LONDON -- BP PLC posted a drop in third-quarter results on the back of lower oil prices but said it is cutting costs faster than expectedfurther evidence that a major restructuring by chief executive Tony Hayward is changing the British oil giant's fortunes, according to a report in The Wall Street Journal.
BP said it expects to slash costs by $4 billion this year, twice its original forecast. It said oil and gas production rose 7% from a year earlier and that its long-troubled U.S. refinery operations have improved.
"These results demonstrate real operational [image-nocss] momentum across the company," Hayward said. "They show that even in the tough conditions that prevail in many of our markets, we can continue to deliver."
The results were weaker than last year's, however, reflecting the effects of a global recession that slashed oil prices and decimated energy demand. Earnings fell 34% to $5.34 billion, or 28 cents a share, from $8.05 billion, or 43 cents a share. Revenue fell 36% to $66.22 billion.
BP's replacement-cost profit, a closely watched figure that strips out the effect of changes in the value of inventories, fell 50% to $4.98 billion. Still, that was 48% higher than analysts had forecast, sending BP's shares up 4.8% to $9.70 in London on Tuesday, the newspaper reported.
The results show how the outlook is beginning to brighten for the Western oil giants. As oil markets turned bearish late last year, the majors' revenues plunged and industry costs stayed stubbornly high. Some investors feared companies such as BP might be forced to cut their fat dividends or slash investments in production.
But such fears ebbed as oil prices recovered from around $30 a barrel at the end of last year to about $80 a barrel now. BP has been cash-flow positive for the last two quarters.
BP's results signal that the big revamp started by Hayward shortly after he became CEO in 2007 appears to have substantially improved the company's performance, which long lagged behind that of its peers. Hayward succeeded Lord John Browne, who had built the company through a string of high-profile acquisitions but presided over a series of operational mishaps, such as the explosion and fire at BP's Texas City refinery in 2005, in which 15 people died.
After taking the reins, Hayward, a longstanding BP veteran who had been head of exploration and production, quickly initiated a broad revamp, the reports stated. He simplified BP's notoriously complex structure, eliminating whole layers of management. And as the credit crunch set in, he slashed costs, in part by demanding that suppliers cut their prices, changing procurement procedures and shedding staff. About 6,500 jobs have been shed over the last two years.
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