BP profits ahead of expectations

Oil giant BP has reported third-quarter profits well ahead of
expectations, sending its share price up 5 %. Its replacement cost
profit between July and September was $4.98 bn (£3 bn). Experts said
the figure had "obliterated" market forecasts. BP's results were
boosted after it made bigger- than-expected cost cuts. But profit was
down 50 % from the $10 bn it made a year ago, as oil - currently
trading at about $80 a barrel - is well below the $147 high set in
July 2008. The company said that unit production costs were 18 %
lower than in the third quarter of 2008 , while oil and gas
production was up 7 % on last year. BP says it expects to cut costs
by a total of $4 bn this year. Share spike "The fall in earnings was
well trailed," said Richard Hunter, head of UK equities at
Hargreaves Lansdown. REPLACEMENT COST PROFIT Replacement cost profit
is the reporting measure typically used by oil companies and
reflects the current cost of supplies The measure strips out gains or
losses related to any changes in the value of the firm's stock of
fuel products "But the numbers nonetheless have obliterated market
forecasts, as evidenced by the spike in the share price in early
trade." Excluding one-off items, BP's profits were $4. 67 bn compared
with analysts' forecasts of about $3.2 bn. The firm's shares rose 27
pence to 594 p. Nick McGregor, oil analyst at Redmayne Bentley, said
that BP's refining business was also key. "For every dollar that oil
prices go up, BP make about $400 m. For every dollar that refining
margins go up, they make about $950 m," he said. "The exploration and
production is the most profitable in absolute terms because it's the
biggest bit, but refining is a big influence on the overall bottom
line." 'Giant' discovery Net income at its Russian joint venture
TNK-BP rose 34 % to $1.7 bn. The project had been marred by a dispute
between BP and the Russian shareholders in the venture, and was only
resolved in September last year when Robert Dudley stepped down as
TNK-BP's chief executive. BP said the venture was well-positioned to
deliver a solid performance in 2009. BP was also buoyed last month by
a "giant" new oil discovery in the Gulf of Mexico. The company said
the discovery amounted to more than three billion barrels. Its well
in the region, dubbed Tiber, has been drilled to a total depth of
about 35 ,055 ft (10 ,685 m), making it one of the deepest wells
drilled to date.