Feb. 1 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, said fourth-quarter profit rose 29 percent as crude prices climbed to a record on their way to topping $100 a barrel last month.

Net income increased to $4.88 billion, or $2.32 a share, from $3.77 billion, or $1.74, a year earlier, San Ramon, California-based Chevron said today in a statement. The company was expected to earn $2.29 a share, the average of 17 analyst estimates compiled by Bloomberg.

Chevron had its biggest fourth-quarter profit gain in three years as global crude demand expanded faster than output from new wells. Chief Executive Officer David O'Reilly plans to spend almost $50 million a day on the search for untapped reserves this year, a 31 percent increase from 2007.

``Everything hinges on higher oil prices for them,'' said Robbert Van Batenburg, head of research at Louis Capital Markets in New York. ``The key question is, with all of these expenditures on exploration and production, when will we see the new fields come online?''

Chevron fell 76 cents to $82.49 in New York Stock Exchange composite trading, dropping along with oil and natural-gas futures.

Fourth-quarter revenue climbed 29 percent to $61.4 billion, Chevron said. Price gains more than made up for a 1.6 percent decline in oil and natural-gas production.

Exxon, ConocoPhillips

Chevron is the last major U.S. oil producer to report fourth-quarter results. Exxon Mobil Corp., the world's biggest oil company, today said its profit rose 14 percent to a record $11.7 billion, or $2.13 a share, exceeding analyst estimates.

ConocoPhillips last week said its net income climbed 37 percent to $4.37 billion. Marathon Oil Corp. yesterday reported a 38 percent decline in profit, to $668 million. Occidental Petroleum Corp. earlier this week posted a 56 percent earnings increase, to $1.45 billion, and Hess Corp. had a 42 percent gain, to $510 million.

Chevron's additions to reserves last year replaced only about 10 percent to 15 percent of the oil and gas the company produced, Chief Financial Officer Steve Crowe said. High crude prices increased the share of output taken by oil-rich nations under production-sharing contracts, reducing Chevron's reserve- replacement ratio by about 30 percentage points, Crowe told investors on a conference call.

Production Outlook

Production this year will rise about 1 percent to the equivalent of 2.65 million barrels of oil a day, Crowe said, down 150,000 barrels from a March forecast. Project delays were at least partly to blame for the lower estimate.

Chevron relied on oil and gas sales for 99 percent of its fourth-quarter profit. Earnings from the segment rose by two- thirds to $4.84 billion. The gain more than made up for losses at the company's U.S. refineries and a 44 percent decline in chemicals earnings.

Output from Chevron's wells fell to the equivalent of 2.61 million barrels of crude a day, the lowest fourth-quarter production figure since the company's $20 billion acquisition of Unocal Corp. in August 2005.

O'Reilly, the longest-serving among CEOs at the world's four largest oil companies, in July pledged to lift output by 3 percent a year through 2010. The company today said it's standing by that target.

`Earnings Power'

``As long as oil prices are up, they're going to continue their aggressive exploration activity,'' said Michael Cuggino, whose $1.7 billion portfolio at Pacific Heights Asset Management LLC in San Francisco includes Chevron stock. ``They've got plenty of reserves to develop and, ultimately, earnings power derives from what they've got in the ground.''

Chevron, which triggered the Saudi energy boom with the 1938 discovery of oil in the kingdom, postponed four major projects last year involving more than 1.2 billion barrels of oil because of equipment failures and soaring drilling costs.

The delayed developments include a liquefied-natural-gas plant in Angola that will cost more than $8 billion to construct, making it Chevron's costliest-ever project after the Gorgon gas project off the coast of Australia.

Chevron in December set 2008 as the target date for beginning production from the $900 million Blind Faith field in the Gulf of Mexico and the $5.2 billion Agbami project off the coast of Nigeria. The company also plans to expand its largest refinery, in Pascagoula, Mississippi, this year and upgrade its Richmond, California, plant to process cheaper types of crude.

The company was paid about $80 per barrel of crude sold outside the U.S. in the fourth quarter, a 57 percent increase from a year earlier. Chevron said it had a 3.1 percent gain in U.S. prices for natural gas, the nation's most widely used heating fuel.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net

Last Updated: February 1, 2008 16:14 EST