UPDATE 3-StatoilHydro keeps FY target as Q1 output shines

* Record Q1 oil/gas output offset by higher tax rate

* Keeps 2009 production and CAPEX guidance

* Q1 EBIT 35.5 bln crowns vs avg forecast of 30.2 bln

* Says expects prices to remain low, volatile near term

* Shares end day down 2 pct

(Adds further details, quotes, updates share price)

By John Acher

OSLO, May 11 (Reuters) - Norwegian oil and gas company StatoilHydro (STL.OL) stuck to its 2009 production target after posting a smaller-than-expected drop in profits for the first quarter as a record output partly offset steeply lower oil prices.

A higher-than-expected 87 percent tax rate in the quarter, up from 71 percent a year ago, resulting from a shift to the U.S. dollar as the functional currency of the parent company, dampened the positive news of record output, analysts said.

Earnings before interest and tax (EBIT) fell to 35.5 billion crowns ($5.57 billion) in the three months to the end of March from 51.4 billion in the same quarter last year.

The result beat an average forecast of a drop to 30.2 billion crowns in a Reuters poll of 22 analysts. Their estimates ranged from 25.9 billion to 35.7 billion crowns.

Oil and gas production rose to 1.94 million barrels of oil equivalent (boed) per day in the first quarter from 1.89 million a year earlier, beating analysts' average forecast of 1.89 million.

StatoilHydro shares erased early gains to end the day down 2.1 percent at 137.70 Norwegian crowns, valuing the company at around 440 billion crowns ($69 billion). The DJ Stoxx Oil and Gas index .SXEP was down 2.3 percent.

StatoilHydro announced last week that it adopted the dollar as its "functional currency" from the start of 2009, though not its reporting currency which remains Norwegian crowns.

The company said that the change would reduce the volatility of the financial items, but increase uncertainties about tax rates.

"StatoilHydro has reported a great operating result ... with profit ahead of estimates across the divisions," ING said in a note to clients. The company's EBIT was 25 percent higher than ING had forecast.

"However, this upside was more than offset by a significantly higher-than-expected tax charge ... related to the change in functional currency," ING said, adding that the change would continue to cause uncertainty in the future.

PRODUCTION GOALS INTACT

StatoilHydro kept its 2009 production guidance of 1.95 million boed and 2012 target of 2.2 million boed, using its "equity method", which does not include the impact of production sharing agreements that curb its off-take when oil prices rise.

"The quarterly result was negatively affected by a 41 percent drop in oil prices, partly offset by a 23 percent increase in the average price of natural gas and a 7 percent increase in lifted volumes of oil and gas," StatoilHydro said.

Chief Financial Officer Eldar Saetre said the 2009 target did not include the effect of OPEC quotas, which cut volumes by about 13,000 boed in the first quarter and the impact on the company would increase.

He added that lower gas demand stemming from the global downturn added some risk to achieving to the target.

"There is downward pressure on (gas) volumes, on prices in the current environment," Saetre said in a conference call with analysts. "Gas demand in Europe has already slowed down considerably, which is affecting volumes on take-or-pay contracts."

The company said that maintenance activity was expected to reduce equity-method production by about 80,000 boed in the second quarter and by 30,000 boed in the full year 2009.

"This has been a good and stable quarter for StatoilHydro -- production has been record high," Chief Executive Helge Lund told a news conference. "Our long-term strategy remains firm."

Average production costs in the 12 months to the end of March were 37.5 crowns per barrel, and the company said it expected full-year 2009 unit production costs to be "in the upper end" of an earlier estimated range of 33 to 36 crowns.

It stuck to its plan for 2009 capital expenditure of around $13.5 billion and for exploration spending of $2.7 billion.

"The company ... expects to maintain a high level of exploration activity in 2009, although slightly lower than in 2008," StatoilHydro said, adding that it aims to complete 65 to 70 exploration and appraisal wells in 2009. ($1=6.373 Norwegian Crown) (Additional reporting by Joergen Frich; editing by Jon Loades-Carter and Karen Foster)