Oil major BP reported a lower than forecast 33% rise in fourth-quarter replacement cost profit and cautioned investors that an operational turnaround could slow this year.
Europe's largest oil company by market capitalization said it had addressed a number of areas of investor concern in 2009, lifting production of oil and gas 4%, bringing its refineries back up to full capacity and finding more oil than it produced in the year.
However, Chief Executive Tony Hayward said output was likely to fall in 2010 and one analyst said rising operating costs would mean the $4 billion of savings BP achieved in 2009 were unlikely to be repeated.
Hayward added that while oil prices, whose recovery was the main driver of BP's earnings rise, were well supported by OPEC, gas prices would remain volatile, and refining margins would remained depressed.
BP's experience reflects the recovery in major economies in the United States and Europe, which would be “slow and gradual,” the CEO said.
Two dealers said they expected the stock to open down 2% on the results.
BP kept its quarterly dividend flat at 14 cents/share and said it would ask shareholders, until last year used to strong rises in dividends, to allow it to offer dividends in the form of shares in future.
This would be more tax efficient for some shareholders and give BP more financial flexibility, a spokesman said.
BP said replacement cost profit, which strips out unrealized gains or losses related to changes in the value of oil inventories, was $3.45 billion in the quarter.
Excluding one-off and non-operating items, which amounted to a net charge of $937 million, the RC result was $4.38 billion, behind an average forecast of $4.65 billion from a Reuters poll of 9 analysts.
The miss was mainly due to BP barely breaking even in its refining business. Analysts had expected a weak quarter after average margins fell to their lowest level in over a decade but BP said its margins were even weaker than the average levels.
BP said output rose 3% in the quarter compared with the same period in 2008, to 4.05 million barrels of oil equivalent per day.
North Sea Brent crude averaged $74.53 a barrel in the quarter, BP said, compared to $55.48 in the same period of 2008. However, gas prices were sharply lower.
Earnings in the fourth quarter of 2008 were hit by a $700 million lagged tax charge at BP's Russian unit. (Reuters)