BP 2015 losses worst in 20 years
Details about BP stock are shown on a screen above the floor of the New York Stock Exchange in the Manhattan borough of New York, December 8, 2015. Reuters

British Petroleum collapsed to its worst annual loss in 20 years on the back of free-falling oil prices and the continuing impact from the Deepwater Horizon oil spill in the Gulf of Mexico years ago.

BP's 2015 loss of $6.5 billion was worse than its 2010 results after the oil spill fiasco, and the company announced it is axing 7,000 jobs, nearly 9 percent of its workforce, by 2017.

BP shares plunged 7 percent in London to top the losers on FTSEurofirst 300.

The oil and gas major said the total cost from the Deepwater Horizon disaster was pegged at $55 billion.

BP chief executive Bob Dudley said low oil prices were to blame for the earnings fiasco, but said the company was moving rapidly to "adapt and rebalance" in a changing environment.

"We're making good progress in managing and lowering our costs and capital spending, while maintaining safe and reliable operations and continuing disciplined investment into the future of our portfolio," Dudley said.

With low oil prices eating into their profits, other major companies in the sector too have announced poor earnings.

While Chevron, the No. 2 US producer, announced last week its first quarterly loss in more than 13 years, Royal Dutch Shell is looking down the barrel too, and is expected to report a 50 percent drop in profits.

"The company will need to focus on cost base and capex in order to return to profitability, with the increase in net debt a concern in the current environment," analysts at Cenkos Securities said, Reuters reported.

70 percent drop

Crude prices have seen a 70 percent drop since mid-2014 and prices so far this year have averaging around $33 per barrel.

With the profits drying up, the oil sector bigwigs are expected to slash capital spending. BP said its capital spending in 2015 was $18.7 billion, down from a planned $24-$26 billion.

BP had said late last year it was cutting 3,000 downstream jobs. Tuesday's announcement of 4,000 job cuts come on top this.