A bigger than expected hit from steeply falling oil prices at the end of 2008 weighed on BP today despite annual profits soaring 39 per cent to a record $25.6bn (£18.1bn).
The oil major's shares fell as much as 5 per cent as markets focused on a 24 per cent fall in fourth-quarter profits to $2.6bn (£1.8bn), below most forecasts.
As developed economies slid into recession last year, oil demand fell by 500,000 barrels a day and is set to fall further this year, the firm said.
BP's average selling prices dropped by more than half to $52 in the final three months of 2008 compared to $111 between July and September as demand fell away.
As well as lower oil prices, BP also suffered from a higher tax bill and $700m (£493m) in one-off losses from its Russian joint venture, TNK-BP, which was dogged by political infighting last year.
Over the full year, BP gained from a spike in prices which hit a peak of almost $150 a barrel in July. Added to rival Royal Dutch Shell's European record of £22bn in profit last week, the duo have gained a combined £40bn haul from 2008.
But prices are currently hovering around the $40 a barrel mark - below the $50 to $60 a barrel break-even point suggested by BP.
BP chief executive Tony Hayward said: "I don't see the record financial performance repeated for some time."
The fourth-quarter results overshadowed a much improved operational showing from BP, which has been hit by refining problems in recent years.
Mr Hayward said the company was "continuing to show powerful recovery". BP has rebuilt capacity at its Texas City and Whiting sites in the US.
The availability of its refineries rose to 91 per cent in the last three months of 2008 - the highest level for three years.
But Collins Stewart analyst Gordon Grey said: "BP has demonstrated a solid recovery from its recent operational problems, but we see significant challenges ahead in terms of the visibility of its growth post-2009 and its susceptibility to prolonged sub-$40 crude prices."
Excluding production-sharing agreements, BP pumped 3.84 million barrels of oil a day in 2008 - 5 per cent ahead of the previous year - with start-ups from nine major new projects including its huge Thunder Horse platform in the Gulf of Mexico.
Mr Hayward has led a drive to cut costs out of the business since taking over in 2007. BP shed 3,000 staff in 2008 and expects to axe more than the 5,000 posts originally planned by the middle of this year.
"I expect costs to continue to fall both from the actions we've already taken and as we begin to drive deflation into the supply chain," he added.
Despite the difficult economic environment, BP expects to grow production this year and lay out $22bn (£15.5bn) in capital spending.
Annual refining and marketing profits rose 60 per cent to $4.2bn (£2.9bn) thanks to the firm's improved operating performance.
Exploration profits lifted to $38.3bn (£26.7bn) from $27.6bn (£19.4bn) after the overall increase in oil prices during the year.