I don't enjoy being especially hard on BP (NYSE:BP). I think this multinational oil giant tries to do right by its shareholders. Witness the nice 3%-plus dividend yield and a commitment to stock repurchases that totaled about $3.8 billion this quarter.

The trouble with BP and others of its ilk -- like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) -- is that production isn't growing at all. In fact, even though we're in a halcyon time for energy prices, these companies are struggling to maintain production, let alone increase it. Of course, you might suggest that if they could all produce a lot more, then energy prices wouldn't be so high. But that's a topic for another time.

For the third quarter, BP's revenue rose 46% on better results from exploration/production, refining/marketing, and other businesses. There are many different ways to peel the onion with respect to BP's bottom-line performance. Reported profits from continuing operations were up 50%, and reported net profit rose 34%, while replacement cost profit climbed 16%. As you might imagine from the numbers, replacement cost profit is a more conservative measurement (when prices are rising) that strips away the effect of price changes on energy held in inventory and not sold.

Total energy production dropped 2% in the third quarter, as the company was hurt by the Gulf Coast hurricanes as well as maintenance shutdowns in the North Sea. Oil production was actually up slightly, but production of natural gas and liquids were down. Thus, the company couldn't see the full benefit of the nearly 39% higher realized prices for energy products in the period. Although BP is working to restore and repair its Gulf operations, it looks as though the impact of Katrina will drag on at least into the fourth quarter -- to the tune of about 160,000 barrels of production per day.

Like other large oil companies, BP has some choices to make about how it wants to spend the cash that high energy prices are producing. Unlike Chevron, BP doesn't seem to be leaning in the direction of big acquisitions. Rather, it's taking its operating cash flow (and the cash garnered from the sale of the Innovene business) and returning it to shareholders. While that's a laudable move, investors should realize that it might come at the cost of lower near-term production, even as the company continues to explore development ventures around the world.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).