* Writes down value of midcontinent gas assets by $1.1 billion
* Fourth-qtr adj profit $1.83 per share vs est $1.66 per share
* Sees 8-10 pct growth in U.S. output of crude oil this year
* Shares rise 3 pct to four-month highs
Jan 31 (Reuters) - Occidental Petroleum Corp's quarterly profit beat Wall Street estimates as the fourth-largest U.S. oil company hacked away at production costs, and it predicted growth of 8 percent to 10 percent in domestic crude output this year.
The results boosted the company's shares 3 percent on Thursday to four-month highs.
Fourth-quarter costs fell by $1.04 per barrel from the third quarter as Oxy used fewer outside contractors and cut uneconomic maintenance activity, among other things.
The cost-cutting program is aimed at reducing U.S. drilling costs by 15 percent in 2013, and the company is about half-way there. Most efforts are in its home state of California, which accounted for 35 percent of fourth-quarter production.
Chief Executive Stephen Chazen said he was "stunned" by how well people in the field had responded to the push for savings, and expects the cost per barrel of oil equivalent, or boe, would fall below $14 from $14.99 for all of 2012.
"There's no plan that says every month you are going to fire 100 contractors or something," Chazen said on a conference call. "We are trying to do it in a way that's not done with a meat axe, but with a scalpel."
Overall, the company's daily oil and gas production volumes rose 4 percent to average 779,000 boe in the fourth quarter. This included an average 475,000 boe per day of U.S. production.
Oil prices, however, were weak in the quarter, with U.S. crude falling 6 percent from a year earlier to average $88.23 per barrel. International Brent averaged $110 per barrel, up just $1 per barrel from a year earlier.
Occidental said its realized price for worldwide natural gas liquids, or NGLs, slumped 18 percent to $45.08 per barrel, while domestic gas prices decreased 14 percent in the same period.
Almost all of the 6 percent reduction in capital spending this year, to $9.6 billion, would come in the United States, with much of it in California.
The Los Angeles-based company plans to cut the number of U.S. rigs deployed to 55 this year from 64, even though oil production would still increase. Output of natural gas and NGLs would likely decline slightly, while international output looks set to be near flat for 2013, Chazen said.
Just over one-tenth of Occidental's capital spending this year would be devoted to the Shah gas field in Abu Dhabi, a $10 billion project in which Oxy has a 40 percent stake that a spokeswoman said was "on track" ahead of its start-up next year.
Occidental reported a net profit of $336 million, or 45 cents per share, as it wrote down the value of gas properties in the U.S. midcontinent by $1.1 billion.
The company's midcontinent natural gas production comes mainly from the Hugoton Field in Kansas, Oklahoma and eastern Colorado and the Piceance Basin in western Colorado.
Adjusted profit was $1.83 per share, above analysts' estimates of $1.66, according to Thomson Reuters I/B/E/S.
Revenue rose 2 percent to $6.17 billion.
Occidental shares were up 2.8 percent at $88.72 in afternoon trading on the New York Stock Exchange.
Asked about mergers and acquisitions, Chazen said there was little on the horizon in terms of purchases in the Permian basin, where it is focused. He side-stepped with a joke a question on whether he would sell out of the high-priced Bakken region around North Dakota, where Oxy has cut rigs.
"If somebody would like to buy my desk, if they pay the right price, they are more than welcome to it," he said. "There's not much in the drawers."