BP suffers falling profits in 2007 as output slides

Roland Jackson Yahoo News 5 Feb 08;

British energy giant BP said Tuesday that net earnings fell last year, despite soaring crude oil prices, as it was hit by declining output following a turbulent 2007.

The world's third-biggest oil major also confirmed it would axe about 5,000 jobs in a cost-cutting drive that was signalled last year by chief executive Tony Hayward, who wants to breathe new life into the embattled group.

"We are absolutely determined to transform our downstream business as a whole," Hayward said in comments accompanying the annual results.

"It will not happen overnight, but we believe that the performance gap with our competitors can be progressively narrowed in the next few years."

Net profit dipped 5.25 percent to 20.845 billion dollars (14.15 billion euros) last year. Production fell 3.0 percent to 3.82 million barrels per day of oil equivalent but revenues rose 6.9 percent to 284.37 billion dollars.

BP said that net profit, excluding gains from the value of its crude oil inventories, tumbled 22 percent to 17.29 billion dollars.

In 2007, the world's major energy companies enjoyed soaring oil prices that h blazed a record-breaking trail on their way towards 100.09 dollars per barrel early last month.

Anglo-Dutch firm Royal Dutch Shell posted record net profits of 31 billion dollars and US titan ExxonMobil hit 40.6 billion dollars -- the largest US corporate annual profit in history.

Last year, however, BP faced a major boardroom scandal, and the continued fallout from a fatal blast at its Texas City refinery in 2005 and a major pipeline leak in Alaska in 2006.

Despite sagging profits, BP's share price jumped 2.68 percent to 556.50 pence on Tuesday as investors concentrated on news that the group has hiked its quarterly shareholder dividend by 25 percent.

In the fourth quarter, meanwhile, BP's net profit jumped 52.7 percent from a year earlier to 4.40 billion dollars (2.96 billion euros), reflecting higher oil prices and volumes.

But excluding the value of its crude oil inventories, net profit plunged by 23 percent to 2.97 billion dollars in the three months, BP added.

Hayward admitted the performance was "very disappointing in refining and marketing in particular."

Fourth-quarter output rose 2.0 percent to 3.91 million barrels per day of oil equivalent, while revenues jumped 28.9 percent to 79.85 billion dollars.

BP is the world's third biggest energy company in terms of stock market capitalisation behind number one ExxonMobil and Royal Dutch Shell.

Unlike its peers, however, BP endured a torrid time in 2007.

In October, the British group admitted that its profits were hit by lower output, weak US gas prices and refinery outages.

The same month, BP agreed to pay 373 million dollars in fines and compensation to settle several US government probes, including allegations of trading abuses.

BP agreed to pay the fines, some of which were criminal penalties, for environmental violations relating to the Texas blast in 2005 and crude oil pipeline leaks in Alaska.

The explosion killed 15 people and raised serious safety concerns about BP's US facilities.

Last May, meanwhile, John Browne unexpectedly resigned as BP chief executive after a newspaper group won a legal battle to publish details of his relationship with another man.

Browne had been due to retire in July after 12 years at the helm of the group he had helped transform into an energy giant. He was replaced by Hayward.

Hayward was head of BP's production unit when in 2006 the group was forced into a partial shutdown of its 400,000-barrel per day Prudhoe Bay field in Alaska following a leak in poorly maintained pipelines.

Towards the end of last year, Hayward unveiled a major restructuring to help transform the group's fortunes.

BP was split into two divisions -- Exploration and Production, and Refining and Marketing -- compared to three currently. BP's Gas, Power and Renewables unit was absorbed into the other two.