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

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

Global oil and gas output of 2.74 million barrels per day (bpd) in the first two months of the quarter was weaker than the first quarter, but the San Ramon, California-based company said its results would benefit from a stronger dollar.

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 decline 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 0.8 percent to $72.43 in after-hours trading, after closing flat at $71.85.

(Reporting by Braden Reddall, editing by Leslie Gevirtz)

California Chevron