'Good year' for BP despite profits slump

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The Independent Online

Oil firm BP said today that it had seen a "very good" 2009 despite missing City profits forecasts for the last three months of the year.

The UK firm, which saw annual profits slump by almost half amid lower oil prices, said its final quarter surplus rose 33 per cent to 3.45 billion US dollars (£2.16 billion).

BP shares slid more than 4 per cent today as its quarterly numbers undershot market forecasts.

The firm has seen a jump in production over the year, but its refining business was hit by "extremely weak trading conditions", particularly in the last months of 2009.

Chief executive Tony Hayward said the firm had exceeded many of its own expectations during the year, despite the global economic downturn.

He said recovery in the major economies of the US and Europe was expected to be "slow and gradual".

While he saw stability in the oil market because of the actions of cartel Opec, he warned that gas markets were predicted to remain volatile and refining margins would remain depressed for the foreseeable future.

BP reported a full-year surplus of 13.96 billion US dollars (£8.75 billion) in the year to December 31 - down 45 per cent on 2008.

Oil prices slumped in 2009 from their peak of 147 US dollars a barrel during the previous year.

BP said a lack of a significant hurricane season helped a 4 per cent growth in production in 2009.

As a result it expects 2010 to be at a lower level, but the firm said its long-term production guidance was unchanged at between 1 per cent and 2 per cent.

The increased production was particularly helped by the mild season in the Gulf of Mexico, resulting in relatively few disruptions to oil and gas production.

The firm's major new Thunder Horse field saw its first full year of activity in the region in 2009.

During last year, BP said it gained access to "significant" new production sites, such as the Rumaila oilfield in Iraq, which it said was "one of the great oilfields in the world".

But while upstream production was strong in the year, BP has seen a steep reduction in profits from its downstream refining business, where weak demand has hammered margins.

Profits for the full year were 743 million dollars (£465.5 million), compared with 4.18 billion dollars (£2.62 billion) in 2008.

Mr Hayward is in the process of a turnaround strategy for the firm and the company reduced headcount by 3,000 in 2008 with another 5,000 jobs shed last year, amid estimated cost savings of 4 billion US dollars (£2.5 billion).

"These results provide the clearest demonstration of the progress we have made and the momentum we have established in growing our business and making it more efficient," he said today.

The firm said it raised 2.7 billion dollars (£1.7 billion) from the proceeds of asset sales last year and expects between 2 and 3 billion dollars (£1.3 billion to £1.9 billion) from sell-offs this year.

This included divesting its interests in the Tengiz oil field in Kazakhstan and the pipeline which carries oil to Russia by selling its 46 per cent stake in LukArco to Russia's Lukoil for 1.6 billion US dollars (£1 billion).

Capital expenditure last year was 20 billion dollars (£12.6 billion) and the firm expects outgoing to be broadly the same in 2010.

"Our strategy remains the same: delivering profitable growth in the upstream; driving cost efficiency in the downstream and at the corporate centre; and investing with discipline and focus in alternative energy," Mr Hayward added.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said the firm was the victim of a high level of stock market optimism.

"Despite high expectations, tough comparatives and a difficult market, BP continues to deliver," he said.

"There is little question that refining margins remain under pressure, but the company is in good shape.

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