Chevron Corp.’s first quarter profits should exceed those from the final period of 2011, in part because of lower costs and higher oil prices, but it still will be impacted because of lower natural gas prices, the San Ramon, CA-based major said late Tuesday in an interim report.

The second-largest U.S. producer by market value after ExxonMobil Corp. said earnings from the exploration and production segment in January and February benefited from crude oil prices from U.S. fields, which averaged $105.65/bbl, and should be 13% more than in the same two months of 2011 and 0.3% from the full fourth quarter of 2011.

However, the interim results indicated that the producer is struggling with low natural gas prices, which in the first two months of this year were slammed in the United States by an unusually mild winter and a supply glut.

Realized domestic gas prices averaged $2.70/Mcf in January and February, which is one-third below prices a year ago and 25% off from realized prices in the final three months of last year, the company said.

Chevron’s U.S. production in January and February totaled 644,000 boe/d, down 7.2% from January-March 2011 and off 2.6% from 4Q2011. U.S. output dropped 17,000 boe/d in the first two months, in part because Chevron completed the sale of its Cook Inlet assets in Alaska at the end of the year (see Daily GPI, July 21, 2011).

The first quarter report is scheduled to be issued on April 27.

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