BP profits slide 22 per cent

Oil giant BP today pledged to close the "performance gap" with its rivals after a 22% fall in profits last year.

The world's third biggest oil firm saw profits tumble to $17.29bn (£8.76bn) in 2007 as problems with its US refineries hit the company.

But chief executive Tony Hayward cheered investors with a 25% dividend hike and progress on plans to create a leaner business by stripping out management.

He confirmed BP's plans to cut 5,000 jobs by the middle of next year, as well as slashing the firm's corporate overheads by up to 20%.

He said: "We are absolutely determined to transform our downstream business as a whole. It will not happen overnight, but we believe that the performance gap with our competitors can be progressively narrowed in the next few years."

The results contrast with rival Royal Dutch Shell, which last week posted record profits of almost £14 billion.

The figures cap a turbulent year for BP, whose long-serving head Lord Browne resigned last May after he lied to a court in a bid to block stories about his private life.

It also faced criticism over the March 2005 explosion at its Texas City refinery, where 15 workers died.

But today shares rose almost 3% as hopes grew for a turnaround of the business.

Hargreaves Lansdown equity analyst Keith Bowman said: "Overall, 2007 was not a vintage one for BP, but the early signs for 2008 are encouraging.

"Despite falling profits over both the fourth quarter and the full year, signs of improving prospects for 2008 are tangible."

BP has struggled with lower margins and production problems with its US refineries, which sent its refining and marketing operation to a fourth-quarter loss of $1.34bn (£678.7m).

Mr Hayward said the performance of refining and marketing was "very poor - despite the fact that we have a strong set of assets".

"The principal reason is poor reliability in some of our US refineries, which is compounded by the complexity and overhead structure of the business segment," he added.

This loss left the group's overall underlying fourth-quarter profits at $4bn (£2.02bn) - well below consensus forecasts of $4.3bn (£2.17bn).

But earnings from the firm's exploration and production division lifted 51% to $7.65bn (£3.87bn) after an improved performance in the final three months of last year.

The group began production from five major projects in Angola, Trinidad and the Gulf of Mexico, and enjoyed exploration successes in Azerbaijan and Egypt.

Over the year, BP produced 3.82 million barrels a day of oil equivalent a day from its E&P division - just inside its forecasts of between 3.8 and 3.9 million.

Mr Hayward added: "We made good, step-by-step progress in bringing new oil and gas fields on stream and rebuilding refining capacity during the period."

The chief executive added that he would boost capital spending by more than 10% to up to $22bn (£11.1bn) in 2008 to raise production levels.

The company is looking to produce more than four million barrels of oil a day in 2009, rising to 4.3 million in 2012, and is now pricing an assumption of crude oil prices at around $60 a barrel into its plans.

BP paid out restructuring costs of $250bn (£126.7bn) in the final three months of 2007 and expects to pay a further $1bn (£506.7m) over the course of this year.

Mr Bowman added: "Production levels have finally begun to improve, cost savings from the group's recently announced restructuring plan should begin coming through and a marked increase in the dividend helps provide underlying support to the share price."

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk