BP to raise dividend amid recovery from Gulf oil spill

OIL giant BP is expected to announce its first dividend increase since the Gulf of Mexico oil spill when it unveils fourth-quarter figures on Tuesday.

Shares are just 2 per cent lower than a year ago and have recovered 31 per cent since the 2011 low in September as oil prices remained close to the $100 a barrel mark and optimism rose over its recovery following the fatal Deepwater Horizon explosion.

City analysts forecast a fourth-quarter dividend of 8 cents a share, up from 7 cents in the previous quarter, which will be watched closely as it accounts for £1 in every £6 invested by pension schemes.

However, the company’s earnings are expected to have come under pressure in the final three months of the year as its refining business suffers from squeezed margins and its production levels come down amid further disposals.

The oil spill recovery efforts were dealt a blow last month when a US federal judge said BP must uphold a clause in its contract with well partner Transocean that would protect the driller from compensation claims related to the disaster.However, the judge left open the possibility that Transocean might still have to pay all or part of any punitive damages and civil penalties imposed by the US government. A trial to apportion blame was set for 27 February in New Orleans.

The company is forecast to report “clean replacement cost” profit of $7.7 billion (£4.9bn) in the fourth quarter, compared with $7.5bn the previous year.

This comes as production dips from 3.6 million barrels of oil a day to 3.45 million barrels. The group was producing more than four million barrels a day before the disaster.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “Petroleum product prices, particularly in the US, are likely to have been outpaced by increasing crude oil costs. The mild winter weather may also have hindered gas operations.”

Chief executive Bob Dudley will be put on the spot once again as he is expected to reveal an updated strategic plan for BP, which is still striving to overcome the damage done to its reputation following the oil spill in April 2010.