By Ernest Scheyder
(Reuters) - Oil and natural gas producer CHEVRON (CVX.NY)Corp
The reliance on refining operations mirrored results at large, integrated rivals Exxon Mobil Corp
Oil prices
"The good thing about the quarter is that it's over," said Fadel Gheit, an oil analyst at Oppenheimer in New York. "Going forward, costs will continue to go down and oil prices are slowly going up, so margins will improve."
Shares of San Ramon, California-based Chevron fell 1.4 percent to $109.48 in morning trading.
The No. 2 U.S. oil company reported net income of $2.57 billion, or $1.37 per share, down from $4.51 billion, or $2.36 a share, a year earlier, but much better than analysts' expectations of 79 cents a share, according to Thomson Reuters I/B/E/S.
Chevron posted a loss in its United States oil production division, a key indicator that the country is one of its highest cost areas.
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.
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.
The company is scheduled to hold a conference call with investors at 1500 GMT Friday.
(Reporting by Ernest Scheyder; Editing by Bernadette Baum)
