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BP has reported a 12% slide in Q4 replacement cost profit from $4.4 billion last year to $3.895 billion, a two-year low, on production losses and lower margins, and has forecast a drop in output for 2007. Q4 net income fell 22% to $2.88 billion ($0.1488/share) from $3.69 billion ($0.1768/share) a year earlier, in line with expectations. E&P profit fell 23% to $5.1 billion as U.S. natural gas prices plummeted and volumes dropped. Oil and gas production in the quarter slipped 4.5% from a year ago to 3.84 million barrels a day, its sixth year-on-year quarterly drop. For the full year, production dropped 2.2% to 3.93 million barrels a day, and the company is projecting a further drop this year to 3.8-3.9 million barrels a day. Production was stymied in 2006 by a slowdown in growth at the company's Russian operations, pipeline spills in Alaska, delays to Gulf of Mexico rigs, and a deadly explosion at a Texas refinery. CEO John Browne, whose leadership has been sharply criticized particularly with regard to the company's U.S. refineries, will step down a year ahead of schedule.

Sources: Bloomberg, MarketWatch
Commentary: BP: Trouble On Two Shores, BP's Output Falls Again; A 'Brave' Buy with Upside Potential as a 'Recovery Stock', With So Much Negativity, BP's Worth a Look
Stocks/ETFs to watch: BP Plc (BP). Competitors: Chevron (CVX), Exxon Mobil (XOM), Royal Dutch Shell (RDS.A), Total SA (TOT). ETFs: iShares Goldman Sachs Natural Resources Index Fund (IGE), United States Oil Fund ETF (USO), Vanguard Energy (VDE), BLDRS Europe 100 ADR Index (ADRU)

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Source: BP's Q4 Profit Suffers 22% Hit