(Updates with closing share price in 14th paragraph.)
Feb. 7 (Bloomberg) -- BP Plc, Europe’s second-biggest oil company, raised its dividend after earnings beat analyst estimates on higher crude prices.
Fourth-quarter earnings, adjusted for one-time items and changes in inventory, were $5 billion, compared with $4.36 billion a year earlier, exceeding larger rival Royal Dutch Shell Plc. The average estimate of 15 analysts surveyed by Bloomberg was for profit of $4.9 billion on that basis.
Chief Executive Officer Robert Dudley boosted the payout by 14 percent to 8 cents a share, the first increase since the company resumed dividends a year ago after the Macondo well disaster led to the worst offshore oil spill in U.S. history. Net cash flow in 2014, with oil prices at around $100 a barrel, will be around 50 percent higher than in 2011, the company said.
“BP is on the turn and has been since the third quarter,” said Stuart Joyner, an analyst at Investec Securities. The dividend increase is “very much a starter of where the company wants to go post-Macondo.”
Net income rose to $7.7 billion from $5.6 billion in the fourth quarter of 2010, the London-based company said today in a statement. Settlements from some partners allowed BP to register a $4.1 billion credit for spill costs in the fourth quarter.
“This is a first good step for investors,” Dudley said in a television interview. “You can look to BP to have a progressive dividend policy.”
BP, which expects production to be “broadly flat” this year, plans to increase investment in projects by about 16 percent to $22 billion. It plans to sell assets worth $38 billion by the end of next year, with about 120,000 barrels of oil equivalent capacity a day to be sold this year.
Production slipped 5 percent from a year ago to 3.49 million barrels of oil equivalent a day, mainly due to lower output in the Gulf of Mexico. That’s still higher than output in the third quarter.
BP’s earnings were also supported by a lower-than-expected effective tax rate of 27 percent, said Jason Kenney, an analyst at Banco Santander SA. “BP’s medium-term upstream volume outlook is steady despite divestments,” he said.
Output suffered for more than a year after the Gulf of Mexico spill forced the company to shut down fields for safety reviews and sell assets to raise cash.
The company is set to start a nonjury trial on Feb. 27 to determine liability and apportion fault for the Macondo disaster.
Dudley said the company was prepared to reach a settlement beforehand if the conditions are right.
“With a reasonable settlement, we will settle,” he said. “If it’s not a reasonable settlement, we’ll go to court.”
BP shares remain about a third lower than before the spill. The stock fell 0.6 percent to 486.5 pence as of the 4:30 p.m. close in London.
The company reached agreements with well partners Anadarko Petroleum Plc and Mitsui & Co., as well as with Cameron International Corp., the maker of the blowout prevention equipment for the well. It has yet to reach agreements with Transocean Ltd., the owner of the Deepwater Horizon rig that exploded and sank, or cement maker Halliburton Co.
The company plans to dispose of the Texas City and Carson refineries by the end of this year.
Shell, Europe’s largest energy company, last week reported a drop in net income to an adjusted $4.8 billion and also announced plans to increase the dividend. Exxon Mobil Corp., the world’s biggest producer, said Jan. 31 that sales missed analyst expectations as production dropped.
BP’s refining profit was supported by “strong operations” at its refineries. Replacement cost profit before interest and tax for refining and marketing fell to $564 million in the quarter from $964 million in the year-earlier period.
Shell’s profit was hampered by a $278 million loss in its refining operations. BP’s refining market margin, a generic measure of profitability, slipped to $9.10 per barrel in the fourth quarter from $9.98 a year earlier.
Brent crude prices climbed to $109.02 a barrel on average in the fourth quarter, 25 percent higher than a year earlier.
--With assistance from Eduard Gismatullin in London. Editors: Stephen Cunningham, Ana Monteiro
To contact the reporter on this story: Brian Swint in London at firstname.lastname@example.org
To contact the editor responsible for this story: Will Kennedy at email@example.com