BP PLC posts 83 percent rise in 3Q profits

[October 28, 2008]  LONDON (AP) -- British oil company BP PLC reported a huge 83-percent rise in third-quarter net profit Tuesday on the back of surging energy prices between July and September.

BP, Europe's second-biggest oil producer behind Royal Dutch Shell PLC, posted net profit of $8.05 billion for the July to September quarter -- up from $4.41 billion in the same period a year earlier.

The company said it was well-placed to continue to reap profits despite the fact that the price of oil has now more than halved from July's all-time high uf $1.47. Oil traded around $64 per barrel Tuesday.

Revenue for the third quarter rose 45 percent to $103.2 billion from $71.3 billion the previous year.

"The high oil price of the third quarter obviously helped our absolute result," said Chief Executive Tony Hayward.

But Hayward also said that he was confident the company would continue to do well even though oil prices could dip even further in the face of an anticipated global economic slowdown that would cut the demand for crude.

"I believe that BP is well-positioned to cope with such volatility," Hayward said, saying the company had not committed as much money as its rivals to high-cost ways of producing oil, such as mining tar sands and converting gas.

"We think the current turmoil may in fact create opportunities for us," added Hayward.

Hayward, who replaced John Browne last year, has focused on bringing new production and refining capacity on line to improve earnings, which have lagged behind rivals such as Exxon Mobil Corp. and Shell. For example, the company began production at Gulf of Mexico oil field Thunder Horse, which was discovered nine years ago, in June.

"These numbers have comfortably surpassed the top end of expectations," said Richard Hunter, head of British equities at Hargreaves Lansdown Stockbrokers. "The change of management seems to be reaping positive early returns."

The company's closely watched replacement cost profit soared 148 percent to $10.03 billion, from $4.04 billion.

The replacement cost figure is viewed by many analysts as the best measure of an oil company's underlying performance because it excludes gains or losses related to any changes in the value of oil companies' fuel inventories, instead measuring the amount it would cost to replace assets at current prices.

BP makes the bulk of its profits in its upstream business, which incorporates exploration for and production of oil. Pre-tax profits in that division doubled to $12.5 billion.

Underlying profit for the downstream business, which includes refining oil and selling it at BP's 24,000 gas stations worldwide, made a pre-tax profit of $1.3 billion, up 70 percent compared to the third quarter of last year.

BP shares rose 4.3 percent to 457 pence ($7.13) in morning trading on the London Stock Exchange.

[Associated Press; By EMILY FLYNN VENCAT]

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