HOUSTON -(Dow Jones)- Hess Corp.'s (HES) fourth-quarter earnings fell 84% as the oil-and-gas company wrote down the value of its stake in a U.S. Virgin Islands refinery and booked the cost of two expensive dry holes in Brazil.

The company's performance in recent quarters has been boosted by high oil prices, as well as improved demand for gasoline and diesel products. But the latest quarter was hampered by exploration setbacks and a pessimistic view on the future profitability of the refining business.

Hess's results, released Wednesday, come on the same the U.S. Department of Justice announced that Hovensa LLC, the company's refining partnership with Petroleos de Venezuela S.A. (PdVSA), agreed to spend $700 million in new pollution controls to solve Clean Air Act violations in its St. Croix, U.S. Virgin Islands, refinery, in addition to a $5 million fine. The Hovensa refinery is the second-largest in the U.S.

Hovensa said Wednesday that it is permanently reducing crude oil throughput by shutting certain older units in the first quarter in an effort to improve performance in tough economic conditions.

Hess reported a profit of $58 million, or 18 cents a share, down from $358 million, or $1.10 a share, a year earlier. The latest period included $289 million write-down of the value of the Hess's stake in the Hovensa partnership, which the company says reflects its outlook for weak refining margins in the future.

The company also reported $72 million in after-tax dry-hole costs associated with the Brazil wells. One of the wells was drilled in 2009, and the other, Sabia-1, was drilled in the fourth quarter. Revenue increased 1.5% to $8.69 billion.

Analysts polled by Thomson Reuters most recently forecast earnings of $1.26 on revenue of $7.23 billion. Analysts with Houston energy investment bank Simmons & Co. wrote in a research note that Hess's adjusted earnings per share was $1.20, "slightly below expectations." Most of the miss was due to "higher exploration expense," the Simmons note said.

The exploration-and-production business reported earnings declined 15%, despite higher prices and production, due to the cost of the dry wells. Average selling prices for oil, including hedging impacts, were up 13%, while natural gas improved 2.1%.

A number of companies have been shifting their focus toward liquids-rich shale plays owing to stronger oil prices, while natural-gas prices remain near historic lows. Hess has been increasing its presence in the Bakken Shale region of North Dakota, through added rigs and acquisitions of additional acreage. In a conference call Wednesday, company executives said that Hess would spend in the Bakken $1.8 billion, about a third of its capital budget, in a bid to bring average production there to an average of 40,000 barrels of oil equivalent a day in 2011. Hess's Bakken properties produced 20,000 barrels of oil equivalent a day at the end of 2010, the executives said.

Hess's CEO John Hess said the company expects to produce between 415,000 and 425,000 barrels of oil equivalent a day on average in 2011.

Hess's marketing and refining business swung to an overall loss on losses at its refining operations, while its marketing business also saw earnings drop.

Shares traded at $78.72, up 2%, on Wednesday. The stock is up 33% in the past year.

--Naureen Malik contributed to this article.

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