The cost to BP PLC of dealing with the Gulf of Mexico oil spill was more than offset in the third quarter by revenues driven in part by higher oil prices, with the British giant reporting a $1.79 billion profit Tuesday.
London-based BP set aside another $7.7 billion to pay for the spill response and cover future fines and compensation relating to the devastating April 20 blowout that spewed millions of barrels of oil until the flow was stopped in July. So far, the company has set aside $40 billion to deal with the spill and its aftermath.
Analysts were expecting to hear that the oil giant was back in the black in the third quarter, but several said they were caught off-guard by BP's revelation of the $7.7 billion in additional set-aside money.
"The fact that one quarter later they're coming back and basically having to add 20 percent to that shows just how uncertain this whole business is -- and just how uncertain the final bill is," Nick McGregor, an oil analyst at the London stock firm Redmayne Bentley, said.
BP's profitable bottom line -- although modest by oil industry standards -- was due to factors including higher oil prices and good performance from the company's refining and marketing businesses. The results, however, were still well below a year-earlier profit of $5.3 billion. BP lost more than $17 billion in the second quarter, mainly due to the cost of containing the spill.
BP's new chief executive, Bob Dudley, said the strong operating performance shows the company's determination to rebuild confidence after "the terrible events of the past six months."
Dudley has been working to resurrect the company's image and reputation, particularly in the United States, and turn around a 35 percent rout in its share price since the Gulf explosion.
Presiding over his first quarterly earnings since replacing Tony Hayward a month ago, Dudley said the company is "well on track" for recovery with sales agreements in place for about $14 billion of assets -- half the amount it has targeted to build up a war chest.
But dividends to shareholders -– suspended after the spill -– have yet to resume. A decision on whether to resume them will be made early next year.
BP's share price was 1.7 percent higher in morning trading on the London Stock Exchange.
The company's exploratory Macondo well in the Gulf blew out on April 20, killing 11 workers and kicking off the worst oil spill in U.S. history. Oil kept gushing until July 15, but it took BP another two months -- until Sept. 19 -- to place a permanent seal on the well.
BP faces a fine of up to $1,100 for each barrel of oil spilled and may still be barred from gaining new licenses to operate in the Gulf, which accounts for about 10 percent of its production.
Other major oil companies, except Chevron, have reported stronger third-quarter profits, and many of them are eager to resume operations in the Gulf of Mexico that were suspended after the BP spill.
Wells in the Gulf can be very profitable, and taxes and royalties in U.S. waters are considered to be much lower than elsewhere in the world. Drilling projects there typically break even when oil sells for $50 to $60 per barrel. It's currently trading near $82 per barrel.
Chevron and Shell have both submitted requests for projects since President Barack Obama lifted the drilling moratorium on Oct. 12, but new regulations, which include more rig inspections, are expected to make it harder for companies to obtain offshore drilling permits.
Analysts are looking for the next major strategic steps from the new boss, who already has unveiled a reorganization of BP's business, splitting the company into three divisions, and the establishment of an independent safety division. He recently told employees that their performance on safety issues will be the only measure for awarding fourth-quarter bonuses as the company tries to tighten performance and clean up its image.