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Financial Times: BP to cut 5,000 jobs as profits fall

By Ed Crooks, Energy Editor
Published: February 5 2008 08:26 | Last updated: February 5 2008 08:26

BP, Europe’s second biggest oil company, has raised its quarterly dividend by 31 per cent to reflect “the company’s increasingly robust view of the future”, in spite of fourth-quarter profits well below analysts’ expectations.

The company announced that it added to its reserves more than 100 per cent of the oil and gas it produced last year, when its leading rivals have either reported poor performance or said nothing about their reserves replacement.

It also gave more details of the restructuring plan announced by Tony Hayward, who took over as chief executive last May following the sudden departure of Lord Browne, with 5,000 jobs expected to go by the middle of next year and a planned 15-20 per cent reduction in corporate overheads.

Replacement cost net profit was $2.97bn in the fourth quarter, down 24 per cent from the equivalent period of 2006. For the year, replacement cost profit was $17.3bn, down 22 per cent.

Excluding “non-operating” charges of $1.03bn related to the sale of 700 US convenience stores, and other restructuring costs, the fourth-quarter profit was $4bn, when analysts had been expecting about $4.5bn.

Those analysts’ forecasts had been cut sharply in recent weeks, generally by about 25 per cent, as after talking to the company they began to focus on issues such as a higher tax charge and weak refining margins, particularly in the US mid-west.

Production of oil and gas was down 3 per cent for the year at 3.82m barrels of oil equivalent a day. However, it was 2 per cent higher in the fourth quarter of 2007 than in the equivalent period of 2006, a better result than for the other oil supermajors to have reported so far – ExxonMobil, Royal Dutch Shell and Chevron.

BP’s reserve replacement also seems likely to have been better than that of its competitors. Exxon and Shell have given no guidance on reserve replacement for 2007, which they will set out over the next few weeks. Chevron said it expected to have replaced just 10-15 per cent of its production.

BP’s dividend for the fourth quarter of 2007 will be 13.525 cents, up 25 per cent from the third quarter, or 6.813p, up 28 per cent in sterling terms. For the year the dividend is up 16 per cent in dollar terms.

The group said the rise in the dividend signalled “greater confidence in its ability to deliver sustained dividend income to shareholders [and] also marks a shift in the balance between dividends and buybacks as a means of returning value to shareholders.”

Last year it bought back $7.5bn of its shares, roughly 2 per cent of its market capitalisation, down from $15.5bn in 2006. Over the past eight years it has cut its equity base by 16 per cent, but the shares have underperformed relative to BP’s competitors for much of that period.

BP shares were up 8p at 550p soon in early London trading.

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