BP falls 4% as earnings disappoint

Shares in BP retreated in morning deals after the oil giant reported 'disappointing' fourth quarter earnings and said it expects production growth to be negative in 2010.

Shares were down 24.1p, or 4.05%, at 570.4p after BP said underlying replacement cost profit for the fourth quarter of 2009, before non-operating items and fair value accounting effects, was $4.4 billion -up 70% on the same period in 2008.

That was down 6% compared to the third quarter and 5% below consensus. Yesterday, US peer ExxonMobil reported better than expected results for the quarter - adding to the pressure on BP shares today.

For the full year BP’s profit totalled $14 billion, down 45% reflecting lower average oil and gas prices and depressed refining margins.

At the operating level, adjusted EBIT (earnings before interest and tax) was $6.279 billion, around 8% below market expectations as a strong performance in the Exploration & Production division was offset by much weaker than expected results in the group's refining and marketing business ($15m compared $1.1 billion last quarter and 97% below expectations). A $492 million charge also weighed.

The oil and gas group said it will pay a dividend of 14 cents - in-line with last year but down 12% in sterling terms at 8.6 pence per share, compared with 9.8 pence per share a year ago.

The group said oil and gas production increased by more than four per cent in 2009 reflecting the ramp-up and start-up of major new projects, including the first full year of production from the Thunder Horse field in the US Gulf of Mexico.

The reserve replacement ratio - a key measure of success in growing the business going forward - was 129%. Anything over 100% means the group has discovered more than it has extracted in any gven year.

But BP said production is expected to be slightly lower in 2010 reflecting the benefit in 2009 of the absence of a significant hurricane season.

Alejandro Demichelis, analyst at Merrill Lynch, said: 'Following a stellar operational performance in 2009, it appears that 2010 may have less shine.'

He had been looking for a 1.5% growth in production in 2010.

Production growth is expected to resume in 2011, and BP's longer term guidance is unchanged, the group said.