Chevron announced Thursday it lost 35% of its profits comparedto the same period in 1998. The company reported a net income of$329 million or $0.50/diluted share versus $507 million or$0.77/diluted share in 1998’s first quarter. The oil and gascompany sold oil at an average of under $10/barrel (a 20% drop form1Q98 prices) and gas at an average of $1.63/Mcf (a 22% drop from 1Q98).

Although second quarter prices are improving from last quarter’sweakness, Ken Derr, Chevron’s CEO, said the company will reducecosts wherever possible.

“Although we are pleased with the recent improvement in crudeoil and natural gas prices,” Derr commented, “we remain focused onefforts across the company to significantly reduce our coststructure for the long-term. Compared with the 1998 first quarter,we reduced operating and exploration expenses by approximately $80million-a positive first step in removing $500 million from ouroverall cost structure.”

Derr said one of the reorganizations will involve Chevron’sPermian Basin and Gulf of Mexico shelf exploration and production(E&P) operations, but did not elaborate.

Chevron’s U.S. natural gas production for the quarter was 1.7Bcf/d, down from 1.8 Bcf/d in the same period last year. Derr saidthe drop was caused by field declines and prior-year propertysales. The company’s U.S. E&P net income of $47 million wasdown 56% from 1998’s first quarter performance.

One bright spot for Chevron was the success of its refining,marketing and transportation operations which accrued a net incomeof $82 million compared to $45 million in 1Q98.

“Our U.S. refining, marketing and transportation first quarteroperating results improved compared with last year, mainlyreflecting higher sales margins and higher refined products salesvolumes. The margins benefited from less downtime and lowerexpenses from planned maintenance at our refineries than the firstquarter 1998,” Derr added.

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