quarters along with its plan for 55%-60% production growth. These plans consist of three major mining initiatives that combined will produce 357,000 bpd with production lives of 40 to 50 years.

With production of Canadian oil expected to quadruple from 1.6 million bpd to 6.2 million bpd by 2030, Suncor is not only well positioned to take advantage of this megatrend but also to return massive amounts of cash to shareholders. Since 2011 the company has bought back 8% of its shares and in April of 2013 raised its dividend by 50%, followed by a 9% raise in February of 2014. 

Foolish takeaway
Suncor and Chevron continue to be two of the safest dividend growth plays on major energy megatrends such as Canadian tar sands, offshore drilling, and LNG exports. Both companies remain historically undervalued and interested investors should not hesitate to use short-term problems and/or price weakness to add to their holdings.