BP, whose brands include Arco, reported a 53% rise in fourth-quarter profit Tuesday as oil prices surged, but full-year earnings fell because of refining outages and rising costs.
The oil giant also unveiled a more generous dividend policy and plans to speed up restructuring and cost cutting.
BP said net income in the fourth quarter rose to $4.4 billion from $2.88 billion a year earlier. Revenue, including asset disposals, rose to $81.5 billion from $62.8 billion.
Full-year profit fell 5.5% to $20.8 billion from $22 billion in 2006. Revenue rose 6.2% to $291.4 billion from $274.3 billion.
Output at BP increased for the first time in three years because of new projects, including those in Angola and the Gulf of Mexico.
The company's closely watched quarterly replacement cost profit -- which excludes changes in the value of crude inventories, measuring the amount it would cost to replace assets at current prices -- fell 22% over the year to $17.3 billion. The quarterly replacement cost figure is viewed by many analysts as the best measure of an oil company's underlying performance.
However, Chief Executive Tony Hayward cheered investors with a 25% dividend hike and progress on plans to create a leaner business by stripping out management. Hayward confirmed BP's plans to cut 5,000 jobs by the middle of next year, as well as slashing corporate overhead by up to 20%.
"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," he said.
BP had some setbacks in 2007. Chief Executive John Browne resigned in May after lying to a court in a bid to block stories about his private life.
The company also brokered a $50-million fine with the Justice Department for a 2005 Texas refinery explosion in which 15 people died. The deal was part of a larger $373-million Justice Department fine for environmental crimes and fraud.