Chevron announced last Thursday it lost 35% of its profitscompared to the same period in 1998. The company reported a netincome of $329 million or $0.50/diluted share versus $507 millionor $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&ampP) 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&ampP net income of $47 million was down56% from 1998’s first quarter performance.

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