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HOUSTON - Oil and gas company Marathon Oil Corp. said Thursday that its first-quarter profit rose two per cent as record oil prices overcame weak results at its refining business.

The Houston-based company said it earned US$731 million, or $1.02 per share, in the January-March period compared with $717 million, or $1.03 per share, for the same quarter in 2007.

Revenue jumped 39 per cent to $18.1 billion from $13 billion last year.

Excluding one-time items, Marathon posted an adjusted profit of $767 million, or $1.07 per share. Analysts polled by Thomson Financial expected a profit of 82 cents per share.

Like its larger competitors, Marathon said its refining and marketing, or downstream, operations were hurt by much lower year-over-year margins. Those reflect the difference between the cost of crude and what the company makes on refined products such as gasoline.

Crude prices in the first quarter averaged about $98 a barrel, nearly 70 per cent higher from the same period a year ago. At the same time, gasoline prices rose about 22 per cent.

"Despite a very challenging downstream environment, our business overall generated very solid financial results for the first quarter, with increased adjusted net income over both the first and four quarters of 2007," said Clarence Cazalot Jr., Marathon's president and chief executive.

On the exploration and production, or upstream, side, Marathon said earnings rose to $684 million from $385 million a year ago, as higher prices far outweighed rising exploration costs.

But Marathon's refining, marketing and transportation arm swung to a loss of $75 million in the quarter from earnings of $345 million in the first quarter of 2007.

In addition to lower margins, the company said results were hurt by increased planned maintenance at its refineries in Detroit, Garyville, La., and Robinson, Ill. As such, the company refined an average of 845,000 barrels of crude a day in the most recent quarter, a decrease of about 123,000 barrels from the first quarter a year ago.

Marathon is the fourth-largest U.S. integrated oil company, meaning it's involved in exploration and production as well as refining and marketing.

The nation's top three are Exxon Mobil Corp., Chevron Corp. and ConocoPhillips.