Oil and gas majors BP and BG have both enjoyed strong third quarters. BP, after its horrific spill-impacted second quarter, returned to profitability with a third-quarter profit of $1.8bn (£1.1bn) - on a headline replacement cost basis. This compares with a $17bn loss in the previous quarter and a $5bn profit in the third quarter of 2009. It also comes after an additional spill-related charge of $7.7bn, bringing BP's Gulf of Mexico spill response cost to almost $40bn. That strong performance reflects higher oil prices having offset lower production following April's Deepwater Horizon accident, as well as subsequent asset sales.
Indeed, BP's disposal programme has generated around $14bn, with management targeting a total of $25bn-£30bn of disposals by the end of next year. With such cash flow further improving the group's financial condition, BP will consider reinstating dividends when it announces full-year results in early 2011. Management's confidence in the group's prospects is further highlighted by guidance that next year's capital expenditure ($17.6bn in the first three quarters of 2010) is expected to exceed the $18bn previously indicated.
BG is also making solid operational progress, which should underpin long-term growth. Take, for example, its floating production facility on the giant Tupi pre-salt field in the Santos Basin, offshore of Brazil - BG initially announced production there of 100,000 barrels of oil per day. Management then announced a 2.7bn-barrel upgrade to the estimated resources at the Tupi, Iracema and Guará fields in that basin. BG's best estimate of economically recoverable gross resources in these fields has since increased 34 per cent to 10.8bn barrels of oil equivalent.
In its core gas business, BG has sanctioned the Queensland Curtis liquefied natural gas project after receiving the necessary environmental approvals. The group will invest some $15bn in the project over the next four years, which increases its 2011-12 capital investment estimate from $16.5bn to $18.5bn.
