BP is to cut 5,000 jobs, including 1,500 in the UK, after seeing profits plunge by 22%. The oil giant recorded profits of £8.76bn for 2007, blaming “disappointing” performances in certain areas compared to rivals, and “notably US refining”.

Announcing the results yesterday, BP chief executive Tony Hayward said: “The steps we have already initiated will cut BP’s headcount by some 5,000 by the middle of next year.

“This is in addition to the 9,500 jobs that will move off the payroll as a result of franchising our US convenience retail business.”

The UK jobs will be axed by the middle of next year but the company declined to specify in which areas.

Hayward described the competitive financial performance of refining and marketing as “very poor – despite the fact that we have a strong set of assets”. He added: “The principal reason is poor reliability in some of our US refineries, which is compounded by the complexity and overhead structure of the business segment.

“But there is far more to do than merely restoring US refining reliability. We are absolutely determined to transform our downstream business as a whole. It will not happen overnight, but we believe that the performance gap with our competitors can be progressively narrowed in the next few years.”

There was good news for investors as the company announced an increase of 25% in its quarterly dividend

And Hayward remained confident for 2008.

He said: “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.

“Output is now ramping up from those fields and refineries and we anticipate that will feed through to the bottom line in the course of the year. We expect BP’s overall oil and gas production to grow in 2008, although our exact net volumes will depend on how the crude price affects entitlements from production-sharing agreements.”

Hayward said BP’s upstream business had secured access to major new sources of oil and gas in Oman, Libya and Canada, underpinning confidence in future growth.

The BP figures came in stark contrast to those of rival Shell, which last week announced record annual profits of £13.9bn, marking a record for a UK-listed company.