The result, which was in line with market expectations, reflected an pounds 888m restructuring charge - announced at the half year - against 14,000 job cuts and asset write-downs.
However, David Simon, who replaced Bob Horton as BP's chief executive in a boardroom coup last summer, said the company's performance was improving.
The results masked a sharp turnaround in the fourth quarter when it made a net profit of pounds 140m against pounds 6m in 1991.
However, underlying operating profits for the year slipped from pounds 2.4bn to pounds 536m due to worsening conditions in the refining, marketing and chemicals businesses. Its nutrition business, however, which is being sold, improved its profits from pounds 39m to pounds 73m.
About 80 per cent of the group's profits were earned in the second half, reflecting the benefits of cost-cutting.
The group reduced its capital expenditure by pounds 1.1bn to pounds 3.4bn while generating more than pounds 1bn from asset sales. The company is aiming for another pounds 1bn of disposals this year.
Group borrowings fell by dollars 1bn to dollars 15.3bn, equivalent to its total net assets. Dismissing recent market speculation that BP may be planning a big cash call, Lord Ashburton, chairman, said: 'There is no rights issue in our plans at present.'
The final quarter dividend has been halved to 2.1p a share in line with similar action earlier in the year. The year's total fell by more than a third to 10.5p.
BP also announced that it would pay pay dollars 630m to the Alaskan state government in back taxes.
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