UPDATE 3-BP's profits thunder to 5-year high
* Underlying profits rise to $3.8 billion
* Nine-month production rises thanks to field start-ups
* BHP deal to complete on Wednesday
(Adds CFO, analyst comment, details)
By Ron Bousso and Shadia Nasralla
LONDON, Oct 30 (Reuters) - BP's profits thundered toa five-year high, boosted by stronger oil prices with productionset to rise further thanks to the $10.5 billion acquisition ofBHP Billiton's U.S. shale business this week.
The results further underscore a striking shift in BP overthe past year as it shakes off the legacy of the deadly 2010Deepwater Horizon disaster with new projects and the BHP deal,its largest acquisition in 20 years.In a further sign of confidence, BP said it now expected tofully fund the acquisition from available cash without resortingto a rights issue as planned. It still plans to sell $5-$6billion of assets to reduce debt.
"We're a bit cautious to use the words 'blow out' whentalking about BP, but today's results are just that," Bernsteinanalyst Oswald Clint said in a note.
BP shares were up 3.4 percent by 0914 GMT, compared with a 1percent rise in the broader European oil and gas sector.
The rise in oil prices over the past year to their highestsince late 2014 has boosted revenue for oil companies such asBP. Coupled with deep cost cuts and stricter spending since the2014 downturn, the sector has enjoyed rapid growth in profits.
CONFIDENCE
BP's third-quarter underlying replacement cost profit, thecompany's definition of net income, rose to $3.8 billion, farexceeding forecasts of $2.85 billion based on a company-providedsurvey of analysts.
That compared with a profit of $1.86 billion a year earlierand $2.8 billion in the second quarter of 2018.
The profit increase came as production in the first ninemonths of the year rose thanks to new fields and high oil andgas field reliability.
Underlying pretax profit for BP's upstream business morethan doubled to around $4 billion in the quarter compared with ayear ago.
"We're seeing a backdrop of a strong and well-performingbusiness," Chief Financial Officer Brian Gilvary told Reuters.
"We're confident within the financial frame we can closethis transaction with all cash," Gilvary said.
Oil and gas production for the first nine months of the yearincreased to 2.5 million barrels of oil equivalent per day(boed) and was set to rise further with the expected completionof the BHP dealon Oct. 31.BP launched nine major oil and gas fields over the pastyear, including in Azerbaijan, Oman, Egypt and Angola that willhelp boost production by 900,000 barrels of oil equivalent perday (boed) by 2021. Most of the production will be gas.
The BHP deal is set to initially add over 100,000 boed inproduction before disposals, which will mostly includepredominantly onshore U.S. shale gas producing assets that BPalready owns, Gilvary said.
Gearing, the ratio between debt and BP's market value,declined to 27.5 percent at the end of the quarter from 27.8percent at the end of June. Net debt was $39.2 billion at theend of September.
Gilvary said that gearing could temporarily rise next yearabove the 30 percent limit the company had set, depending on oilprices, as it pays for the BHP deal.
In the fourth quarter, BP expects lower refining margins andmore refinery turnarounds mainly at its Whiting site in theUnited States.
BP expects its capex in 2018 to be around $15 billion.
BP's operating cash flow, excluding payments for theDeepwater Horizon spill, was $6.6 billion, the same as lastyear.
(Reporting by Ron BoussoEditing by Keith Weir and Louise Heavens)
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