BP has reported third-quarter profits of £3 billion.

BP has reported third-quarter profits of £3 billion ($4.98bn) today (Tuesday 27 October) – 50% down from last year but much higher than financial analysts expected.

The oil giant’s replacement cost profit between July and September “obliterated” market forecasts, and sent the company’s share price up by 5%.

Replacement cost profit is the reporting measure typically used by oil companies and reflects the current cost of supplies; the measure strips out gains or losses related to any changes in the value of the firm’s stock of fuel products.

BP made $10bn last year, largely assisted by the price of oil at a record high of $147 a barrel, yet the current $80 a barrel could not match the previous performance.

However, the results are significantly better than some City analysts had expected, and the profit equates to nearly £1.38m per hour despite the recession. It is also a significant improvement on the second quarter, when BP’s profits fell to $3.14bn.

The firm also increased its annual cost savings target for the second time this year, to $4bn (£2.45bn) from the $3bn (£1.83bn) forecast in July.

A major restructuring of the company under Chief Executive Tony Hayward occurred last year, with a reduction of the headcount by 3,000; the company is set to lose another 5,000 posts by the end of 2009.

Further cost savings have also been attributable to currency exchange benefits, while BP has also been negotiating better terms with suppliers. It was also buoyed last month by a “giant” new oil discovery in the Gulf of Mexico.

The quarterly dividend, to be paid in December, is 14 cents per share ($0.84 per ADS), the same as a year ago. In sterling terms, the quarterly dividend is 8.512 pence per share, compared with 8.705 pence per share a year ago, a decrease of 2%.

BP shares surged more than 5% on the back of Tuesday’s results.