Chevron Corp , the second-largest U.S. oil company, said improved margins at its refineries would offset a drop in oil and gas output to lift second-quarter earnings above the previous quarter.

Chevron's second-quarter refining, marketing and chemicals results would be significantly higher than the previous quarter, the company said in an interim update on Monday.

First-quarter profit had been reduced by charge of $150 million for reductions in downstream employee numbers, part of an overhaul of that division.

Refining margins improved nearly across the board last quarter. Citing industry figures, Chevron noted margins on the U.S. West Coast, where it has two refineries, rose by more than $3 per barrel to $16.30 in the second quarter, while Gulf Coast margins jumped nearly $5 to $21.65; Singapore margins fell, but Northwest Europe margins improved slightly.

The San Ramon, California-based company said a stronger dollar would also help its results, and that net after-tax charges related to corporate and other activities would come in below its usual guidance of $250 million to $350 million.

Chevron will report second-quarter results on July 30.

On the oil and gas production side, global output of 2.74 million barrels per day (bpd) in the first two months of the quarter was weaker than the first quarter.

Its U.S. oil-equivalent output in April and May was down 20,000 bpd from the previous quarter at 714,000 bpd, and international output fell by 19,000 bpd in the first two months of the quarter to 2.03 million bpd.

Chevron, which aims to achieve average 2010 output of 2.73 million bpd, said the fall in production was due to small declines across a number of assets.

Benchmark U.S. oil prices averaged nearly $78 per barrel in the second quarter, down about a dollar from the quarter before but above the $60 per barrel average of the second quarter of 2009.

Chevron shares rose 0.6 percent to $72.25 in after-hours trading, after closing flat at $71.85.

(Reporting by Braden Reddall; Editing by Leslie Gevirtz and Steve Orlofsky)

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