*

Q1 adjusted earnings $5.58 billion vs forecast $4.96

billion

*

To buy back $3.5 billion worth of shares in next three

months

(Adds graphic, refining margins, oil price background,

spending, gas trading)

By Shadia Nasralla

LONDON, May 2 (Reuters) - Shell on Friday

reported a 28% drop in first-quarter net profit to $5.58

billion, beating analyst expectations, and kept the pace of its

share buyback programme steady amid falling oil prices and lower

refining margins than last year.

It said it would buy back $3.5 billion worth of shares for

the next three months, the fourteenth consecutive quarter of a

buyback programme of at least $3 billion.

That contrasts with rival BP, which has sharply cut

its buybacks this year to shore up its balance sheet. Shell's

gearing, a debt-to-equity ratio, of 18.7% is less than BP's

25.7%.

Shell's adjusted earnings, its definition of net profit,

reached $5.58 billion in the first quarter, above an average

forecast of $4.96 billion in a company-provided analyst poll,

but below $7.73 billion a year ago.

At a strategy update in March, Shell pledged to return more

cash to shareholders on the back of higher liquefied natural gas

sales, mainly via buybacks, trimmed its investments through 2028

and raised the prospect of selling or closing some chemicals

assets.

The company on Friday reiterated its reduced annual

investment budget of $20-$22 billion for this year.

Its indicative refining margin stood at $6.2 per barrel,

down from $12 per barrel a year ago, but up from $5.5 per barrel

at the end of last year.

Global benchmark Brent crude prices averaged around

$75 a barrel during the January-March quarter, compared with

around $87 a year earlier.

Shell said its gas trading business was in line with the

previous quarter despite a hit from expiring hedging contracts.

That contrasts with BP, which said that a weak result in its gas

trading business weighed on its first-quarter results.