By Shariq Khan and Gary McWilliams

HOUSTON (Reuters) -Exxon Mobil on Friday edged past Wall Street's third quarter profit estimate, boosted by strong oil output in its first full quarter that includes volumes from U.S. shale producer Pioneer Natural Resources.

Oil industry earnings have been squeezed this year by slowing demand and weak margins on gasoline and diesel. But Exxon's year-over-year profit fell 5%, a much smaller drop than at rivals BP and TotalEnergies, which posted sharply lower quarterly results.

The top U.S. oil producer reported income of $8.61 billion, down from $9.07 billion a year ago. Its $1.92 per share profit topped Wall Street's outlook of $1.88 per share, on higher oil and gas production and spending constraints.

"We had a number of production records" in the quarter, said finance chief Kathryn Mikells, citing an increase of about 25% year-on-year in oil and gas output to 4.6 million barrels of oil equivalent per day (boepd).

Exxon earlier this month flagged operating profit had likely decreased, leading Wall Street analysts to shave their quarterly per share earnings forecast by nearly a dime.

RECORD PRODUCTION

Exxon's results reflected the first full quarter of production following its acquisition in May of Pioneer Natural Resources. The acquisition has already boosted the company's cash flow, Mikells told analysts on a post-earnings call.

The $60 billion deal drove production in Permian basin, the top U.S. shale field, to nearly 1.4 million boepd, helping overcome a 17% decline in average oil prices in the quarter ended Sept. 30.

Volume growth from the Pioneer acquisition and its lucrative Guyana consortium added almost $3 billion to earnings in the first nine months of this year, Mikells said on a post-earnings conference call. Compared with the second-quarter, Pioneer output averaged slightly lower, she noted.

Despite the record, output from the Permian was still below Barclays' estimate of 1.5 million boepd, and Exxon's earnings from U.S. oil and gas production were also softer than forecast, the bank's analyst Betty Jiang said.

No. 2 U.S. oil producer Chevron, whose plans to acquire Hess Corp have locked the two rivals in a bitter arbitration battle over Guyana, beat Wall Street estimates by a nine-cent margin compared with Exxon's four-cent beat.

That helped Chevron shares gain more than 3% on Friday, while Exxon gave up more than 2% of premarket gains to trade about flat by noon ET (1600 GMT).

Exxon expects full year output to average about 4.3 million boepd, including eight months of Pioneer's contributions.