Things are looking up for oil behemoth BP (NYSE: BP) after the Gulf of Mexico oil spill in April 2010 that led to high costs and a decline in productivity. The company's third-quarter earnings have beaten Wall Street estimates, and the company has secured regulatory approval for its first drilling plan in the Gulf since the spill. Will these factors turn around BP's fortunes? Let's take a look.

Number crunching
BP posted a net profit of $4.90 billion for the third quarter of 2011 compared with $1.79 billion for the same period last year. In the third quarter of 2010, the company had to make a lot of repayments against the Gulf spill, which pulled down profits.

However, a 12% decline in production in 2010 has resulted in a 3.6% slide in 2011 third-quarter clean-replacement-cost profit to $5.33 billion compared with the same period last year. The clean-replacement-cost profit is a key parameter to judge an oil company's performance, since it excludes gains or losses from inventories and other non-operating items. Despite a high selling price, the decrease in clean-replacement-cost profit was mainly because of lower production and higher maintenance activity and costs.

Future plans
The oil spill, the biggest in U.S. history, resulted in the halting of production for BP's five Gulf of Mexico rigs. But to BP, that is now a thing of the past, and the company is moving ahead with gusto. In the past 12 months, BP has acquired 67 new exploration licenses in 11 countries and is all set to enter emerging markets like Brazil and India. Production is expected to increase with BP winning regulatory approval for its first drilling plans in the Gulf since the spill. The company plans to make all five Gulf of Mexico rigs operational by the end of the year.

The spill initiated restructuring activities, with BP enhancing safety and decreasing operational risk by setting up new drilling standards. Most of the turnaround activities are now complete.

The company has increased its target for asset sales by 50% to $45 billion, shedding off less profitable assets like that of its U.S. refining capacity in the Carson and Texas City plants and investing in higher-growth opportunities, mainly in exploration and production. This should help the company post higher revenues, though it had an adverse effect on the current production level of the firm.

BP has also settled spill claims with Anadarko (NYSE: APC), MOEX, and Weatherford (NYSE: WFT). It expects to complete the Gulf of Mexico Trust Fund payments by the end of 2012. BP can now concentrate on investing in growth avenues.

Foolish takeaway
With most of the damage control done and renewed focus on operations, BP is poised for a turnaround in the days to come. New licenses along with the resuming of drilling activities in the Gulf of Mexico will help BP keep the production rolling and generate higher revenues. The stock is worth watching out for.

To stay updated on BP's efforts at regaining lost ground, make sure to add it to our watchlist service, My Watchlist. It's free and helps you constantly stay updated on news and analysis on your favorite companies.

Fool contributor Abantika Chatterjee does not own shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.