By Sabrina Valle

HOUSTON (Reuters) -U.S. and European oil companies reported weaker first quarter results on Friday due to a sharp drop in natural gas prices compared with a year ago.

Results at oil and gas firms are still retreating from record levels in 2022 that were boosted by a surge in demand after the COVID-19 pandemic and then when prices spiked after Russia invaded Ukraine.

In the U.S., Exxon Mobil missed Wall Street earnings targets on fuel derivatives and Chevron beat tempered expectations with better-than-expected U.S. oil production.

French oil major TotalEnergies also slightly beat analysts forecasts as good refining margins partially offset a steep drop in profits from natural gas.

"European gas prices declined by 35%, reflecting a mild winter and high storage levels," said TotalEnergies Chief Financial Officer Jean-Pierre Sbraire.

Exxon's profit fell 28%, Chevron decreased 16% and TotalEnergies was down 22% year-on-year, with the two U.S. oil majors also taking a toll from weaker profits from gasoline and fuels.

Henry Hub futures, the benchmark for U.S. gas, has been trading below $1.70 per million British thermal unit (mmBtu), and earlier this year dropped to a 3-1/2-year low on warm weather and oversupply.

Global benchmark Brent crude prices were largely flat against a year ago at $81.76 a barrel in the quarter.

But higher oil prices — currently trading around $90 — means lucrative oil refining margins from early this year are set to fall, with TotalEnergies expecting its refining business to be less profitable in the second quarter and beyond due to geopolitical tensions and OPEC+ production limits.

Last year's strong profits led Exxon, Chevron, Occidental Petroleum to bid for rivals hoping to generate higher oil and gas production.

Exxon posted an $8.5 billion profit, its second highest for the first quarter in more than a decade, while Chevron earned $5.5 billion and TotalEnergies delivered $5.1 billion in adjusted net.

Share prices reflected the profit drops, with Exxon down 2.6% and Chevron falling less than 1% in late New York trading. TotalEnergies' shares closed up 2.09% in Paris after it reconfirmed a $2 billion share buyback.

Executives offered no new guidance on their production outlooks for coming quarters on conference calls, giving investors less reason to cheer.

In part, the two largest U.S. oil companies' outlook depends on pending approvals for two bid deals.

Exxon aims to close its purchase of Pioneer Natural Resources in the current quarter, it said.

Chevron said its offer for Hess is moving ahead. The deal is expected to be put for shareholder vote in late May, and an arbitration process with Exxon that is blocking the sale should be concluded in the fourth quarter.

(Reporting by Sabrina Valle in Houston, America Hernandez in Paris and Mrinalika Roy in BengaluruEditing by Marguerita Choy)