OIL giant BP has seen its annual profits plunge 45 per cent after lower oil and gas prices and depressed refining margins took their toll last year.
The FTSE 100 group posted replacement cost profits – a measure that takes into account the cost of replacing the company's oil reserves at current prices – of $13.96bn (£8.7bn) for last year.
This is down from the $25.59bn in 2008.
Meanwhile profits for the final three months of 2009 standing at $3.45bn – up 33 per cent on the previous year but below analyst forecasts of $4.7bn.
BP, which replaced Shell as the biggest oil company by market value in Europe last month for the first time in more than three years, added it had ramped up its oil and gas production by 4 per cent during the year.
It also brought its refineries back up to full capacity and increased reserves for the 17th consecutive year.
Chief executive Tony Haywood said 2009 had been a "very good year" for the company despite difficult conditions.
Its drive to streamline and simplify its business, which began in late 2007, led to $4bn of cost savings in 2009. Further efforts to cut costs remain a "management priority" in 2010.
Looking forward, Hayward said that BP expects recovery in the major economies of the US and Europe to be "slow and gradual" with gas markets expected to remain volatile and refining margins to remain depressed for the foreseeable future.
"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.
"2009 has been one of the best years for BP and its shareholders since the merger with Amoco.
But we are not resting on our laurels. There's a lot more to be done."