Like its Big Oil brothers, Chevron Corp.'s first quarter profits were slammed by the slide in oil prices, but quick action by management to improve efficiencies and cut costs led to a savings of $900 million across the company, the CFO said Friday.

The San Ramon, CA-based producer earned $2.6 billion ($1.37/share), compared with $4.5 billion ($2.36) a year ago. Revenues plunged to $32 billion from $51 billion. Most impacted were upstream profits, which fell to $1.56 billion from $4.31 billion.

U.S. upstream earnings by themselves were about $900 million lower from the fourth quarter, as sharply lower liquids realizations decreased profits by $735 million. Crude and liquids realizations all dropped sequentially by about 35%.

However, integrated operation proved to be the charm, with the downstream profits almost double from a year ago, at $1.42 billion from $710 million, mirroring results issued by other integrated producers including ExxonMobil Corp., Royal Dutch Shell plc (see Daily GPI, April 30).

To makeup for the shortfall in prices, the company began a big move to lower costs, strong arming vendors and squeezing more efficiencies from its operations,  CFO Pat Harrington said during a conference call.

"In response to the downturn, we are aggressively pursuing cost savings," she told analysts. "Excluding fuel, operating costs in the first quarter were down 13% from the average 2014 quarter. To date, we have completed more than 2,200 supplier engagements, with 700 more in progress.

"We're working across all spend categories to negotiate supplier reductions and to rebid contracts when sufficient reductions have not been offered. The results have been encouraging, with over $900 million in contract savings already negotiated." The nearly $1 billion in savings already "is enterprise-wide," she said.

"This represents cash savings we expect to capture in 2015," which should show up as the year unfolds in several ways, through lower operating expenses, reduced capital outlays and decreases in cost of goods sold. The spend categories with the "sharpest reductions" have been closer to the wellhead, along with activities with shorter term contracts and shorter cycle times from order date to delivery date.

"We're also seeing more immediate responses from suppliers supporting our U.S. operations," Yarrington said.

Searching for external improvements is only one part of the solution to reduce the cost structure, however.

"We're also re-engineering our internal work processes, initiating organizational reviews, right-sizing our work teams to better match spend and activity levels and all of this to align with current market conditions." The objective is a "simpler, more efficient, productive and affordable organization that directly supports our business priorities."

Yarrington cited how Chevron is reducing costs in the U.S. onshore, particularly the Permian Basin.

"In the upstream, we are applying our experience with running manufacturing-type operations to our shale and tight developments in the U.S. and elsewhere," which includes pad drilling. "This is driving significant efficiency improvements in driving the lower costs in our horizontal program in both the Midland and Delaware basins."

Overall, production increased by more than 3% year/year to 2.68 million boe/d net, versus year-ago output of 2.59 million boe/d. The big contributor to U.S. production was from the ramp-up of Jack/St. Malo project in the deepwater Gulf of Mexico (GOM). The project now is producing more than 70,000 boe/d from five wells, which is above expectations (see Daily GPI, March 10).

In the United States, upstream earnings reversed year/year to minus $460 million from $912 million. Higher depreciation expenses, in part because of asset impairments, along with lower natural gas realizations, mostly were offset by higher production and lower operating expenses.

U.S. gas production was 4% higher at 1.26 Bcf/d, even though the average realized sales price fell to $2.27/Mcf from $4.77 a year ago. Domestic oil and gas production overall rose 9% to 699,000 boe/d net, with the most gains from the GOM and the Permian Basin. Liquids production increased 12% to 489,000 b/d net, with average prices for crude oil and liquids at $43/bbl, versus $91 in 1Q2014.

Cash flow from U.S. operations in 1Q2015 was $2.3 billion, compared with $8.4 billion in 1Q2014. Excluding working capital effects, cash flow from operations was $4.3 billion,versus $8.0 billion.

Capital and exploratory expenditures in the first three months were $8.6 billion, compared with $9.4 billion in 1Q2014. The amounts included $730 million in 2015 and $612 million in 2014 for its share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream represented 95% of the companywide total.