Shares in Enterprise Oil plunged by 10 per cent yesterday to 332p, nearly half their level in May, as it warned that it was being forced to consider a dividend cut.
Net profit, after exceptionals, fell from pounds 80m to pounds 12m.
In a letter to shareholders, Sir Graham Hearne, the chairman, said: "I write to you at a time when the oil industry is facing arguably the toughest time in its history.
"Oil prices over the past year have fallen to their lowest level for 25 years in real terms.
"As a result, I have to report a disappointing set of results," he continued.
Sir Graham said the profits were "clearly not acceptable", and he added that the oil industry must discover its own solution "from within, not from without".
The company outlined unprecedented measures to cut costs in every area of its business - from exploration to office space.
Pierre Jungels, the Belgian chief executive, said: "We cannot bank on higher oil prices in the foreseeable future, so we are intent on driving Enterprise Oil even harder.
"A widespread review of our business in a world of low oil prices has identified a number of actions we will be taking in order to create growth, even if crude prices stay below $15 a barrel for several years."
Actions to be taken by Enterprise will include cutting down on exploration for new oil fields - even though it is reckoned to be one of the best exploration plays in town, with an unrivalled record of actually finding oil.
It may also start cutting its stake in associated companies; renegotiating costs, and even letting out excess office space.
In many of the company's projects, cost levels were set at a time when oil prices were much higher.
Liz Butler, an oil analyst at Panmure Gordon, said: "The low oil price is killing them and it is killing every oil company. Enterprise is in a better position that most.
"In real terms, the oil price is probably at its lowest since 1973."
Enterprise realised an oil price of pounds 8.15 ($13.42) a barrel in the first half of 1998, compared with pounds 12.11 ($19.78) last year. Despite cutting its costs from pounds 6.12 to pounds 5.83 per barrel, the impact of this fall has been devastating.
World oil prices have been slashed as Iraq has in effect re-entered the market and the economic slump in Asia has reduced demand. Mild winters in Western Europe and the US and an excess of stock have aggravated the problem.
Mr Jungels said the industry needed a co-ordinated action plan to tackle the cost of getting oil and gas out of the ground, including running wells in common with other companies and bundling assets together.
Internal cost-cutting was essential, including slashing travel, entertainment and commu- nications budgets. But the "real prize" - a cut in costs of 10 per cent - could only be achieved by action across the industry.
Outlook, page 15