(Adds conference call details, updates trading)
By Ernest Scheyder
May 1 (Reuters) - Oil and natural gas producer Chevron Corp reported a 43 percent drop in quarterly profit onFriday, though results beat analysts' expectations as cost cutsand robust refining margins helped offset the impact of tumblingcrude prices.
The help from refining operations mirrored results at large,integrated peers such as Exxon Mobil Corp and RoyalDutch Shell, which tend to lean on their refiningdivisions for profit during times of cheap oil.
Oil prices have slumped more than 40 percentsince last June amid a glut of global supply, harming Chevron'sdivision that produces oil and gas, its largest, but helpingprofit more than double to $1.42 billion at its refining arm.
A Reuters analysis of industry data, though, shows that this"refining boom" for the sector isn't likely to last long, andthat producers' best chance for improving profit is higher oilprices.
"The good thing about the quarter is that it's over," saidFadel Gheit, an oil analyst at Oppenheimer in New York. "Goingforward, costs will continue to go down and oil prices areslowly going up, so margins will improve."
Chevron has sold $4 billion in assets so far this year, partof a broader divestment plan to help fund its dividend from cashflow.
"We will continue to sell assets when we can generate goodvalue," Chief Financial Officer Pat Yarrington said on aconference call with investors. "Maintaining a competitive andgrowing dividend is our No. 1 priority."
Shares of the San Ramon, California-based company fell 2.3percent to $108.48 in afternoon trading.
EXCEEDING EXPECTATIONS
The No. 2 U.S. oil company reported net income of $2.57billion, or $1.37 per share, down from $4.51 billion, or $2.36 ashare, a year earlier, but much better than analysts'expectations of 79 cents a share, according to Thomson ReutersI/B/E/S.
Chevron posted a loss in its United States oil productiondivision, a key indicator that the country is one of its highestcost areas.
Production grew 4 percent to 2.68 million barrels of oilequivalent per day, boosted largely by operations in the UnitedStates, Bangladesh and Argentina.
Chevron continued slashing costs during the first quarter,reducing operating expenses by 9 percent.
The company is renegotiating contracts with nearly 3,000vendors and expects to wring about $900 million in cost savingsout of them this year, Yarrington said. (Editing by Terry Wade and Bernadette Baum)
