BP profits fall on lower refining margins and disposals

The oil giant said underlying replacement cost profits, a measurement that strips out fluctuations in the value of inventories, fell from $3.9bn to $2.8bn (£1.7bn) in the fourth quarter - marginally ahead of analysts’ expectations. Full-year profits fell from $17.1bn to $13.4bn.

The figures were hit by BP’s major divestment programme, including exits from Colombia, Venezuela, Vietnam and Pakistan, and a big drop in downstream profits, where a “significant” industry-wide fall in refining margins was exacerbated by the sales of two big US refineries - Texas, the site of 2005’s fatal fire, and Carson.

Underlying downstream profits in the fourth quarter fell to just $70m compared with $1.4bn the previous year.

The impact was partly offset by strong growth in production from BP’s core markets, notably the North Sea, Angola and the Gulf of Mexico, with 2013 also proving “BP's most successful year for exploration drilling for almost a decade“. The company participated in 17 completed exploration wells.

Having completed a $38bn divestment programme, BP said in October last year that it expects to divest a further $10bn of assets by the end of 2015, with the proceeds largely used to fund share buy-backs. Since then around $1.7bn of disposals have been agreed.

Shareholders are pushing oil majors, not least BP rival Royal Dutch Shell, to improve returns in an era of flat or falling energy prices, thanks to America’s shale revolution.

Mr Dudley said: "Capital discipline is central to BP's strategy; making the right investment choices, sticking to our capital limits, and actively managing our portfolio in pursuit of long-term value."

Capital expenditure in 2013 was $24.6bn, in line with guidance, and is expected to be around $24-$25bn this year and stay within the $24-$27bn range through to the end of the decade.

While BP awaits various court decisions in the US over 2010’s Deepwater Horizon spill that left 11 dead, it has marginally raised its provision for the accident - up $0.2bn to $42.7bn at the end of 2013.

Late last year final investment decisions were taken on two big upstream projects - the Khazzan tight gas development in Oman, and the Shah Deniz 2 gas project in Azerbaijan and associated pipelines. BP’s Whiting refinery in America will also ramp up this year after the completion of a modernisation project.

BP is paying a fourth quarter dividend of 9.5 cents per share, up 5.6pc.

Shares in BP edged down 0.4pc in early trading on Tuesday.

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