BP plc's Gulf of Mexico (GOM) assets are a solid part of the portfolio, but the producer plans to review equipment and procedures before moving forward with any developments, CEO Bob Dudley said Tuesday.

Even though the deepwater GOM moratorium imposed following the Macondo well explosion has been lifted, Dudley told reporters in a conference call that part of the delay in attempting to restart operations is because some of the regulatory procedures have yet to be detailed.

The industry, he said, will get back to work offshore over 2011. However, don't expect BP, the largest offshore leaseholder, to lead the way.

"It would not be sensible for us to raise our hand and rush with the first permit application," Dudley said. "We're waiting to see the pace at which things progress in the Gulf before making a decision."

BP already has begun to test and review all of its offshore equipment, as well as review operational and safety procedures. Once the Bureau of Ocean Management, Regulation and Enforcement has smoothed its permitting procedures and companies restart their offshore drilling operations, BP management then will decide what to do with the drilling rigs that now are idled, Dudley said.

Dudley, who took the helm of BP in October, said the "traumatic" Macondo tragedy requires the company to rebuild trust, particularly in the United States. That will take more time, he insisted.

Even though Tuesday's elections may shift control of Congress to the more business-friendly Republicans, rebuilding BP's tattered reputation is "going to take time," he said.

BP's net profits plunged 67% in 3Q2010 to $1.8 billion (9.4 cents/share), from $5.3 billion (28.2 cents) in the year-ago period and a loss of $17 billion in 2Q2010. In the latest quarter BP took an additional one-time $7.7 billion charge related to the deepwater oil spill.

The latest best estimate of BP's costs related to the oil spill is $39.9 billion, versus the $32.2 billion charge it took in 2Q2010 (see Daily GPI, July 28). Replacement cost profit for the quarter was $1.8 billion, compared with a loss of $17.0 billion in 2Q2010 and a profit of $5.0 billion in the year-ago period.

The new charges reflect "a delay in completing the relief well that finally sealed the Macondo well in September, additional mandated costs for decontaminating and demobilizing vessels involved in the response, claims center administration costs and additional legal costs," Dudley said.

BP's oil spill costs to date are based on management's belief that the company will not be found "grossly negligent." The company hasn't made contingency plans otherwise. However, it would be "imprudent" to rule out additional charges in the future related to the spill, he said.

The Exploration & Production segment, now being restructured into separate functional Exploration, Development and Production divisions, recorded lower production volumes as a result of normal seasonal turnaround activities and as a consequence of the GOM oil spill. However, financial results were stronger than in both the previous quarter and a year ago, thanks to the improved price environment and lower depreciation.

BP's U.S. gas production declined to 2,190 MMcf/d in 3Q2010 versus 2,278 MMcf/d in the year-ago period and 2,240 MMcf/d in 2Q2010. Total domestic output was 564 million boe/d, versus 660 million boe/d in 3Q2009 and 581 million boe/d sequentially. Domestic exploration expenses totaled $78 million, versus $235 million in the year-ago period.

BP's average gas price realizations in the latest period were up at $3.92/Mcf, from $2.81 a year earlier and $3.76 sequentially. Total liquids realized prices were $70.47/bbl, versus $62.77 in 3Q2009 and $72.90 in 2Q2010.

"These results demonstrate that BP is well on track for recovery after the tragic accident on the Deepwater Horizon drilling rig and subsequent oil spill," said Dudley. "We have made good progress during the quarter. This strong operating performance shows the determination of everyone at BP to move the company forward and rebuild confidence after the terrible events of the past six months.

"We have also begun to make important changes in the way we operate across the Group -- including creating a powerful Safety and Operational Risk function and restructuring the upstream segment -- to ensure that safety and risk management are embedded as the absolute priority for every operation, for every person, throughout BP."

The company has sales agreements in place totaling around $14 billion, with a divestiture target of $25-30 billion by the end of 2011. Cash held at the end of the third quarter was nearly $13 billion.

"Looking ahead, we expect fourth quarter production and margins to reflect normal seasonal trends, continued turnaround activity in the North Sea and Angola, continued impacts as a consequence of the Gulf of Mexico oil spill and an impact of around 100 million boe/d from announced divestments," said Dudley. "The gas marketing and trading contribution is expected to improve in the fourth quarter, but not to reach historic levels if lack of volatility in the market continues."

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