Chevron profit beats Street as cost cuts offset cheap oil

(Reuters) - Oil and natural gas producer CHEVRON (CVX.NY)Corp reported a better-than-expected quarterly profit on Friday as cost cuts and strong refining margins helped offset the impact of lower oil prices , sending shares up in early trading.

The No. 2 U.S. oil company reported net income of $2.57 billion, or $1.37 per share, compared to $4.51 billion, or $2.36 a share, a year earlier.

Analysts expected it to earn 79 cents a share, according to Thomson Reuters I/B/E/S.

Shares of San Ramon, California-based Chevron rose 0.5 percent to $111.66 in premarket trading.

Production grew 4 percent to 2.68 million barrels of oil equivalent per day, boosted largely by operations in the United States, Bangladesh and Argentina.

Earnings in the company's refining unit more than doubled to $1.42 billion, as a slump in oil prices of nearly 50 percent since last June boosted margins.

Like integrated rivals Exxon Mobil Corp and Royal Dutch Shell , Chevron relies on its refining operations to prop up profits when oil is cheap.

Chevron continued slashing costs during the first quarter, reducing operating expenses by 9 percent.

"We're taking a number of deliberate actions to lower our cost structure, and I expect these efforts to increasingly show through in our financial results as the year progresses," Chief Executive John Watson said in a statement.

(Reporting by Ernest Scheyder; Editing by Bernadette Baum)