Oil giant BP today said third quarter profits slumped to $4.98bn (£3bn), a fall of 50% on the same period last year.
The results for the July to September period a year earlier were boosted by crude oil prices reaching an all-time high of $147 a barrel, but prices averaged around half that this time around.
BP, which has has been on a campaign to turn around its poor refining performance during the past 18 months, has been buoyed in the period by major discoveries in Angola and Mexico.
Despite today's sharp fall in profits, BP's performance was well ahead of City expectations.
It also increased its annual cost savings target for the second time this year, to $4bn (£2.45bn) from the $3bn forecast in July.
The latest revision comes after a major restructuring of the company under chief executive Tony Hayward. BP reduced headcount by 3,000 last year and is set to lose another 5,000 posts by the end of 2009.
Some of the improved cost savings have been due to currency exchange benefits, while BP has also been negotiating better terms with suppliers.
BP shares surged more than 5% on the back of today's results.
When excluding non-operating items and accounting costs, BP's underlying profits of $4.67bn (£2.86bn) were materially higher than the City's consensus for a figure of around $3.2bn (£1.96bn). The quarterly dividend was also held at 14 cents a share.
BP's figures gave a boost to shares in Royal Dutch Shell, which is due to post its figures on Thursday. The company is expected to report profits of $2.5bn (£1.5bn) — less than a quarter of last year's record.
Production for the quarter was 7% higher than the same period a year ago, mainly due to a strong operational performance and the absence of hurricanes, which impacted on output in 2008.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said the company was in better shape than it has been in the recent past.
He added: “The fall in earnings was well trailed, but the numbers nonetheless have obliterated market forecasts, as evidenced by the spike in the share price.”