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BP hikes dividend as profit beats forecasts

Matt Clinch
Chris Ratcliffe | Bloomberg | Getty Images

Oil giant BP (London Stock Exchange: BP.-GB) hiked its dividend by 5.6 percent Tuesday as its third-quarter profits beat forecasts thanks to what CEO Bob Dudley described as a "strong operational progress" and "focus on disciplined investment."

Underlying replacement profit for the third quarter came in at $3.7 billion, against $3.17 billion forecast in a Reuters poll.

Operating cash flow in the quarter was $6.3 billion, with Dudley adding that its target for cash flow in 2014 is still on track.

(Read More: BP wins reprieveover Gulf spill payouts )

"The strong operational progress we are now seeing across the group, combined with our focus on disciplined investment, also underpins our confidence in growing long-term sustainable free cash flow and being able to increase shareholder distributions," he said in an a press release on Tuesday.

He added that the company intends to continue its program of focusing its business portfolio worldwide around BP's key assets and strategic strengths and expects to divest a further $10 billion in assets before the end of 2015.

In its last quarter, BP missed expectations but has now broken the trend with underlying replacement cost profit - the oil industry benchmark that reports profits which take into account fluctuations in the price of oil - beating market expectations. It was also a rise from the $2.7 billion in the second quarter, compared to $4.2 billion in the first quarter of the year.

BP's shares opened up 3.7 percent in morning trading in London Tuesday.

(Read More: BP CEO hits outat class action lawsuits )

The group said $19.3 billion of its $20 billion compensation fund for the Gulf of Mexico oil spill had now been paid or assigned, leaving $700 million unassigned.

At its last earnings report in July, BP said its $20 billion oil spill compensation fund has almost run out, after provision for costs leaped by $1.4 billion in the second quarter.

In October, BP won a legal reprieve in its effort to force the administrator of a settlement related to the 2010 Gulf of Mexico oil spill to tighten standards in assessing claims. This could potentially spare the oil company billions of dollars in extra costs. BP said on Tuesday said that there were now significant uncertainty as to the amount of claims which have been processed but not yet paid and that will be determined to be payable in the future.

BP has reduced its provisions for these claims to $9.2 billion but said it will continue to revisit the provision in future quarters.The total cumulative net charge to BP's accounts related to the Gulf of Mexico oil spill now stands at $42.5 billion, it said.

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