By ALEXIS FLYNN
BP on 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 UK-based 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
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 US penalties.
BP CEO Bob Dudley on Tuesday said the company's "bias has
always been towards settlement, but only at a fair and
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 UK oil giant suspended its 14 cents/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
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 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
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