BP Raises Dividend as Third-Quarter Profit Beats Estimate

BP Plc (BP/), Europe’s second-biggest oil company, raised the dividend as third-quarter profit beat analysts’ estimates.

Net income climbed to $5.4 billion from $5 billion in the same period of 2011 as underlying earnings in the refining and marketing unit rose to a record, the London-based company said today in a statement. It raised the dividend by 12.5 percent to 9 cents a share.

Chief Executive Officer Bob Dudley is rebuilding the company after the 2010 Gulf of Mexico oil spill erased a third of its market value. He agreed to sell BP’s half of TNK-BP to OAO Rosneft (ROSN) for about $27 billion in cash and shares this month, adding to $35 billion of disposals in the past three years.

“BP’s performance and the strong progress we are making in transforming the company give us the confidence to increase distributions to our shareholders,” Dudley said in a statement. “We are on track with our strategy to 2014 and are laying the right foundations for sustainable growth during the coming decade.”

Profit adjusted for one-time items and changes in inventory of $5.2 billion compared with earnings of $5.5 billion a year earlier. The average estimate of 11 analysts surveyed by Bloomberg was for profit of $4 billion on this basis.

BP added 3.2 percent to 438.50 pence as of 8:01 a.m. in London.

Production Outlook

BP said third-quarter production, excluding the Russian TNK-BP venture, fell 3 percent to 2.26 million barrels of oil equivalent a day from a year ago. It forecast output to rise in the fourth quarter after ending maintenance at fields. BP’s share of TNK-BP output was about 1 million barrels of oil equivalent a day in the quarter, it said.

BP this month agreed to sell its half of TNK-BP to Rosneft, which plans to buy the entire venture for about $55 billion in the biggest oil industry deal in more than a decade. BP will reinvest some of the cash from the deal in Rosneft shares, leaving it with almost 20 percent of Russia’s biggest producer.

Dudley is focusing on BP’s most profitable oil production as he targets $38 billion in asset sales by the end of next year. In the third quarter, BP agreed to sell its Carson, California, and Texas City, Texas, refineries in the U.S. for about $5 billion including inventories. In September, BP agreed to sell a group of fields in the Gulf of Mexico for about $5.6 billion.

U.S. Trial

BP came closer to putting the April 2010 Macondo oil spill behind it in March with a $7.8 billion settlement with victims. BP still faces a trial over fines and liabilities with the U.S. Department of Justice in a trial due to start in February. BP has provisioned about $38.1 billion for spill costs after adding $59 million to its pretax charge in the third quarter.

BP reiterated today that it’s willing to settle with the U.S. “on reasonable terms, though a number of unresolved issues remain and there is significant uncertainty as to whether an agreement will ultimately be reached.”

Refining and marketing “delivered record quarterly underlying earnings,” BP said. “Refining margins are expected to decline in the fourth quarter in line with seasonal trends.”

Profit in the downstream unit was $3.4 billion, compared with $1.1 billion a year earlier and a loss in the second quarter. It expects to process less crude in the fourth quarter because of the planned upgrade works at Whiting refinery.

Refining margins improved in the third quarter. BP’s refining marker margin, a generic measure of global profitability, rose to $19.50 a barrel in the period from $15.84 in the three months through June. BP estimates its pretax operating profit increases about $650 million a year for every dollar gain in the refining margin, according to its website.

Royal Dutch Shell Plc (RDSA) is Europe’s biggest oil company.

To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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