British oil giant BP fell short of market forecasts with flat fourth-quarter profits on Tuesday but resumed share buybacks to support its stock and sold a Chinese stake-holding to help fund the repurchase.
The core oil and gas production business that generates the bulk of profits was the main cause of the disappointment at the world's second largest oil firm as a number of accounting factors all but wiped out the effect of stronger oil prices.
A BP spokesman said the shortfall was partly due to an unusual price lag effect that prevented it from booking Alaska upstream profits late in the quarter, and other special items.
Investors, however, were unimpressed. BP shares fell four percent to a two-month low at 410 pence by 1430 GMT.
The below par performance underlined investor disaffection in the sector after BP's main European rival, Royal Dutch Shell , shocked shareholders last month by slashing its estimated oil reserves.
"This is not a set of figures that is likely to reinvigorate interest in the sector," said Finlay Macdonald of Britannic Asset Management, though he said the buyback announcement was positive and "a point of differentiation between BP and Shell".
Shell signalled in its equally disappointing results last week that it was unlikely to buy back stock this year.
BP's fourth-quarter net profit, adjusted to exclude exceptional items and goodwill and for the replacement cost of supplies, was $2.667 billion, below a Reuters poll of analysts in a range of $2.9-$3.2 billion and average of $3.03 billion. Forecasts had already been reined in from about $3.5 billion after a January trading statement.
In the upstream exploration and production business, higher oil and gas prices and the contribution from its new Russia venture, TNK-BP, were offset by higher depreciation, currency movements, one-off charges and the Alaska profit lag effect.
Nine-month figures were already public, and despite the fourth-quarter setback, the 2003 full-year result was still a BP record at $12.379 billion, up 42 percent on oil price strength.