An earnings beat and big capex reductions get a warm welcome from investors in BP (BP.). The release of fourth quarter and full-year results prompting a 4.1% advance to 455.6p.

The company is helped by the fact expectations were low thanks to last Thursday's (29 Jan) disappointing update from peer Royal Dutch Shell (RDSB) and the collapse in oil prices. While a continuing recovery in the black stuff to $55 per barrel doesn't hurt either.

Underlying replacement cost profit of $2.2 billion compares with consensus expectations for $1.5 billion. Though it is worth noting that the group actually recorded a loss once a $3.6 billion impairment charge (booked to reflect crude's weakness) is factored in. In response to the market conditions BP says it will cut capex to $20 billion in 2015 – 20% below previous guidance and down from $22.9 billion in 2014.

It maintains its quarterly dividend at 10 cents per share. Net debt at the end of 2014 comes in at $22.6 billion for gearing of 16.7% (it stood at 16.2% a year earlier).

The gap between forecasts and reality is partly explained by an unexpected $470 million profit from Rosneft (ROSN). The state-backed operator – in which BP holds a 19.75% stake – has been hit hard by Western sanctions in response to Russia's actions in Ukraine. The profit from Rosneft could be subject to change so keep an eye on this number – particularly as there's reports of an amendment to the Russian firm's foreign exchange accounting system.

Furthermore, these results do not reflect the full impact of the collapse in oil prices. This is likely to show up in the first quarter release on 28 April.

Research house Edison notes: 'The scale of the capex reduction highlights BP's greater capex flexibility compared to some of its supermajor peers, as BP has less capital tied up in mega-projects.'

Issue Date: 03 Feb 2015