Updated from 9:20 a.m. EST

Chevron

's

(CVX) - Get Report

fourth-quarter net income jumped 21% from a year ago thanks to the purchase of Unocal and high crude and natural gas prices.

The San Ramon, Calif.-based company earned $4.1 billion, or $1.86 a share, in the quarter, compared with $3.4 billion, or $1.63 a share, last year. Chevron's earnings missed analysts' forecast of $1.89 a share, according to Thomson First Call.

Chevron's shares rose 16 cents, or 0.3%, to $60.38 Friday.

The company's upstream income or money earned from exploration and production jumped 46% during the quarter as energy prices and oil production soared. Chevron produced 11% more oil worldwide.

Quarterly earnings were also marred by a drop in downstream earnings to $808 million, 25% below the same period last year because of lower margins for refined products in Europe and Asia, hurricane damage and a terminal fire in the U.K.

Fourth-quarter revenue at the country's second-largest oil company was $53 billion, up from $42 billion in 2004. For the full year, sales hit $194 billion, compared with $151 billion in 2004.

Energy companies have been enjoying record profits amid high energy prices, record production levels and rising demand from developing Asian countries. Last year, oil prices climbed 40% for their fourth straight year of increases.

Soaring fuel prices have made up for lost petroleum production in the Gulf of Mexico since hurricanes shut down much of the area's output. During the quarter, Chevron produced 160,000 barrels of oil per day, compared to 300,000 barrels per day before the hurricanes.

Chevron's chief executive, David O'Reilly, said Chevron's gulf production will not be restored fully.

"We've recovered the easy to recover portion in the Gulf of Mexico," O'Reilly said in a conference call Friday. "Going forward will be very much more difficult. There could be as much as 20,000 barrels a day we don't ever get to recover because it will be uneconomic."

O'Reilly said repairs may not be completed this year, because of a new drilling program in shallow water, fall hurricane season, and other factors.

Chevron's gulf production would have naturally declined to 250,000 to 260,000 barrels per day this year if the hurricanes had not occurred because many of the fields are aging and have less oil.

"We're never going to get back to 300,000 barrels per day with these assets," O'Reilly said.