BP shares fall on 'disappointing' £11bn profits

Oil giant BP disappointed investors today as its record profits haul came in well short of the £1.5 million an hour seen by rival Royal Dutch Shell.

The surging price of crude oil sent BP's 2005 profits up by a quarter to 19.3 billion US dollars (£11.04bn) but it fell below forecasts as BP took on a number of accounting charges and continued to feel the impact from hurricane damage and a fire at a refinery in the United States.

Last week Royal Dutch Shell set an all-time high for a UK company when it posted profits on an equivalent measure of £12.93 billion.

But while Shell only managed to replace between 60% and 70% of the fuel it pumped out of the ground in 2005, BP replaced 100% - for the 13th year in a row.

Shares in BP fell 3% today as the company's fourth quarter profits - up 26% to 4.43 billion US dollars (£2.53bn) - were hit by a 553 million US dollar (£316.4m) non-cash charge relating to North Sea gas contracts, and a one-off accounting charge of 454 million US dollars (£259.7m).

Oil analyst Bruce Evers, of Investec Securities, said the results were "a little disappointing" and "quite a bit below" City consensus forecasts.

"BP has been badly affected by the hurricanes," he said. "People expect BP to beat the consensus and when they come in below people do not like it."

Today's figures also renewed calls from Friends of the Earth for a windfall tax, while the TGWU said some of the surplus should be used to tackle the UK pensions crisis.

However, the chief executive Lord Browne denied the allegations of profiteering.

He said on BBC Radio 4's Today programme: "We make most of our money in what most people would regard as the wholesale market, the production of oil and gas, not the refining and sales of petrol.

"The real question is where does the money go? The money doesn't sit in the company. It is used to invest for the future, but the vast bulk of it is sent back to our shareholders, which are basically the pension funds of the UK."

Lord Browne promised BP shareholders a windfall through dividends and share buybacks over the next few years after handing out more than £10 billion in 2005.

He said that if the oil price stayed high at around 41 US dollars a barrel BP would hand out nearly £30 billion between 2006 and 2008. If the price of crude reached 60 US dollars a barrel, it could rise to nearly £40 billion.

The devastating season of hurricanes caused extensive damage to BP's one billion dollar Thunder Horse platform with production now not expected to start until the second half of 2006 - at least six months behind schedule.

The storms also damaged BP's onshore Texas City refinery, which had already been hit by a fatal explosion in March.

Lord Browne said the company missed out on about 1.8 billion US dollars (£1.03bn) worth of business in 2005 at Texas City, which is due to begin operations again this year.

"BP's fourth quarter result was particularly hit by the continued production shutdown of our Texas City refinery during its refurbishment," said Lord Browne.

But he added that the result for the whole of 2005 was "a record" and "reflects the quality of our asset base and operations".

Production fell 2% to 4.02 billion barrels of oil a day in the last three months of 2005 following the hurricanes.

Overall annual production improved from 3.99 billion barrels of oil a day in 2004 to 4.01 billion barrels in 2005.

And BP benefited from the soaring price of crude oil in 2005, which leapt from 45 US dollars a barrel early in the year to above 70 US dollars a barrel on August 30, a day after Hurricane Katrina struck the Gulf of Mexico coast.

Crude oil prices averaged 56.87 US dollars a barrel in the fourth quarter - down nearly 5 US dollars on the third quarter but up more than 13 US dollars on a year earlier.

It helped full year replacement cost profits - the amount it would cost to replace its stocks at current prices - leap 25%.

The top line figure, which does not include exceptional items, was 22.34 billion US dollars (£12.77bn).