BP is to cut 5,000 jobs after announcing that its profits plummeted by more than a fifth in 2007, a record year for the price of oil.
BP's chief executive, Tony Hayward, said yesterday that he would deepen a restructuring aimed at righting the oil giant and branded its performance, which fell short of analyst forecasts, as "not good enough".
The UK's biggest company was dragged down by the performance of its refining business in America, where shutdowns after industrial accidents at its Texas City and Whiting refineries and pipeline leaks in Alaska led to a 22 per cent drop in annual replacement cost profit to $17.3bn (£8.8bn).
About 30 per cent of the layoffs, intended to cut "corporate overheads" by about 20 per cent, will come in the UK, with another 30 per cent in America and the remainder spread throughout BP's global operations. The cutbacks will be pushed through in the next 18 months.
The disappointing performance by BP was even more worrying given the recently unveiled numbers of its rivals. ExxonMobil broke all corporate records last week with a $40bn annual profit. Royal Dutch Shell broke all UK records as profits surged to $27.6bn.
Mr Hayward has been fighting a battle on many fronts since he took over last year after the sudden resignation of Lord Browne of Madingley, including cost inflation that hit about 10 per cent last year. Yet the market was heartened by the company's decision to increase its dividend by 31 per cent, making it the most generous in the sector, and news that it managed to replace "more than 100 per cent" of its reserves.
The dividend increase – a break from the company's long-held preference for share-buybacks – and Mr Hayward's cost-cutting drive underlines his effort to undo much of what was left to him by Lord Browne. He said that the cutbacks were designed to offset rising expenses but that they would not result in an absolute decrease, as costs are expected to continue to spiral upward.
However, environmental campaigners launched fresh criticism of the company's recent decision to buy into Canada's oil sands, ending a decade in which the company had shunned the controversial fuel source. The company also recently consolidated all of its alternative fuel business lines, including biofuels, under one unit called BP Alternative Energy.
James Marriott, of Platform, said the investment "shows BP is aggressively recarbonising. At the same time, BP Alternative Energy is being marginalised".
BP saw production fall last year by about 3 per cent. Yet unlike its peers, BP said that production this year would actually increase next year as new projects, such as its Thunder Horse and Atlantis off-shore platforms in the Gulf of Mexico, begin significant operation. The company also confirmed it had submitted an application to Iraq's oil minister to be considered as a partner to develop the country's massive reserves.
Mr Hayward was sceptical of the view espoused by his opposite number at Shell, Jeroen van der Veer, that the peak for conventional oil production could come by 2015. He said: "Peak oil will be driven by demand rather than supply, and I don't expect that to happen in 2015."Reuse content