BP highest riser on third-quarter dividend hike

BP continued its charm offensive towards investors on Tuesday, with a surprise increase to its quarterly dividend and a promise to keep capital expenditure flat in 2014.

The FTSE 100-listed company boosted the payout 5.6% from 9 cents per share last year to 9.5 cents this year.

It also announced plans for a new disposal programme targeting $10 billion (£6.21 billion) in revenues, with most of the proceeds earmarked for share buy backs.

BP said its current $8 billion programme was half done and in a separate stock exchange statement reported it had entered into a sixth repurchase mandate agreement with an independent third party, which will ensure buy back decisions are made independently, of and uninfluenced by, the company.

On purchase the shares will be cancelled in line with the purpose of the buy-back programme to reduce the company's issued share capital.

Neill Morton, analyst at Investec, said: "The stockmarket doesn't want the oil majors to spend money. Instead, investors want their cash back, and BP has obliged this morning with an increase in the dividend, a new $10 billion disposal programme (with proceeds going to share buy backs) and indicated flat capex in 2014.

"The bull case for 2014 is that operational gearing could surprise on the upside. The downside is that this could yet be overshadowed by the Macondo [Gulf of Mexico] legal fallout. 'Hold' retained."

Based on his current 2014 earnings forecasts, Morton said BP trades on a 9% discount to the sector multiple of 9.4 times and an 8% dividend yield premium.

The company's underlying profits were down from $5 billion in the third quarter last year to $3.6 billion this year, mainly due to a decline of refining margins, and total production for the three-month period was 2.207 million barrels of oil equivalent per day (boepd).

Underlying profit for the first nine months of the year was $10.6 million, compared with $13.2 million a year earlier.

Costs relating to the Deepwater Horizon Gulf of Mexico oil spill in 2010 amounted to $39 million during the quarter, and $280 million for the first nine months of the year.

Users on the Interactive Investor discussion board were largely pleased with what they referred to as "better-than-expected results".

By 12:00pm the shares were up 4.6%, or 20.8p, to 472p making BP the highest riser of the day so far.