BP `self-help' yields record pounds 2.6bn profit

British Petroleum yesterday attributed a 30 per cent increase in its underlying annual profits to a record pounds 2.6bn to the group's so-called "self-help" drive to cut costs, rather than the unexpected surge in oil prices.

However the results failed to grab the enthusiasm of investors, who had expected a stronger increase in the dividend payout in the last three months of 1996. The dividend rose by 0.25p to 5.25p compared with the previous quarter.

BP shares were marked down sharply, ending 27p lower at 694p. Its annual dividend increased by 28 per cent to 19.5p, reflecting the longer-term recovery in the oil giant's fortunes.

John Browne, chief executive, said BP had achieved efficiency savings and productivity gains worth $600m (pounds 375m) in just 12 months. The improvement meant the group had more than exceeded its internal targets in the push to reduce costs by $1.5bn over three years.

Mr Browne said two-thirds of BP's profits rise last year had been achieved through these cost savings, with the remaining third from the boost to oil prices.

Last autumn the price of Brent crude briefly went through the $25 barrier for the first time since the 1990 Gulf War. In the last quarter of 1996 BP's average oil selling price was $23.1, up from $17 during the same period in 1995.

However, Sir David Simon, BP chairman, was quick to dampen speculation of another "30 per cent year" in 1997. He said: "The board fully recognises you can't continue to grow at those sort of levels ... the board doesn't expect that to be repeated every year."

The oil price boost helped profits from oil exploration to rise by 41 per cent to pounds 814m in the last quarter of last year. Quarterly earnings from refining and marketing improved slightly to pounds 163m, as profit margins recovered following last year's petrol price wars.