A bigger-than-expected hit from steeply falling oil prices at the end of last year has weighed on BP despite annual profits soaring 39% to a record £18.1billion.
The oil major’s shares fell as much as 5% yesterday as markets focused on a 24% fall in fourth-quarter profits to £1.8billion, 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’s chief executive Tony Hayward said.
BP’s average selling price dropped by more than half to $52 a barrel as demand fell away in the final three months of 2008 compared with $111 between July and September. Prices are now hovering around $40, which BP has said will deter investment.
As well as lower oil prices, BP also suffered from a higher tax bill and £493million in one-off losses at 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 above $147 a barrel in July.
Added to rival Royal Dutch Shell’s European record of £22billion in profits last week, the duo have gained a combined £40billion haul from 2008.
Mr 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 refineries in America, and the availability of its refineries rose to 91% in the last three months of 2008, the highest level for three years.
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 3.84million barrels of oil a day in 2008, 5% more than the previous year, and saw start-ups from nine major new projects.
Mr Hayward has led a drive to cut costs out of the business since taking over in 2007.
He said: “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.”
Despite the difficult economic environment, BP expects to grow production this year and outlay £15.5billion in capital spending.
Greenpeace criticised the company for its investment decisions, which it claimed had failed to take a new political, environmental and regulatory climate into account.
It said the alternative-energy division had been left to wither on the vine despite the urgency of climate change.
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