Slide in oil price hits BP profit

BP is the UK's largest oil company

Profits at oil giant BP fell sharply at the end of 2008 after the price of oil slid dramatically.

For the last three months of 2008, BP's replacement cost profit was $2.587bn (�1.8bn), down 24% from a year ago and 74% lower than the previous quarter.

Oil prices hit an all-time high of $147 a barrel in July, but have since fallen back sharply to about $40 this week.

Despite the fall in profits at the end of the year, BP's profit rose 39% for 2008 as a whole to $25.593bn.

BP said the fourth quarter was also weak because of a loss of $700m at its Russian joint venture TNK-BP.

A protracted and bitter dispute between BP and the Russian shareholders in the venture was resolved in September when Robert Dudley had to step down as TNK-BP's chief executive.

'Challenging' environment

BP's profit figures were below analysts' forecasts.

REPLACEMENT COST PROFIT

Replacement cost profit is the reporting measure typically used by oil companies and reflects the current cost of supplies

The measure strips out gains or losses related to any changes in the value of the firm's stock of fuel products

"The group's refining business remains under pressure, whilst weather-hit production has been restored at a time of lower oil prices," said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.

"Furthermore, challenges still exist for the group's Russian business," he added.

The oil giant said it expected continued low demand for its products as many countries enter recession.

"The economic environment remains challenging, with continued slowing of global economies and uncertainty in the global financial markets," it said.

BP's chief executive Tony Hayward said that that BP was striving to reduce costs, with 3,000 jobs lost in 2008 and cuts expected to exceed 5,000 by the middle of 2009.

"The mantra in BP today is: 'every dollar counts, every seat counts'," he said.