Chevron (CVX - Free Analyst Report), one of the world's largest integrated oil companies, has reported third-quarter share net of $1.87. This compares to the year-ago tally of $1.92 and our estimate of $2.40. The lower-than-expected figure was due to the drilling moratorium set by the Obama administration pursuant to the Macondo oil spill in the Gulf of Mexico. Not only did this stop Chevron from drilling for more oil, but costs associated with the disaster compressed the operating margin. These expenses included the replacement and checking of drilling equipment, specifically blow-out preventers. Furthermore, a weakening dollar resulted in $367 million in additional foreign exchange expenses.

Now that the drilling moratorium in the Gulf has been lifted, Chevron is expected to submit a number of deep-water drilling permit applications to the Bureau of Ocean Energy Management, Regulation and Enforcement (commonly known as NTL-05). We think, however, that it will be a while before many of these applications are granted, and that the company will have to submit them numerous times. This suggests that it won't be until late 2011 before a significant amount of oil and gas is lifted by Chevron from the deep water in the Gulf.

Still, the company has many other irons in the fire that it can draw upon, with good prospects for reserves in China, Liberia, Turkey, and Australia. All told, we look for share net of $8.85 in 2010, rising to $9.90 in 2011 as oil and gas prices continue to advance on the strength of a gradually improving global economy.

About The Company: Chevron Corporation is the world’s fourth largest oil company based on proven reserves. In 2009, daily gross production of crude oil and natural gas liquids topped 1.845 million barrels. Natural gas production, meanwhile, was just under 4.99 billion cubic feet. Net proved oil reserves were 8.589 billion barrels at the end of 2009, while natural gas reserves were 22.480 trillion cubic feet.

* This report includes late-breaking news not reflected in our full-page review of this company.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.