Lower profits prompt share sell-off at BP

OIL major BP said yesterday that annual profits nearly halved last year as the global economic slump slashed demand for oil, forcing it to cut thousands of jobs and to warn of a slower turnaround in its business this year.

BP’s profit in 2009 fell 45 per cent to $13.9bn (£8.7bn) as weaker demand for fuel from transport companies and industry hit its refining business.

The group has cut 7,500 jobs in a restructuring begun in late 2007 and warned that more cost savings were needed, particularly in refining, although it did not give details.

The group’s chief executive of refining and marketing, Iain Conn, said BP needed to use its refineries better and to make them more efficient in the face of a glut of unwanted fuel.

“There’s too much diesel on either side of the Atlantic,” Conn said.

BP lifted production of oil and gas four per cent in 2009, brought its refineries back up to full capacity and found more oil than it produced in the year. It said, however, that output was likely to fall slightly in 2010 and refining margins would stay depressed for the foreseeable future.

Chief executive Tony Hayward said European and US economic recovery was likely to be slow and gradual and reducing the group’s costs was a priority in 2010.

“There’s a lot more to be done,” Hayward said. Hayward added that while oil prices, whose recovery was the main driver of BP’s quarterly earnings rise, were well supported by OPEC, gas prices would remain volatile. BP reported a 33 per cent rise in fourth quarter profit to $3.45bn, lower than analysts had expected.

Broker Charles Stanley said the group’s exploration and production results met hopes, but there was a large shortfall in the contribution from the refining and marketing division. The shares fell four per cent to 572p.