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2nd UPDATE: BP Ups Dividend As Spill Trial Looms

Tuesday, Feb 07, 2012

- BP reports 14% increase in adjusted net profit

- BP boosts its dividend for the first time since the Macondo spill

- BP reiterates interest in settling Macondo litigation, but only under minimum conditions

- BP to streamline portfolio, boost exploration investment

   By Alexis Flynn 
   Of DOW JONES NEWSWIRES 
 

LONDON-- BP PLC ( BP .LN) Tuesday raised its dividend on the strength of better-than-expected earnings, but reiterated that it would only settle upcoming litigation related to the 2010 Gulf of Mexico oil spill if certain minimum conditions are met.

The U.K. oil giant, which continues to trade at a discount to most peers, reported a 14% jump in adjusted earnings, enabling its first increase in its dividend since the spill. Still, only weeks before the Deepwater Horizon case goes to trial, the company faces significant questions about additional liabilities related to the 2010 catastrophe.

Speculation has mounted in recent weeks that the company could be prepared to settle out of court with the Department of Justice ahead of a February trial in New Orleans that could result in large U.S. penalties.

BP Chief Executive Bob Dudley Tuesday said the company's "bias has always been towards settlement, but only at a fair and reasonable price." He appeared to reject the suggestion that it might be in BP 's long-term interests to fight a lengthy legal battle in the hopes of whittling down the final spill fines.

"Our share price has taken a huge discount because of the uncertainty [around the final spill costs]. So if there is a way in a reasonable and fair way to put this behind us -- and the value of the company goes up, that's actually in the best interests of the shareholders," said Dudley.

BP shares were choppy Tuesday morning, down 0.9% late afternoon in Europe after opening higher, suggesting continued investor skepticism.

BP plans some $38 billion-worth of asset sales by 2013 as the company narrows its operational focus to concentrate on higher-margin production and more selective refining activities. If the plan works, Dudley expects BP to be generating 50% more cash by 2014.

In light of this, BP said it would raise its dividend 14% to 8 cents a share for the fourth quarter, an increase that mirrors its year-on-year improvement in adjusted profit. The U.K. oil giant suspended its 14 cents a share quarterly payout at the height of the Macondo oil spill and reintroduced at half that level in early 2011.

The company said its clean replacement cost profit, a keenly watched figure that strips out gains or losses from inventories and other non operating items, rose 14% for the period to $4.99 billion, compared with $4.36 billion for the fourth quarter of 2010.

This was above expectations of $4.88 billion in a Dow Jones Newswires poll of 11 analysts. It also bested those of rival Royal Dutch Shell PLC for the first time in a year.

The company has set aside $20 billion to pay for damages from the 2010 Macondo oil spill, from which it has paid out $7.8 billion so far. A civil trial to apportion blame-and fines-for the spill is due to begin at the end of this month. If BP is found to have been grossly negligent, it could face fines of up to $20 billion under the Clean Water Act.

BP 's moves to strengthen its production portfolio, including drilling more than twice as many exploration wells in 2012 as last year, will come at a higher cost. The company said Tuesday it would have to raise its planned capital investment for the year to around $22 billion in order to facilitate its planned output growth, a theme that is emerging across the sector as oil companies struggle to replace declining reserves with fresh producing assets.

Dudley cautioned that 2012 production would likely "be broadly similar" to 2011.

The London-based energy giant said net profit for the three months ended Dec. 31 was $7.69 billion, compared with $5.57 billion for the fourth quarter of 2010. However, this figure was inflated by a $4 billion payment received from Anadarko Petroleum Corp. during the period after BP agreed an out-of-court settlement with its former Macondo well partner.

-By Alexis Flynn, Dow Jones Newswires; +44 (0)20 7842 9317; alexis.flynn@dowjones.com

(END) Dow Jones Newswires

07-02-12 1736GMT