Feb. 5 (Bloomberg) -- BP Plc, Europe's second-biggest oil company, posted a 53 percent jump in fourth-quarter profit and increased its dividend after production rose for the first time since 2005.

BP's payout was raised 31 percent to 13.5 cents a share, representing an annual dividend yield of 4.9 percent. Net income advanced to $4.4 billion, or 23 cents a share, from $2.88 billion, or 15 cents, a year earlier, the London-based company said today in a statement.

Chief Executive Office Tony Hayward is offering the highest dividend among the world's biggest oil companies, after Italy's Eni SpA, following pipeline leaks in Alaska, U.S. refinery outages and a fatal Texas refinery blast three years ago. BP is struggling to grow after Russia limited foreign access to its resources and projects in other nations were delayed.

``The market is happy with the dividend increase,'' Alan Beaney, who helps manage $2.1 billion at Principal Investment Management in Sevenoaks, England, said in a telephone interview.

BP closed 0.2 percent higher at 543 pence in London, after earlier rising as much as 3.5 percent. BP shares are down 12 percent this year. That compares with a 16 percent drop by Royal Dutch Shell Plc, Europe's biggest oil company, which last week posted a 60 percent increase in net income to $8.47 billion.

Record Oil

Oil prices in New York were 50 percent higher in the fourth quarter compared with a year earlier, touching a record $100.09 a barrel on Jan. 3. Oil prices will trade between $60 and $90 a barrel over the next few years, BP's Chief Financial Officer Byron Grote told analysts during a conference call.

Profits at Exxon Mobil Corp. and BP are being squeezed by contracts that give oil-rich nations a bigger share of output when crude prices rise.

Exxon Mobil last week reported the smallest increase in per share earnings since a decline in 2002. About 20 percent of its output is governed by production-sharing agreements with countries. Chevron Corp. said on Feb. 1 that additions to reserves last year replaced only about 10 percent to 15 percent of the oil and natural gas it produced.

State-controlled OAO Gazprom is taking control of BP's Kovykta Siberian gas deposit after the Russian government threatened to revoke its contract for failing to meet a schedule.

Analyst Recommendations

Of the 34 analysts tracked by Bloomberg who cover BP, 15 have a ``buy' rating for the stock, while five advise selling the shares. Fourteen have a ``hold'' recommendation.

``The key thing here is the commitment to cash returns,'' Jason Kenney, an Edinburgh-based analyst of ING Wholesale, said in an interview with Bloomberg television.

Excluding gains or losses from holding inventories and one- time items, BP's profit was $4.0 billion, lower than the $4.65 billion median estimate of seven analysts surveyed by Bloomberg.

Hayward, who succeeded John Browne in May, is cutting layers of management to improve efficiency and improve accountability after a series of mishaps. The Texas City refinery explosion in 2005 killed 15 people, production was delayed at the Thunder Horse platform in the Gulf of Mexico and pipeline leaks in Alaska prompted a shutdown of Prudhoe Bay, the biggest oilfield in the U.S.

Settle Charges

BP on Oct. 25 agreed to pay $373 million to settle charges in the U.S. related to the plant explosion, the Alaska leaks and market manipulation. Victims of the refinery blast have called the settlement ``shockingly lenient.''

BP said today its Texas City refinery will increase production to almost full capacity by mid-2008 after faults and closures crimped output. The refinery is returning to normal operations after stopping production in 2005 when Hurricane Rita struck the Texas coast. The refinery also sustained damage in the blast.

BP's refinery in Whiting, Indiana, also lost production because of faults and repairs.

Combined, Texas City and Whiting can process 895,000 barrels a day of crude, or more than OPEC member Qatar produces.

BP's results ``are not necessarily representative of what it'll be doing in the future, because they still'' had reduced operations at Whiting and Texas City, said James Halloran, who helps manage $35 billion at National City Private Client Group in Cleveland.

Output Gains

Quarterly output rose to 3.91 million barrels a day from 3.84 million barrels a day in the year-earlier quarter. Crude and natural gas production fell by 3 percent to 3.82 million barrels of oil equivalent a day for 2007, the second annual decline after a decade of expansion.

BP expects to raise output to more than 4 million barrels of oil equivalent a day in 2009, and about 4.3 million barrels a day in 2012, Hayward said today in the statement. Exploration spending this year will be about $1.5 billion, Hayward told analysts.

BP in December started oil and gas exports from Atlantis after a one-year delay. Pumping will reach plateau production, 200,000 barrels of oil and 180 million cubic feet of gas a day, by the end of 2008, the company said.

It also plans to begin production at the Thunder Horse platform by the end of the year, three years behind schedule.

Angola, Trinidad

BP started pumping crude from the Greater Plutonio field off the Angolan coast in October and natural gas from two fields offshore Trinidad in November and December.

On Dec. 5, BP formed a partnership with Calgary-based Husky Energy Inc. to produce and process crude from Alberta's oil sands.

Refining margins, or profits from turning crude into fuels such as gasoline and diesel, fell to $5.68 a barrel in the fourth quarter from $6.40 in the year-earlier period, according to data posted on BP's Web site.

BP's share of net income from its 50 percent-owned Russian venture, TNK-BP, rose more than fourfold to $752 million in the fourth quarter from $183 million a year ago. BP's share of TNK- BP's full-year profit fell to $2.27 billion from $2.76 billion.

TNK-BP reports its own financial results after BP's and the two sets of figures often do not correspond.

BP said new discoveries more than matched the amount of oil and gas it pumped last year ``in spite of significant product- sharing agreement effects associated with high oil prices.'' The company had a reserve replacement ratio, excluding acquisitions and divestments, of more than 100 percent for a 14th straight year.

To contact the reporters on this story: Eduard Gismatullin in London at egismatullin@bloomberg.netFred Pals in Amsterdam at fpals@bloomberg.net;

Last Updated: February 5, 2008 11:49 EST