London: BP Plc, Europe's biggest oil company, expects the recovery from last year's recession to be "slow and gradual" as fourth-quarter earnings missed analyst estimates.

Earnings excluding one-time items and gains or losses from inventories rose 68 per cent to $4.38 billion (Dh17.17 billion) from a year earlier. That missed the $4.7 billion median estimate of 13 analysts surveyed by Bloomberg News. The shares fell the most since March.

Chief Executive Officer Tony Hayward, who beat last year's cost-cutting target and ramped up operations in the Gulf of Mexico to become Europe's leading energy producer, said output will be "slightly lower" in 2010. Refining margins will "remain depressed" for the time being, he said.

"They have disappointed relative to some reasonably high expectations," said Christopher Wheaton, who manages about $400 million at Allianz RCM's Energy Fund in London. "What's really disappointing is the refining business, which has struggled."

BP, the first of Europe's oil majors to report earnings, will be followed by The Hague-based Shell in two days. ExxonMobil Corp, the largest US company, posted a fifth straight drop in quarterly profit yesterday to $6.05 billion. Chevron Corp, the second-largest US energy company, reported a 37 per cent drop in earnings to $3.07 billion.

"Our operational performance in the fourth quarter and through 2009 was very strong," Hayward said in a Bloomberg Television interview. "Refining margins in the fourth quarter were the lowest for 15 years and, to date, BP is the only company that's made any money in the downstream business in the fourth quarter at all."

Net income of $4.3 billion, or 23 cents a share, compared with a loss of $3.3 billion, or 18 cents a share, a year ago, London-based BP said in a statement.

Production rose 4 per cent to 3.998 million barrels of oil equivalent a day in 2009, BP said. Output is expected to be lower this year because of the absence of a "significant" hurricane season in 2009. BP replaced its reserves by 129 per cent last year, marking a 17th year in which it found more resources than it extracted.

"We expect to see the demand for oil rise by between 500,000 and perhaps 700,000-800,000 barrels a day in 2010, reflecting a gradual restoration of global economic growth," Hayward said in the interview.