(Updates with closing share price in sixth paragraph.)
Oct. 29 (Bloomberg) -- BP Plc, Europe’s third-largest oil company, raised its dividend after third-quarter earnings fell less than expected. The shares gained.
Profit adjusted for one-time items and inventory changes dropped to $3.7 billion from $5 billion a year earlier, the London-based company said in a statement. That beat the $3.4 billion average estimate of 13 analysts surveyed by Bloomberg. It increased the dividend by 5.6 percent to 9.5 cents a share.
Chief Executive Officer Bob Dudley is trying to return BP to growth after divesting more than $60 billion in assets in the wake of 2010’s Gulf of Mexico oil spill. While BP still faces billions of dollars in fines and settlement payouts, Dudley is bolstering dividends and buybacks to gain investor confidence as the shares languish about 30 percent below the pre-spill level.
“The underlying business is performing very well,” Dudley said in a Bloomberg Television interview. “Our shareholders have been very patient with BP and it’s time to reward them. Capital discipline is also very important.”
The company will sell a further $10 billion of assets by the end of 2015 and give most of the proceeds to shareholders, favoring buybacks, it said today. BP is already about halfway through an $8 billion buyback program, funded by a deal in which it sold its half of Russian venture TNK-BP and took a 20 percent stake in OAO Rosneft, the country’s biggest oil producer.
BP jumped 5.6 percent in London trading, the biggest one- day gain since January 2011, to close at 477.5 pence.
The company, which competes in Europe with Royal Dutch Shell Plc and was overtaken by Total SA in market value this year, said in February that underlying oil and gas production should increase this year after holding steady in 2012. Reported output will drop as disposals shave off 150,000 barrels a day.
Production was 3.17 million barrels of oil equivalent a day in the third quarter. Excluding Russia, output was 2.3 percent lower than a year earlier at 2.2 million barrels a day following asset sales. Adjusting for disposals, volumes rose 3.4 percent on higher output from fields in the North Sea and Angola.
Brent crude prices averaged $109.65 a barrel in the period, just 23 cents higher than a year earlier, while BP’s refining marker margin, a generic measure of profitability, dropped to $13.62 a barrel from $23.15. Profit from BP’s refining arm plunged to $1 billion from $3.4 billion.
Capital expenditure this year will be $24 billion to $25 billion and stay at that level next year. It will range from $24 billion to $27 billion through 2020, BP said. The ratio of net debt to net debt plus equity was 13.3 percent at the end of the third quarter, while the effective tax rate was 31 percent.
“The stock market doesn’t want the oil majors to spend money,” said Neill Morton, an analyst at Investec Securities in London. “Instead, investors want their cash back. BP has obliged this morning.”
While Dudley is trying to keep a lid on spending, the company is increasing investment in exploration. It will complete as many as 18 exploration wells this year and bought stakes in blocks off Morocco this month.
BP won a partial U.S. courtroom victory on Oct. 3 when an appeals court ordered a re-examination of a settlement with spill victims and suspended payments after the company said it was forced to pay out for “fictitious” claims. In the second quarter it raised its provision for the cost of those claims to $9.6 billion from an initial $7.8 billion.
Today it cut that figure to $9.2 billion and said that $19.3 billion of the $20 billion trust fund it set up after the spill has been paid out or assigned.
Separately, BP is in the middle of a three-phase trial with the U.S. government over liability for the spill, which may lead to as much as $17 billion in fines under the Clean Water Act. The trial’s final stage probably won’t start until next year. BP today adjusted its provision for the disaster to $42.5 billion.
--With assistance from Ryan Chilcote in London. Editors: Alex Devine, Tony Barrett