NEW YORK: Chevron, the second-largest US oil company, reported a slightly higher-than-expected quarterly profit as rising oil prices and refining margins made up for a decline in oil and gas production.

Chevron shares slipped 0.2 per cent in early trading, though that was better than the 1pc decline for larger rival Exxon Mobil on Thursday after it produced weaker-than-expected earnings due to a drop in oil and gas output.

Chevron's first-quarter profit rose to $6.47 billion, or $3.27 per share, from $6.21bn, or $3.09 per share, a year earlier. That was just ahead of the $3.26 per share analysts had expected, according to the average on Thomson Reuters I/B/E/S. Revenue rose nearly 1pc to $60.7bn. The company is grappling with weighty legal and political challenges due to an offshore leak in Brazil and a deadly accident at a natural gas well off Nigeria.

Chevron's downstream, or refining and marketing, division has pulled out of more than two dozen countries in the past few years, and it said last month it was reviewing options for Egypt, Pakistan and its Caltex refining unit in Australia.

Oil and gas production declined to 2.63 million barrels per day (bpd) on an oil-equivalent basis, from 2.76m bpd a year before. Average benchmark oil prices rose about 12pc over the same period. Factors behind the decline in output included maintenance-related downtime and sales of assets, including some mostly natural gas producing interests in Alaska.

Chevron is spending heavily on production growth that will not kick in until 2014, with its 2012 capital budget of $32.7bn up from $29.1bn last year.

"New production is coming on as planned, and we continue to see strong customer interest in our Australia LNG projects that underpin our future growth," chief executive John Watson said.

Last week, Chevron signed a preliminary deal with Japan's Chubu Electric Power Company to supply it with liquefied natural gas from its Wheatstone plant in Australia, a $29bn project due to start up in 2016. Earnings from oil and gas production increased by 3pc to $6.17bn, while profits from Chevron's refining and chemicals division rose by 29pc to $804m.