LONDON British oil major BP Plc (BP.L) may have marked the oil industry's high point by reporting a record $10.0 billion third quarter replacement cost profit on Tuesday, as the recent collapse in crude prices ensures a tougher outlook.
Europe's second-largest non-government controlled oil company by market value said the forecast-beating earnings showed a turnaround under Chief Executive Tony Hayward was delivering results.
BP shares were up 2.11 percent at 447.75 pence, retreating from opening highs at around 472 pence but still outperforming the DJ Stoxx European oil and gas sector index .SXEP at 4:58 a.m. EDT.
"They are particularly impressive results," said Jason Kenney, oil analyst at ING in Edinburgh. "We will just have to see how long the oil price stays low or lower."
BP added that, even though oil prices may fall further, it remained committed to growing dividends. Investors had feared these could come under pressure after crude fell from a record above $147/barrel in July to around $64 now.
"We think the current turmoil may in fact create opportunities for us and we will look at those very closely," Hayward said in a statement.
A spokesman said this could include acquisitions of rivals or oil and gas fields.
As usual the main driver of earnings was BP's upstream oil and gas production unit, which benefited from a 54 percent rise in the Brent crude price to an average $115.09/barrel in the third quarter, compared to the same period in 2007.
The London-based company said oil and gas production rose slightly in the quarter compared to a year earlier, to 3.664 million barrels of oil equivalent per day, while analysts had expected a small drop.
A spokesman said the production result was due to a good performance at its Thunder Horse platform in the Gulf of Mexico. "The well performance is amazing there," he said.
BP said that adjusting for the impact of production-sharing agreements, under which BP's oil entitlement falls as prices rise, production rose 5 percent.
BP's previously troubled refining unit reported a big jump in profits to $1.97 billion from $371 million in the same period last year.
Analysts say BP has made good progress on restructuring its crude processing division which has been a key area of underperformance relative to rivals in recent years.
"In refining and marketing they have a restructuring plan underway and that looks as if it has helped the results there," said oil analyst Tony Shepard at brokerage Charles Stanley
The replacement cost result, which strips out unrealized gains or losses related to changes in the value of fuel inventories, included a net gain of $1.147 billion related to non-operating items.
Excluding such items, the underlying replacement cost result was $8.882 billion, ahead of an average forecast of $6.90 billion in a Reuters poll of 10 analysts.
BP said its quarterly dividend would be 14 cents per share, up from 10.825 cents a year earlier.
In September, BP resolved a dispute with its oligarch partners in TNK-BP over control of Russia's third-largest oil producer, by conceding some control to the billionaires.
This removed worries that BP might lose its half share of the business altogether but a collapse in Russian stockmarkets and worries about Russian relations with the west after Moscow's invasion of Georgia in August has weighed on BP's shares.
BP shares trade at a price earnings ratio of 4.906 times, based on Reuters consensus estimates for 2009 earnings, compared to 4.932 times for Royal Dutch Shell Plc (RDSa.L) and 8.067 times for Exxon Mobil (XOM.N).
(Additional reporting by Paul Hoskins and Phil Waller; Editing by Paul Bolding and Chris Wickham)