AFP Business News

LONDON (AFP) - British energy giant BP said on Tuesday that its third-quarter net profit sank 34 percent to 5.34 billion dollars (3.59 billion euros), hit by lower oil prices and despite higher production.

But the company's share price surged 4.21 percent as the result was better than expected and as it ramped up its cost-cutting target for the year.

BP said in a results statement that total sales fell 37 percent to 67.9 billion dollars in the three months to September, even as output rose 6.9 percent to 3.92 million barrels of oil equivalent per day.

Net profit, excluding the effect of stocks, slumped 50 percent from a year earlier to 4.98 billion dollars.

Excluding non-operating items and accounting costs, profits sank to 4.67 billion dollars -- but this beat analysts' forecasts of 3.2 billion dollars.

"These results demonstrate real operational momentum across the company," said BP Chief Executive Tony Hayward in a separate statement.

"They show that even in the tough conditions that prevail in many of our markets, we can continue to deliver on our promise to invest in future growth while meeting our commitments to shareholders today."

BP shares jumped 3.84 percent to 588.9 pence in afternoon trade after the group also revealed it would cut costs by 4.0 billion dollars this year.

The company had slashed its headcount by 3,000 people in 2008 and is on course to shed another 5,000 positions this year.

"The fall in earnings was well-trailed but the numbers nonetheless have obliterated market forecasts, as evidenced by the spike in the share price," said analyst Richard Hunter at Hargreaves Lansdown stockbrokers.

In recent weeks, oil prices have soared to one-year highs around 82 dollars per barrel but they remain far below the record above 147 dollars struck in July 2008.

According to BP, the average Brent crude oil price was 68.08 dollars per barrel during the third quarter of 2009, which was 40.8 percent lower than the 115.09 dollars recorded in the same period of last year.

The results statement from BP also boosted shares in rival energy giant Royal Dutch Shell, which will report its third-quarter numbers on Thursday.

BP's production was buoyed in the third quarter by major discoveries in Angola and Mexico.

NCB oil market analyst Peter Hutton predicted that the company would likely upgrade its earnings forecasts after the "positive" results statement.

"These are clearly a very positive set of results, not only convincingly beating forecasts on all key lines ... but also providing the basis for expected earnings upgrades beyond 2009 from the very strong delivery of cost savings," Hutton said in a note to clients.