BP aims to plug performance gap as profits tumble

Business Materials 6 February 2008 01:30 (UTC +04:00)
BP aims to plug performance gap as profits tumble

( dpa ) - Oil giant British Petroleum (BP), hit by a sharp drop in 2007 profits, said Tuesday it was determined to close the "performance gap" with its rivals by proceeding with a restructuring programme that includes the shedding of 5,000 jobs.

The company saw pre-tax profits drop by 22 per cent to 8.76 billion pounds (17.29 billion dollars) in 2007 as problems with its US refineries made their impact on the balance sheet.

Despite the disappointing result, BP rewarded investors with a 25-per cent dividend hike while pledging to create a "leaner" business.

Last week, BP rival Royal Dutch Shell reported bumper profits of 13.9 billion pounds for 2007, boosted largely by the rise in the oil price.

BP, meanwhile, received a fine of 25 million pounds for an explosion at its Texas City refinery in 2005 in which 15 people died.

Last May, the company's chief executive, John Browne, resigned after lying to a court in an attempt to block stories about his private life.

His successor, Tony Hayward, Tuesday confirmed plans to cut 5,000 jobs - from 96,000 worldwide - by the middle of next year, as well as slashing the firm's corporate overheads by up to 20 per cent.

"We are absolutely determined to transform our downstream business as a whole. It will not happen overnight, but we believe that the performance gap with our competitors can be progressively narrowed in the next few years," Hayward said.

But despite the disappointing figures, BP shares rose by 3 per cent on the London stock market Tuesday, as analysts took a positive view of a turnaround at the world's third-largest oil firm.

"Overall, 2007 was not a vintage one for BP, but the early signs for 2008 are encouraging. Despite falling profits over both the fourth quarter and the full year, signs of improving prospects for 2008 are tangible," said Keith Bowman of equity firm Hargreaves Lansdown.

Hayward said the performance of refining and marketing was "very poor - despite the fact that we have a strong set of assets. The principal reason is poor reliability in some of our US refineries, which is compounded by the complexity and overhead structure of the business segment," he said.

BP is pinning its hopes for a turnaround on major new exploration projects in Angola, Trinidad and the Gulf of Mexico, Azerbaijan and Egypt.

"We made good, step-by-step progress in bringing new oil and gas fields on stream and rebuilding refining capacity during the period," Hayward said.

He added that BP would boost capital spending by more than 10 per cent to up to 11 billion pounds in 2008 to raise production levels.

The company was looking to produce more than 4 million barrels of oil a day in 2009, rising to 4.3 million in 2012.