NEW YORK (Reuters) - Exxon Mobil Corp XOM.N said on Friday record oil prices propelled its quarterly and yearly profits to the highest-ever levels by a U.S. company.

An Exxon Mobil employee is seen in a handout photo. REUTERS/Exxon Mobil/Handout

Chevron Corp CVX.N, the second-largest U.S. oil company, also posted an enormous profit in the quarter as crude prices, which reached more than $99 a barrel during the period, outweighed its relatively weak refining profits.

Exxon, the world’s largest oil company not run by a state, fourth-quarter net income rose nearly 14 percent to $11.66 billion, or $2.13 a share, from $10.25 billion, or $1.76 a share, in 2006. Analysts, on average, were expecting earnings of $1.98 per share.

“They performed across the board, upstream, downstream, U.S. and foreign,” said James Halloran, who helps manage about $35 billion at National City Private Client Group.

Revenue in the quarter rose 30 percent to $116.64 billion. For the year, the company pulled in $404.55 billion, slightly larger than the 2006 gross domestic product of Turkey, the world’s 17th largest economy.

The company’s full-year earnings of $40.61 billion set a new record for U.S. profits -- beating out its own previous mark for 2006.

U.S. oil prices averaged more than $90 a barrel during the quarter and nearly hit $100 due to tight supplies, geopolitical risks and the weak dollar. They averaged just over $60 a barrel in the same period a year earlier.

Oil companies around the world have ridden the multiyear energy boom to record levels of profitability. Royal Dutch Shell RDSa.L on Thursday posted a $27.6 billion profit in 2007 -- the largest ever profit by a European company.

But their swelling coffers have attracted unwanted attention from politicians, who have characterized the companies as opportunists and suggested taking back lucrative tax breaks.

Democratic presidential hopeful Barack Obama said Exxon’s profit was a sign that the U.S. economy is “out of balance.”

“Exxon Mobil posted record profits at 11 billion dollars this quarter alone at a time when families are struggling ... to fill up their gas tanks,” he told reporters in Los Angeles.

CHEVRON PROFIT RISES, PRODUCTION OUTLOOK WEAK

Chevron’s net income rose to $4.88 billion, or $2.32 a share, from $3.77 billion, or $1.74 a share, last year. Analysts had expected the company to earn $2.30 a share.

Sales in the quarter rose to $59.9 billion from $46.24 billion last year.

Chevron’s earnings for its exploration and production segment rose 66 percent to $4.84 billion, but profit from its refining, marketing and transportation business was off nearly 79 percent to $204 million.

Profit margins from refining were relatively weak in the quarter as gasoline prices failed to keep pace with oil prices that soared to record levels.

The San Ramon, California, company said its production fell about 1.6 percent to 2.61 million barrels of oil equivalent per day.

Chevron cut its 2008 production forecast and said its 2007 reserve replacement rate would be low, as high oil prices took a bite out of expected production from international projects.

The company expects production in 2008 to rise about 1.2 percent to 2.65 million barrels of oil equivalent per day, assuming an average oil price of $70 a barrel. It had previously forecast production of around 2.8 million barrels of oil equivalent a day, but at a lower average oil price.

Chief Financial Officer Steve Crowe said that 95,000 to 100,000 barrels per day of the cut was due to major project delays.

Chevron also said its 2007 reserve replacement rate would be in the range of 10 percent to 15 percent. Reserve replacement rate calculates what percentage of the oil produced over the year the company replaced through exploration or acquisitions.

Crowe said the reserve replacement rate was hurt by the high year-end oil prices used to calculate the figure, sales of projects and timing of various large projects.

Exxon also had some difficulty with production. Quarterly production rose 1 percent as increased volume from projects in Qatar and the North Sea offset OPEC quota effects, production sharing agreements and lost oil from assets that were taken over by Venezuela.

“A lot of these larger oil companies are challenged to grow production. That’s one of the reasons that oil prices aren’t necessarily expensive at $90 a barrel -- the largest oil companies in the world are proving challenged from a production and reserves replacement standpoint,” said Simmons & Co. analyst Robert Kessler.

“I think all these companies need to be spending more on exploration if they have any hopes to actually turn around production in the long term. The unfortunate reality is that the larger you are, the more you have to produce, and the more you have to find in order to keep that production stable,” he said.

Earlier this week, Shell also reported a drop in quarterly oil and gas production and indicated its reserve levels would disappoint when they are disclosed later this year.

Shares of Exxon closed down 45 cents, or 0.5 percent, at $85.95 and Chevron shares were down $2.01, or 2.4 percent, at $82.49, both on the New York Stock Exchange.