Chevron Corp. said Friday income slipped nearly 2 percent in the third quarter on costs related to the Gulf of Mexico drilling moratorium and hefty foreign exchange charges.
Chevron, America's second-largest oil company, reported earnings of $3.77 billion, or $1.87 per share, for the three months ended Sept. 30. That compares with $3.83 billion, or $1.92 per share, in the year-ago period. Revenue increased 7 percent to $49.7 billion.
The results didn't meet Wall Street expectations, and shares dropped $1.72, or 2 percent, to $82.72 in afternoon trading.
Chevron benefited from higher oil and gas prices and better profit margins in its refining business, but it also booked $367 million in foreign-currency expenses. Chevron's exploration and production operations in the U.S. were more costly due to the U.S. ban on deepwater drilling following the BP oil spill.
John Watson, Chevron chairman and CEO, said he's pleased the government has since lifted the moratorium that stunted offshore activity in the Gulf. Chevron already has submitted one application for a deepwater drilling permit, and it plans to submit several others over the next few months, he said.
"We look forward to the timely approval of our drilling permits and to getting back to work as soon as possible," Watson said in a statement.
Chevron expects oil production to continue to suffer even though the drilling ban has ended. Chief Financial Officer Pat Yarrington estimated the moratorium cut Chevron's production numbers by 10,000 barrels per day in the second half of the year. It's unclear how much the company's Gulf operations will be affected next year, she said.
Chevron's results lag other industry giants. Exxon Mobil Corp. and ConocoPhillips all posted big profit increases in the third quarter, boosted by higher oil and gas prices, increased production and better refining margins. Higher energy prices helped Royal Dutch Shell increase earnings even though it booked more than $1 billion in asset write-downs.
"That may be disconcerting to some, but it's really reflective of how strong their year-ago quarter was," Raymond James analyst Pavel Molchanov said of Chevron's results. He pointed out that Chevron's quarterly profits are down about as much as Exxon's when compared over the past two years.
Chevron oil and gas production was flat in the quarter, though prices increased year-over-year. In the U.S., Chevron sold oil and natural gas liquids for $69 per barrel in the July-September quarter, up from $60 per barrel in the same part of 2009. Internationally, oil and natural gas sold for $70 per barrel, up from $62 a barrel a year earlier.
Its refining business more than doubled profits in the quarter to $565 million on better margins.