The oil giant BP has said it will cut 5,000 jobs after reporting "very disappointing" profits after refining margins were squeezed and costs rose.
Two of BP's US refineries have been operating below capacity
BP said the jobs were about 5% of its total global workforce, but declined to pinpoint where the cuts would be.
Replacement cost profits for the fourth quarter fell to $2.9bn (£1.4bn) from $3.8bn, sending annual profits to $17.29bn - marking a 22% fall on 2006.
The results and cost cutting measures come after a difficult year for BP.
Low points in BP's year have included receiving a $50m fine for the 2005 Texas City refinery explosion in which 15 people died.
This was part of a larger $373m fine by the US Department of Justice for committing environmental crimes and fraud, and included a fine for price manipulation.
And in May, the company's boss, Lord Browne, resigned after lying to a court in an attempt to block stories about his private life.
However, shares rose in London on the news that BP would raise its dividend payments, and on hopes of a brighter outlook for 2008.
The job cuts at BP are part of plans by the company to cut it overheads by 20% in order to boost profits and close the gap on some of its larger rivals.
Last October, chief executive Tony Hayward said the firm's structure would be overhauled, by cutting down on the number of layers in management as well as the number of businesses within the firm.
Last week, its rival Shell announced record annual profits of £13.9bn, marking a record for a UK-listed company. On Friday, Exxon Mobil saw yearly profits of $40.6bn, setting a record for a US firm.
"It will not happen overnight, but we believe that the performance gap with our competitors can be progressively narrowed in the next few years," said BP's chief executive Tony Hayward.
BP's refining and marketing operations were largely to blame for the fall in overall profits, it said, after seeing a loss of $1.34bn for the fourth quarter.
"Although our fourth-quarter profits were very disappointing in refining and marketing in particular, we made good, step-by-step progress in bringing new oil and gas fields on stream and rebuilding refining capacity during the period," said BP boss Tony Hayward.
BP reported a reserve replacement ratio of more than 100% for the fourteenth year in a row.
The replacement ratio is a key figure for oil companies, showing how much oil they have discovered compared with the amount they have extracted.
Despite the falling profits, BP raised its fourth quarter dividend by 31%, a move welcomed by investors.
"The numbers are disappointing, but I think that is more than made up for by the fact that we have got a steep change in the dividend," said Peter Hitchens from Seymour Pierce.
Another analyst suggested that BP's fortunes would now improve.
"It's the end of the trough and the upturn starts in Q1 2008," said Jason Kenney from ING.
"It's a buying opportunity in my book."
The firm's shares ended up 1 pence at 543p after earlier gains of almost 4% were almost completely erased.