Chevron Corp. (CVX) said Friday fourth-quarter earnings fell 3.2% as its refining arm swung to a loss, widely missing Wall Street expectations and overshadowing a large addition of new oil and gas reserves.

Chevron reported a profit of $5.12 billion, or $2.58 a share, down from $5.32 billion, or $2.64, a year earlier. The results were well below analysts' estimates of $2.84 "entirely" due to the plummeting of the company's refining and marketing results, according to UBS analyst William Featherston.

Revenue jumped 11% to $60 billion.

The miss came even after analysts had slashed their expectations two weeks ago when Chevron warned it would not post profits from refining and it would have significantly lower income than the prior quarter. On Friday, Chevron's downstream segment -- as refining, marketing and chemical operations are known -- posted $61 million in losses in the fourth quarter, down from $742 million in profits in the same period a year earlier.

The results show Chevron is feeling the pinch of the struggling refining sector, where refining margins -- or the difference between the price of the crude oil refiners buy and the price of the products they sell -- were hit by higher oil prices and weak fuel demand. Rival ConocoPhillips (COP), which posted a 66% increase in earnings Wednesday, also posted weak refining profits. Exxon Mobil Corp. (XOM), the largest U.S. oil major, will release its quarterly results on Tuesday, and it's expected to also see its earnings hurt by weak refining results, according to analysts.

Chevron's earnings drop came despite a 18% jump in the company's exploration-and-production profits to $5.7 billion. High commodity prices helped Chevron to more than offset a 5.3% drop in fourth-quarter production to 2.64 million barrels of oil equivalent per day. The production drop reflects how Chevron continues to struggle on that front despite making large shale acquisitions and starting up major fields world-wide.

The company said production increases from project ramp-ups in Thailand , the U.S. , Nigeria and Brazil , and new volumes stemming from acquisitions in the Marcellus Shale in the eastern U.S. weren't enough to offset the loss from aging fields, maintenance-related downtime and a 25,000 barrels per day negative effect of higher prices on production sharing contracts. Those agreements give less output to Chevron when oil prices rise.

The company's total 2011 production dropped 3.3% to $2.67 million barrels of oil equivalent per day. Chevron said expects to have a 2012 production of 2.68 million barrels of oil equivalent per day, assuming $111 for a barrel of oil. The guidance is below analysts estimates of 2.72 million barrels of oil equivalent per day. The company said 2012 start-ups at its Angola liquefied natural gas and Usan projects are expected to be largely offset by depletion of aging fields.

San Ramon, Calf.-based Chevron also said it added about 1.67 billion barrels of net oil-equivalent reserves in 2011, an amount equivalent to 171% of its annual production. The largest source of newly booked reserves comes from the Wheatstone Project in Australia , Chevron Chief Executive John Watson said in a press release.

Additions from acquisitions in the Marcellus Shale and multiple development projects in the deepwater Gulf of Mexico also contributed to the reserve additions, he added.

Shares were recently trading down about 3% at $103.39. The stock has fallen 2.2% over the past three months through Thursday's close.

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