Chevron says profits, output down from 2nd-quarter

SAN FRANCISCO (Reuters) - Chevron Corp (CVX.N) said its third-quarter earnings are expected to be lower than the previous quarter, weighed down by a drop in U.S. production, higher costs and the effects of a weaker dollar.

The second-largest U.S. oil company said on Tuesday its U.S. oil-equivalent output in July and August fell to an average 692,000 barrels per day from an average 708,000 barrels per day in the quarter before, while output elsewhere rose by 3,000 bpd to 2.041 million barrels per day.

The 2.73 million barrels per day total compares with Chevron's 2010 target of 2.78 million barrels per day, or 3 percent growth. The company's goal for full-year output growth was increased from 1 percent in July.

In the refining and chemicals division, margins were mixed, while U.S. production fell and international output grew.

Non-cash foreign currency effects due to the weakening of the dollar, which dropped by 7 percent against a basket of currencies .DXY in the third quarter, would reduce earnings by about $400 million, Chevron said in its interim update.

The company also expects U.S. upstream earnings to reflect the higher costs associated with the Gulf of Mexico deepwater drilling moratorium, which was just lifted by the U.S. government on Tuesday.

Benchmark U.S. oil prices averaged about $76.50 per barrel in the third quarter, up from $68 in the same quarter a year before but down from $78 in the second quarter.

The interim update came after the close of the New York Stock Exchange, and Chevron shares were down about 0.9 percent at $83.10 in after-hours trading.

Separately, Chevron also said on Tuesday it is seeking to sell all of its assets in Alaska's Cook Inlet basin, the state's oldest oil and gas producing region. The company statement did not identify a potential buyer or a deadline for the sale.

Chevron's assets there include interests in four oil fields, 10 offshore platforms, two onshore natural gas fields and two gas-storage facilities. Net production is about 4,000 barrels oil of and 90 million cubic feet of natural gas a day, the company said.

The company will report third-quarter results on October 29. Prior to Tuesday's update, analysts had expected a profit of $4.79 billion, or $2.27 per share, according to the average on Thomson Reuters I/B/E/S.

That's down from $2.70 per share last quarter, but up from the $1.72 per share reported by the San Ramon, California-based company in the third quarter last year.

(Reporting by Braden Reddall; editing by Andre Grenon, Carol Bishopric, Gary Hill)