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Last Updated: Tuesday, 8 February, 2005, 17:00 GMT
Bumper oil prices lift BP profits
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BP said its results were strong both operationally and financially
Oil giant BP has reported a 26% rise in annual profit to $16.2bn (8.7bn) after benefiting from high oil prices.

Last week, rival Shell reported an annual profit of $17.5bn - a record profit for a UK-listed company.

BP added that it was increasing its fourth-quarter dividend by 26% to 8.5 cents a share, and continuing with its share buyback programme.

BP chief executive Lord Browne said the results were strong "both operationally and financially".

Management skills

The company is earning about $1.8m an hour.

BP chief executive Lord Browne
Lord Browne is rejecting calls for a windfall tax

Despite the record annual profits figure, BP's performance was below the expectations of some City analysts.

However, BP shares rose modestly, finishing the day up 0.5% at 547 pence.

Its profit rise for the year included profits of $3.65bn (1.97bn) for the final three months of 2004 - up from $2.89bn a year ago but below its third quarter.

Oiling the wheels

Speaking on the BBC's Today programme on Tuesday, Lord Browne said the profits were not solely down to the high oil price alone.

The price of oil will be well supported above $30 a barrel for the medium term
Lord Browne, chief executive, BP

"The profits are up more than the price of oil is up," he said.

Lord Browne pointed out that BP was reaping the benefits of its investment in oil exploration.

"We have spent many years buying (assets) when the price is low," he said.

Exploration advantage

The company has made new discoveries in Egypt, the Gulf of Mexico and Angola.

I think that most of BP's competitors are probably very envious of BP's position in Russia
Robert Plummber, Wood Mackenzie
"BP has positioned itself very well over the last 10 to 15 years," Robert Plummer, an analyst with energy experts Wood Mackenzie told the BBC's World Business Report.

"They're getting the benefits of a very successful exploration programme, which has seen them become a leader in deep water plays around the world."

Wood Mackenzie said BP had also become the number one gas producer in the US, and US gas prices have been very strong this year.

Russian connection

BP is also involved in a Russian joint venture, TNK BP. Despite the forced auction of rival Russian oil company Yukos, analysts believe the BP venture has good prospects.

"I think that most of BP's competitors are probably very envious of BP's position in Russia," said Mr Plummer.

"TNK BP is now probably the second largest oil producer in Russia. The authorities don't seem to be pursuing tax issues in the same way they were with Yukos, so I think the risk is minimal."

High prices

Both BP and Shell face strong prospects in the year ahead as oil prices are expected to remain high.

Currently above $40 a barrel, Lord Browne predicted: "The price of oil will be well supported above $30 a barrel for the medium term."

Despite benefiting from the windfall of high oil prices, Lord Browne rejected calls for a windfall tax, saying that in the North Sea it paid progressively more tax, the more profits it made.

BP put production for the year at 3.997 billion barrels of oil, up 10% on 2003, but slightly lower than the four billion barrels it had initially aimed for.




BBC NEWS: VIDEO AND AUDIO
How BP is staying ahead of the game




SEE ALSO:
BP fined over offshore gas leak
16 Nov 04 |  Scotland
Oil prices help BP boost profits
27 Jul 04 |  Business
Profitable times for BP
27 Apr 04 |  Business
Union's fears over BP sell-off
28 Apr 04 |  Scotland
Investors downbeat on BP profits
10 Feb 04 |  Business


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