By Andrew Callus and Sarah Young
LONDON (Reuters) - British oil company BP Plc
Chief Executive Bob Dudley also outlined the British group's preparedness for a court battle with U.S. authorities over its 2010 U.S. Gulf oil spill, and declared the new Russian strategy it announced last week a "truly distinctive position in one of the world's largest and most important oil and gas provinces."
Third quarter underlying replacement cost profit fell to $5.2 billion from $5.5 billion a year ago. A shrinking business, lower production and lower crude prices took their toll, but the effect was partly offset by a co-incidence of strong refining margins and the company's highest availability of refinery capacity in years.
The result was ahead of analysts' expectations of around $4.1 billion, mainly because of the refining result, and up from $3.7 billion in the second quarter.
BP jacked up its dividend by 12.5 percent to 9 cents a share, its second dividend increase since the spill interrupted payouts.
"They're very strong numbers. They've successfully captured in Q3 refining margins, certainly within the U.S. so that's the reason for the strength within the Q3 earnings," said Bernstein analyst Oswald Clint.
BP has fallen to a distant fourth in the top tier of oil and gas companies after the Macondo well disaster, and amid uncertainty over the future of its Russian operations.
The company had shed vast chunks of its business since the spill that killed 11 people and triggered the United States' worst ever offshore environmental disaster in a bid to raise enough cash to pay compensation.
It is in talks with the Department of Justice and other U.S. agencies regarding a final settlement, but despite reports during this year that an out-of-court deal was close, no such agreement has materialized.
"Whilst it (BP) is ready to settle on reasonable terms, a number of unresolved issues remain and there is significant uncertainty as to whether an agreement will ultimately be reached." BP said in its results statement.
"BP has repeatedly said that it is willing to settle on reasonable terms but otherwise continues to prepare vigorously for the start of trial."
BP said trial is now scheduled for late February 2013.
BP last week embarked on a plan to re-arrange its assets in Russia, agreeing to sell its half of the profitable but mature and troublesome TNK-BP
The aim is to realise a return from a business that has paid no dividends back to BP this year due to disputes with its co-owners, AAR, and to establish a relationship with Rosneft, which is at the center of a much more government-controlled approach to resource development in Russia than was the case when BP bought into TNK-BP in the 1990s.
Beyond that, Dudley also sketched BP's plans beyond 2014 for the first time, predicting a more upstream focused and more oil-centric oil and gas group in future.
"BP expects to generate future growth through increased investment in new upstream projects in higher-margin areas and through new access and exploration," he said.
"BP's business portfolio is expected to become more tightly focused around its strong existing positions and its key operating strengths."
Ironically, TNK-BP, like the refining operations it is busy shedding as part of its divestment programme, also underpinned BP's performance beating result, according to some analysts, many of whom remain sceptical that BP can catch up with its rivals in the industry.
"The sale of TNK-BP to Rosneft, while the removing the headache of being in partnership with AAR, still leaves BP as a large minority in company heavily influenced by the Russian state and Macondo settlement with the US DoJ appears no closer," said Richard Griffiths of Oriel Securities in a research note maintaining his Hold recommendation.
Bigger rivals Exxon Mobil
BP shares were up 3.7 percent at 440.8 pence in morning trade. The stock is still down 33 percent from levels before the 2010 oil spill, while Europe's STOXX oil and gas index <.SXEP> is down 4 percent over the same period.
(Reporting by Andrew Callus; Editing by Sarah Young)