London-based oil giant BP has revealed a 45 per cent drop in year-on-year profits in 2009 as lower oil prices affected its fourth quarter results.

In response, the group said it would continue its cost-cutting programme into 2010 in a bid to improve profitability. This follows a restructuring of the group that led to a total loss of 7,500 jobs in 2007.

Despite falling profits, oil and gas production increased by more than four per cent in 2009, ahead of the companies one to two per cent expected long-term average growth rate.

Underlying replacement cost profit for the fourth quarter of the year, before non-operating items and fair value accounting effects, was $4.4bn (£2.8bn), up 70 per cent on the same period in 2008.

Full-year replacement cost profit for 2009 was $14bn, down by 45 per cent on the full-year profit of 2008. The company said this was a result of ‘weaker market environment of lower average oil and gas prices and depressed refining margins’.

Earnings in BP’s Refining and Marketing division were also impacted by weak trading conditions, particularly in the fourth quarter.

Production during the coming year is expected to be lower; however, group chief executive Tony Hayward expects production growth to resume in 2011 and has kept BP’s longer-term guidance unchanged.

The company also indicated that it expects organic capital expenditure of around $20bn and disposal proceeds of $2-3bn in 2010.

Looking forward, Hayward said that BP expects recovery in the major economies of the US and Europe to be ‘slow and gradual’. The company also expects gas markets to remain volatile and refining margins to remain depressed for the foreseeable future.

‘Our strategy remains the same: delivering profitable growth in the upstream; driving cost efficiency in the downstream and at the corporate centre; and investing with discipline and focus in alternative energy,’ he added.

‘2009 has been one of the best years for BP and its shareholders since the merger with Amoco. But we are not resting on our laurels. There’s a lot more to be done.’