Aided by strong oil prices, British oil giant BP’s profits thunder to five-year high

Profits of British oil and gas multinational BP thundered to a five-year high, boosted by stronger oil prices with production set to rise further thanks to the $10.5 billion acquisition of BHP Billiton’s US shale business this week.

The results further underscore a striking shift in the London-headquartered company over the past year as it shakes off the legacy of the deadly 2010 Deepwater Horizon disaster with new projects and the BHP deal, its largest acquisition in 20 years.

As a further sign of confidence, BP said it now expected to fully fund the acquisition from available cash without resorting to a rights issue as planned.

It still plans to sell $5 to $6 billion of assets to reduce debt.

“We’re a bit cautious to use the words ‘blow out’ when talking about BP, but today’s results are just that,” Bernstein analyst Oswald Clint said in a note.

The oil prices over the past year rose to their highest since late 2014 and has boosted revenue for oil companies such as BP. Coupled with deep cost cuts and stricter spending since the 2014 downturn, the sector has enjoyed rapid growth in profits.

BP’s third-quarter underlying replacement cost profit rose to $3.8 billion, far exceeding forecasts of $2.85 billion based on a company-provided survey of analysts.

That compared with a profit of $1.86 billion a year earlier and $2.8 billion in the second quarter of 2018.

The profit increase came as production in the first nine months of the year rose thanks to new fields and high oil and gas field reliability.

Underlying pretax profit for BP’s upstream business more than doubled to around $4 billion in the quarter compared with a year ago.