LONDON (Reuters) – BPs ( BP.L ) gains thunder to a five-year high, driven by stronger oil prices, with production expected to continue rising thanks to the $ 10.5 billion acquisition of BHP Billiton Slate Business this week.
FILE PHOTO: The BP logo can be seen at a gas station in Kloten, Switzerland, October 3, 201
The results underscore a notable shift in BP last year, shaken with new projects and the BHP deal, the largest acquisition in 20 years, the legacy of the deadly Deepwater Horizon disaster of 2010.  In another vote of confidence, BP said it now expects to fully finance the acquisition from available capital without resorting to a rights issue as planned. It still plans to sell $ 5- $ 6 billion in assets to reduce debt.
"We are a bit cautious when talking about BP, but today's results are just that," said Bernstein analyst Oswald Clint in a note.
BP shares rose 3.4% at 0914 GMT, compared to a 1% increase in the European oil and gas sector .SXEP.
The rise in oil prices last year to its highest level since the end of 2014 has boosted sales of oil companies such as BP. Coupled with deep cost reductions and stricter spending since the downturn of 2014, the industry has seen rapid earnings growth.
For graph to BP Q3 Profits, click on tmsnrt.rs/2P25Zqn
BP in the third quarter underlying replacement cost profit, the definition of the company's net income rose to 3.8 billion US dollars, well above forecasts of $ 2.85 billion based on a company-provided analyst survey. By comparison, earnings were $ 1.86 billion in the previous year and $ 2.8 billion in the second quarter of 2018.
The increase in profits came as production in the first nine months was boosted by new fields and high reliability of oil production. and gas fields rose.
Adjusted pre-tax earnings for BP's upstream business more than doubled year-over-year to $ 4 billion in the quarter.
"We see the background for a strong and well-functioning business," said CFO Brian Gilvary to Reuters.
"We are confident that within the financial framework we can complete this transaction with all the money," Gilvary said.
For BP Cash Flow Chart, click on tmsnrt.rs/2CT4MdA
Oil and gas production rose to 2.5 million barrels of oil equivalent per day (Boed) in the first nine months of the year and should continue to rise expected completion of the BHP contract ( BHP.AX ) ( BLT.L ) on October 31.
BP commissioned nine major oil and gas fields last year, including Azerbaijan, Oman, Egypt and Angola, which will increase production by 900,000 barrels of oil equivalent per day by 2021. The majority of the production will be gas.
The BHP deal is expected to bring more than 100,000 boeds into production before the divestments, which primarily include onshore shale gas producing plants in the US, already owned by BP, Gilvary said.
Gearing, the ratio of debt to BP's market value, fell from 27.8 percent at the end of June to 27.5 percent at the end of the quarter. Net debt was $ 39.2 billion at the end of September.
Gilvary said gearing could temporarily rise above the 30 percent limit next year, which the company has set depending on the price of oil, as it pays for the BHP deal.
BP expects lower refining margins and more refinery changes in the fourth quarter, mainly at the Whiting site in the US.
BP expects to invest approximately $ 15 billion in 2018.
BP's operating cash flow, excluding the payments for the Deepwater Horizon disaster, was $ 6.6 billion, as in the previous year.
Reporting by Ron Bousso; Editing by Keith Weir and Louise Heavens